by Barry Schaeffer
Reprinted from Newspapers and Technology Magazine
One question that nearly always comes up in some form in newspaper circles these days is "what's happening in the business now that the Internet is a reality. The answers, especially where talk is cheap, range from "what Internet?" to " the sky is falling!" Somewhere in that range lie the fortunes of an old and venerable industry, critical not only to the world of business and media but to freedom itself. While I am no more willing than most commentators to offer a discrete answer , it strikes me that you can tell much about a man's answers from the questions he asks and when he asks them. Moreover, because corporations tend to delay action until they are convinced they know the answers, which questions are considered open reveal much about what the industry will do next.
From time to time, I run across ads for scholarly studies of the industry, asking and answering, they would have us believe, the important (and open) questions. Usually, the ads contain teasers listing the major questions to be addressed in the report, and I have been increasingly struck by how revealing these brief sentences are about the state of the industry. I will paraphrase a few of them here.
1. Does it make economic sense to publish online? Do market share, buyer habits and economy of scale mean anything? Does controlled circulation to bump ad rates transfer from paper to electrons? Any publishing financial officer worth his salt must know that most periodical publishing is based on delivering readers to advertisers for less than what the advertisers will pay, and anything capable of doing that makes economic sense even if not in the traditional direct ROI sense. If that weren't true, every publication would charge the full production cost for each copy. What's interesting about this question is its apparent ignorance of the fact that if subscribers are using another medium, newspapers must be in that medium because the advertisers will follow the readers. In the case of the Internet, much of what the new medium delivers is exactly that on which the newspapers have banked their profitability, making the competition for the same dollars.
2. Is online publishing real or a passing fancy like Videotext of the '80s? That anyone would consider this an open question suggests that newspapers have not yet wakened to a reality that isn't waiting for them to decide it's worth a reaction. Not only is the Internet and its impact on commerce real, its development and implementation cycles have rewritten the book on how much time one has to react to changes once they appear on the horizon. Moreover, the investment world has decided that firms capable of rethinking and re-engineering their operations to the Internet are worthy of support long before they can demonstrate solid ROI, indeed before their first dollar of profit. Entire industries have taken the reality of the Internet on faith and invested their fortunes to back up their commitment. If newspapers are just getting around to asking the question, they are, by definition, far behind the train. The Videotext comparison, although still trotted out, is specious. Videotext, a great idea far ahead of both technology and cost, was doomed to failure from day one. The Internet suffers from none of these shortcomings and is riding a wave of technological evolution that makes it progressively less expensive even as its functionality grows.
3. Can online newspapers count on advertisers' financial support? Advertisers, of course, don't pay to support anything, they pay to reach readers and, thereby, sell their goods. That newspapers have not been deluged by offers of money for ads in their online editions has nothing to do with the advertisers' willingness to pay and everything to do with newspapers' inability to attract readers to their sites. If you can deliver the audience, they will pay. One realization that would help on newspapers' parts is that ads on the Internet should cost less per impression than on paper.
4. Can online newspapers charge their readers? Does it matter? After all, readers don't really pay for the paper editions unless $.025 for a 200-plus page broadsheet newspaper delivered to your door is supposed to cover its content and production cost. Newspapers almost give their paper editions away in order to get readers in order to get advertisers. The suggestion that readers pay to read the online edition suggests a different approach to accounting and ROI that will hamstring the online product if it isn't corrected. The success of WSJ online in charging for subscriptions proves the point. Subscribers pay for the unique, targeted news product WSJ puts out because it provides a level of immediacy they want and need to support their business decision making. General newspapers don't offer that level of product so they can't expect subscribers to pay a premium to get their content early.
5. Can online editions meet their goal of being profitable? Where does it say that the goal of an online edition is to be profitable as a standalone business? In the newspaper business, the goal of everything including the online edition is to protect the viability of the paper edition. It isn't pretty but as long as a newspaper must pay for a massive production facility consuming tons of newsprint and ink every day and supported by dozens or hundreds of union craft workers and a massive distribution network, its paper edition must remain profitable. Online editions of anything work at much lower cost and resource levels and need much less cash and turnover to be profitable. But, unless universally popular, they work at lower levels of actual dollar profit. Online editions can contribute to the heath of the paper edition but they cannot throw off enough extra cash to save a failing newspaper. This reality must permeate everything an online edition does, and it inextricably links it to its paper counterpart. Newspapers that think the two can be segregated or that the online edition is the financial solution to their dropping circulation and ad lineage are doomed to failure.
If these questions are still unanswered in the board rooms of the nation's newspapers, it's little wonder the industry's reaction to the growing online opportunity and threat has been near glacial. The world, including the big money, has decided to take the Internet on faith. While there will be winners and losers in this process, the ball game is being played by new rules and newspapers simply must understand their role. If the industry can't develop or attract the creativity and will to get in the game, then others will pick off the good stuff and leave only the remnants of a bygone era.