Adam L. Penenberg
WILLIAM DEAN SINGLETON, a newspaper publisher and chairman of the Associated Press, speaks for many of his comrades when he says online news aggregators are making him “mad as hell and we are not going to take it any more.”
Singleton and his colleagues threaten legal action against Web sites like Google, Drudge Report, Huffington Post and Digg — the sites that have been linking to their newspaper stories without paying.
But their righteous indignation is misplaced. Forget that these aggregators push vast amounts of traffic to their sites and readers to stories that would otherwise disappear without a trace. Google alone claims to send a billion clicks a month to news sites.
News publishers easily could block Google’s spiders with a simple text file. But then their stories would not appear on Google News or in its search engine. You don’t hear news publishers talk about this because that’s the last thing they want.
The truth is aggregators aren’t the problem. It’s the business model. Journalism may be a public trust depending on who is doing the journaling, but most of us don’t work for free. Whether or not journalists like to admit it, journalism is a business.
When you plunk down a dollar and change for a New York Times (NYSE:NYT) , or 50 cents for your local paper, you barely cover the cost of the paper and ink. Someone else is playing sugar daddy or mommy — advertisers. Indeed, a typical paper generates about 80% of its revenue from advertising.
Journalists don’t sell news. We attract an audience that publishers can sell to advertisers — and make a few bucks in the process. The news is simply a lure to aggregate eyeballs so that someone with something to sell can try to reach them. The system has persisted for more than a century. Reporters write, readers pay a pittance to read their writings, and someone else gets stuck with the bill.
In recent years, however, the newspaper industry has come under assault. Circulation is falling — more than 10% between 2004 and 2008 alone. The decline is not a recent phenomenon. According to Newspaper Association of America statistics, this has been going on for 25 years. The Internet may be hastening the problem, but it didn’t cause it.
Still, advertisers have been migrating online, and because readers are but a click away from other news sources, there is intense competition. A newspaper in every town
In days past, when you bought a newspaper to read on the train, you were a captive audience. You either read what was in your hand or were stuck talking to the guy sitting next to you. Newspapers held a monopoly over your time, and because of geographic relevance, they acted like local information monopolies.
Seventy-five years ago, nearly every community in America had at least one newspaper. They had names like The Tyrone Herald in Pennsylvania, the Milford Mail in Iowa or the Moberly Monitor-Index in Missouri. Costing pennies each, they ran a few local stories mixed with wire service copy from The Associated Press, United Press International and The New York Times Syndicate.
Over the past century, the number of newspapers has declined steadily. Research shows that in 1910, there were 2,600 daily newspapers in the United States, the vast majority independently owned and operated. By 1990, there were 1,600 papers nationwide, largely under corporate control and overseen by 15 chief executive officers.
Consolidation killed numerous local papers, and the Times helped. When it began publishing a national edition, the Times drove many smaller papers out of business. Now, the Internet is doing to the Times what it did to small, local newspapers.
Times Chairman Arthur Sulzberger thought he had competition with the New York Post, the New York Daily News, as well as the Washington Post. But there is a mind-bending number of options for the curious reader online. No more monopolies
That means the old way of doing business — taking advantage of the monopoly you held over your audience so that advertisers were forced to go through you to reach them — is no longer a viable business strategy.
The balance of power has shifted from the monopolies providing access to their audiences, to the advertisers who can reach exactly the kind of people most likely to buy their products. As a result, advertisers have been moving online, where they can track their return on investment far better than they can offline.
An advertiser who takes out a full-page ad in the Times print edition has no idea how many people actually see it, and knows even less about how many are prompted into action. All it knows is a Times print reader’s average age is 42. Several generations of readers are growing up and coming of age on the Web.
Newspapers also are not just losing advertisers. They are hemorrhaging readers of the print editions — the other side of the monopoly they once held. It’s far too simplistic to say readers are simply going online to get their news, although there is some truth to that.
People also are spending their time doing other things online. They check out sports blogs and engage in online discussions. They view YouTube videos and go on Facebook to communicate with their newfound friends. They play video games and Scrabulous, catch up on email and share photos online with Flickr. They are doing everything, it seems, except buying newspapers and reading them. Lower profits
Newspapers have set up shop online, but not all the money is following. For years, papers cleared 40% margins. It made being a newspaper owner a very profitable business.
Now, the Times earns hundreds of dollars for each of its approximately 1 million print subscribers, but only a fraction of that on each of their approximately 15 million online readers. Its online audience spends only a few minutes on the site each visit — when they bother to come at all — and about 30 minutes a month, on average.
That’s less than the average person spent reading one daily newspaper over coffee and toast two decades ago. Most of the people who visit don’t come through the Times’ home page. They are pushed there by — you guessed it — aggregators like Google News, Digg and so forth.
Blaming the aggregators or trying to enforce a paid model for online news simply won’t work. And braying at the moon and declaring “we’re mad as hell and won’t take it any more” won’t change the course of events. Paradigm shift
Ah, the irony. The man who originally said that was Howard Beale, a character played by the late Peter Finch in the movie “Network.” Beale was a news anchor fired for low ratings. He goes mad on the air, climaxing with the now famous rant. In the end, he becomes the first man murdered, a narrator intones, because of low ratings.
What’s the solution? There isn’t one. We are in the midst of a paradigm shift. The big media companies with huge legacy costs pertaining to gathering, printing and distributing information either will adapt or die. That means getting a lot smaller — and fast.
If you think it’s bad now, it’s likely to get a lot worse. There was once a whole industry dedicated to the creation and distribution of ice, with trucks delivering door-to-door. The emergence of the refrigerator and freezer melted that business.
After the dust clears, new media organizations, new business models and new journalists will rise from this. And there’s a lot of creativity being unleashed by the chaos. All this doesn’t mean the death of journalism, it just means the end of a business model.
Something else will rise in its stead. That’s the one thing you can count on.
Copyright 2010 Adam L. Penenberg (penenberg.com)