SEPTEMBER 26, 2009
Quality Reporting Doesn't Come Cheap
The decline of newspapers is a tragedy for democracy. How can it be stopped?
By PETER R. KANN
Imagine yourself the proprietor of a venerable and profitable business whose success is based on the quality of your distinctive product, the brand loyalty of your customers, and the fair price they are willing to pay for the value you provide.
Then you hire some bright young managers who develop a new and improved version of your product that can be distributed faster and accessed more conveniently than the old one. The new version—essentially a repackaging since core components are the same—appeals to traditional and new customers. No mystery there, since unlike the older version, for which you still charge, the new one is given away for free.
Consequently, your total customer base grows but your revenues do not. Your profits shrink as the free version lures customers from the paid one. You begin to wonder whether there might be a little flaw in your new business model, whether perhaps you should have charged for the new and improved version, but all the experts now tell you it is too late for that.
So it was that newspaper proprietors, seduced by the allure of a new distribution medium called the Internet, gave young Web disciples license to take their preciously crafted product—news—and repackage it with all manner of bells and whistles from interactivity to instant updates to historical archives and then give it away for free to the very same people and more who still were expected to pay for the traditional product on sheets of inky newsprint. Something was wrong with the logic.
Indeed, a business analyst landing here from Mars logically might question why an unwieldy newsprint product, stale as soon as it rolls off the press and not updated till another sun rises, should not be free whereas the new Internet product, offering all the same news plus more and evolving as does the news around the clock, should not be worth a pretty price? An even wiser Martian might conclude that customers should be given a choice, or offered a combination, but that they should be expected to pay for both.
Based on a nearly 60-year habit of reading them and some 50 years working for them, newspapers still are my preferred way to access and absorb news, but that is not nearly so true of my children and will be even less so for theirs. More and more people clearly prefer to get their news online and, not surprisingly, prefer to get it for free. Good for them, but not so good for the increasingly impoverished publishing companies selling (or these days giving away) news, for the steadily diminishing cadre of reporters and editors who produce it, or for the future of news as we have come to know it.
The start of this downward spiral predated the Internet by some decades as publishers relied more and more on advertising as their primary revenue source, chased larger and larger audiences to appeal to those advertisers, and displayed less and less confidence they could attract those audiences by charging full and fair value for the publications they produced. Thus, well before the advent of the Web, publishers were discounting subscriptions, providing all sorts of peripheral premiums, and giving away more and more copies to maintain artificial circulation bases.
Chad Crowe
At the simplest level, while consumers expected to pay $1.50 or $2 (or more at Starbucks) for a mediocre cup of coffee, they were offered a quality newspaper for 50 cents, or sometimes even less. That advertising still rolled in was a testament to a booming economy and to limited alternatives, particularly in our many monopoly newspaper markets.
If publishers were at fault here for chasing ever larger audiences, editors and even reporters all too often were complicit. The list of modern journalistic flaws and failings is long, but surely includes the blurring of traditional lines between news and opinion and news and entertainment, predatory pack journalism, an undue emphasis on conflict rather than context, pessimism and cynicism (as differentiated from appropriate skepticism and criticism), social orthodoxy, elitism, flea-like attention spans, and more. Yes, the traditional newsprint medium was becoming less appealing, but its messages also were becoming less enlightening.
In any case, by the time Internet editions arrived, the prevailing philosophy in most publishing companies already was that customers could not be expected to pay much for content, that it was easier simply to rely on advertising. The new Internet editions were merely the ultimate extension of that trend: free news to the consumer, total reliance on the advertiser.
But that didn't quite work out as expected. Online advertising, given virtually unlimited supply and also given clever new competitors like search sites, has been nothing like publishers posited. Online edition ad rates and online edition ad revenues are only small fractions of those in traditional print. And as print advertising continues its steady decline, online advertising cannot come close to compensating.
The print editions still have customers willing to pay for at least a discounted subscription, but there are fewer of the customers as free online editions peel them away from print. And so the publishers are left to juggle their twin products—the old one in inexorable decline and the new one in commercial denial—and pray the future may be somehow different.
Actually, it is the present that might have been different. At the dawn of the era of online editions this newspaper, like all the others, was faced with a free or pay choice. At the time, I was chairman of Dow Jones, the Journal's parent company, and virtually alone we chose to charge for our online content. The reasons for this have been the subject of much ensuing speculation.
Allow me to explain: As a predominantly business newspaper the Journal's content was distinctive and very largely unduplicated. That content arguably had a much higher degree of essentiality to customers than general news or entertainment. And while the Internet was a new medium, Dow Jones had generations of experience at electronic delivery of news through newswires and news retrieval businesses. So the brave world did not seem so entirely new.
More important than any of that, however, was a tradition and culture that always had placed high value on news and that always had expected customers to pay full and fair value for news however, whenever or wherever it was delivered. So the decision to charge for an online edition was less courageous than it was consistent. Why should we give all our valuable content and more away for free in some new distribution channel while charging several hundred dollars a year for it in another? The only rational response was not to do so. The result is that the Journal has two successful paid editions, print and online, for sale separately or together. And others in the industry who once scoffed at such a quaint business model now seem envious.
Suppose back when online editions were first launched that several other leading newspapers had made the same decision. Yes, the Journal was different, but it wasn't the only publication with quality content, unique strengths and a strong journalistic tradition. Perhaps the New York Times, the Washington Post and one or two others. A precedent would have been set by the industry leaders, a trend would have begun, and an industry inhabited largely by lemmings would have followed the leaders down a perhaps risky but at least rational route rather than following them over a cliff.
It's now argued that it is too late for publishers to reverse course. Online edition customers have had a decade and more to enjoy the free news publishers are providing and, as in any business, it is far harder to begin charging once customers have been conditioned to expect something for nothing. So it is late in the day for the industry to change and doing so would be risky and painful.
Online edition customer bases would shrink sharply, at least at the outset. Online advertisers would be upset and demand lower rates. Marketing emphasis would need to be redirected to who is reading a publication, in print and online, rather than simply how many. News products themselves, print and online, would need to improve. But what this decision really comes down to is picking a poison, and at least the choice to begin charging offers some hope of cleansing the system and beginning down a road to recovery.
The reason any of this matters has little to do with the plight of newspaper publishers or even with the future of newspapers. The real threat is to the future of news—informative, relevant, reliable news of the wider world around us. And that is disappearing as newspapers, whose reporting staffs still produce most of the news, no longer can afford to do so. As their news budgets and staffs continue to shrink, the key question is what can fill that gap?
Television does not begin to fill it. To the extent broadcast networks ever tried they now have abdicated to so-called cable news channels. These, in turn, now devote most of their resources to covering celebrities, crimes and sundry social trivia and to prime-time programming that pretends to be analysis and informed opinion while mostly offering the spectacle of extremist heads yelling at each other. There are few resources and even less commitment to covering significant news beyond floods and fires.
The Internet is not filling news vacuums either. There are hundreds upon hundreds of online sites and blogs that claim to provide news, but virtually none of them even pretend to pursue the traditional news role of newspapers, which is to invest in professional staffs dispersed around a community and across the country or the globe to cover, analyze, and only then comment on, events. Actually, all they do is comment.
As to all the free online editions of our newspapers, their business model does not begin to cover the cost of significant news reporting. So the online editions with growing audiences—largely cannibalized from print audiences—rely on the poor print editions for almost all the news they give away. Sadly, there is less and less of that, and the ultimate loser, of course, is the public.
Mr. Kann, a Pulitzer Prize-winning reporter, was until 2007 chairman of Dow Jones & Co., which publishes The Wall Street Journal.
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
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