What Dying Business Has Survived By Raising Prices On An Inferior Product?
from the good-questions dept
Charging for the sake of charging
Another weekend has gone by with another series of articles from journalists who are complaining about the state of their industry, without bothering to come up with business models that actually work. David Lazarus, the LA Times columnist who a couple of years ago suggested newspapers should sue anyone sending them traffic, kicks things off by insisting that newspapers absolutely should charge for content online. Once again, as with almost everyone else who has suggested the same thing, this is a business model based on wishful thinking. Nowhere does he explain how the newspapers would add enough value to make people want to pay for news online. Instead, they all seem to assume (incorrectly) that people will suddenly flock to paying for news online.
Of course, they may learn that first-hand soon enough. Last week Cablevision announced plans to start charging for the online content in Newsday which no one wants to bother with (seriously, as Jay Rosen pointed out, Newsday is dead last among the top 30 newspapers in terms of the amount of time users spend on the site). Yet, rather than recognizing they need to improve the content, folks from Cablevision seem to think that because it costs money to produce, people will pay. This is a fallacy that we hear all too often in businesses being undercut by new business models. It’s based on the idea that fixed costs matter in pricing. They don’t. Anyone who has taken a first year economics class should know this, but it’s a myth that gets repeated over and over again. Fixed costs are meaningless to the buyer, who only cares about the value they receive from the content. Yet, that didn’t stop someone stopping by from a Cablevision IP address to insist that we knew nothing about good reporting or writing. That may be true, but we can see from the data that most people don’t think Newsday knows much about it either.
More lemmings take the leap
And, now, it appears that the Hearst Company is looking to go down the same route, trying to charge for content, but again ignoring any reasons why people might want to pay. On top of this, Hearst has the bizarre idea of building its own digital reading gadget. Why do that when more and more people already own perfectly good digital reading gadgets: computers and smartphones. These newspapers aren’t looking to add value. They’re looking to lock things up in a ridiculous belief that there really is some scarcity they can “protect.”
Alternatives abound…
But that’s ridiculous. Even as these newspapers are locking up content, the folks who provide wire services are growing, and even local news providers are rapidly expanding as well. Many small local news shops (who are not printing newspapers) are doing fine through this recession, as the local newspapers lock themselves out of the market, and you have to figure that more people will find these alternative providers. Meanwhile, smarter publications are looking to jump into the market. The NY Times, for example, is kicking off its own citizen journalism project in two Brooklyn neighborhoods. If I were running the NY Times now, I’d also look to expand that program to Long Island, just as Newsday plans to take itself out of the market. This hybrid model has lots of potential — letting experienced journalists interact with lots of folks who are interested in talking about what’s happening in their neighborhoods.
The problem, of course, is that companies like Hearst and Cablevision are still blind to the way people view the newspaper. The community that reads the newspaper has always been the newspapers’ biggest asset. Newspapers don’t make their money from selling the content to readers (that doesn’t even cover the cost of printing and delivery). They’ve always made their money selling the attention of their community to advertisers. But, when they treat that community with contempt at the very same time that the community has many other options, it should be no surprise that the community goes away. In an article about the state of the newspaper business at the Washington Post, the editor at large of Hearst’s San Francisco Chronicle admits: “the public was seen as kind of messy and icky and not something you needed to get involved with.” And now they want that same icky public to prop them up, when that icky public has so many other options that treat them like humans and allow them to take part in the process? Other options that allow them to help write the news, to share it, to spread it, to discuss it and to shape it — so why would anyone pay for the same old news that not only fails to offer these features, but actively discourages them with paywalls and unnecessary barriers?
And don’t think that others won’t rush in to fill up the void left behind — and don’t think they won’t be better than some of the professional “journalists” left behind. In a great (but looooooong) post in the Chicago Reader, Whet Moser, points out that a journalist’s job isn’t just about collecting the news, but explaining it — and a large part of that was reaching out to “experts” and then trying to take what they had said and repeat it to the audience. But, there’s a problem, many of those experts are doing a damn fine job going direct to the public themselves via their own blogs or other publications. They don’t need these middlemen who often got the story wrong. And the experts get “paid” by boosting their own reputations, which helps them do plenty of other stuff which pays them in cash. So the world is better informed sometimes when the experts can route around the journalists, contrary to the claims of dying journalists about how we’ll all be worse off.
Damage your biggest asset, destroy your product, and complain when others do a better job…
In the end, the fact is that newspapers have been providing people with a poor quality product for too long, neglecting their biggest asset (the community) and have been totally unwilling to recognize the onslaught of competition coming from multiple angles. And, to that, their response has been to say that they’ll raise the price on that very “icky” community? And that somehow people will “miss them” when they’re gone? That seems unlikely. Jeff Jarvis points out an excellent point raised by John Thornton concerning the decision to charge: can you name a single dying business who raised prices and survived?
You don’t build your business by damaging your biggest asset. Raising prices on the very community the newspapers need the most, while offering a subpar product in the face of increasing competition has to be one of the most self-destructive moves in the history of business. And plenty of people know this. Yet, the management of various newspapers is still going down that path. It’s like watching the Titantic steer directly into a huge iceberg, even as a bunch of folks with bright shining lights are pointing the way to a clear channel of water. What a shame.
Filed Under: business models, journalism, newspapers
Comments on “What Dying Business Has Survived By Raising Prices On An Inferior Product?”
Newspapers...
“a journalist’s job isn’t just about collecting the news, but explaining it — and a large part of that was reaching out to ‘experts’ and then trying to take what they had said and repeat it to the audience.”
To argue that people can just go to the expert’s blog to get the explanation leaves out two important points: One, one expert do not an explanation make. On a political matter, which partisan expert shall the reader seek out? What the newspaper provides –ideally– is more than one expert opinion, and this leads to the second point: By doing this, the newspaper provides a crucial service: It saves time. One article, well researched and well written, provides in one location, a good deal of the information an individual like Whet Moser may be seeking
Are newspapers perfect? Of course not, and the business model desperately needs to change –perhaps an iPaper model along the lines of iTunes.
But one should not be so cavalier or contemptible towards newspapers. I hear people foolishlish spout all the time that they don’t read newspapers; they get their news online? If they do that, here’s a piece of news for them: You ARE reading the newspaper. Maybe not the one that comes to your driveway but you are reading the newspaper. Most of the news content on the internet comes from newspapers, or it comes from the Associated Press, which is mostly supported by newspapers. The rest is blogs: People commenting on stories generated by newspapers.
Television and radio? A large part of the daily news cycle you see or hear is from the paper. Newspapers are where the bulk of original reporting happens. You wanna see an even less-informed public? Get rid of newspapers, and that’s exactly what’ll happen; it’s exactly what IS happening.
What we are losing in web-based media is editing. In a newsroom, nothing can be communicated to the outside world that didn’t go through an editor to make sure you had your facts right, spelling right and so on. Now, every person is his or her own publisher and/or her own editor or her own reporter. And the world is full of people who are sending out what they consider to be news. It may be, it may not be, it may be made up and it doesn’t matter anymore. That’s the worst part of the demise of newspapers and the rise of the internet. The discipline that should go with being able to communicate is gone.
Re: Newspapers...
No one ever said everything you read online will be worth your time or bandwidth. However, an important asset will be your reputation and the community you build around your content. Sites, such as this one, capitalize on these intangible but incredible valuable resources to make money and sell other items, such as the advise from the Insight Community here.
Re: Re: Newspapers...
Although obviously I could use an editor…
Re: Newspapers...
“That’s the worst part of the demise of newspapers and the rise of the internet. The discipline that should go with being able to communicate is gone.”
Who decided that there is a particular “discipline” that should be required for public communication?
This kind of arrogance is why I won’t miss the print media.
It might surprise people in the “newsrooms,” but the unwashed masses do have the capability to recognize authoritative figures and synthesize an opinion from multiple information streams.
Print media is but one of those streams. Maybe that’s what has the media elite so miffed.
Re: Newspapers...
maimzini, have you actually read a newspaper of late? It’s lowest common denominator pap that is so watered down it no longer conveys much information. Being knowledgeable on subjects that a newspaper is reporting on and seeing how they get it mostly wrong, I suspect that they do much the same for the subjects that I don’t know about. I don’t trust them much at all.
The problem with newspapers is they contain little of actual value.
Re: Newspapers...
“that didn’t go through an editor to make sure you had your facts right, spelling right and so on.”
And lets not forget the most important job of an editor… making sure their bias is input to every story reported on. Facts be damned!
“Are newspapers perfect? Of course not, and the business model desperately needs to change –perhaps an iPaper model along the lines of iTunes.“
Historically the price you pay for a newspaper is not for profit. Back in the day you were changed 25 cents merely so that the newspaper could give concrete figures to advertisers as to how many readers it has. And to give the printer concrete figures on how many papers to print each day. However, advertising has drained because of the loss of readers and the once profitable classifies are nearly dead. So local newspapers are cutting back on content and are forced to charge more and more for less and less.
I’ve said this a million times, back in the centuries before this one, the most efficient means to get in depth news to everyone was for each city have it’s own publisher printing out daily papers on dead trees. TV and radio didn’t kill off the newspapers because their news was not in depth enough.
Now the wire services such as AP, Reuters, and UPI have spread out their stories and articles to thousands of websites across the country.
Where once it made sense for every community to have their own news paper, it does not make financial sense for every community to repost the same wire services articles over and over again. It’s no wonder that these local newspaper websites are not profitable. If your local papers puts up a crappy site, or a paywall, or charges too much for the classified ads, you’ll just get access from any number of other websites.
The solution is not to save the newspaper. That’s already dead, for all intents and purposes. The solution is to save the news. And that’s not a difficult task. As reported today, the wire services are profitable.
Answer.
What Dying Business Has Survived By Raising Prices On An Inferior Product?
The U.S Government.
Re: Answer.
Pish! If the US Gov were a corporation, it’d have gone down in flames due to racketeering, extortion, price-fixing, price-gouging, and a laundry list of other sundry illegal activities.
Re: Re: Answer.
Yes, but, those activities aren’t illegal if you happen to be the United States Government.
Re: Re: Answer.
Pish! If the US Gov were a corporation, it’d have gone down in flames due to racketeering, extortion, price-fixing, price-gouging, and a laundry list of other sundry illegal activities.
Oh yeah? Hasn’t happened to the RIAA has it?
“And that somehow people will “miss them” when they’re gone? That seems unlikely.”
I’ll miss them, but it won’t stop me from getting my news.
My city
My city has a newspaper and a TV station. The newspaper owns the cable company, so they SHOULD have a huge advantage over everyone else on distributing local news.
The newspaper still thinks about selling news to subscribers, so they set up a paywall. It didn’t work.
The TV station is used to a business model in which you think in terms of selling eyeballs to advertisers. They set up their own local news site which is going great. It is kind of ugly because it has so many ads, but the local news is available there. They also have free classifieds, and I am finding better things listed there than in the paid newspaper classifieds (I can still look at at the classifieds because there is a copy of the local paper in the break room at work).
I dropped my newspaper subscription to weekend only a few years ago when the parakeet died. I stopped the weekend newspaper when I quit fishing.
What a shame
…not.
This is an example of economic Darwinism. “Old media” outlets can evole or die, and most have chosen the latter.
Good riddance. In a free market, the economically stupid shouldn’t survive.
Newspapers vs ?
The newspapers screamed bloody murder when radio and TV came along and started having newscasts and they survived that, so why is it that the internet is causing their demise? Is it because they don’t give us what we’re looking for anymore? They had better wake up pretty done soon before they all go totally under.
Good ol days gone
I dunno what to think here. A part of me wants to fight about loss of privilege and how my journalistic rights are being eroded. BUT the little man in me wants to support stuff like this. Hmmmm, need a holiday.
I will give you an story of a fella who screwed about like this and his CUSTOMERS liked what they got. His name was Rob Rodin and he was a successful guy. The story has been published and my guess is that the people liked it!
From the Lo0ne voice over the water
Cheers
Good ol days gone
I dunno what to think here. A part of me wants to fight about loss of privilege and how my journalistic rights are being eroded. BUT the little man in me wants to support stuff like this. Hmmmm, need a holiday.
I will give you an story of a fella who screwed about like this and his CUSTOMERS liked what they got. His name was Rob Rodin and he was a successful guy. The story has been published and my guess is that the people liked it!
From the Lo0ne voice over the water
Cheers
Good ol days gone
I dunno what to think here. A part of me wants to fight about loss of privilege and how my journalistic rights are being eroded. BUT the little man in me wants to support stuff like this. Hmmmm, need a holiday.
I will give you an story of a fella who screwed about like this and his CUSTOMERS liked what they got. His name was Rob Rodin and he was a successful guy. The story has been published and my guess is that the people liked it!
From the Lo0ne voice over the water
Cheers
Good ol days gone
I dunno what to think here. A part of me wants to fight about loss of privilege and how my journalistic rights are being eroded. BUT the little man in me wants to support stuff like this. Hmmmm, need a holiday.
I will give you an story of a fella who screwed about like this and his CUSTOMERS liked what they got. His name was Rob Rodin and he was a successful guy. The story has been published and my guess is that the people liked it!
From the Lo0ne voice over the water
Cheers
Re: Good ol days gone
This is what happens when you let the retards across the water have the internet.
The real problem with the paper
When you watch a movie from or about the 20’s or 30’s Newspapers ruled! Then TV came along and took the “News” away from the newspaper. They still had “Local interest”, more content, but what really made them profitable was coupons, classifieds, and ads.
Now you can get local news today with more up to date content than a paper can ever do. As far as coupons and classifieds, easier and cheaper to throw up a a site.
Only way for paper to survive is if they can find SOMETHING you can’t get anywhere else. Perhaps if they made it fashionable to have ink stained fingers!
It’s the Los Angeles Times, so what do you expect?
Ever since the Chicago Tribune corporation bought the Los Angeles Times, the paper has been seeking a lowest common denominator audience.
There are scant facts in today’s Los Angeles Times paper. Opinions are boldly asserted as facts. Entertainment “news” ends up in the business section. The entertainment section is worse than watching TMZ.
Then they increase prices by 25 cents (75 cents for the daily, 1.50 for the Sunday edition).
Once upon a time I was a subscriber. This was when they offered hard news, followed by clearly marked analysis, followed by clearly marked opinion. I quit subscribing when they stopped publishing thoughtful journalism.
I then occasionally purchased papers from newsstands. This was when they still had good comics, syndicated some interesting national writers on the opinion page, and offered some good movie reviews.
Now I’ll think about reading the Los Angeles Times at a cafe if someone has left a copy of the paper lying around and I don’t have anything else with me to read.
I’ll get local news on the radio (if in the car or on a bus), or the local news channels. I’ll get national and international news from NPR, CNN International, Christian Science Monitor, and the BBC.
The rest I’ll do without. Does that make me less informed? Probably. However, the effort it takes to extract solid news, information, and facts from the Los Angeles Times, Orange County Register, or Long Beach Press-Telegram is no longer worth it.
As a co-worker would say, “The juice isn’t worth the squeeze”.
Yes, there are other successful (?) business models who sell 90% garbage and still make profits.
1. Movie industry
2. Music industry
3. Software industry (Microsoft, I’m looking at you)
This is all about how low can the expectations be set, how many people can be laid off, and still have enough customers to keep revenue growing.
Market analysts watch trends carefully, make predictions using nonparametric statistics, and then look for ways to reduce cost / quality without seriously perturbing the profit margin.
Companies are not in the business of providing goods and services. Companies are in the business of aggregating wealth for a small group of C level executives, board members, and majority stock owners. Everything else is secondary.
It is easier (read less effort, more cost-effective) to lobby for (and get) preferential treatment from local, state, and federal government than it is to actually improve a business. With the absolute lack of intelligence that most politicians exhibit coupled with their self-interest, lobbying is the most cost-effective way of aggregating wealth.
The occasional fines along the way when the boundaries of law are pushed are just viewed as the cost of doing business. Those fines indicate areas of law that need to be addressed by lobbying.
How a small newspaper made money on-line
I used to work at a small newspaper as a software developer. It was a cutting-edge place as technology goes, we put it on the web in 1994, which was pretty early for newspapers. The on-line newspaper was free. They made the money off of the searchable archives. They charged a yearly fee for an account to search the archives. The archives were good too, they spent quite a lot of time getting there entire history of articles (back to 1910 or so) with pictures into their electronic archive. I would think this would still work, just exclude bots so that the search engines don’t do the archiving for you. Local history is the added value that newspapers are looking for.
Re: How a small newspaper made money on-line
Actually, that is contradictory to what Techdirt has been suggesting all along. Adding a pay wall decreases the value of those archives. Sure, some people bought into it thus leading to profits, but opening those archives up to cause spikes in readership would lead to more advertising opportunities.
It's a free market
They can charge whatever they want. Getting people to pay what they want to charge is another issue, so charge away. I get much of my news by internet, not mainstream newspapers. In my experience any item after page two of a paper, takes a week to even hit the paper if at all. at that point it’s not news anymore, it’s history. What is news to the paper may be trivia to me an vice versa. I prefer raw news, unfiltered by an editor, I will decide what is of interest and choose which political perspective I prefer. I will at least see a broad variety of views.
Missing newspapers?
I’ve not bought a newspaper in 15 years – ever since I discovered BBC news and slashdot.org (amongst others). I like reading multiple sources – I don’t want a journalist’s gloss and error-prone mis-writing to get in the way (which is the reason I don’t rely exclusively on the BBC).
Every time I’ve had personal involvement or close contact with a news story, I’ve found significant errors in what the news coverage later says. Usually errors that indicate a complete misunderstanding of the real story by the reporter(s).
Finally, when you actually read a story on multiple sites, you not only get to see more viewpoints, you also get an understanding of which sites/sources are particularly lazy in their simple regurgitation of others’ news print.
Newspaper?
Whats a newspaper?
Seriously who uses newspapers in 2009.
You mean they still print this stuff…. WOW!
Bad Business to insult your customers
The only difference between newspapers and airlines is that people have an alternative to newspapers. I used to read the Dallas Morning News only for their football coverage. They began to charge for that coverage, so I just stopped reading the paper all together. Charging didn’t raise their revenues from me, it only reduces my interest in their content.
Airlines are going down the same path of charging customers for things that used to be free, and insulting them in the process. They can get away with this until an alternative, like high-speed rail, replaces them. People have finally found an alternative to the newspaper, and so they are abandoning this grumpy dinosaurs with glee.
Newspapers and their business models
You commented:
That seems unlikely. Jeff Jarvis points out an excellent point raised by John Thornton concerning the decision to charge: can you name a single dying business who raised prices and survived?
Well, yes; though it hardly applies here, so I basically agree, even though I disagree.
When I was studying economics many years ago, we saw how, at one time, a whiskey brand (Jack Daniels, I believe) had such low sales on one type of whiskey that they raised the price very high, hoping that they might recover a little money.
Sales zoomed. It seems that before it was seen as a cheap, undesirable whiskey; it now appeared to be an expensive, highly prized whiskey.
I assume if a newspaper (such as the NY Times) could somehow turn on that “snob appeal” it might work for them.
It’s obvious that many of you a) haven’t read a newspaper and b) have no idea how wire services really work.
The Associated Press, for all intents and purposes, is a syndicate. By paying a fee (to them, not to newspapers)a publication gets all rights to anyone who signs up with AP, so the Peoria Little Times gets the same stuff from the New York Times, although usually a day later (and vice-versa, but rarely do big metros cherry pick stories from small dailies, they merely cover it their way.)
So, “I’ll rely on wire services” is a statement that will appear more inane as time and newspapers go by the wayside. AP writers would call me at my podunk newspaper to file my story quickly so they could have it and distribute it across the state. That’s how AP works. Do you think they have more than a handful of reporters in LA or New York? Want to guess how many they have in SF? Or Sacramento? Or Baton Rouge?
Blah, blah, blah, media companies shouldn’t charge for content is a stupid argument. Who else works for free? As a reporter/journalist I like to be paid and have benefits. Would you ask a computer programmer to work for free?
Anyway, it’s all a moot point because I was laid off and am now arguing with flaming twits on a techie-geek board. I miss my newsroom and the lack of logical fallacies.
As for media elite, quit using buzz words that you don’t understand. If by “media elite” you mean we can afford to go out after work for a few beers– then yeah. Other than that, our influence stops at the county level.
Re: Re:
Blah, blah, blah, media companies shouldn’t charge for content is a stupid argument. Who else works for free? As a reporter/journalist I like to be paid and have benefits. Would you ask a computer programmer to work for free?
Anyway, it’s all a moot point because I was laid off and am now arguing with flaming twits on a techie-geek board. I miss my newsroom and the lack of logical fallacies.
And with that kind of thinking there will be a lot more ex-journalists joining you in the unemployment line.
Re: Re:
Blah, blah, blah, media companies shouldn’t charge for content is a stupid argument. Who else works for free? As a reporter/journalist I like to be paid and have benefits. Would you ask a computer programmer to work for free?
No wonder you were laid off with logical fallacies like that. No one has said that you shouldn’t get paid. No one said you should work for free. And if you knew anything about the actual newspaper *BUSINESS* you would know that your salary was never paid for by subscribers in the first place.
I really can’t understand how any logical person can conceive of the statement above.
And you say your newsroom didn’t have logical fallacies? Yikes. That means it was ALL logical fallacies like the one you wrote above. No wonder you’re all going out of business.
And a lot of flaming twits will be in that unemployment line, too. And your mama as well.
Personally, I loved the part about trying to pick apart my post — talking about logical fallacies and you couldn’t name one! Hilarious.
Actually, I have no idea how I was paid. The media industry’s revenue is more complex than simply advertising. Secondly, by charging for subscriptions you are giving advertisers targeted audiences — something the luxury mags have been doing for years.
As I said, some of you have no clue about what you’re talking about, so don’t delude yourself into thinking you’re giving an indusry and very intelligent people any useful advice. That’s all.
Re: Re:
Personally, I loved the part about trying to pick apart my post — talking about logical fallacies and you couldn’t name one! Hilarious.
Wow. So you don’t have much reading comprehension either.
The logical fallacy in your post that we pointed out:
Claiming that giving away a part of your product for free means working for free. It doesn’t. Never has. Some journalist you are.
As I said, some of you have no clue about what you’re talking about, so don’t delude yourself into thinking you’re giving an indusry and very intelligent people any useful advice. That’s all.
Yes, that’s why we’re doing a pretty good business advising the folks who probably laid you off. They certainly seem quite interested in paying us for our insight. Clearly, they didn’t feel that way about you.