The myth of free news
By Peter Osnos, Senior Fellow for Media at The Century Foundation
One of the most persistent explanations for journalism’s present financial troubles is that consumers no longer have to pay for news.
The notion that everything these days is “free†on the Web is an article of faith—which happens to be wrong. Listening to a prominent newspaper editor make the “free†point the other day to a group of mostly nodding (and eminent) figures in the media world, I realized that a cri de coeur (an impassioned outcry of protest) is increasingly necessary. There is a great deal of money being generated by the transmission of news, but very little of it is going to the providers of that news, which is no longer tolerable. News is no more free these days than the “complementary†bag of pretzels you get on a plane, after you’ve paid for the ticket.
Newspapers a bargain compared to hundreds a month for tech
Consider that the consumers are paying for broadband, cell phone service, and satellites, plus the cost of the lap-tops, PDAs, televisions, and iPods. The monthly bill for all the delivery is easily a couple of hundred dollars. Mac laptops start at $1,099. Good Dell laptops start at $999. There are cheap cell phones but the kind that offer news and entertainment are still pricey as is the service that supports them. My household monthly tab for two cell phones (a Blackberry and an iPhone), a premium cable package, broadband, and two desktops computers, is about $675. Obviously, we use these devices for a great many things and, in today’s world, they are probably indispensable.
By contrast, the New York Times subscription delivered to our door by hand is $5.10 per week. Around the country, the Orlando Sentinel is $19.50 for thirteen weeks; Atlanta Journal-Constitution is $10.99 a month; the Minneapolis Star Tribune is $42.25 for thirteen weeks.
Google payments: Way to end crisis?
So here’s the deal. Today’s crisis in the gathering of news would disappear if the “Googles,†making a fortune in advertising; the “Verizons,†making a fortune in transmission; and the “Apples,†making a fortune in hardware, would pay a share of the cost of the news and information that flows through them. There is a direct precedent for this concept in cable television in which the content providers—ESPN, CNN, and all the rest of the proliferating channel spectrum—are paid for each subscriber by the companies carrying the programs. Most of the cable channels also sell ads, which makes them double-dippers in the way newspapers and magazines have always been. This is very lucrative. Rupert Murdoch’s News Corporation’s cable channels, including Fox News, posted a 23 percent increase in profit in the last quarter of 2007. No wonder Murdoch is prepared to throw billions at newspapers. He sees that the profits will come through his other holdings, recycling the news or charging the cable providers for it.
The question therefore is why don’t the wildly profitable transmitters of news pay for the gathering of it? The answer I’ve heard (and there may be others) is that a substantial portion of the traffic to the major news sites associated with newspapers and magazines comes through the search engines rather than direct. These vast audiences in the millions justify the increases in advertising prices the news sites charges for appearing in their space. There are all kinds of partnerships out there now between the mega-search enterprises and print publications for the solicitation of ads and some sharing of resulting revenue. But the increasingly serious declines in circulation and advertising revenues at metro newspapers, in particular, show that a new model for raising revenue is going to be required to maintain meaningful news operations—locally, nationally, and internationally.
Rumblings about a possible pittance-per-click-through from Google
I asked a major news proprietor whether he can imagine his colleagues starting to charge the transmitters and even the hardware manufacturers for the content they carry. That would only work, he said, if enough of the major news gatherers went along with the demand, which he thought unlikely. There are also rumblings that Google is discussing the possibility of paying a pittance per click-through from their advertising-supported search results, which would be a very important step. An issue as fundamental as how the expensive and critically important collection of news will be supported in the future is part of the ongoing cycle of perusal at media industry confabs and “keynotes†at trade shows, but the shape of those discussions misses a crucial point: most news is not free to the consumers of it and shouldn’t be described that way. They are paying for it, but that money doesn’t go to the people who gather the news. It goes to the hardware and services that deliver it.
Time-Warner cable spin-off : Later chapter in tug of war
And the more powerful, profitable, and pervasive these transmitters of news and entertainment become, the more they will certainly be able to charge for their services. The tug of war between the creators of content and the distributors of it in all forms is a long-standing issue. The announcement last week that Time-Warner is spinning off its cable systems is an acknowledgment that owning both content and delivery isn’t a guarantee of the best possible business. Figuring out the fair disposition of income from media is for the moguls to do. But in the meantime, editors should let readers know that they are paying, handsomely, for the news they get on the Web. It’s just not going to the people who gather it.
Image: CC-licensed “Free beer” photo from Unhindered by Talent (wrong!).
Moderator: Peter Osnos is founder and editor-at-large of PublicAffairs Books and executive director of the Caravan Project. Reproduced with permission from a regular Osnos column called The Platform. I, not Peter, picked the photo. - D.R.
May 6th, 2008 at 12:05 pm
Um, you say there’s a crisis here, but I haven’t exactly seen a decline in the quantity of news being delivered. Why do we need some new scheme when the market seems to be taking care of this (as you point out, Murdoch has an interest in keeping the newspapers going to feed his real revenue makers, a bit like Marvel these days keeps its comics churning to provide fodder for its television and movie properties).
May 6th, 2008 at 5:36 pm
Interesting article, but what a strange reasoning! This is a lot like asking a camery company paying money to cute girls because so many photographers are buying the cameras do take pictures of them.
Today, there are five sound models of news delivery (with news just being a content category with the distinction of having an especially short lifetime):
1) Free (self-paid) sourcing, free (self-paid) delivery: Typically, gatherers and deliverers are interest groups that want to draw attention to topics or agendas that would otherwise go unnoticed or underreported but are vital to the gatherers and deliverers. The people that are donating time and money to make it happen do not do so with the hope of financially recouping their expenses. Example: Indymedia, Discovery Institute, Greenpeace, perhaps Teleread.
2) Free (self-paid) sourcing, source-paid (or externally paid) delivery: The gatherer has money to pay a deliverer directly or indirectly for distributing their news. The source pays because they This is done if a commercially vital agenda can be helped by handing out the news, so the news in question are typically advertising, policy inducing spin or PR pieces. Examples: CEI, or INSM in Germany
3) Delivery-paid sourcing, reader-paid delivery: Some journals pay their researchers to gather news, and are paid by their audience for delivery. Example: Stratfor, NewScientist, Stock market newsletters
4) Delivery-paid sourcing, externally (ad-) paid delivery: News gatherers are paid to deliver content to publishers, which use the content to attract audiences that they can sell to advertisers. This is the predominant model for print and TV.
5) Publicly paid sourcing, publicly paid delivery: Some European countries (such as Germany) have a public TV, radio and internet news sector, which is paid by a mandantory fee by all people possessing receivers and overseen by regulatory commissions to ensure quality and neutrality standards.
Peters contribution is motivated by a new, transitional model:
6) Free sourcing, externally paid delivery. Here, customers or advertisers pay for the delivery, while the deliverer makes use of news which are in the public domain.
These free news are either willingly contributed by internet users in their spare time, or they are scooped from the portals of other news deliverers which made them publicly available.
Some of the news deliverers that make content publicly available resent the fact that Google scoops their news — but of course they may stop Google from doing so simply by preventing it from indexing their pages. They do not do it, because the advertising value for their brand as a news deliverer, and the value of the additional visitors outweigh the losses.
Model 6 is usually not sustainable for the news source as a primary business. However, this is no reason for the deliverer to pay the source! This will only work if the deliverer can earn additional money by buying content. Which currently they do not (although Amazon is experimenting with earning money by having the Kindle audience pay their favorite bloggers).
The situation for some news provides may be dire, not simply because Google is not paying them, but because online eats into print and TV, and online margins are too small due to the abundance of available free competition. As long as the major news providers do not agree on taking all their online content off Google’s index, this situation will not change, and there is no good reason why it should.
In the same way, if all the cute girls unite and refuse to be photographed unless being paid, perhaps Canon will start rewarding them. Until then: fat chance.