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The Ocean

December 16, 2009

Wrote this as an assignment for class, figured I’d post it here as well.

The Ocean

How newspapers are faring in the wake of the internet and how they might put some wind back in their sails

36 years ago, in the song “The Ocean” Led Zeppelin compared their audience at concerts to an ocean. Jonathan Harris, the vice president of digital media at The National Post, makes a similar comparison with internet traffic: “It’s hard to dam an ocean; all you can do is divert water.”

But that’s exactly what The Post is trying to do with its online content: get people to visit their website. The Post’s earlier strategy was to put up a paywall, blocking access to its website for non-paying customers. But things didn’t go as planned; “Traffic tanked as soon as we put the paywall up,” Mr. Harris said.

If newspapers like The Post can’t simply charge for its content online as it does for the print copy, how can they make money? This question, and the search for an answer, has defined the newspaper industry ever since people began to read news online instead of paying for a print subscription.

But it’s not as serious a shake-up to the business model as everyone thinks. Mr. Harris explains:

In an online model, we’re giving away stories for free, but in the old model we’re paying you to read the newspaper. It costs money to distribute the newspaper to people’s homes. Today’s model [the content is] free; in the old newspaper model it costs [the publisher] to deliver the newspaper to you. This new model is more efficient.

Although this new model is “more efficient,” it doesn’t seem to be working. According to “court documents… The National Post had an EBITA[earnings before the deduction of interest, tax and amortization expenses] loss of $20.3 million, $16.3 million, $13.1 million and $12.7 million, respectively” from 2005-08.”

Mr. Harris suggests that newspapers might keep themselves afloat for longer by “increasing the price of the newspaper and lowering the amount of papers delivered.” This makes sense. By far the largest expense for newspaper publishers is in the printing (“It’s a killer,” says Mr. Harris). Unfortunately, a large part of The National Post’s woes are entrenched in the newspaper business. “News and opinion [are] harder to monetize” because they are commodities, Mr. Harris says. Through the proliferation of blogs and free access to information on the internet, newspapers have lost their competitive edge, and, slowly, their subscribers and advertisers.

People are only willing to pay for very specific kinds of news and information — not the kind of broad coverage that a newspaper provides. Mr. Harris provides a few examples of the kinds of digitial services and information people will pay for: “Music (iTunes), certain services (Amazon), niche content that serves business interests (legal sites where you can search specific cases), stock information.” More specialized sources of information, such as blogs and trade magazines can better serve these markets than newspapers, which typically cover anything from politics to television and film.

If the internet didn’t force a change onto newspapers, perhaps the newspaper industry would be better off now if it had. The music industry has had its fair share of trouble with piracy, but is now resurfacing and innovating with services such as the iTunes Music Store. If newspapers had faced the abrupt challenge that the illegal downloading of music presented rather than a slow decline in subscribers and ad revenue (compounded by the recession), they might be more resilient than they are now.

“All publishers are looking for new models,” Mr. Harris says. “You can’t force people to buy something. You have to recognize what the market wants.” And the market doesn’t appear to want to pay to receive news online. Conversely, people don’t want to live in a world without newspapers. More than providing news, newspapers excel at “shining a light in the dark places,” as Mr. Harris puts it, of society. Investigative journalism, or the newspaper’s role as a watchdog for corruption and crime is central to a newspaper’s business model. Mr. Harris says that “investigative journalism is important in the business perspective: a news organization can spend the time doing this and building [their] brand, whereas amateur writers and less established organizations can’t do this sort of thing.”

It might be in the newspaper industry’s best interest to capitalize on investigative journalism, and other features that remain unique to print newspapers. Anyone can set up a website, but  not everyone can move from blogging online to delivering newspapers. “People aren’t paying just for the content but a service. The service is to have stories printed and delivered on [your] doorstep,” says Mr. Harris.

But newspapers might also do well to appeal to potential readers who don’t have a lot of time on their hands. Everyone can conjure up an image of a man or woman sitting at their kitchen table on Sunday, sipping coffee and reading the newspaper. But the idea of skimming articles in the morning, on the way to work, or in the evening isn’t as popular. Many feel guilty if they let issues of their newspapers build up over a week in the mailbox, unread.

So although providing content online is a more efficient delivery method for newspapers, roadblocks still remain. Gina Chen at The Nieman Journalism Lab, a project of the Nieman Foundation at Harvard University, writes: “The truth is, for me, not subscribing — either in print or online — has little to do with money. It’s about commitment. And I think that’s the problem many news organizations are facing as they try to bring their products online.” Ordering a newspaper for a year, five or six days a week, is a large commitment. Isn’t it more liberating simply to read news at your own pace, from any number of different online sources?

Newspapers need to find a reason to draw you away from other news sources, or else they will not offer customers anything they cannot get elsewhere for free. If The National Post and other newspapers are to succeed in the long term, they will need to differentiate themselves from both each other and the myriad ways consumers have to find news on the internet.

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