Spurred by alarming erosion of the newspaper industry, the New America Foundation recently hosted a panel session with various, political, media, and journalism figures, featuring among others, Sen. Ben Cardin (D-MD), Atlantic Editor James Bennet, Washington Monthly Editor in Chief Paul Glastris, Harvard Kennedy School’s Alex Jones, philanthropist and Washington Monthly investor Jeffrey Leonard, and Steve Coll, President and CEO of the New America Foundation and former Managing Editor at The Washington Post. Titled “Who Pays for the News?” the panels sought to address how the media can provide independent, investigative, and public-spirited journalism in a moment of such profound structural change.

While panelists and other observers have enumerated a number of reasonable causes of the newspaper industry’s woes – ad revenues lost to the internet, poor quality of reporting, the debt burden of news conglomerates – these problems fail to grasp the broader context by incorrectly conflating symptoms and disease. This mistaken reasoning was best characterized by Sen. Cardin, who offered an elegiac declaration that the business model of a traditional newspaper is “dead,” a fact Sen. Cardin believes to imperil democracy as we know it. Although the temptation for drama can be hard to resist, this particular diagnosis suffers from the incorrect assumption that traditional outlets are inextricably tied to the news they report. To be fair to Sen. Cardin, newspapers have themselves enthusiastically embraced this assumption, helping foment a process wherein media companies have wandered haphazardly into a parallel, but nonetheless entirely distinct industry. The question then, pace Sen. Cardin, isn’t whether the print business model is “dead” in the digital age, but rather why it was ever presumed to work.

The answer – that newspapers employ the reporters who generate news content – seems at first obvious, but like blaming lost ad revenues, focuses too narrowly. Of course, it’s hard to begrudge the mistake; the act of reporting is not an inconsequential commonality between online and print news production. Unfortunately, there are also a series of far more consequential points of disunity. To name a few: printing costs, work space (the New York Times recently spent over $600 million on its new headquarters), and paper delivery.

What’s more, the shape of modern newspaper production owes to economic realities that simply don’t apply to the Web. For instance, the sheer breadth of coverage in the New York Times can be attributed to the economies of scale associated with printing and delivering a physical newspaper. As the quantity of paper printed increases, the marginal cost decreases. For a newspaper then, it’s good business sense to try and cover as many topics as possible. The same is true for the reader, who gets more per dollar in a large daily newspaper than by aggregating by hand. By contrast, the marginal cost of Web publishing – in essence, the cost of an additional page view – rapidly approaches zero. As such, there’s little economic benefit to a Web publication expanding coverage to include disparate topics. This development is just fine by the reader, who with the help of RSS, can gather information from across the Web in one browser window for no additional cost.

Similarly, traditional print revenue streams like subscriptions and ad revenues also illicit the dangers of facile parallels. For example, Paul Glastris suggested during the panel that the buyer-seller relationship with respect to Web journalism had been abrogated, and a culture of free content had grown too deeply ingrained. In fact, cost expectations for Web content do not result from a wild-eyed spirit of rampant anti-capitalism, but instead reflect the near zero marginal production costs of Web publishing. When the cost of producing an additional “copy” of a story is almost zero, how can the publisher set a reasonable price?

A closely related problem belies advertising revenues. Because of the relatively low production costs of Web publishing, even if ad models were perfectly portable between print and online mediums, expected revenues would still be lower. Meanwhile, the inapplicability of economies of scale to Web publishing means that the costs of adding more original coverage (hiring reporters, editors, etc.) will rapidly outpace the revenues that advertising across that content can generate. This isn’t to suggest that Web journalism can’t function as an ad supported industry. Indeed, smaller and more focused outlets like TalkingPointsMemo and Politico are already succeeding in this model.

Still, correctly identifying the problem and highlighting a few working models doesn’t answer the many remaining difficult questions. Will the dailies make the transition? Will market solutions like online advertising support less popular, but socially invaluable investigate and local reporting? What role, if any, can the government play in ensuring a vibrant and robust press? Over the coming weeks, I hope to address all of these questions and more – so stay tuned!

May 14th, 2009 by Jonathan Berke | No Comments
Tags: digital media · Media · newspapers