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.”
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.