Wednesday, June 3, 2009

Invest in the content, not the channel

The American Press Institute, a newspaper industry group in Reston, Va., today released its big report on how it believes news companies should move away from free online content toward a pay-to-play model. There is no shortage of opinions on this issue, and many commentators/bloggers quickly jumped on the report as the last gasp of a dying business model. They may yet be right.

Download the 31-page report. (My favorite line, from page 23, is the header for this blog entry.)

But I'm not counting out the industry types just yet. The fact that a number of newspaper publishers and executives were in on the creation of this report means that when they do move, they're likely to do it in concert. No matter how loudly analysts yell or how much certainty they display, nobody knows what would happen if a large percentage of the content creators suddenly began charging for their news products and aggressively defending what they see as their intellectual property rights.

That said, I read the report this afternoon with quite a bit of trepidation and mixed feeling. Philosophically, I think publishers -- like music labels and film studios -- have a right to make money off the content they generate. The reporters and editors who do all that work deserve to get paid at the end of the day. And I do not necessarily agree with the horse-is-already-out-of-the-barn argument so often thrown around. But I do agree that the Web is fundamentally different than traditional print and should be treated in entirely different ways, including when it comes to charging for content.

The beginning of the report, when it states its assumptions and talks about adopting a paid-content model, left me feeling decidedly uneasy. It started off defensive and traditional, maybe as a sop to the industry's publishers who hold sway at API. An interesting thing happened as I continued reading, however. Some of the ideas started to sound right, even good. By the end, I had circled a number of points and could begin to see the makings of a functional news-company business plan.

It started to get really interesting when the subject of hybrid pay models came up. This is something I can get my mind around. The future doesn't have to be either entirely free or completely behind a Steel Curtain demanding your credit card number.

The hybrid model might offer a combination of online and offline products. A subscription might include access to the Web site, an e-reader edition, iPhone applications, deeper access to the news archives and a weekend print product or niche publication. News organizations might offer a bundle of products and services at different price points, much the way cable television offers premium channels, pay-per-view and digital recording devices along with telephone and Internet services. Users pick and choose, and their purchases show up on a monthly bill. In fact, the news might become a premium service that shows up as a monthly charge on the bill from your Internet service provider.

So, to extrapolate, news orgs might offer some basic news online for free in an ad-supported environment. Then it would partner with various technology companies to provide variations on micropayment or subscription models across a number of platforms. Provide e-readers or electronic-paper options to consumers who want it that way; make deep, niche-oriented premium content online and via mobile; develop iPhone and other smart phone apps; and a print product (not necessarily daily) as the top-end premium product for people who want to luxuriate with their news and information a little more.

One subscriber might want it all, and could have it at a bundled price. Another might only want the Kindle DX version with access to the expanded content online. A third might prefer only an iPhone app subscription. And a fourth might not want to subscribe, but would be willing to pay a nickel to read a story he or she is interested in. (Maybe even to pay another pass-along rate to send it to his or her friends.) All would be priced differently, and users would get a bill at the end of the month they way they do now with cable television or their phone company.

Go this route and news companies would lose a chunk -- possibly a very large chunk -- of their audience overnight. But they'd still be getting paid for their content, which is no small thing. Like cable companies and phone companies, they wouldn't have to earn the business of everyone in the market. Not even close. If you believe (as I do) that advertising will pay a smaller and smaller portion of the bills for these companies in the future, that's probably okay. Something else needs to replace much of that lost ad revenue, and this is one of the ways to start experimenting and moving toward that eventuality.

Regardless, this is all easier said than done. It would require news providers to be better than they've ever been, for one thing. Convincing people that you have a truly unique and valuable product, in a world where a lot of other information is free and easily available, is no easy thing. But that's what we're supposed to be good at, so this would be the time to prove it. If customers don't agree, of course, you're sunk.

Given the current trends, we'll be sunk anyway if we don't find a way to gin up additional revenue soon.

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