Sunday, August 9, 2009

The free ride that's killing the news business

David Marburger and Dan Marburger write:

Remember the Little Red Hen? She's the one in the folk tale who asks the other barnyard animals if they will help her cut the wheat, grind it into flour and bake the bread. They refuse. But when the warm bread emerges from the oven, they are eager to help the hen eat it.

Now let's suppose the story continues, with the Little Red Hen opening a roadside stand to sell her bread. Instead of merely eating it themselves, the cow, the pig and the dog each take some of her loaves and open competing roadside stands. Vying for sales, they undercut her price and each others'. Because the Little Red Hen bore all the costs to produce the bread, and the other animals bore none, she can't afford to match their prices, and they drive her out of business.

Current law compels one business in the U.S. to play the role of the Little Red Hen -- the daily news business.

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1 comment:

aml said...

There are some thing that the Marburger's seem to be leaving out:

1. Advertising is tough through all media outlets, and that can partially explain why Internet advertising rates aren't keeping up with the increases in readership. Its nearing three months since the television's upfront, and little if any has been sold. Radio advertising is down significantly as well.

2. Most of the traffic that went to classified advertising in newspapers has not gone to news websites OR aggregators. Advertisers want to advertise because they believe that if they put a little money for advertising it will return to them severalfold in sales. Classified advertising was amazing in this regard. Someone started with a need ("I need a new car") sought out a newspaper with that need in mind, and in tune to the idea of purchasing a car. (compare that to TV advertising or most newspaper display advertising that wants to try to convince me that I want to buy Frebreeze, or Coca-cola, or shop at Macys, etc.) Automotive, Real Estate, and Career advertising has a much higher response rate than most advertising, but its gone now, mostly due to either search or specialized search sites. If you are interested in cars you are much likely to go to Google directly than a newspaper web site. If you want a job you go to or Craigslist.

(it isn't all the newspapers fault that they lost the classifieds market. Some of it is due to the way the web makes much more active readers (who will search for content that interests them rather than consuming media until it arrives.) Search has allowed a closer link between advertiser an consumer and no longer uses media as an intermediary. Also, since sites say that the DMCA allows them to be carriers rather than publishers of content, they aren't held to the same standard that newspapers are for advertising. (so Craiglist is exempt from the Fair Housing Act, but newspapers are not, even if they publish their ads on their web sites.)

3. Advertising on the web isn't the same everywhere, and advertisers care about where their ads are seen. Look who advertises at where the op-ed was published, Sprint, Target, etc. The scapegoat of the article can get ads for places like American Red Cross (which probably advertises run-of-site if they buy ads on a news originator site, and across advertising networks otherwise.) and sketchy privacy violating advertisers like "Do you support Obama's Healthcare, vote here now."

From there look at other sites relying mostly on links, Drudge Report, Huffington Post, etc. teeth whiteners, massage therapist training schools, etc. The news originators and the news aggregators aren't competing in the same advertising market.

4. Although they pay it lip service, they seem to minimize the amount that aggregators give traffic to the news web sites. I would be unlikely to read an LA Times op-ed unless it was brought to my attention. Or a Cleaveland Plain Dealer, or Tampa Bay 9 news, etc. I may not click on the original link of every article, but that is because I'm not interested in the content of every article. An aggregator giving me even a direct copy of a headline and a lede is only going to prevent me from clicking through if reading one or both has proved to me that the subject matter is uninteresting. The aggregator can try to pique my interest, but I don't have to take them up on all of them.