Thursday, August 7, 2008

A radical step for saving newspapers

In response to my gloomy predictions about newspaper commoditization, newspaper columnist (and editorial cartonnist) Ted Rall says: “News does not want to be free.” Rall’s plan: pull their websites, copyright the stories, and cut off the news services (which for decades have had the rights to republish the content of their newspaper clients).

Here I find myself partly in agreement with Rall, which is a real shocker. If I were to read every one of Rall’s columns for the past 6 months, I’d say I violently disagree with almost all of them — they’re not just wrong, but bone-headly so.

Here, however, I agree with two main points of Rall’s analysis. First, the non-response by America’s newspapers is failing abysmally. If the managers of these businesses were thinking long-term, they’d take risks — die fighting rather than die quietly — because their current strategy is clearly going to fail. (I might modify the plan to — as one prominent newspaper publisher suggested — stop free websites but keep the content available for a fee).

Second, one of the biggest problems that the newspapers face is that their content is being provided by AP, AFP, Reuters, DJ etc to the websites that are slitting their throats, such as Google and Yahoo news. Anything that helps these competitors just hastens the inevitable.

Rall’s plan is a radical break from the past, but the past strategy has failed. I personally think it would be more fun to do it Rall’s way, and if I were a newspaper heir — with a big city metro — I’d try to convince my cousins to let me give it a try. However, there are at least two management theories that strongly suggest this isn’t going to work.

First, in his 1997 manifesto Clay Christensen basically said that low-end solutions get underestimated until they wipe you out, and that the only way to survive such a threat is to cannibalize yourself. Pulling all your content off the web — rather than trying to make a successful business on the web — is worse possible thing to do in Christensen’s book.

Second, there’s the ol’ prisoner’s dilemma problem. If the NYT and NY Post and Daily News and Newsday all take down their websites, maybe New Yorkers will actually buy papers. But maybe the New York Sun or New York Observer won’t, and enough readers will consider these papers “good enough”. If one newspaper defects (ink-stained wretches: think newspaper strike) the rest will defect too.

OK, so most cities aren’t like NYC: they don’t have four printed dailies, but one. Still, the big cities tend to have a suburban daily (or chain of mini-dailies). Some cities have a free subway daily, and nearly all have a free weekly that might want to offer an online news update.

Even without competitors, newspapers have the problem of substitutes: they’re called TV stations. Survey after survey reports that local television has 3x the audience that local newspapers do. So Google and Yahoo wouldn’t hire local reporters to counter Rall’s Revolution, but the TV stations already have them. (They’re called “producers,” not to be confused with the sit-down and stand-up news readers).

I can’t see how this cat will ever get back in the bag. The good news is that because the newspapers are largely irrelevant to 90% of the American population, they could probably form a cartel to control the distribution of their proprietary IP (i.e., rein in the AP) and there would be no plausible antitrust agreement against it. But the chances that hundreds of newspapers will agree on anything seems slim: perhaps once they’re all owned by three big chains, then it will happen.

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