Kelly - Stepp, Time to Panic

"Daily newspaper circulation has declined every year since 1987... Thirty years ago, 71 percent of adults read a daily newspaper. Ten years ago, it was 59 percent. Last year's figure: 48 percent."

Those are ominous indicators of changing economics and, seemingly by definition, diminishing marginal utility. I think there are two distinct factors at play in diminishing "utility" or demand for traditional media, especially newspapers - although both stem from the technological revolution.

The equimarginal principle assumes that soverign consumers will seek to "maximize utility from consumption." If information is the currency, how do we define maximimum utility? Is it the most beneficial or valuable information (i.e., Wall Street Journal) or the most enjoyable (i.e., TMZ.com)? Ready access to a world of selectable information online literally changes the equation because now consumers can choose to meet their varying utilities minute by minute, spreading allocation of time far and thin. This diminishes investment in traditional media like daily newspapers or local and network newscasts.

But, the decline in news consumption began even before 1987 among younger Americans, so onsumer utility was venturing elsewhere even before the Internet - probably due largely to VCRs and cable TV. We talked last week about the fixed costs of newspaper production and distribution (in the 60 to 75% range) - the variable costs can come only from staff cuts which dilute quality, which Stepp rightly slams as counterproductive. I love his vision for a highly interactive hyper-local news page (ranking sermons?!) but think he's too optimistic. He mentions four staples of journalism (entertainment, discussion, connection and reliable information) but only the latter may be better in print than online. I couldn't agree more with Yonghwan about selective exposure. If the attribute of interest to consumers is self-selected, free information - both consuming and creating it - traditional news is in big trouble.