Scarcity versus surplus & "inferior goods"

The Taloussanomat case study is interesting because December 2007 is the earliest I know of any newspapers ceasing print publication altogether. The Christian Science Monitor didn’t stop until April 2009; http://www.csmonitor.com/2008/1029/p25s01-usgn.html.

Taloussanomat’s 10% spike in online readers with the cessation of print is amazing – I think that’s a pretty impressive jump given that most U.S. print readers also read online. Of course, it loses its luster when compared to the increase in online consumption of the Guardian and London Times. Now, the fact that the spike lasted 5 months is a mixed bag – is it good that it didn’t drop off after just a few weeks or is it bad that it dropped off at all? It’s a bit scary from an advertising perspective that online readership continues to fall. That means the payoff from the online-only gamble is entirely staked in cost savings, not an increase in online revenue. Scary. On page 6, Thurman and Myllylahti finally get to the crux of the decision – the paper was in dire straits and abandoned print out of desperation (losses of 31%). In that environment it, literally, pays to experiment.

I love the discussion of the key difference in economic principles of print versus online – the economics of scarcity versus surplus (p. 7). That’s fascinating and betrays that it will be hard for “inferior goods” like newspapers with dwindling audiences to be able to compete strongly online. Rather than a clash of the titans it’s a clash of the cheaps – low production cost versus low renumeration. How do you make the cost numbers small enough to run in the black from minimal and capricious online income? You use the Web to do what newspapers have long done – you target a subset of reliable, lucrative readers like the Taloussanomat is doing with the e-mail, and you “re-purpose” content so you can sell it twice, on other sites and in other publications. Interesting.

Most interesting is how the change to online only has affected the paper’s journalism: fewer original enterprise stories; more narrative rather than scholarly economic reporting; more stories from other sources, including PR people. Is this the future of American journalism? Can online-only outlets like the Voice of San Diego or Spot.us pick up the slack and tell the important stories? Or will corruption become easier to get away with without traditional newspaper journalism? It seems sadly ironic that newspapers will follow the ways of TV production (p. 13) – first, fast, piecemeal updates – when TV news in the U.S. has been riding newspapers’ coattails for decades.


Paul Farhi, Online Salvation
http://www.ajr.org/Article.asp?id=4427
Wow, the NY Times draws more than 10% of ALL online newspaper traffic and still is losing $18 million a quarter? And they stay for a minute a day – 20 seconds a day at the next nine newspapers? Ouch. The Farhi article mentions “hard core” visitors online and I suppose people like me and Kang fit that profile. We both still read print newspapers but Kang raises a compelling point. With print circulation you can reasonably predict to advertisers how many people will read your product next week or next month. Even with dwindling readership you can promise some number. But online who knows? I know that, unlike with print, online advertising is paid for after it runs, not before, which means this is more vital for news outlets than for advertisers. Also, I read papers in print and online, but I also go first to news aggregators, like Kang mentioned. Is Alice beginning to influence my behavior? 

The Patterson study is already dated – it’s from 2007: http://www.hks.harvard.edu/presspol/research/carnegie-knight/creative_destruction_2007.pdf
But it’s interesting, finding that brand names matter, probably more than anything else. In Miami and elsewhere, local newspapers teamed up with local TV stations in coverage partnerships, sharing some resources (video, reporting) and cross-promoting each other. Given that both are sinking ships, that model hasn’t been very stable either, with rotating TV stations and newspapers signing and breaking deals. And Miami is a big-paper town, with Tribune’s Sun-Sentinel and McClatchy’s flagship Miami Herald. TV stations are familiar with CMP – it’s how they set ad rates based on ratings. But if it takes 10 (or more) online readers to replace 1 print reader, that won’t compensate for the savings – even 70% savings – of printing and distribution. Look at it this way – the San Jose Mercury News “touted plans to increase its share of Internet revenue to 20 percent – by 2012.” So 80+ percent of revenue comes from print (90% for the Times). Saving 70% on publishing costs you 80% in revenue – and that’s bad math. My new BFF Craig Newmark seems to agree.