News Distribution and Revenue-Generation in the Internet Era

-- By SamSalyer - 07 Dec 2011

It is no secret that the Internet Era has hit news organizations hard; the death of newspapers has, of course, been a widely reported phenomenon. As more people access news though free online sources, fewer are inclined to pay for newspapers or magazines, transforming the once wildly profitable newsprint industry into one that struggles to stay in the black.

What "wildly profitable newsprint industry"? Are you actually talking about the newsprint industry, the people who make the paper? You can't be talking about newspaper publishers, who have been going out of business and consolidating for fifty years now. No one was making good money out of newspapers before the Internet.

Nor has this anything to do with free information sources. People are rarely driven out of business by someone competing with them on their costs. Usually what hurts a business is competition with how it makes its money. What the Internet did to newspapers was that it created Google and Craigslist. If we're going to talk about the business of newspapers, please let's at least try to remember what the business was.

Nationally, the number of newsroom staff has shrunk by a quarter over the last five years, as newspapers lay off reporters and copywriters to combat sharp declines in circulation and advertising revenue. As the revenue generated by print editions shrinks and online revenue growth stagnates, news organizations must adapt quickly or go under. The way news is distributed and funded is rapidly changing.

Why Newspapers are Dying

Most of those who bemoan the fate of newspapers are centrally concerned about the “serious” news – investigative reports, coverage of the Governor’s budget cuts, or the city counsel meeting. Most newspapers, however, devoted more coverage to soft news – sports, entertainment, human interest stories – than to hard political or investigative reporting. A glimpse at The Huffington Post suggests that this is still true.

Traditionally, the bulk of newspaper revenue came from advertisements: car dealerships, retailers, listings for homes, and job openings. These businesses advertised in newspapers because of their wide circulation to people who mainly wanted to read about celebrities and sports. Their money funded the “serious” journalism that fewer people paid attention to. This was the old newspaper model, as stated by Clay Shirky: “[w]riting about the Dallas Cowboys in order to take money from Ford and give it to the guy on the City Desk.”

There's lots of things Clay is smart about. Why quote him about something obvious?

But now the web provides better celebrity and sports news for free so people are canceling their subscriptions. Car dealers have learned that most people spend several hours researching a potential car purchase online, so they send more advertising dollars to cars.com instead.

Umm, cars.com is not really the point here. Why are we discussing not the elephants, but the tick living on the back end of the mouse?

It’s important to recognize that “serious” newsgathering has always been subsidized by something else. With the demise of the newspapers model, that subsidy is going to have to come from new sources.

A New Distribution Model

Many have begun to suggest that newspapers adopt a non-profit model, using extensive endowments to fund their operations. While this is a viable option for well-known newspapers which could attract the sort of massive endowments that would be required (an estimated $5 billion for the NY Times) it doesn’t seem realistic that money could be found to endow newspapers around the country.

Umm, when you're not actually printing anything on, like, paper, what's this "around the country" thing? These aren't baseball teams playing in stadiums, they're "heads of ecosystems," like National Public Radio, Wikipedia, MIT, or archive.org. I assume the survival of "New York Times" as a generic designation, but they are in fact a network of reporters sharing content, and they will become more so as the cooperatives from which they presently consume grow in importance.

There is a necessity for a nationwide network of reporters sharing content, so that there will be someone on the ground when a tornado hits Iowa, or reporters from Anchorage who can inform the country about the back-story of the newest Vice-Presidential candidate.

Happening. Just look for it and you'll see it.

But there is no longer a need for newspapers in all these places. Since there is no longer a need to physically deliver news to subscribers, reporters are freed from word limits and news organizations are freed from the need to package wide-ranging stories together in a paper made appeal to all their subscribers. Instead, readers can use RSS to receive exactly the information that interests them.

This conflates two different and quite unrelated questions: the simultaneous de-localization and re-localization of journalism that comes with the Net, when informational friction is reduced to zero at all geographic scales, and changes in reader habits that come from the hyperefficient filtering of digital information streams. Both are important, but the mash-up of the two isn't important, it's just misleading.

This gives individual reporters the opportunity to develop their own audience by covering a very specific beat. A reporter could extensively cover a relatively small community in the sort of depth that is impossible in a newspaper trying to expand its circulation. Likewise, because physical distribution is no longer necessary, a reporter could thoroughly cover a topic of intense interest to a small, wide-flung group of people. By making it possible for reporters to concentrate their coverage on smaller communities, the quality of that coverage will increase.

That's re-localization. Sharing makes it possible, by connecting that better local coverage to everyone, whether local or not, who would make a voluntary micropayment to support it.

As public radio and the growing number of community and ethnic newspapers (the only segment of the newspaper industry currently expanding) have demonstrated, if you provide an information service of sufficient quality and value, people will pay you for it, even when it is ostensibly available for free. As Michael Goldhaber explained in "The Attention Economy and the Net", in an information economy, attention can be used to generate money. Additionally, direct funding of reporting will increase the quality of news. When a reporter’s paycheck comes directly from the community he is covering, he will be more responsive to the actual needs and interests of his readers.

His income always comes from the community she is covering, plus the community she is informing. The only historical variable is how much of that support had to be consumed in printing things on paper and delivering the paper in trucks (answer, almost all of it), and how much of what was left over was stolen by the publisher (answer, almost all of the rest). Now, minimizing the remainder of the intermediation between writer and editor, on the one hand, and reader on the other, turning that remaining intermediation into a non-profit controlled by the community, we secure for the writer and editor the very best deal possible, and we give to the community covered and informed the only thing they deserve to have: control. We can do that with Central Park, and we can do that with Carnegie Hall, and we can do that with National Public Radio, and we can do that with the New York Times. What's the problem again?

There is also potential for investigative reporting, the most bemoaned supposed casualty of the death of newspapers, to be funded through a "Street Performer Protocol," as described by John Kelsey and Bruce Schneier. Reporters covering both local and national stories could release preliminary results, and condition further investigation on a certain level of donation from the public. This funding model would also have the twin benefits of directing reporters’ time and energy towards stories that peak the public interest, and towards investigations that show signs of bearing fruit.

Why bother with some old technology? All you really mean is we can PayPal? reporters who publish things on the web that we know are valuable and that won't get done if we don't pay for them ourselves.

The end of newspapers could lead to a news model based around a few endowed, national news organizations, a network of reader-supported local and community reporters, and investigative reporters or teams looking into specific stories or allegations that the public has an interest in funding. This model is enabled by the reader’s ability, in the internet age, to access exactly and only the content he is interested in, and has the potential to improve new coverage by allowing reporters to cover a more narrow beat and requiring them to be more responsive to their readers.

What's "could"? Which part of this hasn't already happened? If all of it has already happened, what could we make this essay about that would push the conversation forward, instead of suggesting that the present could still occur one of these days?

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