Commentary

Newspapers are not dead yet. But their hoped-for rebirth as Internet ventures requires a new strategy to create value in their journalism. Proposal: Papers should agree to 24-hour delay in release of their content, free, on web.

By Peter Scheer

Reports of the imminent death of newspapers–which lately have become a staple in the very newspapers that are said to be flat-lining–are, as a good print journalist once said, greatly exaggerated.

Newspapers, especially big metropolitan dailies, are suffering, to be sure. They are losing editorial staff due to layoffs at nearly the rate they have been losing advertising to the Internet. Although the industry as a whole is still decently profitable, valuations have been falling because the markets, focused on revenue trends that point only downward, are panicked about the future.

The herd is betting that newspapers are in a death spiral, but some very smart investors think otherwise. They include Gary Pruitt of McClatchy, Dean Singleton of MediaNews, plus several hedge funds and savvy individual investors who bid unsuccessfully for the Knight-Ridder chain and are reported to be in the hunt for various parts of the Tribune Company, owner of the Los Angeles Times.

The optimists are not in denial about the magnitude of the restructuring underway in the news business. They see the trend lines too. But they anticipate that, following a period of continued decline (which they think will be gradual, not precipitous), both readership and advertising will stabilize once again, albeit at lower levels. And they are gambling that, from that more stable base of core customers, they will be able to reinvent newspapers as fast-growing online businesses, which the markets will value accordingly.

While the optimists are right, in my view, on the first part of this strategy, they need to rethink their plans for the Internet. Newspapers cannot succeed as Internet ventures–not on the scale they need to survive—if they persist in using a business model predicated on giving away their news content and selling ads based on the audience drawn to their free content.

The reason is that newspapers can’t sell nearly enough ads to make that model work. Even the most popular newspaper web sites are unable to sell advertising equal to more than 9 or 10 percent of their print edition revenue; and this after years of investment online. It’s not that newspapers can’t sell advertising on the Internet; it’s that ads must be sold on a scale that is vastly higher–think Yahoo or YouTube–than the levels newspapers can ever hope to achieve.

The challenge to newspapers today is how to realize the value in their news content. The market currently values newspapers’ content at effectively zero because zero is what most publishers, as a matter of business strategy, charge for it online. (The Wall Street Journal, with its specialized content, is the notable exception.)

In truth, newspapers’ editorial content has huge untapped value. This is so because the conventions of modern journalism make newspapers’ content relatively accurate and relatively credible in an online world in which the trustworthiness of nearly everything else–blogs, web sites, chat rooms, whatever–is unknown.

Despite this advantage for newspapers, individual papers generally cannot charge for their content online because similar content is available elsewhere on the Internet for free. If the Los Angeles Times unilaterally restricts access to its content to paying subscribers, users will go, instead, to washingtonpost.com for national and international news and to Sacbee.com, sfgate.com and mercurynews.com for state news. The LA Times will have achieved little except reduced ad revenue and a smaller audience online.

What to do? Here’s my proposal: Newspapers and wire services need to figure out a way, without running afoul of antitrust laws, to agree to embargo their news content from the free Internet for a brief period–say, 24 hours–after it is made available to paying customers. The point is not to remove content from the Internet, but to delay its free release in that venue.

A temporary embargo, by depriving the Internet of free, trustworthy news in real-time, would, I believe, quickly establish the true value of that information. Imagine the major web portals—yahoo, google, aol and msn.com—with nothing to offer in the category of news except out of date articles from “mainstream” media and blogosphere musings on yesterday’s news. Digital fish wrap all.

Participating newspapers must be careful to limit their agreement to just one issue: the duration of the embargo. All other competitive issues–subscription policies, how much to charge for different types of access (print and online) and to whom (consumers and Internet aggregators)– must be strictly off-limits.

To keep the Justice Department at bay, it needs to be clear that the papers are not acting as a cartel, but as a standard-setting body agreeing on a common standard for the timing of release of copyrighted content to the free Internet.

Collective action to create value in news content, while unorthodox, could enable newspapers to retool themselves into Internet businesses that can sustain the costly editorial staffs needed to create the content. For an industry that seems to be running out of options, it’s an idea worth considering.

Peter Scheer, a lawyer and journalist, is executive director of the California First Amendment Coalition.
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RESPONSES

Can 24-Hour Embargo Help Newspapers?

Media Post Publications

by Wendy Davis
The California First Amendment Coalition has a plan to save newspapers from the perceived threat of Google, Yahoo and other portals. Newspapers should withhold their content from all but paying subscribers for at least 24 hours, proposes Peter Scheer, a lawyer, journalist and executive director of the nonprofit.

“A temporary embargo, by depriving the Internet of free, trustworthy news in real-time, would, I believe, quickly establish the true value of that information. Imagine the major Web portals–Yahoo, Google, AOL and MSN–with nothing to offer in the category of news except out of date articles from ‘mainstream’ media and blogosphere musings on yesterday’s news. Digital fish wrap,” he wrote in a column in Sunday’s San Francisco Chronicle.

The full response appears here.

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