Why the Internet Pro(ph)its are Wrong
I want to throw down my gauntlet in the future of journalism debate and I will do so making a falsifiable statement (a rarity in these discussions): Journalism will not become profitable again until the industry figures out how to charge people for online content.
Recently I went to yet another hyperbolic panel discussions on internet journalism. The CEO of Slate.com Jacob Weisberg spoke in triumphant tones of how the time for coexistence between print and online was over now that the internet guys had bigger “armies”. It sounded a bit like a declaration of war from some newly empowered ethnic nationalist movement whose glee over a fresh shipment of arms stripped away any facade of caution or diplomacy. This guy was ready to march on Rome and he didn’t mind saying so.
Some of his hot air was sucked out when an audience member asked him, “Is Slate.com profitable?”
His enfeebled response drifted from something about lawyers to an awkward silence.
And that is the point – behind all the rhetoric and triumphalism it is very hard to think of any free ad-based content that has proven profitable. Google – the king maker of adbased revenue – has not been able to monetize there most user-centric web 2.0, journalism for the people, ethno-everything magic tool: youtube.
And folks if Google can’t create big ad based profits on user generated content that ought to be telling us something.
The theory is that people are unwilling to pay for content now that anyone can publish stuff online. There is no scarcity, according to this reasoning and people will not pay for something that is not scarce. You or I can put up a movie review according to this argument and it can compete with the best.
This is wrong.
Scarcity of news is actually increasing not decreasing. Its true that anyone can publish online for free – and there are certainly more opinion makers than ever before – but that does not mean that you can do reporting for free and we actually are seeing a shrinking core of new coverage.
The media adopted a false economy online. When one newspaper decided to offer free ad-based content they all had to jump in or face being left behind. For awhile the public adapted to this free, unsustainable model and the newspapers and magazines – bloated from decades of plenty – could afford to try out this new idea of giving it all away. It failed.
Ad revenues were never able to deliver up the goods. All the sources of news that we have relied on for decades are going under. And they are not being replaced. A million opinion writers blogging on a million other opinion writers cannot fulfill the one vital function of journalism: to gather news.
We have gotten into thinking that this is a service we can get for free because we jumped on board with the news media’s failing experiment in something for nothing over the past eight years. And once a certain amount of news media and consumers decided to invest in this experiment the rest had to. But now it is coming to an end.
The audience will not come to paying for content out of a love for the product but out of a neccesity. The failure of the free model is going to leave us with very few quality media outlets. That means there will once again be scarcity.
When quality, free content dwindles past a certain point people will once again be willing to pay for news, just as they always were before these past eight years of illusion. The industry, for its part will need to work out a pricing structure that leverages the ease of payment and low cost of publication that online offers.
Lots of people thought that noone would ever buy music again but Itunes found price structure that worked – as of June 2008 the store has sold 5 billion songs. The trick was knowing to do it 99 cents at a time.












