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The problem facing the newspaper industry is a similar problem facing the airline industry. It is one reason why the airline industry has had terrible economics

The problem facing the newspaper industry is a similar problem facing the airline industry. It is one reason why the airline industry has had terrible economics since Kitty Hawk. At first, the newspaper business model was this: there were many competitors, and each competitor faced a mix of fixed costs (staff, printing facilities) and variable costs (paper, ink, delivery). All was fine, because nobody would give away product that had real cost associated with it. But then the variable cost disappeared. No more paper, no more ink, no more delivery. Suddenly, the only thing left was fixed costs. And all the competitors realized they could start undercutting the next guy, while still making some infinitesimal incremental profit on each viewer. Of course, that incremental profit does not amount to enough to pay for all those fixed costs (staff) that still exist. And hence the problem we have today. Airlines face the same problem. Fixed schedules and a low cost per incremental seat. So there are always price wars going on to "buy" seats from competitors. But then they can't make up for their fixed costs, and they go out of business. Without the introduction of variable costs into web content, the newspaper industry will resemble the airline industry: it will rarely make money, and, on net, probably destroy most shareholder dollars invested in it. People will keep talking about erecting pay walls, or fixing the system, but there will always be the next guy who will be willing to provide the same thing for free to grab all those viewers.

alanthonyc 17y ago
There is a fundamental flaw in your analogy: airlines are selling actual scarce goods (limited seats on a plane). Newspapers, as they are today, aren't really selling anything. Fact: News existed before newspapers. Fact: News will exist after newspapers. The "news industry" has never been in the business of creating anything. They were simply in the "fact distribution" business. Facts used to travel more efficiently via the newspaper than any other means (gossip, telephone, even television). But now that distribution costs on the internet are virtually nil, they can no longer make money by exploiting inefficiencies. This is the reason that Simon's plan is never going to work. If they try it, they'll go out of business just that much sooner. There are publications that still make money off subscriptions. The Economist is the shining example (I even subscribe, for a pretty substantial fee). The value in their publication is in their analysis of the facts. Everybody will know the same things pretty quickly. However, not everyone will come to the same conclusions. Those conclusions are what they should be charging for, not the facts.
- albertsun 17y ago
  Even people in the "fact distribution" business via the internet (newspapers or not) will expect to make an amount equal to the value they are creating by moving those facts about.
- antidaily 17y ago
  Maybe common facts or stories (eg "MJ dies") could free or cheaper than exclusive content.
- lutorm 17y ago
  I disagree that papers aren't creating anything. To the extent that todays' news industry just parrots back press releases, you may be correct, but I definitely think there's a need for not just interpretation but investigation. If there had been no newspapers in 1972, I don't see who would have put in the effort of pulling at the threads until the Watergate scandal unraveled. To take a more modern example, I don't see any bloggers that would have taken the time or had interest in doing the few big investigative stories that the San Jose Mercury has broken in the past few years, the one about people being wrongfully jailed because of bad public defenders and the one about the SJ Police's outrageously high number of downtown disorderly arrests, come to mind. Those are not stories that would have come out in the absence of an operation willing to commit to long-term footwork. They certainly wouldn't have been written by some bloggers looking for news online, because it's happening in the real, offline, world, and you can't just "link" to it. Without newspapers, or the equivalent thereof, these stories would not be told and no one would keep the government honest (to the extent that newspapers today haven't already failed at this). And I think this would be a loss to society.
  - alanthonyc 17y ago
    I've heard the Watergate story used as an example before of a reason why news organizations should "matter." At first thought, it sounds like there is a third value proposition there (the three being fact distribution, analysis and investigation). Upon thinking about it more, don't you think that the value of the Washington Post is a little over-emphasized in that story today? As much as the newspaper itself played a huge part in allowing the story to break - from employing and training their staff, through providing an infrastructure for doing the investigation to publishing the actual piece - they almost had as much of a role in killing the story. If the editor at the time had succumbed to the pressure from the politicians, he may have caused the story to disappear. In the end, it wasn't the "newspaper" who investigated it, it was two guys named Woodward and Bernstein. One thing I believe in is that the internet empowers the individual to do things that were previously impossible to do by one person. Theoretically, I think this applies in this situation as well. As for the SJ Mercury News example, would that not be the same thing here? I'm sure there at least a couple of individuals in that group that are driving this kind of journalism. Maybe the newspaper as an organization helps foster and nurture this type of behaviour, but so what? Couldn't an organization that is not in the business of printing on paper do the same thing? What is the difference between a newspaper and a blogging organization anyway? Is it the salary? Is it the medium? Nobody is decrying journalism, just the old (economically) unsustainable models.

alanthonyc 17y ago

There is a fundamental flaw in your analogy: airlines are selling actual scarce goods (limited seats on a plane). Newspapers, as they are today, aren't really selling anything. Fact: News existed before newspapers. Fact: News will exist after newspapers. The "news industry" has never been in the business of creating anything. They were simply in the "fact distribution" business. Facts used to travel more efficiently via the newspaper than any other means (gossip, telephone, even television). But now that distribution costs on the internet are virtually nil, they can no longer make money by exploiting inefficiencies. This is the reason that Simon's plan is never going to work. If they try it, they'll go out of business just that much sooner. There are publications that still make money off subscriptions. The Economist is the shining example (I even subscribe, for a pretty substantial fee). The value in their publication is in their analysis of the facts. Everybody will know the same things pretty quickly. However, not everyone will come to the same conclusions. Those conclusions are what they should be charging for, not the facts.

albertsun 17y ago
Even people in the "fact distribution" business via the internet (newspapers or not) will expect to make an amount equal to the value they are creating by moving those facts about.
antidaily 17y ago
Maybe common facts or stories (eg "MJ dies") could free or cheaper than exclusive content.
lutorm 17y ago
I disagree that papers aren't creating anything. To the extent that todays' news industry just parrots back press releases, you may be correct, but I definitely think there's a need for not just interpretation but investigation. If there had been no newspapers in 1972, I don't see who would have put in the effort of pulling at the threads until the Watergate scandal unraveled. To take a more modern example, I don't see any bloggers that would have taken the time or had interest in doing the few big investigative stories that the San Jose Mercury has broken in the past few years, the one about people being wrongfully jailed because of bad public defenders and the one about the SJ Police's outrageously high number of downtown disorderly arrests, come to mind. Those are not stories that would have come out in the absence of an operation willing to commit to long-term footwork. They certainly wouldn't have been written by some bloggers looking for news online, because it's happening in the real, offline, world, and you can't just "link" to it. Without newspapers, or the equivalent thereof, these stories would not be told and no one would keep the government honest (to the extent that newspapers today haven't already failed at this). And I think this would be a loss to society.
- alanthonyc 17y ago
  I've heard the Watergate story used as an example before of a reason why news organizations should "matter." At first thought, it sounds like there is a third value proposition there (the three being fact distribution, analysis and investigation). Upon thinking about it more, don't you think that the value of the Washington Post is a little over-emphasized in that story today? As much as the newspaper itself played a huge part in allowing the story to break - from employing and training their staff, through providing an infrastructure for doing the investigation to publishing the actual piece - they almost had as much of a role in killing the story. If the editor at the time had succumbed to the pressure from the politicians, he may have caused the story to disappear. In the end, it wasn't the "newspaper" who investigated it, it was two guys named Woodward and Bernstein. One thing I believe in is that the internet empowers the individual to do things that were previously impossible to do by one person. Theoretically, I think this applies in this situation as well. As for the SJ Mercury News example, would that not be the same thing here? I'm sure there at least a couple of individuals in that group that are driving this kind of journalism. Maybe the newspaper as an organization helps foster and nurture this type of behaviour, but so what? Couldn't an organization that is not in the business of printing on paper do the same thing? What is the difference between a newspaper and a blogging organization anyway? Is it the salary? Is it the medium? Nobody is decrying journalism, just the old (economically) unsustainable models.