Richard Posner has written a characteristically thoughtful blog entry about the uncertain future of newspapers. He renders widespread journalistic concern about the unwieldy character of newspapers into the crisp economic language of “bundling”:
Bundling is efficient if the cost to the consumer of the bundled products that he doesn’t want is less than the cost saving from bundling. A particular newspaper reader might want just the sports section and the classified ads, but if for example delivery costs are high, the price of separate sports and classified-ad “newspapers” might exceed that of a newspaper that contained both those and other sections as well, even though this reader was not interested in the other sections.
With the Internet’s dramatic reductions in distribution costs, the gains from bundling are decreased, and readers are less likely to prefer bundled products. I agree with Posner that this is an important insight about the behavior of readers, but would argue that reader behavior is only a secondary problem for newspapers. The product that newspaper publishers sell—the dominant source of their revenues—is not newspapers, but audiences.
Toward the end of his post, Posner acknowledges that papers have trouble selling ads because it has gotten easier to reach niche audiences. That seems to me to be the real story: Even if newspapers had undiminished audiences today, they’d still be struggling because, on a per capita basis, they are a much clumsier way of reaching readers. There are some populations, such as the elderly and people who are too poor to get online, who may be reachable through newspapers and unreachable through online ads. But the fact that today’s elderly are disproportionately offline is an artifact of the Internet’s novelty (they didn’t grow up with it), not a persistent feature of the marektplace. Posner acknoweldges that the preference of today’s young for online sources “will not change as they get older,” but goes on to suggest incongruously that printed papers might plausibly survive as “a retirement service, like Elderhostel.” I’m currently 26, and if I make it to 80, I very strongly doubt I’ll be subscribing to printed papers. More to the point, my increasing age over time doesn’t imply a growing preference for print; if anything, age is anticorrelated with change in one’s daily habits.
As for the claim that poor or disadvantaged communities are more easily reached offline than on, it still faces the objection that television is a much more efficient way of reaching large audiences than newsprint. There’s also the question of how much revenue can realistically be generated by building an audience of people defined by their relatively low level of purchasing power. If newsprint does survive at all, I might expect to see it as a nonprofit service directed at the least advantaged. Then again, if C. K. Prahalad is correct that businesses have neglected a “fortune at the bottom of the pyramid” that can be gathered by aggregating the small purchases of large numbers of poor people, we may yet see papers survive in the developing world. The greater relative importance of cell phones there, as opposed to larger screens, could augur favorably for the survival of newsprint. But phones in the developing world are advancing quickly, and may yet emerge as a better-than-newsprint way of reading the news.
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Interesting post on targeting-ads………..thanks guys
I agree with the article in that the newspapers need to sell targeted Ads
How is this relevant to the issue of newspapers? It has to do with advertising, but on web sites in general, not just newspaper companies’ sites.
Mango: there will remain market demand for reporting, and thus there will remain reporters. Whether they are paid employees of newspapers and other old-skool media or have some other personal business model, they will exist.
Eh, that’s odd. What had I been referring to in my previous message? I don’t see (or particularly remember) anything about investment planning here. 😛
I will find it interesting to see how blogs and other online media are affected if newspapers really do disappear because many of the stories are taken from newspapers and not an original piece of reporting.
How is investment planning relevant here? We had been discussing advertising.
The wave of the future is the web not print media
The elephant in the living room here is that the same thing applies to television. Television advertising is a bit more targetable than newspaper advertising, but it’s not enormously so, and, analogously to the spread of online blogs and other sources of “news-on-demand”, we are beginning to see the rise of video-on-demand.
Broadcast television as we know it has no chance to survive make its time.
I agree with all of the descriptions about the problems of newspapers, but I think these problems are entirely solvable by the transformation of newspapers in not-for-profits. This sounds counter-intuitive at first (why would they do well as a not for profit, other than the tax advantage, of course) until you consider the many benefits that news papers (and a free press in general) give to society–for example: the exposure of corruption, raising public health issues, the public discussion and debate of important issues such as War–and it can be seen that newspapers, as a social institution, have unique moral connectivity in the larger society, and that connectivity makes their functioning as a not for profit not only likely, but preferable.
OK, that sounds like pie-in the sky theory, but it is actually happening. Here are a couple of examples:
link to discussion of this article at my blog: http://enigmafoundry.wordpress.com/2008/03/05/rumours-of-the-death-of-the-newspaper-have-been-greatly-exaggerated/
And another story from the Saint Louis Business Journal:
Thus, the newspapers have inverted the market–they are selling a social good, and maintaining their independence, too.
I have a theory that in some online advertising systems – Project Wonderful most notably – advertisers display risk-seeking utility. They pay more per unit for advertising if they can buy a lot of advertising all at once. I’ll buy a thousand clicks at a penny each, but if you can only sell me a hundred, then they’d better be less than half a penny each. Although that sounds irrational, it seems to be borne out by the actual prices people do pay in ad auctions. My link on this comment is to an article about this idea.
If it’s true that advertisers behave that way, and if they do it in other media as well, that could help save newspaper and television advertising: the advertisers who want really big exposure can’t afford to target because there just aren’t enough readers or viewers in the targeted venues. Those advertisers may still be willing to pay for untargeted ads, even at a higher rate, just to get the sheer numbers they want.
You’re 26?!
🙂
If instead of selling audiences to advertisers, you’re one of those peculiar folk interested in selling news to those peculiar audiences in pursuit of it I’d check out the keynote speech http://www.digitaldeliverance.com/blog/2008/06/second_annual_global_conferenc_1.html at the Second Annual Global Conference on Individuated Newspapers.