Tech & VC 21 Sep 2007 02:33 pm
News Consumption
From the WSJ, a picture of newspaper revenues offline (left) and online (right):
As exemplified by the picture above, newspapers can’t figure out how to make money online. However, it feels like primary news consumption is moving online at a much faster rate than online news revenues are growing.
I exclusively consume my news online. Almost all of my peers do the same. This story from ABriefMessage is a nice anecdote to capture this overwhelming feeling that print news is antiquated due to the shift to online consumption.
So, as more people consume news online, it gets increasingly cheaper to give each person their news. Paper, ink, bags, boxes, trucks, and delivery personal all cost money. Much more money than bandwidth and servers by contrast. The marginal cost of delivering the news to a customer online practically zero. And, as we all know from econ 101 (which I attended at Wikipedia University, so feel free to tell me how wrong I am in the comments), the price of a good in a competitive market always gets pushed towards its marginal cost.
Therefore, I don’t think we’ll ever see a day when the left side of that newspaper revenue chart shifts over to the right side of the chart. Because it costs essentially nothing to serve each incremental customer in an online news model, each incremental customer expect to pay essentially nothing for the news.
[Note: I found this picture via Lightspeed blog and is originally from the WSJ. Due credit to both.]
7 Responses to “News Consumption”
on 21 Sep 2007 at 4:01 pm 1.david said …
That’s a truly staggering graph (though I’m a little confused by what the right graph measures… is that just newspapers, or is that all online ads). Very interesting stuff, and I do think that’s a pretty good point about cost of delivery. Cheers!
on 21 Sep 2007 at 7:02 pm 2.yancey said …
this is somewhat tangential, but stories/posts like this always put me in a certain mindset: news doesn’t just happen. sure, sometimes it does (and this is generally of the 6 o’clock local news variety), but the vast majority of what we consume as news was carefully researched, tracked, followed, poked and prodded, and some bit of information that a group of people deemed important and viable is uncovered and presented to us. with me?
now who is it that uncovers more than 80% (if my memory serves) of this information? newspaper reporters. cable news would not have anything for their talking heads to “debate” if it weren’t for newspapers. blogs would not have anything to respond to. most of what we learn about our world comes from reporters who work for newspapers, men and women who do more than take dictation from public officials and corporations, people who factcheck.
of course some are better than others, and our media leaves much to be desired. but at its core function, it is excellent. much better than the so-called “citizen journalists” of the blog world, who are great for contextualizing shared information, but who are terrible at actually uncovering it. and television news… where to begin?
anyway, what this comes down to is that the process of newspapers shifting online with smaller budgets is *not* a good thing. sure, they can save somewhat on delivery and printing costs, but staffing is more important than ever, and i have a hard time believing that the companies/funds/whoever that own the newspapers will decide to keep on their international reporters and ax a couple of ad guys instead. writers and journalists are incredibly devalued right now — freelance rates are the same as or lower than what they were in the late ’60s (think about that) — and shifts like this are only furthering it.
certainly music fits into this as well — how do some of our oldest professions survive in this new world — and the same issue complicates both situations: how to adequately compensate the people who create the product that we readily consume? no one has answered that yet — but stay tuned for q1/q2 2008. ;)
on 22 Sep 2007 at 8:44 am 3.Andrew Parker said …
Yancey,
I totally see your point, and I too am concerned about journalistic integrity in the digital media space. Two points:
- I think the quality of journalism coming our of some (not most, just some) zero-budget blogs is actually a good deal higher than your average newspaper column, so money is not necessarily the limiting factor.
- blogs are often better factchecked that major media outlets IF A) the blogger is popular enough to have a large commenting community, B) you make sure to read all the comments of any given blog post, and C) the blogger doesn’t moderate comments based on disagreeable content.
In the case where A, B, and C are all satisfied, I think the comments are the ultimate fact check because people can’t wait to correct a blogger in the comments. Furthermore, they are not paid, they work out of passion to enhance the resource they love reading. So, their motivation is far greater than any normal factchecker. This insight was best captured on the USV blog here: http://www.unionsquareventures.com/2007/05/who_do_you_trus.html
on 24 Sep 2007 at 2:00 pm 4.Eric said …
Hey Andrew,
I posted the same exact pic on my blog the other day too: http://www.marketing.fm/2007/09/20/online-vs-print-spending/
I think we will continue to see the right side of the graph climb – and possibly be equal if not higher. “Overall” is what gets people in counting spend – these numbers are usually from sources that have to report it. I would like to see the real numbers from all the smaller sites that do not report ad revenues back to a higher source.
Also – at what point do crossover buys come into effect? How do we count advertising that is part of a offline buy? All just food for thought.
on 25 Sep 2007 at 8:22 pm 5.candice said …
A coworker at my clients’ made a reference to the evening news the other day.
I said to him, “You realize, that no-one anywhere near my age watches the evening news?”
on 26 Sep 2007 at 2:07 pm 6.Ethan Bauley said …
Scott Karp at Publishing2.com (along with Jeff Jarvis and others) is building a really interesting platform described as “a journalist-powered news aggregator.”
http://blog.publish2.com/2007/08/14/introducing-publish2-networked-news/
They ask:
“[H]ow can [Digg] be extended to every topic, every niche? How do you identify the right human intelligence to network, to create a truly extensible news aggregation platform?”[...]
The answer:
“[Create] a platform for networking the one group of people who are disproportionately more likely to be effective news filters across every conceivable topic: journalists.”
I think this has a lot of merit…their “manifesto” is pretty captivating, and I think their definition of “journalists” will get them far…
on 02 Oct 2007 at 6:10 am 7.Nick Malik said …
Andrew, The fact that newspapers have been unable to make money selling advertising online is not meaningful. There are other organizations that have been able to sell advertising to make money online. They have not been selling journalism. But they will. Therefore, your assumption that the money will never move to the right is flawed. Perhaps the existing journalism companies will have some difficulty, but the model will not die, and it will flourish again.
It is interesting to note that most newspapers got started by folks with an idea that they wanted to share, but they did not become widely read until advertising funded their growth. The same model will occur again, perhaps with some of the older companies, and some newer companies mixed in as well.
Good journalism is the differentiator for any media company. If a company wants me to view their ads, they need to provide me with summaries of information written in a balanced manner that helps me to make decisions about the world I live in. I will subscribe to that services, and if necessary, pay for it.
I do not believe that journalism will die. I live on online news sites. My homepage is MSNBC, which I consider one of the best online news site. They use real journalists, in the historic sense. If, or when, they start to charge for their services, I will pay. The quality of their reporting is far-and-away better than the biased noise on the blogosphere. Hands down.
Can you tell me if Barak Obama wants to move people to universal health care? Does Mike Huckabee want to keep troops in Iraq? If you can answer these questions, thank a journalist, not a blogger.