Will Digital Subscriptions Save Newspapers?

Probably not for most.  On-line there is easy substitutability for new content and thus price competition soon erodes away any real profit - or so it appears.  But there are a few uniquely situated news organizations that provide something a bit different: a broad range of coverage, in-depth reporting, a national and even global reach and the reputation for quality.  The New York Times is one such organization and over a year ago they decided to stop offering their content for free and start digital subscriptions.  The results, while not providing any comfort to smaller, regional papers, are encouraging for the Gray Lady.

Here is the blog Newsonomics dissecting the numbers and extrapolating their impact on the bottom line:

The numbers in brief, from this morning’s Times 2011 earnings report:

• 390,000 digital subscribers overall.
• Growth rate of 20% fourth quarter over third quarter. 

Those are the public numbers. We’re left to extrapolate the dollars. My extrapolation is that the run-rate for the Times’ new digital revenue is about $86 million a year.

He then goes on to discuss some other interesting numbers:

In talking with Paul Smurl, VP of paid products for the Times, this week, I picked up some related datapoints that help us understand what this first year may lead to:

• 70%+ % of the Times’ print subscribers have now “authenticated.”

• Churn is less with digital than print customers: Skeptics opined that people might sign up, but then flee after sampling the paid digital product. The opposite appears true: Smurl says digital churn is less than print churn.

• About 12% of digital buyers live outside the U.S.: That’s a growing number. It’s an indication that the Times is becoming a global news medium.

And my favorite (because it describes me):

Exploiting Sunday: It took about 12 seconds for Times’ readers to figure out the new subscription math, when the company when digital-paid last year. When they did the math and saw they could get the four-pound Sunday paper and “all-digital-access” for $60 less than “all-digital-access” by itself, they took the newsprint. Which stabilized Sunday sales, and the Sunday ad base.

The problem with local paper like The Oregonian who would like to follow this model is that they don't have a suitably differentiated product - there is just too much competition. The problem for consumers is that it is too hard to judge quality past a certain point - what stories are being missed, what stories are not explored deeply enough, and so on? When such information asymmetries exist in markets the result is well known: all the high quality stuff goes away.

Eco-nomics and Newspaper Economics: Solar Manufacturing

This is a post with two themes.  Both are based on the interesting article from the New York Times, which appears on the front page of the Oregonian's Business section today, on the bankruptcies of US solar manufacturers and the growth of the industry in China.  

The first is a theme that I have sounded on before:  I am worried about the future of solar manufacturing in the US and thus I am pretty pessimistic when I hear the rah-rah talk of local politicians about local manufacturers. Don't get me wrong, I rejoice when I hear about big investments by companies like SolarWorld and the jobs they bring, but I am not sure there is much of a future in their presence here unless it is in innovation and R&D and away from pure manufacturing. Perhaps this transition is already happening. I have no idea.  But I know about comparative advantage and right now in solar, China has it.

The second is a theme from this week - the troubling economics of daily newspapers.  I mention this here because of the fact that the Oregonian republished a NYTimes story with huge local implications - which is why, I am sure, they chose it for the front page.  But I can image a time not too long ago when the O would have assigned a business reporter to work the local angle on this.  Go to SolarWorld and get a response, talk to local politicians and get their take, etc.  But today what we get is the NYTimes piece verbatim without any mention of local impact.  

And why I bother talking about newspapers all the time is that these things matter a lot.  Many local politicians, many government development dollars, many state tax breaks have gone into bringing solar manufacturing here.  It is important that the public understand the implications of these decisions and are able to evaluate the decisions on their merits.  I can mention it all here and ponder what this may mean to our local economy, but I am not a reporter and I can't really give you any answers.

Newspaper Economics

It has been a while since I lamented the decline of the newspaper industry, or more precisely, the decline of quality investigative journalism.  So let me dive in once more.

Anyone who is paying attention could hardly miss the children's crusade that is going on at the Oregonian. After the massive bloodletting of experienced (and expensive) reporters, there is a whole new gaggle of fresh faced (and cheap) reporters who look (thanks to the new little pictures that accompany their bylines on-line) all about 16 years old.  Apparently this is happening everywhere.  I have no doubt that these are skilled and well-trianed reporters, but they lack the experience and connections of those they replace.  It could be that the energy and eagerness of the new crop might make up for this, but I have some reservations.  I think we are losing a huge amount of human capital.

Anyway, what prompted this is a fascinating (and a bit troubling) article on the youth of the campaign press corps in the New York Times:

A group of five fresh-faced reporters from National Journal and CBS News clicked away on their MacBooks one recent afternoon, dutifully taking notes as seasoned journalists from the campaign trail shared their rules of the road.

The journalists were mostly in their 20s, learning the basics: never get too close to a source; master the art of eating while driving; never rely on a hotel wake-up call.

For decades, campaign buses were populated by hotshots, some of whom covered politics for decades, from Walter Mears to David S. Broder to Jules Witcover. It was a glamorous club, captured and skewered in Timothy Crouse’s best-selling “The Boys on The Bus,” about the 1972 campaign.

Now, more and more, because of budget cutbacks, those once coveted jobs are being filled by brand new journalists at a fraction of the salary. It is not so glamorous any more.

By the way, I still link to the NYT frequently despite the paywall (which I pay for) because apparently the paywall is easy to circumvent and, in fact some believe that it is intentionally so.  So those that want to hassle with deleting part of the url can do so and get the content for free.  Here are instructions. But even more to the point apparently if you follow a link to the NYT, you will never hit the paywall. Here is Felix Salmon: "The NYT paywall is so porous that it can be considered to be a genuinely freemium model. If you follow a link to the NYT site, you will never run into the paywall — no matter how many times you do so or how many NYT articles you’ve read that month."

Is Journalism a Public Good?

Yes, says Leonard Downie and thus the government should subsidize newspapers.

No, says Howard Gleckman, no business should be subsidized, apparently never having heard of public goods, externalities, and the like.

Regardless, Gleckman may be right about papers, at least in their current form. Perhaps the answer is not to subsidize newspapers, but journalism itself. How to do so is a challenge that I have no good answer for because journalism is so immediate, competitive grants and the like are not really reasonable.

Not-For-Profit Newspapers?

Congressman Ben Cardin (D - Maryland) has introduced the Newspaper Revitalization Act to allow newspapers to become 501(c)3 non-profit corporations. He explains his motivations in this op-ed in the Washington Post.

This not-for-profit model is something I have thought a lot about before, and though I really don't know if it will work, I think it is worth a try. This bill confuses me a little bit, however. For starters, I am not sure why an existing newspaper cannot become a 501(c)3 corporation already, one of the categories is education and it seems pretty easy to argue that newspapers are educational. The other thing that confuses me is that political endorsements would be prohibited, but "they would be able to editorialize and take positions on issues affecting their communities." This seems like a hair-splitting argument. For instance, if the Sam Adams lies came out before the election, could The Oregonian editorialize that he should not get elected? Could it say it would be better to vote for the opponent?

I have explained the economics of the newspapers role in our democracy before - it is a public good, and a vital one, and thus the public has an interest in supporting it. Others have pointed out that it might be hard for newspapers to be a watchdog if they are beholden to the pubic purse controlled by politicians. This might be true, when Ken Tomlinson became the head of the Corp for Public Broadcasting, NPR was threatened. Though in the end NPR does not seem to have suffered too badly. This economics argument is distinct from the economics of the newspaper business by the way - that is another story.

So is non-profit status the answer? This legislation is designed to community newspapers not big city dailies, and yet it is the big city dailies that I am worried about. Could an OPB-like model of memberships, foundation and corporate support work for such large newspapers? I don't know, what are your thoughts?

Newspapers in Peril

The San Francisco Chronicle, the Chicago Tribune and the Seattle Post-Intelligencer are all among newspapers teetering on the brink of collapse. They are also papers in a twon with competing dailies. Today, another newspaper from a two-paper town announced it will close - tomorrow. Denver's Rocky Mountain News is shutting its doors.

This comes on the heels of this shiny new downtown office building the Denver Newspaper Agency (the entity that publishes both the Denver Post and the News in a joint operating agreement) built just a couple of years ago.

Does this portend the demise of dailies in one-paper towns? I sure hope not, I don't think we, as a democratic society, can afford for that to happen. Remember, the free market does not provide an efficient level of public goods and, to me, the media's watchdog role is a public good.

While I am talking about newspapers, is it now a common thing for newspapers to employ their own working reporters as columnists? I was surprised to see Anna Griffin's byline recently as I thought she had moved to being a full time columnist for The Oregonian. I prefer her as a reporter as I find her columns to be strange and incoherent - as if she is trying to rant like a columnist, but it does not come naturally. Anyway, I think it is dangerous for the reputation of a newspaper to have the same person reporting and opinionating on the news.

What to do About Newspapers?

I am an economist, trained to appreciate markets, and yet when I start to talk about one of my pet concerns, the fact the newspapers and their 4th estate role are dying (which I have blogged about in the past), normal people who usually mistrust markets tune me out and say things like well it will all be internet based soon, nothing to be done, etc., etc. But the problem there is that no one has figured out how to make internet newspapers turn a profit, so what will happen to real reporting?

My question is: can we afford, as a society, to loose the essential watchdog role of the media? I think not. Partly this comes from my background studying developing countries where corruption is a huge drag on growth. Many countries lack an effective independent media which allows corruption to flourish unchecked. And partly this comes from the fact that I believe a well-function democracy relies on well-informed citizens.

So what to do? I have advocated for the idea that public money should be used to support what is, essentially a public good. And now, or the first time, I find a prominent economist arguing the same thing. The point of this article is that it is the reporting that should be supported, not the papers themselves - I agree entirely. I good friend suggests an NPR-type model of print journalism, member driven and government supported - what do you think?

The Fourth Estate Redux

I have fretted in the past about the decline of newspapers and, unlike some, am not convinced that blogs and on-line media will be able to fulfill the same roll that newspapers play in a democracy.  Anyway, more fuel for my paranoia, Washington News Bureaus are shrinking and disappearing.  The link is to an excellent New York Times article - highly recommended - and addresses some of the issues about why I think that local dailies are indispensable.

Newspapers and Public Goods

On Monday, I received my Oregonian with the notice that, starting with that edition, the Metro section would be cease to exist and would become part of the A section. On Blue Oregon, Paul Gronke see it as a sign that it is time to abandon the paper. This is just another indication of the sad trend of dying dailies. Some see this as the inevitable result of market realities and we should let the market decide how and where people get their news. This is wrong.

Markets only 'decide' efficiently if they are complete and this means, among other things, that all costs and benefits of a product are private. But there are clear public goods aspects to newspapers: they provide oversight of government (the 4th estate); they inform the population which, especially in a democracy, leads to better policy; and they enhance community through their coverage of local events.

So why then don't we offer public funding for such a public good just as we do things like parks and schools? I fear for a state that has virtually no professional reporters covering the government, the community, etc. For such a vital role that we assign newspapers we should be much less indifferent to their decline. And, no, blogs are not a good substitute. Nor are the electronic versions of the papers, because without reporters, the web-sites won't have much news.

It is hard to imagine public subsidies to newspapers given the long tradition of leaving it to private market forces (and vast fortunes were once made in the newspaper business when there were few other ways to advertise widely), but I am beginning to worry that the health of our democracy will suffer if we don't start thinking creatively about how to preserve the papers. Look what cable news has done to public discourse and our democracy...

Perhaps we need an on-line national public newspaper similar to NPR. Partly funded by taxpayers, this would ensure that 'print' journalism would continue and could include, as a big part of its mission statement, local state-by-state coverage. I don't know the answer, but I am worried.