Intractable Business Model Conflicts

In one sense, the Web is a blessing. Daily circulation for the newsprint Post, now 673,000, may be down from 813,000 in 2000, but we are drawing an eye-opening 9.4 million unique visitors online each month, 85 percent of them from outside the D.C. circulation area. Those readers don’t bring in the cash that print subscribers do — given the gotta-be-free mentality of the Web — but they do expand our reach.

The ticking time bomb here is the wholesale abandonment of newspapers by younger people who grew up with a point-and-click mentality. When I was speaking at Harvard recently, a smug graduate student said, “I get everything I need from YouTube. What are you going to do about it?”

[From Howard Kurtz – Post Buyouts Come With an Emotional Cost – washingtonpost.com]

What an interesting juxtaposition of thoughts in this column in the Washington Post. Like many manufacturing industries have done in recent decades, the newspaper industry is in the midst of structural reorganization as a consequence of technology and consumer behavior shift.

What Kurtz is observing is an interesting conflict of business models born out of the inefficiency of one and the brutal requirement to be efficient in the other. Print subscriptions are suffering and as a consequence the ad margins that newspapers enjoy for advertising and classified advertising that eyeballs never see is going away.

Contrast this to the online side where pretty consistently it is found that online unique readership of newspaper websites is 10x greater than print subscription numbers. Yet because online is a somewhat performance based model with display advertising, newspapers can monetize only those parts of their web sites that generate impressions. More people see the website but revenue per unique visitor is lower.

Scott Karp recently observed that traditional advertising fails on the web and it is no more evident than in the newspaper business where they enjoy high, and growing as well, traffic but have a failing online business model.

Kurtz is wrong about younger generations abandoning newspapers, indeed it would be very difficult to support any statistical argument that begins with the premise that only old people are clicking on newspaper web sites. What younger generations are abandoning online, as they are in broadcast, is dumb advertising that provides little utility and in a digital world can simply be ignored or fast-forwarded through.

Kurtz also offers this observation:

The economics of the Web, for now, won’t support a staff that can hold public officials accountable across the region and still cover every Nationals game. So I cling to an old-fashioned, almost mystical belief in the power of ink on paper.

He’s right but in making his observation he is exposing his own ignorance to the broader underpinnings of “being digital”. Online web media won’t support hundreds of staffers because they simply don’t need to. We are entering an age where we rediscover the power of syndication at the hands of technology that has driven down integration to the cost of text. The Washington Post online doesn’t need to cover every Nationals game because ESPN, MLB.com, and numerous blogs are already doing it. Syndicating that content either through exclusive agreements or with public RSS provides readers with a far more compelling and comprehensive experience than any single newspaper alone can manage.

Of course, syndication is nothing new in newspaper, the AP and various other wire services have build large businesses on this idea, and most recently the Washington Post itself is syndicating TechCrunch’s stories.

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