Andrew Jesaitis

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Saving Journalism: How to beat free
Nov 2, 2009
5 minutes read

An interesting parallel can be drawn between the predicament in which journalism finds itself and the piracy problems that have plagued the entertainment industry. What’s more is that the two industries reacted to the distribution of free content in opposite ways.

The RIAA and MPAA went after consumers directly and tried to enforce anti-piracy law to maintain pricing power. This approach clearly failed as consumers still share music and by the RIAA’s own estimates it costs the music industry $12.5 billion per year.

The journalism industry instead has, for the most part, provided content free of charge. This approach has not been an effective way to monetize the news. Newspapers have seen their advertising revenue drop by 23% over the past two years.

The old guard is quick to label people as unwilling to pay for music or news. I do not buy the argument that people are just too stingy to pay. If this were the case, the iPhone wouldn’t have rocketed to such a spectacular success with a yearly $1000 price tag.

However, there are actual business models for media that work.

First, let’s take the example of Netflix. Most people find it reasonable to pay $9 a month for unlimited movie content. Netflix solves the traditional problems of driving to the video store, wasting money on a bad flick, and late fees. But, more importantly, it attacks piracy by doing something a thousand lawsuits can never do. It provides value-added services that BitTorrent can never have. You are guaranteed to have the genuine movie you want, at your convenience, without having to deal with sub-par quality. In essence, that $9 provides the quality control that allows you to have the freedom to enjoy your movie without having to be a geek (with free time) to find an (illegal) copy online.

Second, iTunes or Amazon’s MP3 store. For about a buck they provide this same quality control for music.

Finally, Hulu. I don’t even watch cable anymore. Hulu provides (almost) any show I want, on demand, with less advertising for “free.” While you can only watch the last five episodes of the show, it is still much better than the alternative on cable. Moreover, the advertising is more effective on Hulu than on cable, since I can choose if I want to watch a longer advertisement upfront, in exchange to see the show commercial free. Additionally, since the same advertisement airs throughout a show when this option isn’t selected, I can actually remember what companies are advertising right now.

What’s the common thread that allows these services to succeed? They have embraced a new business model instead of trying to enforce an old one through legal action. What they provide is a quality-guaranteed product on demand.

So there are at least three business models that I see as viable alternatives to the current way content is provided. No single model will be the magic bullet that cures the ills of media companies. Different services will serve different purposes. Furthermore, when these models are combined synergies arise. Imagine if you could stream any song from the iTunes library for $10 a month. What if Hulu posted all back-episodes for premium members who pay the same amount. Think about Netflix allowing you to pay a small fee to keep a DVD, like GameFly.

Now, translate these business models to journalism.

I know that many in journalism are not fans of paywalls, as they destroy the concept that access to news is a right and have had mixed economic results. I say “mixed results” because while the Wall Street Journal maintained its paywall it gained standing as the number 1 US daily publication. In fact, the Wall Street Journal was the only major paper to gain market share last year.

Maybe the solution is a tiered service model? Provide the breaking news for free, but offer in depth investigative reporting and analysis at a low subscription price or on a micro-payment basis.

Maybe the solution lies in newspapers forming a Co-Op and for your monthly fee you can select 10 papers to subscribe to. This model additionally solves the problem of who jumps first. However, if they all fail to change to a sustainable business model, I can easily predict the winner–the one with the largest pile of cash to burn. And in the current environment, we won’t have long to wait.

The kicker is that papers will need to provide content with a quality standard higher than what’s provided on free sites. It means having amazing writing like The Economist, the reach of the New York Times, and the photography standard of National Geographic. It means picking off the top free columnists and being their exclusive outlet. It means providing content across the spectrum of devices (computer, iPhone, Kindle) for that low fee. These cliche ideas amount to the same concept that has allowed Netflix, Amazon, and Hulu to succeed–providing a quality-guaranteed product.

In essence, I’ve said nothing new in this post. But, somehow the media has forgotten the fundamental tenant of business-you have to provide something for which people are willing to pay. This is a burden on the provider, not the consumer.


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