Newspapers don’t get it, online users already pay for content

The newspaper industry is trying to build pay walls around their online content. The idea is that readers need to pay for content. This is a big problem because newspaper executives don’t understand how much their readers already pay to be online. In fact, they pay more than any newspaper subscription in history.

Subscriptions have always been a loss-leader. Delivering a paper costs a lot of money. There is the printing press, paper, ink, press employees, union truck drivers, subscription managers, subscription software, and finally the — increasingly inaccurate — paper boy. Even at a dollar a paper, it isn’t enough to cover these costs.

Many newspapers, desperate to get subscribers, have discounted their subscriptions to only pennies a day. Readers have never paid for content — they don’t even pay for the paper it is printed on.

Who pays?

So who really pays for the newspaper? The advertisers. It’s advertising money that pays for journalism. So why are subscriptions important if they don’t pay for the content?

Well, they offset the cost of producing the paper which is a big help. But the main reason newspapers need subscribers is so they can tell an advertiser that they reach X number of people.

The real product of a newspaper is its readers. Advertisers are the real customers of a newspaper. They buy reader attention. The more readers, the more valuable the newspaper, the more money an advertiser was willing to pay.

But not anymore. The Internet gives advertisers more options to directly reach their potential customers without advertising in the newspaper. And as readers quit subscribing to newspapers, there is even less incentive for advertisers to continue print advertising.

Online subscription fallacy

So newspapers want to take this model online. To create the same environment where they can tell advertisers how important their content is to readers because they have X number of online subscribers. But here is where everything breaks down.

Newspaper executives are working under the assumption that online readers are getting their content for free. This is absolutely false.

The online world cuts the delivery model into two. The first half is the publisher. They create a webserver and put it on the Internet. Compared to a printing press, a webserver is petty cash. And Internet access for the news company is trivially inexpensive.

The second half of the delivery system is the reader’s ISP. Most people who use the Internet regularly are paying anywhere from $50 to $200 a month for the privilege. If you add in the cost of Internet access at work, at home, on smartphones there is a lot of money spent to get people online.

Readers pay more

The cost a newspaper pays to deliver content online is a tiny fraction of the printing and delivery costs of a real paper. The cost difference is so great, in fact, that the burden has shifted almost entirely onto the readers.

The idea that readers are getting their online content for free is absolutely ludicrous.

Protect the print edition

I think Zachary Seward put it best:

“It’s counterintuitive, but charging for the website may be an effective way to protect the print edition, which still provides 80-90 percent of income at most newspaper companies.”

That’s what this is all about — protecting the print edition. I’ve seen one newspaper start charging for online content. Their online fee is exactly the same as a print subscription. And if you get the print subscription you get the online version for “free”. I’m sure they hope everyone will get the dual print and online subscription so their print subscription base remains as high as possible to maximize their print ad revenue.

But it can only go so far.