Earlier this week I had an article published (over the fold) on what will become of newspapers. Where was it distributed? The Age of course.

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NEWspaper Business Model

Joshua Gans, The Voice, 13 July 2009.

It is commonplace to hear about the impeding death of the newspaper. And that notion is given its true irony when we realise that we live in the age of news.

News is more widely available and widely consumed than ever before. Reading (words that is) is clawing back its past lost share to viewing. So how can it be, that what used to be the principle vehicle for the delivery of the news, is somehow uneconomic?

The crucial word, of course, is “delivery.” The newspaper was a way of getting news to people in a timely fashion. It aggregated it, and came up with a process of putting it together and distributing it that was cheap and could all be done before 6am in the morning. Magic. To be sure, there were other means of getting the news—including radio and television—but these never delivered so much. A television news broadcast required the viewer to sit through what the station thought they wanted to hear. But a newspaper allowed you to pick and choose. Even if you were only interested in a few things a day, the newspaper could deliver it all and satisfy a broad set of possible ‘few interests.’

The Internet has changed all that and it has done it on so many fronts, it has been hard to sort out.

First of all, it has completely displaced newspapers as a source of classified ads. This was the function of bringing sellers with ‘limited interest’ products together with potential buyers. But the organisation of a newspaper just can’t compete with the ability to tailor product searches online. Somehow for housing, cars and jobs, classifieds hang on but there is a clear feeling that their days are numbered. And the issue here is not that they had anything to do with producing or reading the news. Instead, by using newspapers to distribute classifieds, the cost of the magical pre-6am delivery network could be shared. Soon the news will be on its own.

And that is really bad news because, second, the Internet has completely displaced newspapers in terms of timely delivery of a large amount of content. The newspaper delivers news that is largely old and, as I will argue shortly, this has undermined its social purpose. Moreover, nowadays, instead of flicking through the newspaper I can browse and search through web pages. But even so, few websites have managed to replicate the satisfying morning experience of turning the pages and finding points of interest.

So what has been the reaction to all of this? In many markets, newspaper publishers have taken their classifieds online. However, this has only exposed more quickly the fact that they cannot subsidise the delivery of the news. In relation to the newspapers itself, there has been much discussion about how to make up the revenue. It is asserted that consumers still like the news and so will pay for it. However, this logic completely ignores what people like about the news.

The conventional view about the news is that it is ‘information’ or ‘content.’ People value knowing what is going on and, in some cases, specifically so (for example, financial information or the weather). But this fails to recognise that as content, the news is fairly inconsequential. You might read about the latest social or political scandal or that there problems with the war in Afghanistan or a controversy over a missing child in Portugal but none of it will do what information should do, change what you are doing in your day-to-day lives. Instead, it provides a point of social contact. It is something to discuss with your co-workers over morning tea and muse about. But no one is changing what they do as a result. Put simply, for the vast majority of news, the value comes from being able to talk about and share it (“did you hear about”?) rather than add to your pool of knowledge per se.

And this is precisely why the loss of timeliness is so critical. That social conversation has already occurred by the time you read the news in the morning papers. Chances are your friends and co-workers know well before you do what will be of interest. And it has already been brought to your attention. So what you are getting in the paper is not the news at all. Indeed, now you have to work reading it to find something new.

In this environment, raising the price of the news (something you think of doing when you think news is information) destroys whatever social value it might have. If I have to pay for the news, that is a problem because I cannot be sure others have read it enough to participate in conversations. Moreover, the means by which newspapers ensure that payment sticks (logins, paywalls and blanking out cutting and pasting) mean that I can’t share it to even begin those conversations. It just doesn’t reach the blogs, email or Facebook. If the news is social, payment, even micropayment, kills its value. It should not surprise us that this does not and has not worked except where that social value isn’t there (e.g., in the finance pages).

Will journalism and other aspects of the creation of the news survive all of this? I think it will but the age is so disruptive it will take time to work out precisely how. The fundamentals are sound (there is demand and supply) but those in charge of the key businesses have yet to sort it all out. And the Internet has brought with it competition for the creation of news, opinions and expression. Indeed, rather than trying to lock-in their content, newspapers have to ask themselves “why aren’t teenagers stealing our content?” They aren’t and until they are, you aren’t producing what interests them.

But there is another fundamental demand that is disappearing but that could be the hope for the newspaper business: the morning browse through the newspaper. You just can’t do that on the Internet because no one has designed web pages for that purpose. When I visit a news site, I see much of the same content as the last time I was there. What I want is for it to recognise what I saw the last time and to update itself in an intelligent fashion. I want it to configure itself and then provide a mass of content and a way of browsing through it. And I want to see what people are saying about it. And not just a 1,000 random people but my people (the same people who are on my Facebook page). This activity is still there for the taking. The Internet has removed the morning paper as a means of doing it. We are some thought and maybe a technical device away from getting it back. Who knows when that comes back I might even see the ads.

Joshua Gans is Professor of Management (Information Economics) at Melbourne Business School. He writes for the economics.com.au blog.

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