In Search of the Magic Bullet

As other colleagues have noted, now is a bad time to be working for a newspaper. Advertising is drying up, papers are going bankrupt, reporters are being furloughed, bought out, or let go in droves, and some papers are even closing entirely. There has been much talk recently about how to save newspapers, and I came across a possible solution that makes a whole lot of sense. Recently, in the Poynter Institute's E-Media Tidbits blog (which, I admit, goes straight to my RSS reader as a requirement for class), Mac Slocum posted about the Gawker-Defamer merger, and what it teaches about ad revenue. Slocum says that two things can be done to protect advertising revenues and create other revenue streams: stay intentionally small, and (this is the important thing) create products with natural scarcity. This makes a whole lot of sense for one good reason: capitalist economies rely on scarcity! This is why newspaper ad prices were so high: they offered a set level of space that would reach a large audience (a large demand for ad space for a small amount of supply). However, in the age of the Internet, there is infinitely more space for advertising, driving the prices down (a large amount of supply that can meet a large amount of demand). Now, news was also something with relative scarcity in the pre-Internet environment. People could only get their news from newspapers and radio, and later television. The capacity to provide news from both the respectable organizations and the average person has increased as well, allowing users to consume different voices from around the world. So, both news and ad space are no longer scarce. News organizations need to come up with value-added products that users can consume for a fee in addition to the news they providing for free on the Internet. Some would argue that news from trained journalists is indeed the value-added, scarce resource that should be paid for. However, we are past the point of no return for that argument. News organizations have opened Pandora's box by putting news online for free, and no one is going to be willing to pay for it now. Subscriptions don't work because they create a wall keeping new readers out, and micropayments are just a variation on the subscription model (my other colleagues have discussed both of these). Those are the two options people see now, but I just don't see them working. Now, if I may geek out for a minute, webcomics have been using the scarcity model for at least 10 years. Their content is published online for free, but they offer things for sale that are naturally scarce--book collections, original art (a singularly scarce resource), merchandise, and community--that supplement their ad revenue, which is higher because they reach a smaller, niche audience, but still only a small part of their income. People are able to make a decent living off this model, and it's all based on providing their content for free. It is possible that the model could be scaled to a larger organization (minus the ad revenue part). (See this article I wrote last semester for more info on the webcomics model.) Slocum mentions conferences, meetups, education, consulting, and syndication as possible value-added, scarce products. While these are good ideas, I don't think there's enough market for them for a large-scale, current news operation. This is where scaling down a news organization to a local level can help--it also drives the advertising prices up. Is this a magic bullet? Maybe. It will be up to a news organization to try the model and see if it works. Success will hinge on coming up with a good enough value-added product, and finding a balance in scaling down its operations to balance ad revenue and ability to cover what it needs to cover. Anyone looking for a business partner? Cross-posted to the American Observer.