While newspapers are wallowing in catastrophic circulation losses, their online revenues are falling short of objectives, and more people look to the web for news, Amos Gelb, a former TV guy and now an associate professor at George Washington University’s School of Media and Public Affairs, suggests a new model for profiting from running a serious news operation: cost transference.
In short, the idea is for Internet Service Providers (ISPs) – his example is Verizon Internet – to pay for news feeds on a per-subscriber basis. It’s how CNN works – collecting 37 cents per subscriber from every cable television provider that carries CNN (which is pretty much all of them). While CNN does earn revenue on advertising sales, its most dependable revenue stream is from the cable providers – which in turn simply pass that cost along to consumers as part of the cost for basic service on their monthly bill. And consumers don’t seem to mind – even though there is plenty of market evidence right now that they wouldn’t pay the same 37 cents per month directly to CNN if given the choice.
How does this transfer to newspapers? The largest news organizations (Gelb cites Time Warner, New York Times and Washington Post) would block their content to ISPs, except when paid on a subscriber basis. Those ISPs that make the payments would then pass along the cost to subscribers.
People who care about getting news content online would gravitate toward those ISPs that provide it.
The model strikes me, on its surface, as incredibly complicated given the wide range of business models that exist among ISPs. It also doesn’t include the many smaller news organizations that, one way or another, are going to survive, but will never be large enough to command attention from ISPs.
I don’t ever really expect to see the model play out as Gelb describes it. But I like the out-of-the-box thinking he brings to the discussion, and I agree with his assessment that news is something people want, and something people will pay for – just not directly.
In fact, the way I see it, it’s already playing out on small scale and through a slightly different medium: the burgeoning app store business.
There are now multiple places where smart-phone users can buy applications: iPhone’s App Store, Blackberry’s App World, and soon, Palm’s App Catalog. Each of these offers apps that let you aggregate and read news from various sources. Many are free, some cost money – from a $2.99 one-time download fee to monthly subscriptions (or so I’m told, though I haven’t actually found one on the monthly model in my time at either of the functioning app marketplaces).
So people are paying money to download an app that will deliver the same news they could get for free right now on the Internet? It’s a little different than the model Gelb envisions, but it plays out the same way psychologically: People who buy these apps aren’t actually paying for news; they’re paying for a new gadget on the smart phone. The cost has been transferred.
Gelb’s notion is heavy lifting, to be sure. To achieve the kind of behavior change that he describes, large news organizations are going to have to give up on their most cherished belief: that increased profit necessarily derives from increased distribution. And then they would have to convince numerous other organizations – like Google, Yahoo, Verizon and AT&T – to alter their business practices, all while risking the anger of their paid customers.
It sounds like a long shot at best. But the drastic decline in circulation and revenue that news media is experiencing is, if nothing else, a strong motivator.