Matthew Yglesias notes Michael O’Hare’s prediction that consolidation of the newspaper business will be bad news for an informed electorate:
The traditional business model of a paper newspaper, in which readers’ attention is sold to advertisers by placing the ads next to news on a physical page, is broken. One fracture is a very broad withdrawal of public attention from anything that takes very long or much effort to engage with, from music to books and news; another is the IT-driven transformation of text from a product that can be denied to anyone who doesn’t pay for a physical object to a practically non-excludible public good. Still another is a phenomenon not fully understood, which is the much greater difficulty advertisements have drawing attention on a computer screen than on a paper page, evidenced by the flashing ads that now pop up screaming for attention over content on newspaper web pages. And we may also be seeing an example of “Baumol’s cost disease”, the steady increase of the relative cost of products like expert, competent, writing (music performance, in his example) that can’t take advantage of productivity improvements through technology.
When O’Hare says it’s difficulty for online ads to attract attention, he seems not to have heard of a little company called Google. It’s on track to earn $10 billion in revenues this year almost entirely by selling ads on computer screens. Google’s hundreds of thousands of advertisers don’t seem to be having any trouble getting users’ attention.
Given that most people still get most of their news and entertainment via non-Internet sources, there’s every reason to believe that the total size of the Internet advertising market will be an order of magnitude larger than that in a couple of decades. In a $100 billion market for Internet eyeballs, there should be plenty of room to pay people to do high-quality news-gathering.
I think it’s unlikely that the bulk of the 21st century news-gathering market will be structured like a traditional newspaper. The structure of the traditional newspaper is driven by the economies of scale in the 20th century newspaper business. The Internet has largely obliterated those economies of scale. As a result, I think you’re likely to see a lot more decentralization in the reporting business, with more speciality websites focused on narrow subjects, independent reporters who syndicate their content to dozens of different outlets, and a variety of aggregators and filters that allow people to get exactly the news they want. It won’t look very much like the traditional newspaper, but I see no reason to think the quality or quantity will be any worse than what we’ve got now. Nor is there any reason to think that there will be any shortage of opportunities to turn a profit, as Mr. Page and Mr. Brin have demonstrated.
Matt worries about who will cover local news, but I don’t think there’s any reason to be alarmed. The rule of thumb I’ve heard in the newspaper business is that subscription fees pay for distribution, while advertising pays for content. The Internet is simultaneously eliminating distribution costs and subscription fees, but I don’t see any reason to think that the relationship between advertisements and content will change very much. People still want to read local news, and local businesses still want to advertise to local consumers. It’s not obvious why the revenues from online advertising will be any smaller than revenues from ads offline.
The only problem is the short-term problem that local papers will need to shed a lot of overhead before they can concentrate on their core competence of local news. Most papers have people on staff doing non-local news, arts, culture, sports, etc. They also have a large staff devoted to selling classified ads, taking subscriptions, delivering papers, etc. Most of those people will probably need to be laid off before local papers become profitable again as much smaller websites focused on delivering local news you can’t get elsewhere on the Web.
But if they can make that very painful transition, I don’t see any reason to think they won’t be able to flourish in that niche. And if they fail to make the transition quickly enough, I have no doubt that other websites without the baggage of print distribution will move in and provide high-quality local news.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
Comments on this entry are closed.