Michael Masnick of TechDirt took issue last week with my post showing the wide disparity between the value of online and print readers of newspapers—calling the exercise “totally meaningless.”
I never said it was the codebreaker, but okay. And I’d like to correct a couple of things.
First, Masnick says “it’s not the users who are paying here, it’s the advertisers.”
That’s not right. Advertisers account for most of newspaper revenue, but subscriptions and newsstand sales in 2008 accounted for nearly a quarter of overall revenue, hardly peanuts. To put it another way, newspapers took in, directly from readers, some $231 per unit of circulation (subscribers plus average newsstand sales) last year. That alone is five times the $46 they took in from online readers—a number that itself is inflated by upsells and the like.
The New York Times now gets more money, by my estimate, from readers than it does from advertisers.
Masnick also says:
Concentrating on the small group of people who will pay me $1,000 and ignoring the massive group who will pay me $5 isn’t very smart…especially when the first group is rapidly shrinking and the latter is growing…
First of all, the online figure isn’t growing at all. Total online ad revenue was down 16 percent* in the second quarter and 13 percent in the first. It’s fallen five of the last six quarters.
Second, I said nothing about “ignoring” readers on the Web. See The Wall Street Journal’s hybrid model, for an example of how to engage a Web audience while also getting money from them and preserving your print circulation.
* I originally transposed these numbers. Thanks to reader Bradley J. Fikes for the catch.
Your correction of Masnick's article requires a few corrections of its own:
(1) By your own admission, advertisers account for three quarters of newspaper revenue. Print subscriptions barely cover the cost of printing and delivery. So indeed, advertisers are paying for the cost of news, as they have always done.
Masnick's larger point, which you didn't address, is that the marginal value of the reader is the key metric: "Getting one more print subscriber doesn't increase the ad revenue by the amount discussed unless they can actually sell more advertising."
(2) Masnick pointed to the growth in online readership, while your rebuttal concerned online revenue. They are not the same. Also, declining revenues are hardly unusual in a recession.
(3) The link you provided to the NAA shows that print advertising is off far more sharply than online advertising. You left that out of your rebuttal.
You said:
"Total online ad revenue was down 13 percent in the second quarter and 16 percent in the first."
(Those numbers are wrong according to your source, btw, you appear to have transposed quarters.)
Here's a head-to-head comparison, using your own source:
In the second quarter
-- Online ad revenue was down 15.9 percent.
-- Print ad revenue was down 30.15 percent.
In the first quarter:
-- Online ad revenue was down 13.4 percent
-- Print ad revenue was down 29.7 percent.
In all of 2008:
Online ad revenue was down 1.8 percent.
Print ad revenue was down 17.7 percent.
#1 Posted by Bradley J. Fikes, CJR on Tue 8 Sep 2009 at 10:38 AM
Oops. You're right on me transposing the first and second quarters, Bradley. Thanks for the catch, corrected above.
Your other points are off, though.
1) This is a bit left field, but since you put it out there--no, money is fungible. Advertisers and subscribers pay for news. Advertisers and subscribers pay for printing and delivery. You could just as easily make the case that subscribers pay for the news and advertisers pay for the delivery. Subscription and newsstand revenue doesn't come close to covering the cost of printing and delivery.
Masnick's "marginal" point is also just wrong as far as revenue goes. Every subscriber or newsstand sale adds new revenue. Plus, it increases (or these days slows the decrease) the audience you can sell to advertisers.
2) What's the point of a reader (from a business perspective) without revenue? The whole point of adding readers is to add revenue, so it's entirely fair to point out that this is not happening.
We all know we're in a recession. That doesn't mean, say, cable TV ad revenues are declining or that overall Internet ads, down 1 percent, are plummeting.
3) I also didn't note that a dollar is a unit of currency that you can exchange for something of value. I think we can assume a base of knowledge here. If you don't know print advertising is suffering more than online advertising, you probably don't care. And anyway, print ad declines are spelled out in the second paragraph of my post, linked above, that set this back-and-forth off.
#2 Posted by Ryan Chittum, CJR on Tue 8 Sep 2009 at 12:34 PM
Ryan, thanks for the reply, but you still need to review your math.
Less than 25 percent of revenue comes from print subscriptions, according to your own numbers. So no, it's not just as easy to say print subscribers pay for news. If we take your point that money is fungible, than print readers pay for less than 25 percent of news coverage.
"I also didn't note that a dollar is a unit of currency that you can exchange for something of value."
And it has nothing to do with any of your arguments. However, your selective presentation of NAA data does.. Any point you make about online revenue falling applies with greater force to print revenue. You cherry-picked data in your rebuttal, giving a misleading impression. This is bad journalism. You should correct it instead of staying in denial.
#3 Posted by Bradley J. Fikes, CJR on Tue 8 Sep 2009 at 01:24 PM
Bradley,
Re subscribers paying for news, you're clearly misreading that. The two sentences before that say: "Advertisers and subscribers pay for news. Advertisers and subscribers pay for printing and delivery."
I don't know how much clearer I can make that. The point of saying you "could just as easily make the case that subscribers pay for the news" is to show the flaw in the advertisers-pay-for-the-news argument, something that's also clear.
And it's not "cherry-picking" data to respond to a specific point about online readers/revenue in a 270-word blog post and not spell out an almost universally known fact. Maybe next time, if I have 500 words, I'll also point out the sky is blue or that newspapers are in financial trouble.
#4 Posted by Ryan Chittum, CJR on Tue 8 Sep 2009 at 04:01 PM
Ryan,
The point of saying you "could just as easily make the case that subscribers pay for the news" is to show the flaw in the advertisers-pay-for-the-news argument, something that's also clear.
If subscriber and advertiser revenue were evenly split, then you could "just as easily" make the case. But the revenue split by your own numbers is less than 25 percent from subscribers. Do you really think 25 percent = 75 percent?
Or if we take your "money-is-fungible" point, then you're less than 25 percent right, and TechDirt is more than 75 percent right.
And it's not "cherry-picking" data to respond to a specific point about online readers/revenue in a 270-word blog post and not spell out an almost universally known fact.
You picked out a stat showing online ad revenue is in decline, ignoring the recession and the worse plight of print advertising. That directly undercuts your argument. That's unprofessional.
You could have said:
"Online revenues are also declining, although print revenues are declining even faster, and it's unclear how much of the decline is due to the recession."
Of course, that would have weakened your thesis about the continuing importance of print, but you'd have presented a balanced picture.
Maybe next time, if I have 500 words, I'll also point out the sky is blue or that newspapers are in financial trouble.
Ryan, you're not fooling anyone. You got caught fiddling with numbers to make your point, and think if you deny, deny, deny, nobody will notice. Wrong. You undermine your own credibility by pretending you didn't do anything wrong.
#5 Posted by Bradley J. Fikes, CJR on Wed 9 Sep 2009 at 10:08 AM
Bradley, quit trolling. Thanks.
#6 Posted by Ryan Chittum, CJR on Wed 9 Sep 2009 at 11:39 AM
I think I'm with the troll.
I subscribed to the WSJ online for several years, but recently let my subscription lapse because I found that the amount of original content was small and I barely had time to keep up with all the other (free) feeds my rss reader.
Here are a few observations by a news consumer:
1) Reporting on news events has zero marginal value. It's simply not possible to charge money for this in today's online world.
2) News analysis has low to zero marginal value. As an example, WSJ once did a great job with this, but now there are hundreds of credible subject matter experts with blogs. These "expertise communities" are usually nicely woven together and the analysis contains or at least addresses multiple points-of-view with cross-linking. There are also plenty of meta-blogs that help you find the subject matter communities. (e.g. many probably found this post through techdirt)
3) Investigative reporting has margin value and is unique, but using an advertiser supported approach is tough due to conflicts of interest. A pay-per-user model is tough because once the story is out, anyone can read about it without paying. In truth, I'm not sure there's a viable for-profit model that can support investigative journalism. This is a shame because it is, IMO, the most vital role that the press plays. Unfortunately, this role has long been subsidized from other sources and the other sources aren't available anymore. I think a non-profit foundation approach is the most likely end-state for this.
#7 Posted by Jim, CJR on Thu 10 Sep 2009 at 09:24 AM