The newspaper paywall now has a champion in some guy in Nebraska named Warren Buffett.
Buffett, who just forked over $150 million for the Omaha World-Herald Company, has some wise words, however late, on newspaper business models: Stop giving away your product with one hand while charging good money for it with the other.
Buffett tells CNBC’s Becky Quick that papers have three major problems, two of which they can’t really fix:
But the third thing is that newspapers have been giving away their product at the same time they’re selling it. And that is not a great business model. So when they put papers up on the Internet and you get it free, you’re competing with yourself. And that— you’re seeing throughout the industry— you’re seeing a reaction to that problem and an answer to it, and that’s important for the…
BECKY: And the answer is charging people online?
BUFFETT: Yeah.
BECKY: Yeah.
BUFFETT: Yeah, in other words, you shouldn’t— you shouldn’t be giving away a product that you’re trying to sell.
This is what Walter E. Hussman Jr., who owns the Arkansas Democrat-Gazette, has been saying for years now. His paper has charged online, and its daily circulation has fallen just 3.5 percent in the past decade while U.S. papers overall tumbled 16 percent from 2002 to 2009 alone (when Newspaper Association of America numbers stop).
The Wall Street Journal has charged from the beginning and its print circulation has stayed roughly even over the past ten years, while overall circulation, including digital subscriptions has actually risen significantly. The New York Times has already reaped tens of millions of dollars a year in incremental revenue by adding its paywall, and now it seems everybody is jumping on board, including Gannett and the Los Angeles Times.
Jeff Bercovici notes that Buffett’s prescription for newspapers isn’t being used at the Washington Post, where he owns more stock than any other shareholder and sits on the board. I would note, though, that the Buffalo News, which Buffett controls, said this week that it’s considering one. And while Buffett is famous for letting his managers run their businesses, you can bet that paper will have one.
GigaOm’s Mathew Ingram says Buffett doesn’t understand the industry, writing that the news business is not actually in the news business:
I’m going to side with the Washington Post on this one, and one of the reasons for that is the way that Buffett describes his argument: he says that newspapers are giving away their product while still trying to charge for it. But that assumes the “product” is the news, and that this is what newspapers are charging for — and I don’t think that’s really the case any more. For content companies of all kinds, the product is (and in many ways, always has been) the relationship that you can build with readers around your content. And the monetization of that now comes in many different forms.
With the anti-paywall folks, paying for news is never actually paying for news. You see, when you pick up The New York Times or Bloomberg BusinessWeek at the newsstand, you are not paying for the news—the stuff you thought you were paying for. You’re paying for the relationship.
I don’t think so.
Anyway, relationships, which every industry has, aren’t quite what they used to be in the news industry, of course. Circulation is one thing, and advertising revenues are another. When last I checked, newspaper industry ad revenues were at 1963 levels in real terms. As Michael Perry writes today, they’re now the lowest they’ve been since 1951 and down two-thirds in eleven years:
Paywalls aren’t going to fix that problem. But guess what? Nothing is going to fill that $40 billion hole. Readers, if they want professional content, and I think they do, are going to have to foot more of the bill.
Buffett, one of the great investors of all times, gets it.
Please tell Jeff Jarvis that he'd better change his tune before revenues improve at papers. You can't be as wrong as he is and keep tenure.
But who knows, he's really got a couple of barn-burning successes going on as an official advisor to...
Patch-
http://articles.businessinsider.com/2011-12-16/tech/30523936_1_ceo-tim-armstrong-sales-person-local-ads
And The Guardian-
http://www.journalism.co.uk/news/guardian-announces-new-digital-first-strategy-amid-losses/s2/a544759/
Jarvis better realize that Clay Shirky has already changed his mind and jumped ship on cybermedia utopianism and recognized a place for paywalls...calling them "donations". Sure, dogg, whatever you gotta say to make paying fo news and eating crow palatable.
#1 Posted by Stephen, CJR on Tue 28 Feb 2012 at 06:32 PM
Stephen says, "You can't be as wrong as he is and keep tenure."
Dood! Do you have any idea what "tenure" means?
Otherwise, I concur, hopefully.
#2 Posted by Edward Ericson Jr., CJR on Wed 29 Feb 2012 at 02:17 PM
Buffett and Ingram are both wrong. The business of newspapers historically has been to attract audiences through bundled content - news, comics, movie listings - and sell those audiences to advertisers. (In that sense, the audience is the product.) Subscriptions and newsstand prices have been far, far below market rate and to a degree existed simply for gravy and to maintain a semblance of credibility (not free like shoppers and alt-weeklies - whose margins were even higher than dailies). Classifieds - Craigslist! - and coupons - Groupon! - were the other revenue pillars. No one has ever paid for the news itself, in part because it's not a commodity.
#3 Posted by Steve Rhodes, CJR on Wed 29 Feb 2012 at 03:21 PM
" No one has ever paid for the news itself, in part because it's not a commodity". Then explain why two million people have signed up for the NYT,WSJ and FT paywalls. For the coupons? The comics? Are you serious? The hundreds of millions of unique visitors to news websites go there because news is worthless to them? Just cause Clay Shirky says it doesn't make it true. BTW... If that is the case, then just wait. He'll do a 180 on that just like he is doing with paywalls.
Shirky in 2010 saying paywalls "cant save organizations".... http://www.shirky.com/weblog/2010/11/the-times-paywall-and-newsletter-economics/
Shirky in 2012 saying they work!.... http://www.shirky.com/weblog/2012/01/newspapers-paywalls-and-core-users/
AMAZING!!!
#4 Posted by Stephen, CJR on Wed 29 Feb 2012 at 03:56 PM
Ryan wrote: "Readers, if they want professional content, and I think they do, are going to have to foot more of the bill."
padikiller responds: Yeah... Either that, or journalists are going have to do more work for less money...
Which is more likely?
And WAIT a minute, Ryan! Where is the justice in taking money from the poor readers to give to rich journalists?
Mere reporters at the NY Times make $92,000 a year! Even their lowly colleagues at the Pittsburgh Post-Gazette make $57,000 a year.
Now the average American household member has an income of only a bit more than $26,000.
So... Each NY Times reporter could take a pay cut of $20,000 a year and still have nearly $50,000 a year in higher than average income! That's plenty of money.. Certainly more than they need.
Problem solved, Chittum-style! All we need to do is to have the Gubmint deduct enough money from the rich journalists (and also make them work for free, like we're going to make the rich doctors work for free) and then the Masses will get free journalism!
But seriously...
Who honestly thinks readers are going to pay for content? For real?
I have people who will pay me $200 per page to secure intellectual property rights. How many readers are beating down the door to get Ryan's latest link to Paul Krugman's column? Or Trudy's latest account of her most recent visit to a free clinic somewhere?
I think one probably has a better and brighter future as a town crier than as a dead tree journalist.
#5 Posted by padikiller, CJR on Wed 29 Feb 2012 at 03:59 PM
Warren Buffet?
Oh yeah. The ultimate political entrepreneur. The definitive one-percenter.
"Please tax me more. (Just don't take away my subsidies and make me earn all my profits.)"
Suckers.
#6 Posted by Dan A., CJR on Wed 29 Feb 2012 at 06:15 PM
I don't get why people fawn over this guy. Is it really because his hypocritical campaign to raise taxes favors the liberal narrative?
When is any journalist going to start asking Buffett serious questions about his key role in enabling the financial meltdown (through Moody's)?
And $150 million for Buffett is nothing, like money he found under a sofa cushion. This is a PR move more than an investment. Nothing like owning the local paper to insure good PR, eh?
#7 Posted by JLD, CJR on Wed 29 Feb 2012 at 09:33 PM
Hey Padkiller,
You may want to take another look at your link to reporters' salaries. The Times and the Post-Gazette are both guild papers, which means higher salaries.
According to the U.S. Bureau of Labor Statistics, there were approximately 45,130 reporters working in the U.S. in May 2010 making between $20,000 and $75,000 a year, with the majority making around $34,500.
As a journalist myself, I can tell you that there are probably fewer than 45,000 reporters working in the U.S. now due to staff cuts.
Work harder for less pay? I work at newspaper that needs six reporters to adequately cover the community - we have three.
I barely make $29,000 a year. I work more than 60 hours a week trying to cover three different beats and get paid for 37.5. I frequently work nine hour days and sometimes skip lunch, just to get things done for the next day's paper.
And God forbid I get seriously ill and land up in the hospital with my health insurance that covers very little after I have paid my $5,000 deductible.
So tell me Padkiller, how much harder do you want me to work to earn that 50 cents you put in the newspaper rack to get my paper. Oh that's right you don't pay anything, you get all your news for free online.
#8 Posted by zannyred, CJR on Sat 3 Mar 2012 at 11:51 PM
zannyred wrote: "So tell me Padkiller, how much harder do you want me to work to earn that 50 cents you put in the newspaper rack to get my paper. Oh that's right you don't pay anything, you get all your news for free online."
padikiller responds: I do get all of my news for free. I don't pay a dime for news and I don't pay for my local paper, which has fallen upon hard times.
I do feel sorry for you guys - yours is a dying trade, going the way of the TV repairman and the keypunch operator. There are simply too many people willing to do what you do for free, and the internet doesn't lend itself to detailed (but day-old) analysis. You can't replace 20 seconds of video with 5000 words.
I think you either need to resolve to become a volunteer or take up a new career. My local paper is thrashing in its death throes - free classifieds to deal with craigslist - reduced print content to deal with expenses - and a brand new leaky paywall that isn't working. They're trying it all, but there is no way that it will be able to fight instant delivery.
Dude, if Netflix home delivery lost out to the internet, how do think news delivery can survive? Honestly?
The only things keeping my local paper alive now are the coupons, the legal ads (likely soon to be lost due to a change in Virginia law allowing internet posting) and the internet advertising (which the paywall has got to be hurting).
My salary breakdown was more of tongue-in-cheek jab at Ryan - I was poking fun at his habit of deciding how other peoples' money should be distributed.
#9 Posted by padikiller, CJR on Sun 4 Mar 2012 at 09:15 AM
Yeah, newspapers need to include paywall to survive, somebody need to pay ppl who are working on newspapers.
http://www.hypebuzz.com/business/paywall.php
#10 Posted by hypebuzz, CJR on Wed 7 Mar 2012 at 03:42 PM