TCS Daily


The News-and-Views Industry of the 21st Century

By Nathan Smith - May 26, 2005 12:00 AM

It's understandable that the New York Times wants people to pay to read its op-ed page, so its recent decision to begin having online readers pay to view content is not a complete surprise. It's not a charity, after all. And by providing content online for free, newspapers reduce the incentive for people to subscribe to the paper. People are responding to those incentives, and newspapers are losing subscribers. As the Wall Street Journal has reported:

"Circulation numbers... released [May 2] by the Audit Bureau of Circulations... show industrywide declines of 1% to 3%... Circulation at Tribune Co.'s Los Angeles Times is likely to be off in excess of 6% of its most recently reported figures. Belo Corp.'s Dallas Morning News expects to report daily circulation down 9% and Sunday circulation down 13% from the year-earlier period... Long stuck in a slow decline, U.S. newspapers face the prospect of an accelerated drop in circulation."

The New York Times has increased its circulation by only 0.2 percent despite expanding into markets outside New York, where it is losing subscribers. And it's having trouble getting ad revenues. Meanwhile, while I've come to prefer the Washington Post for news, the NYT has the best team of op-ed columnists in the country. David Brooks and Tom Friedman, to cite my favorites, not only provide shrewd, fascinating, and unpredictable commentary, they also transcend mere punditry, and are worth reading for their literary merit. Can't the Times cash in on that talent?

Well, they plan to try, but when they do, they'll lose the bloggers. Ann Althouse reacts:

"I'm a longtime subscriber to the paper NYT, so I'll have access to the 'Special Voices' without paying anything more, but the pay-wall nevertheless deters me from reading. Reading and blogging are a merged activity for me, and I'll invest my reading time in things I can link to."

Kos agrees: "If my readers can't read it, why would I link to it?" My blog is much lower-profile than Ann Althouse and Daily Kos, but I know the feeling. It's not just that I won't pay $50 for a subscription. Even if I got a free subscription for some reason, I would read the NYT columnists a lot less, because I couldn't link to them, and other people wouldn't be linking to them. They just won't be part of the conversation anymore. To a blogger, if it's not freely available, it doesn't exist.

This will be a problem for the Times because, first of all, bloggers are a big demographic all by themselves: over eight million and counting, by one estimate. What's more, bloggers are just the kind of news junkies who, a decade ago, might actually have paid $50 to read the Times op-ed page. Second, many readers come to Times columns through links from the blogosphere.

What's peculiar about the economics of news-and-views is that, by raising the price, the Times will not merely reduce demand for their product, they'll reduce its value, because the significance of an op-ed does not come only from the author, but from the audience as well. Martin Luther King's "I Have a Dream" speech would have been much less interesting if it had been given at some obscure academic conference, rather than on the steps of the Lincoln Memorial in front of an audience of hundreds of thousands. Likewise, John Tierney and Paul Krugman will be less interesting when they are no longer writing to the internet masses, to America and the world, but merely to the narrow, unrepresentative subscriber base of the Times.

On the other hand, the Times has its bottom line to take care of. So what should they do? It's a problem.

Money for Ideas

The New York Times' dilemma is just the latest manifestation of the vexing economic conundrum of how to finance intellectual production.

Information is a "non-rival" good. This means that my having an idea, or knowing a fact, or watching a film, does not conflict with your having the same idea, or knowing the same fact, or watching the same film, in the way that my eating an apple conflicts with your eating the same apple. This is both wonderful and problematic.

It is wonderful because society can make a fabulous abundance of art and science, prose and poetry, film and music, news and opinion, available to each of its members. It is problematic because in most markets, the supply curve intersects the demand curve at the point where marginal cost equals marginal revenue, so that producers will produce the optimal amount of the good without any government intervention. But for information, the marginal cost is zero. That means markets don't clear, demand doesn't equal supply, laissez-faire doesn't yield the optimum result.

The traditional financing model for newspapers is a combination of subscription revenues and advertising. Subscription revenues assume the protection of intellectual property, which prohibits arbitrageurs from reprinting your newspaper and selling it at half-price because they don't have to pay your writers. Intellectual property artificially gives the creator of an idea a monopoly over the use of that idea by prohibiting others from using it without the creator's permission (typically paid for). This is philosophically problematic, because the notion that a person can in any sense own an idea is an odd and perhaps disturbing one.

But the challenge for intellectual property today is not philosophical but practical. The internet makes the media environment more fluid, and transaction costs suddenly loom much larger. Newsprint readers who put a couple of coins in a machine to buy a daily paper, or who renew their subscriptions once a year, aren't much deterred by the time and trouble involved in the process of purchasing the newspaper. But today's internet readers, with an endless sea of interesting links to choose from, wouldn't submit to the inconvenience of pulling out their credit card even if the fee were as low as a nickel or a dime, let alone $50. They'll just move on -- all the more so because you know that's what others will do, and you want to read what everyone else is reading.

But if you can't rely on subscription revenues, what are the alternatives? How will great writers like David Brooks and Tom Friedman make a living?

Other Models

To play devil's advocate for a moment, the internet strengthens the case for public subsidy. Intellectual property is what economists call a "second-best" solution, since some people who could have read a story at no extra expense to society won't get to. In the kind of theory which assumes an omniscient and beneficent government, the state should figure out which authors generate content whose social value is great enough to warrant providing a living to those authors, put them on the state payroll as long as they keep producing good work, and make their work available to the public for free. In reality, of course, governments are not omniscient and beneficent, and the last thing we want to do is give them control over the reporting of news and the expression of opinion. The propaganda ministries of dictatorships are Exhibit A in the case against state-run media, of course, but the BBC's recent conduct is almost as scary: what they did in the David Kelly affair may, if you'll forgive a bit of poetic license, be described as framing Prime Minister Blair for murder to punish him for adopting a policy (the war in Iraq) which they opposed. Fortunately, there is no American equivalent of the BBC. Americans know intuitively that it would be a threat to liberty.

Two better options are the Maecenas model and the Talleyrand model.

Maecenas was an ancient Roman renowned for his patronage of the arts. Wealthy people who want to give something back to society should reconsider writing that check to their alma mater and consider, instead, endowing a writer. An endowed writer would get a weekly income for a set time or for the rest of her life, provided that she agrees, for example, to write one column a week, and make it available to the public online and for free syndication in newspapers.

James Miller suggested in "Campaign Money for Blogs" that a partisan millionaire should create awards to bloggers who prove politically useful. I agree, but I would hope that someone would be willing to endow a writer for the mere beauty of her prose as well. And who will these Maecenases of the blogosphere be? Perhaps a few of the wealthier of those millions of aspiring pundits who populate the blogosphere will eventually come to the conclusion that they have more money than writing talent, and that the best way they can contribute to the blogosphere is to endow someone else to do it for them. (Then again, in a way, this is happening already: every blogger with a day job is his own Maecenas.)

Talleyrand was a French politician, who, amazingly, managed to participate in every government of the Revolutionary and Napoleonic period, surviving to represent France at the Congress of Vienna. A historian I read, inclined to admire him, reported that "Talleyrand had convictions; he simply preferred to be paid for acting on them." This will be a fitting motto for a different kind of journalist. What I have in mind is not a corrupt hack who will write whatever someone who pays him wants to write. No, the journalist of the tradition of Talleyrand will know and write just what he believes. But he will figure whose self-interest is served by his articles being available to the public, be it George Soros or General Electric or trial lawyers or the Ford Foundation or the People's Republic of China, and persuade them to pay him for it. The rest of us will have to get a bit less snobbish about journalistic independence, but we'll also rely on citizen-bloggers to filter these writers, to rely on them selectively, to applaud them when they're providing good information and good arguments, and to expose them when they pull a fast one.

If this is anything like how the news-and-views industry of the 21st century shapes up, I'll be surprised if an organization like the Times will be able to attract the best writers. The general blogosphere will be the farm teams of writing; magazines will be the Major League. No writer worth his salt will ever agree to have anything he writes placed behind a subscriber firewall, not out of solidarity with his readership, but because his work won't be read, which means people won't care what he thinks, and having people care what you think is the essence of successful punditry.

The Road Ahead for Newspapers

This leads to a more serious question: Will newspapers have any place in the future news-and-views industry at all? If I follow Mickey Kaus's "First Rule of Journalism" for a moment -- generalize wildly from your own experience because you're not that special -- then I conclude that newspapers are already irrelevant. I haven't read print newspapers regularly in years. I've read plenty of content from newspapers online, but I usually link to it through blogs or internet portals, and half the time I don't even notice which newspaper I'm reading. Nor do I decide whether to trust it based on the source, though sometimes based on the author; I decide whether to trust it based on the style, on its seeming plausibility, on its consistency with what I already know, and on what the author says his sources are. Just because newspapers, in their online form, are still read doesn't mean they get to define what is newsworthy, that they're useful in establishing trust, or that they're helpful in promoting good writers.

What is the rationale, anyway, underlying the particular bundle of services embodied in your average daily newspaper? Out of hundreds of thousands of words of content, most readers surely do no more than glance at a few articles. There are movie listings, classified ads, and crosswords. There's nothing in or about a newspaper that the internet can't do better, except one: it's paper. You can take it with you and read it on the subway, or on a bench in the park. Plus, your eyes get tired of staring at a computer screen all day. The best thing about a newspaper is that it's paper.

Which leads me to this conclusion: The best way for newspapers to cut costs, and thus maintain profit margins, may be to outsource writing responsibilities. Content is cheap and abundant, because, as I mentioned before, information is a non-rival good. The comparative advantage of a newspaper is not content provision. For finding talent, and as the prime forum for the exchange of news-and-views, the blogosphere and the internet are better adapted. It's printing and distributing to people's doorsteps every morning dozens of pages of newsprint, portable and easy on the eye, that newspapers and newspapers alone do best. They should focus on that.

A generation from now, running a newspaper will be pretty simple. One, you'll surf the web for good articles, debates, the latest major speeches, think tank reports, and blog posts. Two, select fifty thousand words or so of the best, most relevant content, in a variety of styles. Third, contact the writers for permission to syndicate, decide which fees (for those who ask them) are worth paying, and transfer the appropriate amount to their PayPal accounts. Fourth, correspond with advertisers, and assemble all the ads that are ready to print on a given day. Fifth, lay out your paper. Sixth, send it to the printers. Seventh, distribute it. Your staff will consist of web-surfing editors-and-content-finders, layout people and printers, and delivery boys with bikes, plus a staff to drum up advertisers and maybe a few reporters who deal with local issues.

Newspapers, in short, will end up carrying water for the blogosphere.

The author is a writer living in Washington. Those wishing to endow a writing chair for him can email him at Nathan_Smith@ksg03.harvard.edu Find more of his writing here, here and website.

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