The death of “Free” content?

Hey buddy, can you spare a buck? Or ten? Or a million? This is the cry of many newspapers as they struggle in the new electronic media age. They claim that if their revenue continues to slip away, the online content many websites use will stop. This could mean that online news will suffer or even possibly go away. An article on CBS Sunday morning mentions that many newspapers are struggling in the new economy of the internet as they provide free electronic editions of their print newspapers as these same editions suffer from falling subscriptions.

So many businesses offer free content online that some economists claim the internet cannot long support this model. They blame a fickle public for this problem, claiming that before the internet, people had no problem shelling out the subscription fee for their daily news. But what they fail to remember is that newspapers have always gotten their content revenue from advertisers, not from subscriptions.

The money that people pay in either subscriptions or cover price at the news stand is to cover the distribution cost. If the cover price was for content, then the price would be significantly higher. Think of all the work that goes into printing a paper: the reporters, the editors, the graphic artists and photographers, the pressmen all get paid—some quite handsomely—to print that newspaper that will be lining a bird cage or wrapping your garbage tomorrow. No, the cost of generating newspapers is covered by the ad revenue for all those ad inserts and block ads on every page. Those ads are huge business generating millions of dollars. Those ads support the news and always have.

So the problem really boils down to newspapers not moving enough print editions to justify the cost of these ads. The rates they charge for ads are based on how many readers that can legitimately claim. If subscriptions fall off, the rates must also fall, so their revenue falls. This is worrisome for the future of the newspaper industry and lends credence to those who claim that print is dead. However, if print is dead, then who will provide the content for the websites?

All the news that is read online is aggregated from the many online editions of print newspapers. Yahoo or Google or even your ISP portal page is full of news pulled from local newspaper websites. No ISP has in-house news team writing original content. Very few websites have original content providers. Why? They cannot afford them.

Youtube is a model of the free content system. Many people cite the site as how websites can exist in the free market of the ‘net. But Youtube gets more than 90 percent of its content from users who are not paid, so it can afford to provide it for free. The commercially provided content was submitted by production houses as previews for network shows or theatrical releases and is written off as advertising expense by those companies.

One thing to remember, is that many, heck even most websites with free content have advertising on them. These sites are making money. Maybe not the same percentages as the old print model, but that will work itself out in time; especially as the economy continues its shift from print to online. The trick is getting the advertisers to pay the same amount for ‘net ads as they do for print.

What about the end user, you might ask. Why should they get all that content for free? Well, remember in the print model, the subscription fee that the consumer pays is for distribution only. All content is ad supported. The distribution in the online model is covered by the ISP. Subscribers are paying for the distribution by paying their ISP for the internet connection. Content providers no longer have to pay the printers, the truckers, or the delivery team to get the newspaper to the customer’s door. The ISP does that. Much cheaper for them, much simpler for the consumer.

With the electronic economy, traditional outlets have to update their revenue model, they know this and they are looking at it. However, they do not have to radically alter it. The ad-generated scheme will continue to support the process, if they can get the advertisers to accept the ‘net ad as much of a revenue stream as the print.

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