Newsprint Kills Newspapers

From a lengthy—but worthwhile—London Review of Books story about the newspaper business:

in the US, the newspaper business is a local one, with a strong tendency towards de facto monopoly. Most of America’s cities have (or had) a dominant newspaper, and that paper had a monopoly of classified advertising. During the long years of the 20th century’s newspaper boom, that monopoly was the proverbial licence to print money.

Economic theory holds that there are very, very few sustainable monopolies. Without government protection from competition through licensing and regulation, human nature will produce either competition for the monopolist’s profits, or technology which makes the monopolist‘s business model obsolete.

The internet is the package of technologies which killed print newspapers. Not the desire for news, but abilty to print money by publishing news:

The journalism being produced by newspapers now has more readers than ever before; in some cases, many millions of readers more. They are reading it for free online, of course, but still: it’s hard to be depressed by the thought that your product has a huge new audience.
…
The internet is the most effective means of giving stuff away for free that humanity has ever devised. Actually making money from it is not just hard, it may be fundamentally opposed to the character and momentum of the net. And yet this is where the newspaper business now is. Its underlying problems are to do with the net: loss of circulation and ad revenue are both driven by the rise of new media. Its opportunities come from the net too: that huge new army of readers.

Online ads do allow newspapers to make money off their vast new audiences. Instead of fighting the advance of technology, the newspaper business could embrace it. Viewed as a stand-alone, the online versions of newspapers may be economically sustainable. It is the cost of their dead-tree editions that pulls them down:

The production and distribution of newspapers is fantastically, outlandishly expensive. Everything about it, from the paper to the newsprint to the presses to the maintenance to the distribution infrastructure, costs a bomb. In OECD-speak: ‘On the cost side, costs unrelated to editorial work such as production, maintenance, administration, promotion and advertising and distribution dominate newspaper costs. These large fixed costs make newspaper organisations more vulnerable to the downturns and less agile in reacting to the online news environment.’

Why is that a good thing? Because the internet can make all those costs go away. If newspapers switched over to being all online, the cost base would be instantly and permanently transformed. The OECD report puts the cost of printing a typical paper at 28 per cent and the cost of sales and distribution at 24 per cent: so the physical being of the paper absorbs 52 per cent of all costs. (Administration costs another 8 per cent and advertising another 16.) That figure may well be conservative. A persuasive looking analysis in the Business Insider put the cost of printing and distributing the New York Times at $644 million, and then added this: ‘a source with knowledge of the real numbers tells us we’re so low in our estimate of the Times’s printing costs that we’re not even in the ballpark.’ Taking the lower figure, that means that New York Times, if it stopped printing a physical edition of the paper, could afford to give every subscriber a free Kindle. Not the bog-standard Kindle, but the one with free global data access. And not just one Kindle, but four Kindles. And not just once, but every year. And that’s using the low estimate for the costs of printing.

The Christian Science Monitor dropped their print version a few years back. I was a long-time subscriber, and I gave their new model a try.

I missed the dead-tree version. It is easier to read longer stories in print. And my habit was to take my Monitor to the gym and read while pedaling a stationary bike. I couldn’t do that any longer. And I’m not convinced that reading it on a tablet (iPad) or Kindle would work. Even if the readibility of the screens on those devices is as good as some people claim, electonic devices do not mix well with sweat and iron plates.

If, however, some corporation like the New York Times was willing to send me replacement e-readers—because they could now afford to—it might prompt me to try again.

Even better would be an e-reader built into the stationary bike.

Hmmm…

Via: Newmark’s Door