Friday, November 14, 2008

Who Will NOT Pay for The News

Now that the press barons have returned home after circling the deck chairs in Reston, excuse me, "developing a shared vision for going forward," we'll be anxiously awaiting the results. Meanwhile, I recommend a look at the available video output from another comfortable confab, the Monaco Media Forum, held last week. There's half a weekend's worth of viewing there, so I haven't yet digested it, but expect to comment on it Monday.

Alan Mutter has a roundup today of third-quarter financial results from the publicly-traded newspaper firms. Most of those that have not plunged in the red on an operating-profit basis are seeing 40 to 90 percent declines. Elsewhere, an analysis of the New York Times Company's QIII results looks pretty scary, if you know what a quick ratio is. (Their currently liabilities are more than double their current assets, which is something that would put any normal company into bank covenant default and make it very difficult to refinance debt.)

So, the question of the moment is certainly: Who Will Pay For The News. Those with a vested interest in the topic may want to maker their calendars for O'Reilly Tools of Change for Publishing Conference, February 9-11, 2009 in New York. Although it's a book industry gathering, it looks like newsies might learn something as well. Jeff Jarvis will be there, as a keynote speaker, no less. (What would a conference be without him?)

Meanwhile, a substantial piece of thinking to chew on (yes, I know it's ancient, but I'm just catching up with it): "Free! Why $0.00 Is the Future of Business,"a piece in Wired by Chris Anderson (see also his related Long Tail blog post). If you haven't previously encountered it, it's long but worth adding to your weekend reading, and it has new relevance during the current crises in newspapers and elsewhere. Samples:
The rise of "freeconomics" is being driven by the underlying technologies that power the Web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero....

This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all....

The huge psychological gap between "almost zero" and "zero" is why micropayments failed. It's why Google doesn't show up on your credit card. It's why modern Web companies don't charge their users anything. And it's why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.

Traditionalists wring their hands about the "vaporization of value" and "demonetization" of entire industries. The success of craigslist's free listings, for instance, has hurt the newspaper classified ad business. But that lost newspaper revenue is certainly not ending up in the craigslist coffers. In 2006, the site earned an estimated $40 million from the few things it charges for. That's about 12 percent of the $326 million by which classified ad revenue declined that year....

Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.
Barons of the press, repeat that: Reputation and attention are the new scarcities. Again: reputation and attention are the new scarcities. (Keep repeating. Monetization will follow.)

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