I think James Suroweicki’s column on the newspaper business takes a wrong turn here:
For a while now, readers have had the best of both worlds: all the benefits of the old, high-profit regime–intensive reporting, experienced editors, and so on–and the low costs of the new one. But that situation can’t last. Soon enough, we’re going to start getting what we pay for, and we may find out just how little that is.
This is wrong. As Felix Salmon says when you pay for the physical newspaper you’re not paying for the news, you’re paying for the paper. A newspaper is a big physical object. Creating it and distributing it on a daily basis is a hugely expensive undertaking. And subscriptions to newspapers are cheap — the amount of money being charged for home delivery of The New York Times or any other major paper only does a tiny amount to defray the costs of producing and delivering the object.
The problem newspapers are having with online isn’t that the readers won’t pay, it’s that the advertisers won’t pay. The reduced costs per reader make up for the reduced revenue involved in giving the product away, but a physical newspaper generates far more in terms of ad revenue per reader than does a newspaper website. Probably once physical newspapers all disappear, ad rates for news websites will go up somewhat merely because ad buyers won’t have as many options. But I think it’s plausible that even when everything shakes out online advertising revenue still won’t support the volume of staff that print advertising revenue once did. In that case we’re going to have to count on a mix of nonprofit media (ProPublica, Center for Independent Media, ThinkProgress, The American Prospect) and value-adding analysis by experts workers on an amateur basis (Brad DeLong, Greg Mankiw, Mark Kleiman) to make up the gap. That and, of course, increased productivity on the part of journalists — Google and email have made it much more efficient to research stories than it once was.
But in terms of revenue for for-profits, the action is all in the advertising — can people come up with ways to raise more money — not in charging readers.