Why not?

Sweet and simple!

Hal Varian, Google’s chief economist had some interesting facts in his FTC presentation.

Total online revenue has grown to 25-33% of newspaper ad revenue, while newspaper online ad revenue is only 3-5% of the total newspaper ad revenue. Which agrees with the proportion of pages they visit, 3% online and 97% on print.

Approximately 50% of the total costs could be saved if newspapers dropped the paper from “newspapers“.

Cable TV, billboards and… direct mail?? are the winners in ad growth. While we could almost draw a straight line for the downward slope for newspaper revenue shrinkage since 1990, and for circulation per household since 1950.

Interestingly, newspaper ad revenue predicts recessions. There’s a steep drop since the year 2000…

Local news has fared better than national, worse off: classifieds.

43% of online users get their news from their phones, mostly for the weather, and 46% jump to at least 6 different sites to get their news.

Remarkable content has to jump the subscription fence to viralize itself

In discussing Chris Anderson’s views of a new digital free market, it occurred to me that we have to look at marginal costs from a totally different perspective.

Briefly, we accept newspaper copies in our doorways, —nobody expects them in our bedrooms. By the same token, a delivery to the web is similar in nature, it is a place where the reader may pick up his news.

Then, who cares what goes on within the reader’s bedroom?

Though we do care about him paying for his copy, —like he used to, less distribution costs—, and to respect newspapers’ copyrights.

Now, in regards to marginal costs, they should be viewed as the cost of producing an additional “article”, —not of an additional “edition”—, which is a better reflection of the true nature of the online publishing business, raising and distancing the price from free.

But, with all the free media, readers are confused.

We must continue to educate them out of their confusion and into a better ethic’s ethos. Free content harms an author of a song, book, scientific research or the journalist behind a news article. If you don’t believe me, ask any songwriter.

Then we must take care of our content.

The enforcement of copyright protections and subscriptions is needed to counter the ease in which digital content can be acquired and reproduced. One “lonely” free publication is enough to allow the whole wide world to read it, and I need not mention how easy it is to copy digital content.

With these thoughts in mind, I feel we should set the subscription fence to separate trusted content from the rest. Some of the remarkable content should jump out of the fence to viralize itself, in order to grow site traffic.

Even with AP and the other news agencies continuing to publish their articles free to readers, all trusted and quality journalism has no alternative but to find home within the subscription fence.

Highly engaging blogs, as well as, breaking news, exclusives and all news with a high marketing value should be brought out into the open, or free, to viralize as many readers as possible.

What do you think?

If we are to believe in what Dan Pink —so adamantly— presents as the latest findings of Social Science, then, we should be doing whatever we want at work as long as we deliver the goods…

And also, that managers are an invention that is obsolete—so we can do away with them too.
(So far, I like it.)

In essence, studies show that people perform worse with financial incentives, except on mechanical tasks. It seems that focus hinders the harvest of the more precious creativity crop, which requires an open “walking on the edge” frame of mind.
(Too bad, that hurts. Let’s keep this between you and me.)

We are motivated by autonomy, mastery and purpose. The urge to do things on our own, to feel that we are conquering our skills and that we are doing something for a higher purpose.

Now, this doesn’t mean that we should work for free. We should get a fair reward for our labor, but, from there on, it’s these other motivations that drive us to do our best —fascinating stuff!

Here’s where I see that trained journalists should act as community ring leaders, to harness blogger stories that evoke that sense of higher purpose in doing some good for their community.
(I’m sorry, I smell cheap, but gratifying work.)

Bloggers with a natural high interest in their communities who get published in their local newspaper, may be a great way to help the bottom line. Which would fit nicely within the hybrid “Microsoft – open source model” I’ve been promoting, where high quality journalism sits behind paid subscriptions and highly engaging community blogging is free.

Malcolm makes a great argument to debunk the “information wants to be free” statement, citing as an example the $500 million spent in research by a biotechnological company on one project.

He also points out that there are always two sides to this issue. One, like Amazon, that would love to get books for free, but a second, the authors and publishers, who need to charge a fair price to survive.

If content is free, ask yourselves, why are authors going to write music, books, report news, do scientific research..?

Are we all going to go out on concerts and sell T-shirts?

Finally, there is an underlying major ethic issue at stake.

If Google News or anyone else gets content for free, isn’t this piracy, isn’t this the equivalent of robbing someone’s labor..?

Are we all going to be treated like idiots in this new technological paradigm? Are these the moral standards that we will teach our children?

Could Google News be affecting the brand value of newspapers?

It’s outright impossible for a newspaper to compete with a news aggregator.

First, the content they get is free. Then, they publish a selection of the best articles published from any news source. If they’re missing a topic, they use AP paid articles to fill in the gap.

If one stops to think for a moment, AP’s policies make no sense. First, they publish themselves their own articles giving away their news online, then, they allow aggregators to use them too, and finally they syndicate their service to newspapers?

Doesn’t publishing an article online “once” make it available to all readers worldwide due to the Internet’s ubiquity? Or, doesn’t that first free AP publication make the value of their content laughable from there on?

Shouldn’t they limit their content usage to print publications only, to be in accordance with the geographical limitations of print publishing?

It’s not only a sure suicide for AP, but it’s also helping to kill newspapers. In the long run, the only AP clients standing are going to be Google News and maybe a few other aggregators, which is not enough for AP’s survival. Unless, of course, Google decides to buy AP and get into the news content provider business.

But, enough with AP. The intention of this post was to bring attention to another significant angle in which Google News is deteriorating newspapers.

As I’ve mentioned before, there’s only two kinds of online destinations, search and bookmark. The former is laser focused on a specific subject matter, but the latter, takes us to a trusted place to see what else the author has to offer.

If newspapers allow their bookmarks to fade away with Google News, so will their brand value and… their existence.

One more reason to take aggregators to court —their practices are damaging to the copyright holders of news content.

Digital marginal costs are practically nil. Economy 101 tells us that a producer should sell down to a price close to his marginal costs to maximize his profits.

Chris Anderson explains Free in this wired video.

Let’s review this “free” issue with a loupe —it may be the undoing of the media and advertising industry.

Rephrasing, economic theory states that a producer should stop his production when the price of a good is equal to its marginal cost. It makes no sense to produce more when there is no profit.

We can derive some important consequences from this statement.

First, if the price of a digital good is not higher than the marginal cost of producing one more unit, production should stop —or, we should not sell any more units.

Second, marginal costs, although insignificant, never touch “0″, they’re always greater than “0″, with the implication that the price should never be free, because it should always be higher than the marginal cost.

So, why is the media giving away its content for free?

If the media is basing its strategy on Gillette’s model, they’re giving away the razor… with the blades.

It can’t be Microsoft’s “give piracy leeway, to get a future lock-in” strategy, because the media has a shallower and hence no hook to a news learning curve.

Could it be a “free for all” to the last man battle, in a twisted “transistor versus tube” strategy, where the media is anticipating their foes with these nil prices..?

Unfortunately, the answer is none of the above. I won’t go into further detail, it doesn’t help. Let’s just say that media erred in expecting advertising to cover those costs.

The first thing that comes to my mind, is that we need to be tech savvier, —it’s why its taken us so long to figure this out—, to gain control of the distribution of our online content.

We should also get our own advertising networks in place. If not, Google and others will continue to earn the lion’s share of the online market —with commonplace accepted 70-75% commissions. Having our own ad networks would allow us to turn the tables, to potentially increase revenue three times on (text and display) contextual ads.

I don’t like walls. They hinder creativity, and they don’t work most of the time, e.g. the Nigerian terrorist’s bomb plot aboard Flight 253. But, in order for journalism to survive, we need to apply a subscription model.

We sometimes miss that a “digital good” or content is the final product. It’s not what takes place at a hardware store site, where content is given for free, but the purpose of the site is to get the visitor to pay for the hammers and nails.

There’s also the issue of reporting, interviewing, taking pictures, recording, and on and on… which are not replaced by software, as in the case of a travel agent or stock broker. In the end, producing content is costly for the news source.

Unless, of course, you’re Google News (or any other news aggregator) and you feel that you have the right to piggyback on the best news sources for free to publish an edition with select content… Don’t we all wish we could do that?

Intent, and damage to the commercial value of the work are important considerations, in the copyright protection law. So, my next recommendation is to continue to escalate the enforcement of our copyright protections, which have been much neglected, but is a movement that is starting to gain momentum within the media.

Next, and although I hear this little voice in the back warning me that we must stop all leaks, to avoid the ship from sinking, I find that the Microsoft versus open software model fits nicely with our situation.

Microsoft charges a premium on its software, and users are willing to pay the premium, because of the risks they avoid by not using an unsupported free open version.

I still feel there is a case for branded journalism institutions capable of charging a premium for reader perceived quality journalism.

Branded news institutions have a place, readers not only need to find more about something they know little about, as with searches, but they also need to know what they know nothing about… They need to go to a place where they trust they will be informed of what is going on.

Getting back to the content metering issue, I’d like to bring you back to how magazine subscriptions worked a few years ago. Their promotions were endless and their enticing offers never ceased. In other words, I feel that a similar continued enticement, with free and discount offers should candy the reader’s path into his subscription —like it used to.

Finally, since the Internet is ubiquitous, either content is remarkable —a la purple cows— or it’s focused locally, in order to be able to get paid subscribers.

There’s much more, I’m sure —love to hear your thoughts.

An Orwellian Big Brother is a lot closer than I thought.

Let’s see, you want to visit the Miami Seaquarium…

You’re Google search will give the above result, which shows you their hours of operation and a link to More information… which takes you to a Google maps page with more Google ads.

Google is adding detours to allow for more billboards in this extended new road —while hijacking and denying the traffic and potential up sell at the website motivating the search.

As shown, the parasite behavior of Google, Yahoo, Gawker, Newser and other aggregators is  more pervasive than expected.

This kind of ruse should be contested in court. Intent, and damage to the commercial value of the work voids any “fair use” exemption to (U.S.) copyright law.

According to Brad Templeton’s essay:

The “fair use” exemption to (U.S.) copyright law was created to allow things such as commentary, parody, news reporting, research and education about copyrighted works without the permission of the author. That’s vital so that copyright law doesn’t block your freedom to express your own works — only the ability to appropriate other people’s. Intent, and damage to the commercial value of the work are important considerations. Are you reproducing an article from the New York Times because you needed to in order to criticise the quality of the New York Times, or because you couldn’t find time to write your own story, or didn’t want your readers to have to register at the New York Times web site? The first is probably fair use, the others probably aren’t.

Fair use is generally a short excerpt and almost always attributed. (One should not use much more of the work than is needed to make the commentary.) It should not harm the commercial value of the work — in the sense of people no longer needing to buy it (which is another reason why reproduction of the entire work is a problem.) Famously, copying just 300 words from Gerald Ford’s 200,000 word memoir for a magazine article was ruled as not fair use, in spite of it being very newsworthy, because it was the most important 300 words — why he pardoned Nixon.

But it’s not all negative news for content providers, Google has joined the Apple and Amazon group vying for the distribution of books. In the ensuing competition, publishers have been able to lock-in better deals, distributors are now getting a 30% agency commission and Google cannot break apart nor search these books.

 

According to Don Peck’s “How a New Jobless Era Will Transform America“, the current recession is expected to extend itself into a prolonged slow recovery, snail pacing the creation of jobs, a daunting task if we consider the millions that will have to be (re)employed to achieve normalcy, at 5% unemployment.

The jobless and their disintegrating families will be left with deep scars. The young from the poor neighborhoods, whom after losing all hope, lose their opportunities by caving into drug dealing or addiction. Those suffering from the trauma of an extended spell of job loss, even if employed later on, will feel that they have no hope, nor their children, of ever recovering their past opportunities.

What does this all mean for us?

First of all, we have to recognize that the future will look dimmer for most of us mortals, but it also means, that the recession is undoubtedly accelerating the Darwinian process of eradicating the ill adapted (media) institutions out of this rapidly changing environment.

“Welcome to the New Normal“, as John Mauldin so fittingly coins this new high unemployment era.

Interview with Mish Shedlock
Second, we have to recognize and persist in reporting the big story of our time: China.

The story is simple. China has cheap labor, by now probably around 15% of the cost of US wages. This imbalance, which is fostered by the Chinese government through currency manipulation, will continue to wreck havoc in the west until wage equilibrium is achieved.

That’s why the recovery will be slow. Ask yourself, where is investment likely to find a home? Not in the west, but in China, where their own government attempts at stopping the incoming flow of investment, to avoid overheating their economy, have failed.

Next, the highly corrosive environment leaves little time to mend our ways and find solutions.

Finally and most importantly, journalists will have to find in their (hearts and) voices a way to raise the west’s broken spirits.

In our lively Linkedin discussion, each time I would point out a certain feature which I feel needs to be addressed to get “newspapers out of the mess they’re in”, Jack would quickly respond that if we delivered good content, the rest would fall into place…

I think the best way to introduce ourselves into the vast subject of content, is to take a peek at how technology is affecting us all today. Douglas Rushkoff’s Frontline digital nation (90 minute) presentation is an excellent starting point.

It feels like we’re taking-off on our first flight to a Ray Kurzweil world, where changes accelerate at a breathtaking pace, forcing us all to desperately adapt to survive the turmoil of information overload.

On the positive side, technology’s attractiveness is helping to raise students’ levels at under-performing schools. On the negative, it’s distracting, it’s addictive, and multitasking dumb the contemplative, and highly focused endeavors.

We, the immigrants to this digital new world, also learn that our young natives will not read more than 200 pages, nor concentrate for more than a snippet at a time, a paragraph, then they’re off to their facebook, e-mail… And, that the not for long natives, in the ever evolving turmoil, have no need to memorize since they can find anything at fingertip reach.

 

This evokes Ray Bradbury‘s science fiction novel Fahrenheit 451. Bradbury stated that his novel was not about censorship, but a story of how television destroys interest in reading literature, leading to a replacement of knowledge with “factoids”, partial information devoid of context.

As in Bradbury’s book burning dystopia, we are not only dumbing ourselves down, but we have also allowed search companies —the Orwellian big brother— to watch over (and record) all we do. We have let them stand between our work and our clients, through the aggregation of all sorts of information, as in the case of newspapers and news aggregators.

Let me repeat. We’re dumbing our kids down… We’ve allowed the search companies to have our precious personal information, and… they’re becoming the intermediaries distancing ourselves from our clients, or readers.

Am I getting too paranoid?

Do the exercise yourselves with the Google phone number giveaway. Ask yourselves: who will control the telephone business, if Google is successful with their feature-laden numbers?

Will a doctor or plumber suffer too, if he is not listed in the directory which everyone will be carrying in their pockets?

I’ll be back soon with more… free content.