The beleaguered New York Times and other news outfits like it have been engaged a giant game of industry chicken over the last several years in an effort to see who will make the first move toward charging for its online content.
The stakes are huge. Each company is rightly worried that the first one among them to implement any kind of pay system will be the sacrificial lamb, and it seems the NY Times simply blinked first.
Details are minimal and speculation rampant. Unlike the failed TimesSelect model that was abandoned a few years ago, this model apparently will charge for general usage, rather than premium content.
The more interesting aspect to this development goes rather like this: Will people pay up?
My stance on this issue is the same as when I analyzed Rupert Murdoch’s petulant remarks about Google last month. The heads of the old media companies (think NYT, News Corp., NBC, etc.) are massively discounting the game-changing effect that the Internet has and will continue to have on media business models, some of which predate the last century.
By moving in the direction of paid content on their websites, they are attempting to replicate the Scarcity Business Model in the online world. This business model is based on charging for a good or service in accordance with its availability. Prices are determined based on the laws of supply and demand, and each consumer decides whether of the value of the good is worth its cost.
In the case of a newspaper the physical object is purchased for access to the intellectual content, as there is (or rather, was) no other way to get the information firsthand.
Scarcity is what gives the newspaper or any other physical good its value. But no such scarcity exists in the online world. The physical good is not the only gateway to the information. If you are reading a newspaper, I cannot read the same newspaper at the same time. But online, thousands of people essentially read the same paper or access the same information at the same time.
Clearly the laws of scarcity do not apply here, and therefore any content or media business strategy that takes the Scarcity Business Model for granted in the online world is making a colossal strategic error.
These companies will argue rightly that they deserve to be compensated for the services they provide. They will argue correctly that without some sort of pay system journalism as a profession will cease to exist, and we will all concur that an uninformed populace cannot sustain a democracy.
But the newspapers fail to realize that they are in the newspaper business, not the journalism business. There is no future to the gigantic, unwieldy broadsheet format that has fallen out of favor with the under-50 set, especially now that anyone with Internet access can be an aggregator and distributor of information and play the role of a newspaper without any of the overhead.
A parallel exists in the recent record industry collapse. When companies in this space began to lose money to the digital revolution, they tried every way possible to impede progress. They poured money into DRM and waged punitive lawsuits against their own customers. And like newspapers today, they wailed that without them nobody would make music any more.
Then Apple came along with the iPod and the iTunes store and developed a successful new business model selling music. It then successfully expanded it to movies, TV shows, even rentals, and is expected to make a play for the eBook market next week.
Record companies still exist as a legacy industry of course, but a dying one. This will likely be the fate of the newspapers as well, because someone along the line will hit upon a content delivery system that people will be happy to pay for and the journalism industry will realign itself. We will remember the old pay sites like we remember GeoCities, casualties of the creative destruction that has always driven the free market.
My guess is that the pay system may hold back the tides for now at the Times, but the Grey Lady is in a long-term slide. My prediction is that the Times as we have known it for the last 150+ years will cease to exist by the end of this decade, and the same goes for most of the other old-media companies. And to them, I say good riddance.
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