I'm sure that Ryan Chittum's blog post tonight will get a lot of attention. It uses some statistics to show the "surprising resiliency of print" in holding audience share despite all the buzz about online news.

Just as when Martin Langveld pulled a statistical rabbit out of his hat to show that almost all "newspaper reading" happens in print, this post will be celebrated by print executives seeking comfort in their old ways.

Chittum argues that most newspaper audience consumption happens in print, not online.

Chittum calculates total time on the New York Times' site by multiplying 17.4 million visitors by the 14:29 average each visitor spent on the site (in a normal month the TOS is twice that, as he acknowledges). 17.4 million visitors times the more-normal 30 minutes on site per visit would be 8.7 million hours a month online. (Update: An earlier version calculated time based on data of time per visit. Nielsen actually counts total time per visitor for the month, as Ryan notes in the comments. Numbers have been updated.)

Chittum calculates readers spend 26.4 million with the print newspaper each month. And that calculation is far less certain. To calculate the amount of hours spent with the newspaper, Chittum adopts an internal estimate by the New York Times that every reader spends an average of 30 minutes a day. That's an unsubstantiated internal number thrown out by an executive (during a web chat, ironically). There's just no way this is true. Many subscribers don't even pick up the paper on a given day, many more only see the front page. Certainly there aren't 2.2 readers each spending an average of 30 minutes a day with every copy printed. When a newspaper pays a consultant to tell them people spend time reading their paper, the consultant tells them that. At least web analytics are real.

This numbers argument aside, Chittum's a pretty smart guy. I disagree with him on some things (pay walls, AP's DRM strategy), but he's not one of the ink-stained denialists.

He acknowledges at the end of his post that the discussion of the present numbers isn't even the most important metric. What matters is the trend -- what market is growing, which one is shrinking:

"This analysis doesn’t present any trendlines, which are moving away from print and toward online. But this is fifteen years into the age of the online newspaper—and going on a decade into the high-speed Internet era—and you can spin it a couple of ways: It points to the surprising resiliency of print, or it signals the pitiful job newspapers have done online.
"I’d say it’s some of both."

So whatever you choose to believe about the current balance of readership, we all know which way it's going -- online -- and that we need to get ahead of it.

I'm sharing an interesting comparison of two recent influential pieces on the issue of pay walls for newspaper websites -- one for it, and one that argues instead for new products and revenue sources.

Compare the words used by Umair Haque in his "Nichepaper Manifesto" (which calls for news organizations to invent something new instead of trying to charge for the old product) to the words of David Simon's "Build the Wall" article in CJR (which calls for the New York Times and the Washington Post to lead the way in building pay walls around traditional newspaper stories posted online).

The big difference? Haque is looking forward for solutions, while Simon is looking backward at protecting old power centers of print.

The words in the Nichepaper Manifesto: develop, strive, knowledge, different, new, better, innovators, 21st century, readers.


The words that define David Simon's backward-looking screed: Times, Post, product, papers, paid, revenue, industry, wall, advertising

Let's talk about the undertones of jealousy some newspaperfolk direct at Google, because it's getting in the way of real progress.

The thought goes something like this: "We hardworking journalists are going broke to produce all this content, and Google just links to it all and makes billions off the ads next to OUR STUFF! They owe us a cut, they're parasitic aggregators!"

The frustration of newspaperfolk at their lack of a successful online business model is understandable. But those who blame Google are just lashing out blindly. Here's why it doesn't make sense:

Google is not a newspaper. Google does not compete with newspapers. Google is not even a content company.

What does Google do? It organizes the world's information and allows anyone to find the piece of information they want -- whether it's news, websites, images, video, or other stuff. It is the dynamic table of contents for the Internet -- showing the way to content.

Point #1) Google is not stealing your money.
Google makes money by sending traffic to your content. No one goes to Google to "read Google," they go to follow links. You get more traffic because of Google. Whether you can monetize it through ads or another business model is your own problem.

(Sidebar: Another common complaint is that Google News results don't necessarily list the original source of a story at the top. Frequently cited is the example of SI.com breaking the Alex Rodriguez steroids story, but Huffington Post's AP rewrite getting top search results. Some say this is unfair. But in truth HuffPo just focuses more on optimizing its content for search engines. They play by the same rules, they just play better. A professional news site better accept that SEO is part of the game now. Also, killing the AP would help)

Point #2) Google earns its money.
Detractors talk about Google as if it were a needless middleman stealing value from the market. It is not.

Google provides an immensely valuable service of connecting a user to the right web resource among billions of options. That service is more valuable than any single piece of content on the web.

As it provides excellent free search, Google has invented a way to make billions by selling keyword-targeted ads at auction. This extracts maximum value from almost countless niches and actually serves its advertisers and users very well.

News websites will likely need to reinvent new revenue streams online by solving new problems for users and connecting users and sellers in ways that BOTH win, like Google does.

Don't hate Google. Be Google.

It's becoming more and more and more clear that the Associated Press does not like the rules of the Internet and intends to resist them. That's actually pretty predictable when you think about it, because the Internet doesn't like the AP either.

More specifically, the Internet has no place for the AP. The roles that AP played in the print media system are either unnecessary (generic wire service coverage) or downright harmful (redistributing member content) in the digital system.

The AP evolved as a cooperative of newspapers, as well as some radio and TV stations, to solve two specific problems of the pre-Internet era:

1) How does a local newspaper, with no national or international bureaus, fulfill its mission to digest daily all the world's happenings? Answer: form a cooperative, AP, where everyone shares the cost of staffing bureaus and shares in the content.

But on the Internet, that model is of little use. Online news sites succeed by focusing on one niche and creating their own unique value in covering the hell out of that niche, better than anyone else. You don't need AP content on a news website. Cover what you cover. Users will go to CNN, BBC or the like for the national/international news anyway.

2) How does a network of newspapers share important stories among each other so they may all reprint them? Answer: permit AP editors to copy or rewrite your content and send it over a wire (an actual telegraph "wire" in the early days) to other AP members. Because newspapers generally didn't compete across geographic markets, there was no harm to letting others reprint your work elsewhere, and you benefited from theirs.

On the Internet, of course, the opposite is true. We're all in one big market now, with everyone just a link away from any piece of information in the world. There is no need for a "wire" to send copies of stories around anymore, when one site can simply link to the original story on the other site.

More importantly, the wire copying causes much harm. The AP takes the unique value provided by the original site and dilutes it by making the product free for thousands of other outlets to repost, instead of sending all the traffic back to the site that created the valuable thing in the first place. The AP is the "parasitic aggregator" that it and others so often label other blogs and news sites.

So the AP's two reasons for existence don't hold up online. The AP senses this, and its leadership is going through the Kubler-Ross stages of grief (moving from Denial to Anger now, Bargaining will be next when more members start to cancel). We don't need an AP online (which is why it's laughable that AP thinks we all will be willing to license their content and pay for it).

You do your thing, I'll do mine, and we'll link to each other. No wires.

My post from this weekend. about why newspapers have not charged readers the cost of content production since the 1830s, went viral Thursday morning. So this morning I jumped into some analytics to study how it happened. I thought I'd share the findings for anyone who might find it useful or interesting.

The major find: Ideas like this spread through social networks, peer-to-peer, then find their way into blogs and MSM sources next.

As best I can reconstruct, a few of my Twitter followers started retweeting the post link late Wednesday. The firestorm really started, though, after former washingtonpost.com Editor Jim Brady and later NYU journalism professor Jay Rosen tweeted it.

From there it started a cascade of retweets and e-mails from a network of followers. This got the attention of some mainstream news sites and blogs, including The Guardian, Media Bistro and Salon, which solidified the meme.

Overall, almost two-thirds of the visits seem to have come from Twitter.com or direct traffic that was mostly via Twitter clients. Here is the percentage of visits by top sources chart:

If you are really interested in understanding the economics behind free-content business models, start by watching Wired editor Chris Anderson's appearance on the Charlie Rose show (video below).




Then get his book, "Free: The Future of a Radical Price." His summary of the theme in Wired is here. You can buy it, but of course it's also available free on Google books, or a free audiobook you can download (285MB zip file) or listen to here:

More chest-thumping hot air coming out of the Cleveland Plain Dealer, regarding the bizarre idea to ban linking to and blogging about news stories for 24 hours. (Read the source document here)

A "news" story about the controversy was published today on Cleveland.com. Reporter James F. McCarty steps in with an account dripping with sarcasm and disdain for the Internet and defending the Marburger brothers' plan, which was first spread by a Plain Dealer columnist, Connie Schultz. This is the same dismissive attitude that drew so much heat on "reader representative" Ted Diadiun, who called bloggers "a bunch of pipsqueaks out there talking about what the real journalists do."

About a week later, the Cleveland.com web guy dragged Diadiun back before the camera to try to salvage the paper's image. Digital guy John Kroll argued that not everyone at the paper is a backward-thinking digital Neanderthal.

But then today we get this: "Idea for protecting newspapers draws national spotlight, bloggers' ire" Count the arrogant phrases:

"...a newspaper industry suffering from ... a plundered work product." (Me: Cites no data to support the claim)

"found...their ideas a flash point for cyberspace bloggers who screamed in protest. OMG!" (Me: ... because bloggers are all 12-year-old girls? Come on.)

"Protesting bloggers didn't appreciate the references to parasites and the threat to their 'free-ride' existence." (Me: Adopts the false premise that bloggers have nothing they don't copy from newspapers. Continuing....)
"But the Marburgers also have found more sympathetic forums for their Quixotic crusade to save newspapers. They were interviewed for a story in Editor & Publisher, an influential print industry magazine. Saturday, David Marburger will appear on National Public Radio's "On the Media," which airs at 6 a.m. on WKSU FM/ 89.7, and at 4 p.m. on WCPN FM/ 90.3. And on Tuesday, the Russian News and Information Agency is flying both men to Washington, D.C., for an hour long interview." (Me: Translation = But the traditional media is jumping on board so who cares what those bloggers think)

"...apply economic theories to the problem of unfair competition from online and broadcast media." (Me: Again, adopts the premise of "unfair" competition)

"Not surprisingly, the blogging beneficiaries of cost-free news stories fervently oppose the Marburger plan. " (Me: More of the same)

"The Marburgers have the support of Plain Dealer President and Publisher Terrance C. Z. Egger." (Me: Oh, those visionary leaders of the digital age?)

I wanted to believe John Kroll that not everyone at the Plain Dealer is stuck in 1992, but it's getting really hard.

UPDATE: Also just noticed that reader comments have been disabled on the latest Plain Dealer story.... because who wants to hear from any of those Internet people

I have a history lesson worth reading for those who think news should or may have a price online.

The common discussion among such people these days goes like this: "We've always charged people to read us in print, and so people ought to pay something for reading us online, too."

But here's the truth, folks: Newspapers haven't actually charged for news content since the 1830s.

Up until then, most newspapers were subscription-only and cost about 6 cents a day (or about $1.20 in today's dollars, adjusted for inflation).

By asking subscribers to bear the full cost of production, newspapers limited their audience to the few who could afford the luxury. That was actually OK for the time, because literacy rates were quite low anyway.

But compulsory education raised literacy rates as the 19th century progressed, and in the 1830s publishers realized a new model to reach the growing market -- the penny press.

The New York Sun in 1834 sells for a penny, marking the end of newspaper's charging readers the total cost of production

Newspapers cut their price from 6 cents to just 1 cent (about 20-25 cents today), thus reaching a much broader circulation and finding advertisers would pay to reach that market. The first popular penny paper, the New York Sun, printed this motto at the top of every front page: "The object of this paper is to lay before the public, at a price within the means of every one, all the news of the day, and at the same time offer an advantageous medium for advertisements." (source)

Since then, for about 180 years, the retail price of a newspaper has never reflected the total cost of assembling and producing it. Any paper that tried to charge such a price (6x more) would lose circulation and be undercut by correctly priced competing papers.

As news now moves online, the same rule of economics apply: The price of a product in a competitive market falls to the marginal cost of creating and delivering one more unit.

For printed newspapers, the marginal cost was a little more paper and ink, maybe an extra block on the delivery route. Subscription fees never accounted for the fixed costs of producing the content: the building, staff, printing press, etc. That share of costs has long been paid by advertising and diluted by economies of scale.

The same economic forces apply online. And because the marginal cost of bits is nearly zero, the appropriate price becomes too small to bother tracking. Free is the result.

In fact, the principle of marginal-cost pricing is even stronger in the Internet economy because there are very low barriers to entry and nowhere near the startup costs of print. And the marginal costs such as bandwidth and storage decline every month.

Those who ignore the rule of marginal-cost pricing and try to charge users for content in a competitive market will be undercut by more efficient competitors who stick with free. They'll also face an endless fight against piracy, because economics says the product should be free and technology makes it easy to duplicate and spread.

(This is not to say some news providers couldn't get away with charging online; but to do so they would have to have content so valuable and unique that they don't face the competitive forces that pull prices down to the marginal cost of ~zero. And even if you find a specific niche and premium content you can charge for, you're likely to face free competition once the word gets out.)

So, newspaper folk, economics actually says the same thing about charging online that it has said for 180 years about charging for print: you must set consumer prices at or fractionally above the marginal cost. In print, that may be the 50-cent newsstand price. Online, with cheap bits, it's ~zero.

If economics hasn't allowed total-cost subscription pricing in print newspapers, even with their market monopolies and other advantages, why would anyone think economics would allow such pricing in the ultra-competitive online market?

UPDATE: See also, "In-depth on the free content argument"

A blog post by Robert Picard on the economics of newspaper classifieds is drawing some attention. (E&P's Editor-at-Large Mark Fitzgerald and Associate Editor Jennifer Saba picked it up on their Fitz & Jen blog.) Picard argues there is a "poor connection between Internet advertising and newspaper woes."

He cites as evidence industry numbers showing that, while newspaper classified revenue has dipped in the past two (recession) years, there hasn't been a comparable increase in online advertising revenue. Since the money doesn't show up online, he reasons that the newspaper downturn may be mostly from the economic cycle and not a long-term erosion of revenue. After all, it doesn't appear to have gone anywhere else, right?

Wrong. This logic makes the mistake of comparing two incomparable advertising economies -- the scarce space and expensive distribution costs of print, and the abundant space and almost-free distribution costs of online.:

Classified volume is indeed moving online, for good. The reason the revenue numbers don't add up has to do with the "demonetization" of markets as they move online. It is best explained by Chris Anderson in his new book "Free: The Future of a Radical Price." I quote from the relevant section:

In 2006, the site (Craigslist) 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 (at newspapers) declined that year."
...
Craigslist makes very little money, just a tiny fraction of what it erased from newspaper coffers. Where does the wealth go?
To follow the money, you have to shift from a basic view of a market as a matching of two parties -- buyers and sellers -- to a broader sense of an ecosystem with many parties, only some of whom exchange cash directly. Given the size of Craigslist today (50 million users every month), it's easy to see how more money can change hands there than did in any newspaper classifieds section, leading to better supply/demand matching and economic outcomes for the participants, even though less money remains in the marketplace itself. The value in the classifieds market was simply transferred from the few to the many.

Craigslist, Monster.com and the like are indeed taking the classified market online. They're not charging or collecting as much revenue, but they also don't need to. The online economy is different. The space to post ads and the path of distribution is nearly free. There will never be as much money flowing into the online classifieds providers, but that's no reason to think the money is coming back to print.

Welcome to the new site. I spent the weekend migrating the blog and building a new template.

The blog is still here, of course, but I'm adding a bunch of aggregation features as well. You'll find links culled from Twitter, news stories and many excellent blogs that also track news innovation.

I hope you'll find the new format useful and come back regularly to explore my thoughts and the many others that will flow through this page.

Please leave your comments or suggestions on this post if there's anything you would like to see added.

A wildly misguided idea to protect newspapers is emerging in Cleveland these days. (If you're already up to speed, skip to graf 4.)

It is an idea dreamt by the brothers David and Daniel Marburger (a lawyer-economist duo) and espoused by Cleveland Plain-Dealer columnist Connie Schultz. (I call them the Axis of Snivel.)

They propose amending federal copyright law to ban "aggregators" from paraphrasing or linking to their content in the first 24 hours.

Now, you can argue that is unconstitutional. You can argue it's impossible to enforce. You would be right. But of more interest is that the entire premise of the complaint will be turned on its head in the near future.

The premise of the argument is that newspapers are the "originators" of content, locked in an unfair battle against parasitic "aggregators" who repurpose it and take a freeloader's cut of traffic and advertising revenue.

The trend in reality, and it's accelerating by the way, is that NEWSPAPERS ARE THE AGGREGATORS. The original reporting of daily life now and in the future happens in social networks among peer groups. In many cases now, news breaks on Twitter and blogs. Newspapers come by second and fact check. How would the Cleveland P-D like it if their new copyright law prohibited them for 24 hours from reporting plane and train crashes, celebrity deaths, political scandals, or anything else that Twitter, TMZ, Talking Points Memo or the Drudge Report had first?

As professional news organizations shrink and the social web grows ubiquitous, the professionals are the ones left to aggregate, curate, verify and trendspot among the mass of social chatter and viewpoint blogs.

Any organization or company exists because it serves a valuable purpose. The valuable purpose of news professionals is changing. We used to need newspapers to give us original information. We had no way to know what was going on in the community unless the newspaper originated it. Now the problem is information overload. When endless data and discussion is streaming about, the value of the news organization is to make sense of what we're all hearing already.

That's a perfectly good role that offers a solid future for professional journalism. But it is decidedly different from the old world, and it is clear that some in the old media world are not ready for it.

Take, for example, the response from the Cleveland Plain-Dealer's "reader representative" Ted Diadiun. (Misnomer warning: Diadiun represents the paper TO the reader, not vice-versa as you would expect.)

Diadiun tackled the Schultz/Marburger backlash in his weekly video chat this week. His dismissive, talk-down-to-you explanations include this gem about 11 minutes into the clip: "It's really a bunch of pipsqueaks out there (on the Internets) talking about what the real journalists do."

The columnist Schultz's own column on July 5 responding to criticism began, "When you write a column and immediately become the target of numerous bloggers, you suspect you're on to something."

If Schultz & Friends don't grow respect for and get plugged into the social/blog network of news, pretty soon they will be irrelevant. And still wondering why.