Nathan Myhrvold, former CTO of Microsoft and perhaps the smartest guy around, gives his take on the future of newspapers. From Bloomberg. 

Deadline Approaches on Survival of Newspapers

By Nathan Myhrvold - Jan 22, 2012

These days, one of the saddest stories on Page 1 is about newspapers themselves. All over the country, venerable old dailies are shedding reporters, editors and other workers.

In my hometown, the Seattle Post-Intelligencer stopped its presses for good in 2009, as did the Rocky Mountain News, in Denver. In the past few years, major papers have gone bankrupt in Philadelphia, Minneapolis and other cities, as circulation and advertising revenue have plummeted. Even the proud New York Times recently needed a $250 million loan from Carlos Slim, a Mexican multibillionaire.

Just a decade ago, newspapers were still the primary conduit for local information. Where else could the neighborhood furniture store advertise a sale; the local factory attract new workers; or town residents sell their used cars or sofas? The paper used to be dropped daily on almost every stoop in town.

For much of the early 20th century, the newspaper business was both profitable and competitive. New York City still had seven dailies in 1960, spanning a full range of political philosophy and journalistic style. Movies such as “Citizen Kane” and “The Front Page” portrayed an era when driven newspapermen would do anything to get a story. The U.K.’s rough-and-tumble Fleet Street remains something of a throwback to that era, as demonstrated by the recent phone-hacking scandal -- which led to the demise of yet another century-old paper, the News of the World.

Selling the News

The great winnowing of the industry began slowly, as the rise of television siphoned off much of the national advertising business. Even then, most cities retained one or two papers operating profitably as monopolies or duopolies. Newsrooms took this privileged economic position for granted; they began thinking of themselves as selling news rather than ads. Competition based on journalism, they rationalized, would drive readership, and ad revenue would follow.

In market research I did at Microsoft Corp. in the early 1990s, I estimated that the Wall Street Journal took in about 75 cents per copy from subscribers, $1.25 at the newsstand and a whopping $5 per copy from ads. The ad revenue let them run a far bigger newsroom than subscribers were paying for. It was a bargain for readers and a boon for journalists, who were able to travel to distant assignments and do in-depth reporting.

The trouble was, the tie between excellent journalism and revenue worked only so long as the ads did. New online formats gutted the newspaper-ad business. Why pore over tiny print looking for a job in the want ads when you can tap a few keywords into monster.com, then click through and apply? Why pay a steep per-character rate for a classified when you can hawk a whole garage full of used stuff on EBay or Craigslist for free? In so many ways, Match.com, OkCupid.com and hundreds of others offer a better experience than personal ads can. RottenTomatoes.com tells you what movies to watch, Fandango.com lets you book the tickets, and OpenTable.com gets you a dinner reservation.

Newspaper websites tried offering these services, too, but it wasn’t their strength, and they failed to keep up. It didn’t help that online sites such as Google News could serve up most of the news without ever hiring a reporter; they just aggregate information from many free news sites. Newspapers’ trump card had been the local information that they alone offered, but the Internet was simultaneously better at both local and global information distribution.

At least when television burst on the scene in the 1950s, it largely spared classified and truly local advertising. It also created its own journalism; some of the revenue that television diverted from newspapers was reinvested in TV news. In contrast, the new forms of Internet advertising rarely support news gathering, or content creation of any sort. Instead, most of the ad money now goes to infrastructure technology that connects people with ads, search engines such as Google, or social networks such as Facebook.

Who Will Pay

The dilemma for early 21st century journalism is this: Who will pay for the news? This column is part of an experiment in one direction. Bloomberg makes its money providing proprietary financial information to subscribers, and this business has not been hurt by the Internet, so it can afford to offer a good old- fashioned op-ed page without ad subsidy. As the saying goes, it’s nice work if you can get it. But this model won’t extend very far because there aren’t a long list of similarly situated data providers dying to support journalism.

Filmmakers and book publishers have never relied much on advertising revenue; when we want to read “The Girl With the Dragon Tattoo,” or watch “Avatar,” we know we need to pay without an ad subsidy. Would the public be willing to pay full price for journalism, too?

A few newspapers -- the Economist, the Wall Street Journal, the New York Times -- have started selling digital-only subscriptions. It’s a first step, but they still plainly consider their print editions to be the gold standard, so they generate little unique digital content and fail to tap the full potential of online news. Tellingly, their current web revenue falls far short of what it would take to support their newsrooms. Meanwhile, most online news sites are still free, which tends to undercut the business model of those who charge.

The situation reminds me of the early 1970s, when cable arrived in our neighborhood, and the adults in my family were arguing over why anybody would pay for something they could already get free. After all, with a set of rabbit ears, you could tune in three major networks and plenty of local affiliates, all supported entirely by ads.

Quality Cable TV

Initially, cable providers offered the same channels as conventional broadcasters did, so picture quality was the selling point. Cable cut down on ghosts and snow and having to fuss with an antenna. Once improved reception got cable-TV operators going, they shifted their selling proposition toward quality -- and quantity -- of programming. Ted Turner started CNN. Others started HBO, MTV and Discovery, betting that consumers would pay for a kind of television they never had before.

It took 20 years, but the cable-TV industry prevailed. A generation grew up thinking “I want my MTV.” Today, 85 percent of American households subscribe to cable, satellite or telephone-company TV, paying an average of $82 a month, according to the research firm SNL Kagan. This revenue has been a bonanza for TV production, financing some of the best television shows ever made, all outside the original broadcast networks.

Could newspaper journalism likewise entice readers to pay for online news? People like quality journalism, so I believe that, ultimately, they can be persuaded to pay for it. But as with cable, the price will have to start low; it can then inch upward as the public gradually accepts the new business model.

The question is whether paid-subscription news sites can make the transition fast enough to make up for their plummeting ad revenue. It takes time to persuade people to pay for something they expect to get free. Ultimately, the change will happen, but maybe not fast enough to save some of the great institutions of newspaper journalism.

(Nathan Myhrvold, the former chief strategist and chief technology officer at Microsoft Corp. and the founder and chief executive officer of Intellectual Ventures, is a Bloomberg View columnist. The opinions expressed are his own.)

Some interesting stats from Forester Research, detailing the amount of time spent by the average consumer by medium. Predictably, the survey shows time spent on newspapers and magazines way down. 

Full story here.

Forrester: Time Spent on Internet Is Equal to TV

Research already showed younger demos spending more time on the Web than watching TV

Dec 13, 2010

- Brian Morrissey

There’s one graph every digital business uses: It shows the huge gap between the percentage of consumer time spent on the Internet and that of marketer budgets spent on online ads. Forrester Research is giving them new ammunition.

A new consumer survey from the researcher found that for the first year, the amount of time U.S. households spent watching TV and using the Internet is equal at 13 hours per week. This comes on the heels of research showing that younger consumers (18-30) already spent more time on the Web than watching TV. Now, people 31-44 are also spending more time online than with TV.

The figures are at the heart of a running debate about ad-budget allocation. One side is the proposition that marketer priorities are seriously out of whack, because their budgets don’t match up to consumer behavior. Venture capitalist Mary Meeker calls this a "$50 billion opportunity." Another school of thought is that TV remains by far more important to brand building than the typical Internet options of display ads and search links.

Forrester takes pains to note it’s not predicting the demise of TV. In fact, the amount of time spent watching TV has remained stable over the past five years. During that same time, however, time spent on the Web has risen 121 percent. The biggest losers in comparison to the Web are: radio (down 15 percent), newspapers (down 26 percent) and magazines (down 18 percent).

One important note: While the time spent figures are equal, over a third of the hours on the Web are for work purposes, while TV is nearly exclusively a leisure activity.

Unsurprisingly, Forrester found e-commerce and social media the major drivers of growth over the last three years. E-commerce use rose from 37 percent to 60 percent, while social media went from 15 percent to 35 percent.

 

From the Association of Free Community Papers (AFCP: 

How Print Helps the Internet

Telegraph.co.uk became the first British newspaper website when it was launched 15 years ago.

When I took over the editorship of the fledgling Telegraph internet site early in 1995, two questions were constantly being posed to me. The first was: how can you make money out of something you give away free? The second was: does this mean the end of newspapers? The first of these questions was always the most tricky, because, in reality, no one had a clue how we were going to make money. The Telegraph's internet operation was essentially a marketing initiative with a brief to explore this new medium and report back. No one said anything about making money, although reader offers were always part of the mix from the start, so there was a token nod in the direction of commerce.

 

I recall a rather a rather scary meeting with the then proprietor Conrad Black, who asked me the same question. I pointed out to him that he was always complaining that city analysists undervalued the share price of Hollinger (which owned the Telegraph) and that one of the reasons they gave was that the company did not have an internet strategy. By backing an internet newspaper, I reasoned, he would show them that he did have a strategy and his share price would rise accordingly - so at least he would make some money that way. The answer seemed to satisfy him and we were allowed to keep going.

 

The longer term answer remains elusive. Short of charging for content, no one really is completely sure 15 years later. And although the telegraph's internet operations do attract many millions of advertising revenue now, these revenues are still smaller than the sales and advertising revenue of the print titles.

 

As to the second question, my answer remains the same as it was then: of course the internet doesn't spell the end of newspapers. No new medium has ever sunk an older one without trace. Contrary to popular musical mythology, video didn't kill the radio star (although DVD and Blu Ray have certainly given video a kicking) and TV didn't kill radio - in fact, radio is going from strength to strength, while a lot of TV is struggling to survive.

 

And the longer time goes on, the more convinced I am that that the internet needs newspapers. The reason is simple: people like reading, and whilst reading from a screen is bearable for short items, it gets tedious for anything more than a few hundred words. I'm prepared to bet that the majority of people, young and old alike, when they find something online they want to give detailed study to - whether its an article or the terms and conditions of their holiday booking - the first thing they do is hit the 'print' button so they can sit down with a bit of paper in their hands.

 

I think there's something deeply ingrained in the DNA of post Gutenberg culture concerning typography and design - and nowhere do you find more exciting an innovative typeography and design than in mass ciculation newspapers and the plethora of magazine and supplements they bring in their wake. And whilst the design of websites has advanced from the rather sparse minimalism that characterised our efforts 15 years ago, they still have a long way to go before they can replicate the best that newspapers have to offer.

 

But beyond the aesthetic argument, there's a more profound argument about the centrality of newspapers, and this is to do with the business of telling stories, and creating compelling narratives. If you examine the world's great online sources of news and opinion, for example, the vast majority of them have sprung from newspapers or from broadcast organisations with strong roots in newspaper journalism culture.

 

So, in a curious way, things have come full circle. Fifteen years ago, the Telegraph newspapers needed an internet site to help transform the brand image of the paper, to make it seem more modern and relevant. Now, I think, when our internet presence has made us a global brand, we need the newspaper even more to remind those readers why they value what they are reading.

 

By Derek Bishton

 

 From MediaPost. 

An average 74 million people visited a newspaper Web site each month in the third quarter of 2009, equaling just under 40% of all active U.S. Internet users, according to the Newspaper Association of America, citing research performed by Nielsen Online.

This is the most unique visitors recorded since the NAA and Nielsen began tracking newspaper Web site audiences in 2004; the previous record was 73.3 million in the first quarter of 2009.

Although year-over-year comparisons are difficult because of a big increase in Nielsen's panel size in June, the active-reach figure appears to be remaining stable, as newspaper Web sites have hovered around 40% for the last two years. 

Full story here.

 

This survey  shows that Americans believe TV news and information is the most credible, followed by radio and daily newspapers. Sometimes you read these surveys and wonder what the actual questions were because it is hard to imagine that anyone believes TV news is more credible than print. I don't like to comment on content because everyone else does but here is one example of "credibility" in TV journalism. Last summer there was an unfortunate incident in Connecticut in which a woman literally had her face riped off by a pet chimpanzee owned by a friend. It was a crazy story and a very sad one for the injured woman and ultimately the chimpanzee. However, the breathless coverage it received from local news was similar to what you would expect if Bridgeport had fallen into the sea. There was live coverage from outside the home for weeks. There were people interviewed who had been in the house once and seen the chimpanzee, etc. It was a circus and the farthest thing from credible that can be imagined. My experience has been that most people are pretty smart and know the difference between entertainment and news, which makes me question these types of surveys. 

 

 

A recent article from MediaPost provides an interesting opinion from a top researcher in the digital field regarding the future of newspapers. Jeffrey Cole - director of the USC Annenberg Center for the Digital Future - believes that " Newspapers...have the greatest opportunity they've ever faced," in light of the rapid growth of internet usage. To read the full article, Click Here.