Newspapers and the flawed argument against free-of-charge

"The meta-philosophy of free — we should get rid of this philosophy."  

Editor's note: This is a foray from our usual Charleston-only coverage but is delivered as it relates to the politics behind our industry. It will also be the first in a to-be feature: Blogging Behind TheDigitel.

I spotted that quote in a New York Times piece, it came from the head of public affairs at Springer Publishing. And it's that quote -- more than any other -- that shows the danger on which the newspaper now treads.

This danger can be divided amongst three main problem areas: The misconceptions of today, the risk to democracy, and the longterm implications to Free. 

The misconceptions of today

The myth peddled is that folks pay for journalism when they buy a print newspaper. That is a deception.

Even with today's greatly depreciated advertising revenue, newspaper ad revenue far far outweighs revenue from circulation.

Evidence: As of August 2009, McClatchy's ad revenue was down 30% but was still 260% of total circulation revenue.

That is: If your paper was not ad supported, a 75¢ daily would cost around $2. A $1.50 Sunday would cost nearly $4.

Now that is in today's deprecated ratio of falling ad dollars and (sometimes) rising subscribers -- back track just a little to McClatchy's prior quarter and the theoretical "rack price value" is a 3.8-to-1 ratio. In that scenario the 75¢ paper costs $2.85.

What's more, the cost of newspaper production is somewhere around 35% of the total cost of a newspaper's operations. That means circulation revenue accounts for less than the cost to produce the product.

To be clear: A newspaper costs more to make than you pay to have it thrown in your driveway. Newspapers are only profitable because of advertising.

People don't "pay for the news" when they buy a paper, they subsidize the cost.

That said, there's a real marketing case to be made for marketing power of making someone pay for a product. Similar to the $20 bottle of wine that's only worth $6.

The risk to democracy

Despite the cost of entry to the print product (that's the cover price) the newspaper does a lot of good in creating a more informed society by having its product left in coffee shops and passively seen by those walking on sidewalks.

Today that effect largely exists online, but by aiming to create value through limiting the flow of information, newspapers will greatly limit their reach and damage their pervasiveness. 

Damage to the social good caused from widely dispersed information should not be taken lightly by the industry that touts itself as the Great Defender of Democracy.

If your stated goal is that of business or entertainment, then pay walls may well serve you and the reader, but if your goal is to defend democracy there's a real ethical case that restricting access is the wrong choice.

But newspapers are private companies, and not public institutions.

The longterm implications to Free

Let's backtrack to that quote up top: "The meta-philosophy of free — we should get rid of this philosophy."

Newspaper content is not Free online, it's free-of-charge. I cannot take newspaper content and duplicate in a book, I cannot take that content and edit a few words and then post on my site, I cannot do anything other than what the company and copyright law permits me.

Newspapers are not Free. 

Now, let's tackle the other side of that point. What is Free about a lot of newspapers is the software that is critical to their everyday publishing.

Whether it's the Free Firefox Web browser, their Web sites database, their Web host operating system, their content management system, their blog, their word processor, or any number of high or low level computer components, it's more than likely newspapers couldn't do what they do in print or online without the contributions of the true Free community.

Secondly, as much as newspapers hate Google, that free-of-charge service as well as many others has proven quite useful to newspapers from searching to mapping to communication in general.

If Free and free-of-charge is so bad, then newspapers ought to directly compensate those behind the free services and software they use.

My point here is that if newspaper are successful in creating a society where free is frowned upon then they themselves will be harmed.

As shapers of public opinion, newspapers risk derailing that train at their own longterm peril and ours. We may well be left with a more litigious, more complicated society. The industry clearly points towards free goods and charging for service.

Conclusion

Newspapers are in trouble, their model is flawed and they need more revenue to sustain it.

There is hope in that the online side has less production costs, but as papers are wedded to a print product it forces papers keep a foot in the past.

It's an industry caught between two ages and unless it can find a way to navigate the two diverging icebergs it may well slip into the icy waters below.

It's fairly clear that the answer is not a pay wall.

If you're looking for hope, the answer -- I think -- is to look for your solution not in increasing revenue but doing more with less. Efficiency is the name of the game.

After all, only some 20% of newspaper cost is that of Real Journalism.

But no stockholder wants to hear that.