Carr’s dreams

Curmudgeonly contrarian Nick Carr picks his head up and comes to the defense of TimeSelect — after it is dead and buried — but misses some obvious economic realities. Carr quotes a Financial Times columnist who quotes a University of Chicago study (warning: a PDF filled with formulae) that points to the Washington Post and argues that the paper and its online site were not complementary but competitive and so the Post should have tried (as the Times did) to get money out of its online audience while the getting was good.

But this ignores the essential economic fact here that newspapers are no longer monopolies. With the internet, they gained new competitors the world around and lost the pricing power that their monopoly over production and distribution gave them. So it’s foolish to judge the Post or Times in isolation as if they could demand and get money from consumers who can now go to plenty of other sources.

Carr et al also ignore the economic reality of Google and the link becoming the new means of media distribution. If you hide your stuff, it cannot be found. And so long as you are hidden, your competitors will grab that distribution and marketshare from you.

Fred Wilson quotes a commenter on Carr’s blog, SidneyV, who instructs:

In periods of fundamental technological change & discontinuity, leaving money on the table may well be a smart strategy. . . . Sam Walton (whose descendants collectively are now the richest people in the world) pointedly refused to price the goods at the “going rate”, which a Harvard Business School prof of that time would have considered stupid. So Times would have been better off if they had recognized it at that time. At least they are smart enough to recognize it now. . . .

BTW, in late 80′s, Larry Ellison, nobody’s fool as a businessman, enunciated it thusly: in early markets, maximize marketshare, not profits. NY Times should have become *the* go-to place for news & views online. They always had the breadth & depth of content. The fact that they let a whole lot of other sources jump ahead speaks volumes of their failure of vision.

Carr thinks the Times left money on the table by taking down the wall. I think they burned money by putting it up. And once again, nowhere have I seen a decent financial analysis of the cost of TimesSelect: the cost of marketing to acquire subscribers and cope with churn, the cost of customer service, the cost of ad revenue lost, the cost of traffic lost to other sections and advertising lost there as a result. Clearly, the Times made that analysis and tore down the wall.

Matthew Ingram also rebuts the study Carr so dearly wishes to rely upon, first quoting the its conclusion regarding the Post: “Removing the [news website] from the market entirely would increase readership of [the newspaper] by 27,000 readers per day, or 1.5 per cent.” To which Matthew responds:

He therefore concludes that the Post has lost $5.5-million in newspaper revenue as a result of providing its news online for free. Does that make any sense? It might to an economist, but I would argue his thesis fails the reasonability test. If the washingtonpost.com website were to disappear or be locked behind a pay wall tomorrow, does anyone really think that 27,000 people would suddenly go out and start reading the paper edition?

Gentzkow clearly does. I think they would be more likely to just go elsewhere for their news, such as Google News or Yahoo News or MSNBC or CNN. It might be tempting — and make for a much simpler business case — to argue that a product like the Post competes primarily with its own website, and vice versa, but I don’t think that is the way things work.

Rob Hyndman also points out to Carr and company that lots of the people formerly known as readers like using the internet and wouldn’t it be foolish for a newspaper such as the Post or the Times to push them to competitors by putting up a pay wall?

Note finally Alex Patriquin’s analysis at Compete.com of NY Times op-ed audience since they took down that wall: “…[T]he Opinion section has more than doubled unique visitors, while the overall NYTimes.com site has grown by roughly 10% in the same period.”

Carr accuses of me being a member of the free-content hallelujah chorus who, he says, “take as a personal affront any attempt to charge for ‘content’ online.”

But Carr misinterprets me and projects a motive on me that is not there. I’m not saying necessarily that I want content to be free; hell, I’m a writer for a living and if I could be paid for my writing — and paid more than I am — I’d be delighted.

Instead, I am saying that content is free and companies like the New York Times and writers like me (and my students) as well as Carr had damned well better figure out how to work with that essential economic reality. Wishing that you could charge as if you were still a monopoly protected by the size of the gas tank of your nearest competitor’s trucks is foolhardy and dangerous. Carr’s analysis is as wistful as it is incomplete, sloppy, and hazardous.

And — this is what blows Carr’s mind — one response to this new networked economic reality is to view other media sources — your paper, the other guy’s news web site, your writing readers’ blogs — not as competitors but as complementary sources that enable you to do what you do best (and get the maximum value you can for that via advertising) and link to the rest (saving you the expense of inefficiency that news media still carries from its legacy today). One response to competition everywhere is to open up to collaboration, enabling you to identify and exploit your greatest value in a new economic reality.

  • http://www.subhub.com Evan Rudowski

    Hi Jeff,

    I am not sure this University of Chicago study is looking at things the right way, but I don’t think you are either.

    You are right that newspapers, in possession largely of commoditized news and opinion content, are not in a good position to profit from a subscription model when there are so many free alternatives. You are correct in saying they’d typically be better off opening up to free web traffic and monetizing via advertising.

    However I continue to be perplexed by the manner in which you have leapt to the conclusion that this must also apply to individual journalists and other content creators.

    It is true that you could not charge for access to your blog because it is pure opinion and, while valuable and interesting, it must compete in the crowded universe of free opinion. If BuzzMachine were to end tomorrow, it would surely be missed by many of us but it also would not cause us much financial loss if we were to be without it.

    However there are many journalists and content creators who specialize in creating highly actionable, valuable content targeted at niches, and for which there are few substitutes — and these individuals and publishers are doing very well charging for their content. Plenty of readers are willing to pay for content that is unique and which gives them a perceived edge in their personal or professional lives.

    It is a shame if you are telling your students that paid content is a broken model, because it is not, and if they are listening to you they are missing out on one potential way to make real money for themselves — thus ironically perpetuating their likely serfdom to those Big Media entities which will continue to control the mass traffic and advertising dollars on the web (the names will have changed but the game will be the same).

    By insisting so absolutely that “content is free” — without any acknowledgment that a robust paid content marketplace continues to thrive — you ironically seem to be helping to devalue content and the work of content creators.

    I can’t imagine this is an outcome you would desire. Therefore may I encourage you to ratchet down the undifferentiated “content is free” rhetoric and perhaps consider a more nuanced approach to the subject which at least recognizes that paid content can and does work in a considerable number of specialized contexts?

    Kind regards,
    Evan Rudowski

    P.S. The Guardian, for which you write and consult, recently announced that they will charge for access to their 200-year archives. How do you feel about that?

  • http://blog.blogcosm.com/ Scott Lawton (Blogcosm)

    Nick seemed to miss 2 key points covered by Tim Harford (The Undercover Economist) in the post that NIck cites.

    1. the dates: charging was “probably” more profitable in 2001 or 2002, but “doubtful” by 2004.

    2. the study covered charging for the whole site not just a few select columnists

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  • http://centristcoalition.com/blog Jon Kay

    Er, Evan, I can’t speak for Jarvis, here, but I think you’re misinterpreting him.

    SOME content – e.g., blogs written by people like me whose motive is as grumbling outlet rather than soures of cash – IS, unquestionably, free.

    If you choose to charge for content of a type well-covered by the blogosphere, then you’re trying to charge for something that people can easily get free.

    Political opinion happens to be one of the better-covered blogosphere topics – I feel I can do tons better, opinionwise, than any newspaper I’ve ever read by looking at my favorite blogs. The opinion there is often more factual, better-considered, and certainly more diverse in opinion than any newspaper opinion page in history.

    So, let’s say, just hypothetically, you’re a major newspaper and you want to charge for your editorial page? Why should I want to pay for that? I think that’s all he’s saying.

    I do subscribe to my local paper, by the way, for a great local humorist, local news, and real estate listings. And I shuck for The Economist, because it has great, worldwide, factual NEWS coverage. Get the pattern? These are things blogs are so far weak at.

  • http://adrianmonck.blogspot.com Adrian Monck

    Matthew Gentkow’s study is based on survey research from between 2000 and 2003. Which makes it an interesting historical assessment of what strategy might have worked a few years back.

  • http://www.subhub.com Evan Rudowski

    Thanks Jon. I agree with the distinction you’re making. However my concern is that some people (and I think Jeff is among them) have reacted to the Times Select announcement in a more generalized way — suggesting that paid content overall is dead. At least I am not seeing the subtlety in their pronouncements that is reflected in your comment.

    This worries me, because people like Jeff have amassed substantial influence, and other people listen. The “content is free/paid content is dead” meme is gaining momentum, led by Jeff among others, and I think it’s incorrect when applied so broadly and indiscriminately. I would hate to see individual content creators, or publishers, be influenced by this meme to the point that they fail to consider paid content as a legitimate revenue option.

    If Jeff meant to say “opinion columns are free,” or “grumbly personal blogs are free,” I wish he’d clarify. But until/unless he does, I just hear him saying “content is free.” Jeff is an intelligent and forthright person, so I can only assume he means what he says. If that’s so I think he’s incorrect on this point — although typically I enjoy and agree with much of what he says.

    Best wishes,
    Evan Rudowski

  • http://geistbear.blogware.com Thomas

    I think the funny thing Times Select did was killed me as a Times Columnist reader. I used to read Tom Friedman’s work because I liked his books. Even after the pay wall came down I don’t think that I have read a single column of his since, because I am out of the habit and I am hard pressed to bother.

  • http://www.tyndallreport.com Andrew Tyndall

    Rudowski –

    Perhaps you, too, are using a term “broadly and indiscriminately.” Could you be more specific about what you are referring to when you use the term “content provider”?

    I agree with your argument if you confine “content” to the non-journalistic sphere. Obviously there are many forms of “content” that providers can and should charge for: customized consultancy, proprietory market research, copyrightable creative writing and so on…

    …in the sphere of journalism, however, true value derives from its contribution to the body politic, shared information, flowing freely, improving the discourse of civil society. This civic value is greater than any economic value to be derived from collecting a rent that can be levied by, antidemocratically, treating news as intellectual property to be closely held.

    The more citizens have access to news, the more social value it has. Treating the product of the press as sellable property, rather than free speech, undermines the republic.

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  • Craig Calder

    I think history will look upon Times Select as a futile attempt by traditional newspaper minds to try and stuff the digital genie back in the bottle.

    Times Select was never about maximizing profits it was about maximizing control over a perceived competitor. The Times was willing to risk its online growth and alienate loyal web readers to force a price on NYTimes.com.

    The price, any price was the key. Because once NYT had a price on the web site it could raise print subscriptions and add Times Select on as added value. It was never about online subscription revenue.

    But desperate Times call for desperate measures.

    The business folks at NYT lost the Times Select battle but won the ultimate war to control the digital future of the brand. Just like GM, NYT is building the future by going backwards.

  • Tracy

    We need to start a petition about the bad situations about Dell