Columnist's Solution To Newspaper Woes: Take Down Newspaper Websites

Say That Again

from the yeah,-that's-got-a-chance dept

It’s almost cute when long-time newspaper columnists with almost no grounding in basic economics try to come up with plans to “save” the newspaper industry. It almost always ends up demanding some form of collusion, government bailout or a complete suppression of basic economics. Sometimes all three. We’ve seen ideas where newspapers would team up to collude on ad prices. We’ve seen (many, many times) the idea that newspapers should collude to charge for all content online, and we’ve seen demands that newspapers should just get money from the government. Even better, some have demanded that Google somehow fund or just outright buy newspapers.

The latest to jump into the fray of ridiculous suggestions on how to “save” newspapers is political cartoonist and columnist Ted Rall. Reader “parsko” points us to a new Rall column where he makes three suggestions on how to save the newspaper industry — except that I’m half wondering if this is pure satire. Because his three suggestions seem more likely guaranteed to kill the newspaper industry even faster than just sitting still. Of course, the reason he gets it so wrong is he so badly misunderstands basic economics as the underpinning of his argument:

All three of my suggestions are predicated on the simplest principle of capitalism: scarcity increases demand. Newspapers have made news free and plentiful, which is why they’re going broke.

Apparently, Rall has never looked at a supply/demand curve (or, if he has, he misunderstood it badly). Scarcity does not increase demand. If it did, you would imagine that the best manufacturing strategy of every company in the world would be to produce just one of something. After all, demand would sky rocket, and everyone would be filthy, stinking, rich, right? Scarcity can increase price, but that’s different than demand. And, in fact, induced scarcity that increases price would almost certainly decrease quantity demanded (which is not the same as demand itself), rather than increase it. And, “demand” shouldn’t be what newspapers are looking to maximize, but profit. And, raising price does not mean great profit. This is pretty basic economics, though, apparently foreign to Rall.

As for the reason why newspapers are going broke, well, first that’s an exaggeration. Most newspapers are actually quite profitable, even if revenue has been shrinking for some of them. Also, claiming that the reason some newspapers are facing declining revenue is because they’ve made content more available is simply, laughably, incorrect. It shows a near total lack of understanding of the history of newspapers (odd, since Rall’s degree is in history), as well as a complete misunderstanding of the market newspapers are in. The problem isn’t that they’ve made news abundant, but that they built their old business model on the basis of a near monopoly on information — which is now gone.

Let’s move on to his suggestions:

First: newspapers should go offline. If the last decade has proven anything, it’s that you can’t charge for a product–in this case, news–that you give away. So stop! All the members of the Newspaper Association of America should shut down their websites. At the very least, papers ought to charge online readers twice as much as for print subscriptions–searchability must be worth something. Want news? Buy a “dead tree” newspaper.

You see why a part of me wonders if this is satire? Apparently, the solution (or at least part one of the solution) is that newspapers should all collude with each other to make their product less valuable while pretending that competition doesn’t exist. Talk about a recipe for disaster. Rall makes a few huge mistakes here (beyond the collusion and ignoring competitors part). First, he doesn’t seem to understand what product newspapers actually sell. He complains that you can’t sell what’s free (which is, of course, untrue…) but seems to not realize that what newspapers are really selling is eyeballs to advertisers.

And you know what advertisers almost certainly don’t like? Fewer eyeballs. And that’s exactly what you get when you make it more difficult for anyone to see your newspaper.

Second, copyright every article in the newspaper.

Apparently Rall is unfamiliar with copyright law as well: every article in the newspaper is already under copyright. Automatically. Welcome to US copyright law.

“The majority of bloggers and Internet addicts, like the endless rows of talking heads on television, do not report,” notes the invaluable Chris Hedges. “They are largely parasites who cling to traditional news outlets…They rarely pick up the phone, much less go out and find a story. Nearly all reporting–I would guess at least 80 percent–is done by newspapers and the wire services. Take that away and we have a huge black hole.” And a lot of unfulfilled demand one can charge for.

Or… a huge blackhole that will almost immediately be filled in by opportunists who recognize how wonderful it is that old school newspapers just cleared the playing field for them. Not to mention, in doing so, those newspapers will have pissed off a large majority of old readers who will be thirsting for new sources of news that don’t try to make life more difficult for them. Apparently Ralls thinks that “newspapers” are the only people who report news, and that they somehow have the lock and key on it.

Newsgathering requires extensive infrastructure. Beat reporters, freelancers, editors, stringers, fact-checkers, and travel cost a lot of money. (A week in rural Afghanistan costs at least $10,000.) Why shouldn’t newspapers–the main newsgathering organizations in the United States–be compensated for those expenses?

And they are compensated for it — when they put in place a business model that makes sense. There is no right to compensation for expenses. There is only a right to set up a business model as you see fit, and see if the market has demand for it. Apparently Ralls also missed that economics lesson when he skipped out on the one about how scarcity impacts demand.

Every newspaper article should enjoy an individual, aggressively enforced, copyright. Radio and TV outlets that currently lift their news reports out of newspapers–without forking over a cent–would have to hire reporters or pay papers a royalty. Paying newspapers for usage, even at a high rate, would probably be cheaper.

Aha. We’re back to copyright. Except, again, he seems to be confused about copyright law, implying that somehow copyright covers the very concept of the story, rather than the actual expression of the story. Rall appears to believe that whoever reports first hand on a news story somehow “owns” that story and can charge anyone who reports on it as well in a non-first hand manner. I would suggest he talk to some lawyer friends about how well such an “aggressively enforced copyright” effort like this would succeed in court.

Step three on the road back to fiscal viability: cut off the wire services. Nowadays an article written for a local paper can get picked up by a wire service, which sells it for a ridiculously low reprint fee to other papers and websites like Google. At bare minimum, newspapers that originate stories ought to require wires to charge would-be reprinters the thousands of dollars each piece is worth. Better yet, don’t post them in the first place.

Yes, please, make distribution more difficult. Because, you know, there’s nothing your market likes better than the fact that you’ve made it that much more difficult to get your product.

There are a couple of problems with my prescription.

Just a couple?

First, my suggestions only work if every paper follows them. Aside from the cat-herding organizational hurdles, accusations of collusion and price-fixing might bring down the wrath of government officials assigned to enforcing anti-trust laws.

Oh yes, there’s that.

Second and perhaps more daunting, the “information wants to be free” mantra, once the cry of wacko libertarians, has become state religion.

Ah, and of course, a nice final slam at “wacko libertarians” with nary a single explanation of the basis for those claims (you know, the basic economics, which Rall apparently skipped over). These are actually the least of the problems with Rall’s plan. The much bigger one is simply reality, which would take his three suggestions and basically destroy any newspaper that agreed to go along with them.

Filed Under: business models, copyright, economics, free, newspapers, ted rall