24 June 2009

Newpaper Ad Revenue Way Down

Judge Richard Posner offers up some facts about the newspaper industry:

Newspaper ad revenues fell by almost 8 percent in 2007, a surprising drop in a non-recession year (the current economic downturn began in the late fall of that year), and by almost 23 percent the following year, and accelerated this year. In the first quarter of 2009 newspaper ad revenues fell 30 percent from their level in the first quarter of 2008. This fall in revenue, amplified by drops in print circulation (about 5 percent last year, and running at 7 percent this year--and readership is declining in all age groups, not just the young), have precipitated bankruptcies of major newspaper companies and, more important, the disappearance of a number of newspapers, including major ones, such as the Rocky Mountain News and the Seattle Post-Intelligencer. Falling revenues have led to layoffs of some 20,000 employees of the remaining newspapers. Print journalism has come to be regarded as a dying profession. Online viewership and revenues have grown but not nearly enough to offset the decline in ad revenues. Even the most prestigious newspapers, such as the New York Times, the Wall Street Journal, the Washington Post, and USA Today, have experienced staggering losses.

From here.

His suggestions for copyright protection as a remedy don't ring true, however. He suggests that:

Expanding copyright law to bar online access to copyrighted materials without the copyright holder's consent, or to bar linking to or paraphrasing copyrighted materials without the copyright holder's consent, might be necessary to keep free riding on content financed by online newspapers from so impairing the incentive to create costly news-gathering operations that news services like Reuters and the Associated Press would become the only professional, nongovernmental sources of news and opinion.

The newspaper's old business model may be dead. This doesn't mean that there is no business model by which news gathering can make economic sense. National Public radio, for example, receives very little of its funding from government sources, even though it has a government charter. The Colorado Independent, in the sidebar, also has a grant based business model, rather than an advertising or subscription based business model.

Before commercial investor owned, advertising funded companies came to dominate news collection in this country, political parties provided a funding base for most newspapers, including one of the predecessors of the Rocky Mountain News. Before newspapers that served the general public came along, we had "foreign correspondents" whose business model was similar to that of today's investment analysts. Notably, newspapers in a fair share of the world manage without any copyright protection at all for their news reporting.

The vast majority of the fine arts sector operates on a mix of fee for service, advertising and contributions for donors, something close to the National Public Radio business model. So do many private educational institutions, and most private hospitals started out that way although many are now profitable from fee for service alone.

Indeed, the Associated Press, as its name suggests, is not itself an advertising revenue driven, investor owned operation at all. It is a producer cooperative of participating newspapers, in which participating newspapers generate much of the total content available. Most of the member newspapers are advertising revenue driven, investor owned corporations, but the AP is not. Members contribute both funds and content to the shared enterprise with funding requirements based on audience size, just as NPR member stations do.

Also, fair use blogging of news stories is a big part of what drives traffic to newspaper websites. The notion that this kind of citation reduces newspaper website traffic is probably empirically wrong.

In Japan and New Zealand, at least, probably elsewhere, part of the way TV and radio ccontent is paid for is with a tax on each TV and radio you own.

The item by item licensing contemplated by copyright law is horrifically cumbersome in practice and if it was really required in practice, every commercial radio station in the country would soon collapse under a mountain of copyright suits. In fact, the only way commercial radio exists at all is for the copyrights in the vast majority of the songs to be available by paying a small number of blanket licenses based upon audience size, and then to impose record keeping requirements on licensees. The data from the radio stations is then used to divy up the the royalties to artists and music studios and others entitled to them.

Why do I get a newspaper even though I could get most of the content online? Simple. Ease of use and scanning issues aside, I want the coupons that come with it and it is nice to have the physical paper around the house for various purposes (like surface protection from children's paint projects).


Dave Barnes said...

In other news:
1. The number of farmers decreased last while food production increased.
2. The number of blacksmiths decreased while miles driven per automobile remained high.
3. The number of secretaries decreased while the number of voice mails increased.
4. Carbon paper manufacturers hurting as more "photo copiers" are sold.

Andrew Oh-Willeke said...

Creative destruction and all that, I hear you. On the other hand, while this involves technological change, the productively based cause and effect cycle your examples suggest isn't nearly so obvious.

No one doubts that internet delivery should be paperboys and printing press operators out of work. But, the notion that content providers should lose work, despite much smaller changes in their productivity is non-obvious and more complex in causation.