Thursday, July 02, 2009

Why the Marburger Plan to Save Newspapers Won't Actually Save Newspapers

Yesterday we looked over the so-called Marburger proposal to allow newspapers (and presumably other content providers) to sue news aggregators for unjust enrichment. Since that post I've seen a couple others talking about monopoly of information, so I say again -- the Marburger plan would only protect reporter work product, not the information itself. If a reporter can obtain the same information independently, the cause of action should fail. (Accent on should -- the Marburgers do not entertain the possibility that the cause of action will drift and morph beyond what they envision, but that's another post.)

Before we get started on the problems with the proposal, a couple of caveats. First off, what I know about the newspaper business is what I read. Same with some internet use patterns. The difference between what lies below and what the Marburgers have done is that I have paid attention to things they haven't. Again I restate my central objection -- the Marburgers prove propositions with thought experiments that should be tested with data.

Finally a couple of links that got left off of yesterday's post. First off, Editor and Publisher covers the proposal, but with no critical comment. New media guy Marc Cantor weighs in with ideas about what the newspapers themselves can do to maintain an audience. (h/t Brewed Fresh.) A piece from the UK looks at the Marburger plan in the context of the far more draconian proposal from Judge Richard Posner to give papers intellectual property rights over their links. And if you really wanna get geeky wit it, here's a Coase Theorem treatment of the Posner idea. There has also been more dogpiling on Connie Schultz from various blogs. You can look through the links in yesterday's post and extrapolate if you really want to see more of that sort of thing.

Now on to the show.

Marburger Cures the Wrong Disease.

My biggest objection to Marburger (for want of another name, this is what we'll call it) is that it assumes that the gravest threat to newspapers is losing readers. While papers have lost readers steadily throughout the Twentieth Century due to competing media (radio was killing off papers long before the internets) the precipitous drop in revenues has happened on the advertising side.

Advertisers have been migrating steadily to online sources that have nothing to do with newspapers. This is particularly true of classified advertising which has traditionally been an indespensible revenue stream for newspapers -- up to 70% of profits. Craigslist has done the most damage, but Monster, and for that matter Ebay have all taken away business that newspapers once dominated. As a result, classified revenues have dropped by half since 2000. Analysts like Lauren Rich Fine (that's the source of the 70% figure) have been warning for years that newspapers cannot survive ad revenue losses of this magnitude.

Online classified services offer advantages that newspapers cannot match. If you are paying for a newspaper classified, you are subsidizing that news gathering operation whose expense the Marburgers so persuasively described. Your cost is based on total circulation, despite the fact that only a tiny percentage of those readers are likely to have any interest in your ad. With online classifieds, on the other hand, every pair of eyes that wanders into the site is at least in the market for something along the lines of what you want to advertise. No one goes onto to read about Michael Jackson's kids. They go to buy a car.

(By the way I have a theory that computer-based advertizing is a general danger to both content providers and content consumers. Advertizing is generally really inefficient. Again only a tiny percentage of whoever sees an ad has an interest in the subject of the ad. As computerization allows greater targeting, advertizing becomes more efficient. The more efficient it is, the less businesses have to buy it.)

Marburger does nothing about the loss of classified advertising. By their admission, they are talking about marginal increases in traffic. But traffic doesn't matter if it doesn't attract advertizing.

Curing the Wrong Disease, Part 2 -- Problems in Monitizing Websites.

The Marburgers would no doubt object that online ad pricing is dictated by traffic, which is true. But its not like newspaper website advertising was profitable, then the profits started to erode due to unfair competition from aggregators.

The fact is that it's really difficult to sell enough advertising to support web-based journalism. There isn't as much real estate on a web page (versus print where, among other things, you have facing pages that don't have an analog online). And people can block ads. And web advertising is still working to overcome a past rife with charlatans (remember the commercial about the poor sap who shot the duck in the banner ad?)

And of course news organizations are competing with sites that allow better targeting (see above.)

Over time, changes in technology may make monitizing online content easier (the rise in video allows commercials that you can't fwd past) or harder (written content on mobile web allows pretty much no space for ads). But between the loss of advertizing to other providers and the basic difficulty of paying for journalism with online ads, the newspapers are facing an inevitable decline that tinkering with intellectual property will not fix.

That said, the free rider effect that the Marburgers identify is the sort of thing that lawyers should seek a remedy for. Whether the Marburgers have correctly identified that effect and whether their proposal would provide an adequate remedy is another question.


Gloria Ferris said...

Another good, thoughtful post, Pho. Soon, value is not going to be measured by $$$. My take would be to create value not found in other venus in your nespaper. Give people a reason to pick up your paper every day because you offered in depth investigative reporting. It appears to be coming back to the PD, but is it too little too late and the connection to advertisers makes some stories suspect concerning topics. Not on the reporters' side but editorially.

Connie Schultz said...

Pho, I appreciate your smart and thoughtful response to the Marburger proposal, and to my columns. I don't agree with all of your objections, but I am mullng them over and alerting interested parties on my end to read your posts.

I also want to thank you personally for focusing the discussion on the subject matter at hand. I have come to expect nothing less of you. Thanks for setting a high standard.

Connie Schultz
The Plain Dealer

John Ettorre said...

Good, thoughtful stuff that actually advances the conversation. But then, you always seem to do that.