Old media's problems are the costs not the lack of paywalls

By Sarah Lacy , written on November 26, 2012

From The News Desk

GigaOm's Mathew Ingram is one of my favorite bloggers (who doesn't work at PandoDaily), so I'm delighted that this time, I actually agree with him on something.

Go read his post on why paywalls are not the answer to dying newspapers right now. Because he's completely 1,000 percent right.

Ingram takes on the Columbia Journalism Review for calling the Washington Post total Luddites for not erecting a paywall. The article is so flawed and reactionary to digital realities, it's a breathtaking view of how the old media world still thinks. Like when you go to New York and see that people still wear ties to work everyday.

A few points, in addition to the ones Ingram raises:

  1. Chairman Don Graham is not a Luddite, and he's not stupid. He is not a Luddite by old media publisher standards or frankly by any standards. This is the man who was one of the first to spot Facebook as a future tech titan back when everyone was saying it would be as doomed as Friendster. And he's still on Facebook's board today and more tapped into the powers of the tech world than any other old media newspaper man on earth. I assure you, CRJ, he knows more about where the future of this medium is going than you do.
  2. Unlike a lot of newspapers, the Post trying to do something innovative, rather than just take the easy out of throwing up a paywall. It was the first publication to wildly embrace Facebook's platform, and while its Social Reader has had ups and downs, it was looking very promising for a time. The point is not whether each experiment works. It's that the Post is embracing new media, not fighting it. Knowing Graham's approach, I expect more of this as more platforms proliferate. The argument "Innovation hasn't worked yet, so ditch it," doesn't exactly get how innovation works.
  3. The Post still has a sense of mission. I've been thinking about the Washington Post quite a bit lately. I am reading Katherine Graham's autobiography, and it's insanely inspiring. The Graham family felt a great sense of mission with the Post, dating back to Katherine Graham's father's stealth purchase of the paper. He'd set as a life goal giving back by a certain age, and reviving a dying Washington paper was the way he did it. He poured years of his life and a good deal of his fortune into that venture before really seeing any true growth. It was the consuming passion of the family for generations. The more I learn about the Graham family, it's not a surprise that this was the paper that broke Watergate. And unlike other old newspaper families whose heirs have subsequently off-loaded the publications for cash, the younger Grahams still do feel that sense of mission. Part of that sense of mission, I would imagine, is making news accessible for the public and finding a sustainable way to be part of journalism's future, even if that's the harder road to take.
  4. Subscriptions were never meant to be major revenue drivers in the old world either. CRJ writes, "The illogic of giving away something online that you charge for elsewhere is now coming home to roost." That's incredibly disingenuous, because for most newspapers, the cost of a subscription merely paid for the logistics associated with getting a piece of dead tree to your door. The Web doesn't have those costs. Subscriptions were never meant to be a major revenue center. Ads always were. The problem is classifieds got taken away by the Internet, not that subscriptions got taken away. The future of the industry will be in ads as well. Those who figure it out will win; those who erect paywalls will have diminishing influence. Many reporters will opt to work for places where their work is more widely read instead of an ivory tower with declining readerships and still no solid financial future. There are simply too many good journalists not working at places with paywalls. As an industry, newspapers just can not compete with free. You can debate all day long whether offering news for free to begin with was a mistake or not. It doesn't matter anymore. The horse has long since left the barn.
  5. If an offline publication can't sustain $60 million in losses without a paywall, maybe the costs are the problem. The CJR's biggest reason the Post needs a paywall is because its losses are unsustainable. Duh. On this we agree. The entire model of news has changed. But the answer isn't trying to prop up unsustainable old world costs by charging readers more money. It's retooling the business dramatically. I'm sorry if that means layoffs. But there are 500 people in the Post's newsroom. You can't tell me there is no fat to be trimmed. I'm sorry if it means killing sacred cows like the print edition. But that's an eventuality for all of these papers one day anyway. The problem is not revenues -- as plenty of scrappy new media publications have proven. The problem is the costs, and you do not need $60 million to produce nine months of top journalism. Witness how consistently the tiny AllThingsD team beats the Wall Street Journal on tech stories for evidence of that. Now, clearly the Wall Street Journal needs to cover more than tech. But there's a huge cost delta between the two. Publisher Katherine Weymouth seems to get this, as staff cuts were allegedly the root of the top editor's recent departure. CJR stupidly assumes a small staff means a bad staff. Further, the CJR provides copious evidence that free isn't a way to pay 500 people, but no evidence that a paywall does. It says the Times is bringing in $100 million in annual revenues from its paywall, and it has double the circulation of the Post. Well, even if the Post were able to do as well on a per-reader basis -- a big "if" -- that wouldn't come close to covering the Post's losses either. The New York Times own paywall revenues are barely keeping up with the fall in print revenues, and the Times has done it better than anyone. This is like advising someone teetering on bankruptcy to fill out a form for another credit card, rather than cut their monthly expenses. It might buy you some time, but that's about it. Anyone with a long term view, has to be looking beyond paywalls.
Newspapers have three options: The first is to try to compete on raw page views with the most giant media corporations in the world. This obviously erodes quality. I think the CJR and I can agree on that one. Option two is to put up a paywall. This might stem some of the losses initially, but a paper's place in the world is forever changed. These publications are trading short term viability for longer term irrelevance. The world won't pay for news online. Option three is to innovate. Sorry, I know it's unpalatable, but that's the only one that reinvents a model, which we all know by now is badly, badly broken. Otherwise eventually newer news organizations win. And again, like the CJR, I don't want to see that happen. A lot of the old media DNA -- pioneered by people like the Graham family -- are crucial to our national dialog. But no one has a God-given right to have a 500-person sized newsroom and still print on dead trees when the market doesn't seem to prize either. Adapt, die, or wither away, old media. Just like everyone else.

Like Ingram, I applaud the Post for refusing to take the short-term way out. Maybe they'll have to put up a paywall later. Maybe they'll wind up cutting staff, and the product will suffer. But they're one of the only great media empires actually looking for a digital solution to a digitally-created problem.

[Base image courtesy in pastel]