Online News: Free or for Fee?

October 2nd, 2011
in econ_news

guardian Econintersect:  There is a battle going on in mainstream media.  It is a battle for survival as the internet has been systematically replacing print as a primary source of news.  First television news assaulted the historic dominance of newspapers as prime news providers, but that was a small wave compared to the internet tsunami.  Newspapers have been moving more and more of their content online but the strategies being pursued have two different major thrusts:  Free content supported by advertising or reader fees with less advertising.

Follow up:

Spiegel Online has a story on a focal point in this battle involving The Guardian.  From Speigel Online:

The Guardian has been losing money every year since 2004. Last year alone, it and its sister newspaper, the Observer, lost more than €47 million. It's only thanks to the farsightedness and generosity of its former owners, the Scott family, that the paper hasn't gone bankrupt.

Since 1936, the paper has been funded by the Scott Trust. This structure has but a single aim: "To secure the editorial independence of The Guardian in perpetuity."

Many newspapers would like to be based on such a business model. The Scott Trust owns a number of lucrative companies, including the used-car magazine and portal Auto Trader. The profits generated on these are used to offset the heavy losses incurred by The Guardian.

"Our mission is to be profit seeking rather than profit finding," says Deputy Editor Ian Katz. Even CP Scott, the paper's owner in the early 20th century, believed it was more important to be influential than to turn a profit.

However, the Guardian's losses have become too big to absorb -- and in 2007 the Scott Trust was forced to sell some of its assets to refill its coffers.

Andrew Miller, a former consumer-goods industry manager and for the past year the managing director of the newspaper's parent company, the Guardian Media Group, recently warned that if the Guardian continued to make such heavy losses, the company would simply run out of money within five years.

The Guardian is fighting this red ink by reducing staff (nearly 300 employees let go out of 1,800 since 2009) and just recently with a 20% increase in the print copy price to £1.20 an issue.  So far The Guardian has continued to make it’s very popular website accessible without fee.

The New York Times, faced with big losses chose a different path and started charging for internet access.  Online readership collapsed the very next day, but now some of the readers have returned and are paying fees that help the paper’s bottom line.  Another world class newspaper, The Wall Street Journal, has been charging for online access after a small number of free reads in any 30-day period.

Just what is the most profitable way for traditional newspapers to use the internet is yet to be determined.  It may take years to find out.

Source: Spiegel Online International

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