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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

February 15, 2007 at 11:30 AM

News tip of the day: It takes money to make money

That’s the conclusion of a new study that analyzed 10 years of newspaper business results.

The University of Missouri study found that papers that spent more on content made more money. Papers that cut newsroom spending and spent more on marketing and circulation were less profitable.

“If you lower the amount of money spent in the newsroom, then pretty soon the news product becomes so bad that you begin to lose money,” Esther Thorson, an advertising professor and associate dean for graduate studies at the University of Missouri’s School of Journalism, said, according to Reuters.

I’m glad to hear it, of course.

But what does the study mean for all the startups that are trying to build online news sites with minimal investment in content?

They’re investing almost exclusively in the circulation and marketing side, and counting on users and wire services to provide content at little to no cost.

If the conclusions of the newspaper study apply to online news sites like Newsvine, NowPublic and even Digg, their future profitability is uncertain.

Those ventures could also be affected, eventually, if the study prompts changes in the newspaper business.

This may seem out of whack if you think of newspapers as only a print product. That hasn’t been the case for several years now. Virtually every newspaper is an online business as well nowadays. (Perhaps the differentiation shouldn’t be old vs. new media, but media that produces original content and media that simply repackages the content of others …)

So, if the study motivates newspapers to revisit their investment approach and spend more on content (I’m trying to be optimistic …), they’ll simultaneously look at how that content will be monetized online.

If the papers conclude that their content is likely to be consumed mostly at sites like Newsvine and Digg, instead of at their own Web sites and alongside their ads, they’ll have two choices:

1. Don’t bother to spend more on content. That’s what’s been happening at a lot of papers lately.

2. Invest in content, and limit its redistribution online. Why should they let others sell ads around their content?

If they choose option two, newspapers could try and get more revenue from wire service agreements that give their content to online news sites like Newsvine.

They could also adjust wire agreements and delay distribution for a longer period of time. That way, if a paper breaks a story, you’d have to go to its site to read it. What a concept.

It’s complicated because most papers are now owned by conglomerates that operate wire services. The conglomerates like the revenue their wire content brings from online news sites, even though those sites compete with their individual publications for readers and advertising.

Option two could also result in more papers charging for online news. I’ll bet more will follow the steps of the New York Times, which offers a mix of free and paid content online. That’s inevitable if papers come to see their Web sites as the core franchise.

Some papers are already clamping down and rejecting the Web 2.0 siren song — that sharing content with ad-supported Web startups helps everyone, boosts site traffic, attracts young readers, and so on. That’s what happened in the Belgian case against Google, where papers said their content — all of their content, even the headlines and story summaries — is worth more than link love and site traffic.

Many online news enthusiasts could not care less about whiny old newspaper types. They believe bloggers and “citizen journalists” will fill the news void. I hope someone does.

But reporting takes time and effort. Eventually those bloggers and CJs are going to want a share of the profit their content is making for sites that aggregate news online. Then they’ll be facing the same quandary as newspapers are today.

Comments | More in | Topics: Digital media


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