Doh. I just laid off my business model

Each day brings another story that publishers are lurching to the business model that will save newspapers: charging for online content. Yet, each day brings news of additional buyouts and layoffs in newsrooms. Sometime soon, the publishers are going to figure out the next problem: they neither have enough good content that’s worth selling nor sufficient talent to produce it.

Over the past three years, newspapers have shed 27,000 jobs, many in newsrooms, including more than 9,000 jobs so far this year. Consider the assets they’ve jettisoned: the very people who are accomplished at producing high-value content that could be monetized under pay-for-content plans. What other industry would reduce the one asset, the one investment, that differentiates them?

Let’s do the new math in the new world of paid content. Say each of 27,000 laid-off newsies was capable of producing just one story of value per week. That’s 1.4 million stories. Now let’s iTunes those stories, just the way the publishers would like, selling them for a one dollar. If just one person would buy a story for a buck, then publishers lose $1.4 million in potential revenue from those stories. But a market of one doesn’t make a newspaper, nor does it reflect the really big, Google-like numbers that publishers think they’ll get on the Web. Jack the market to only 2,000 paying customers for one story a week, and you’re looking at $2.8 billion in lost revenue from the people you just laid off. At only 10,000 customers — the size of a small weekly newspaper — that’s $14 billion in lost, potential revenue if you take the formula forward. And at Google-like numbers in the hundreds of thousands or millions, then, well, you’re talking about real money that you’ve let get away.

Once again, publishers are about to learn new realities from the Internet. The first is that you can’t produce enough content to supply it. The second is that the content you do produce probably isn’t worth what you think. The third is that the competition is fierce: many of those 27,000 journalists you trained, then fired, are now working against you on their own sites.

Dale Peskin

Dale Peskin

Dale is co-founder of We Media.

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  • Stephen

    A publisher struggles to convince people, even people over 40, to pay 50 cents for an entire newspaper. Why would anyone pay $1 for a single story? Now, take some scissors and cut out all of the staff-written stories from your local paper today, lay them across your desk, close your eyes and jab your finger down somewhere. Take the story you poked and go around the room asking everyone how much they would pay if there was no other way to read that story. That story about the noise ordinance? Doesn't affect me — won't pay. That story about state budget cuts? Heard it on the radio this morning — won't pay. That op-ed by the blowhard I hate? I'd pay for him to be fired, but that's about it. Some people will pay a little bit for some stuff, a demented few may even pay $1, but there are many things the staff spends its time on that no one ever would pay for by itself.

  • I wrote about the same issue (among others) in a post last year – http://olago.wordpress.com/2008/04/01/how-to-keep… – where i defend that news companies should hire the best because they will make it pay. Instead we see lay-offs and precarious working conditions for young journalists still trying to get the gist of the job. So everytime i read "Google killed our business" or other whining of the sort i just yell at the screen "you did it to yourselves you idiots". Either i'm right or i have to take my pills like the doctor ordered. Great post.

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