As a small fish in the publishing industry, I understand why it can be difficult to develop a business model that is sustainable for the long term, especially when you use the old profit expectations of the 1870s through early 1990ss as a reference point. Even as someone aware of the hardship that faces the industry, I am still amazed at the deterioration in the industry over the past two decades. To get a feel for it, remember that the Taylor sold The Boston Globe (technically a publicly traded stock known as Affiliated Publications) to the New York Times for $1.1 billion in 1993. In 2013, John Henry (of Boston Red Sox ownership fame) bought The Boston Globe for $73 million. Talk about the tyranny of reverse compounding—over 90% of the newspaper’s value was lost over a recent twenty-year period.
The issue with newspapers isn’t really circulation—although dwindling circulation numbers are a problem—but rather, the amount of advertising income generated for each eyeball that views content. Two decades ago, a circulation of 10,000 was enough to run a small-town paper in the suburbs at the kind of profit level that could allow you to take care of yourself, go on a vacation here and there, save for retirement, and put the kids on a few sports teams. It was the kind of thing that would give you $50,000 in annual profit in 1991, and keep in mind that $50,000 in 1991 is analogous to $97,000 today.
The problem now is that each eyeball is only worth about 10% of what it was worth back in the 1990s. Seeing an ad on a cellphone is not nearly as profitable as seeing an ad on the front page of The St. Louis Post-Dispatch in 1991. That’s the state of the industry. If you read Google’s quarterly disclosures, you’ll see that the rise of mobile online use has affected the cost per click for advertising. In a nutshell, here is what happened: From 2012 through now, the cost per click would decline 6% on average in each Google disclosure. I can testify to their figures: I have seen periods where this site’s traffic has grown by 20%, but the income has only grown by 8%, 10%, or 12% because moderately declining payout rates are interacting with higher volumes.
That long-winded introduction was my way of saying that the current status quo regarding advertising income is not enough to sustain newspapers that have printing presses, dozens of staff members, editors, bosses, pensions, medical obligations, and investigative arms that need to be funded. You need advertising plus subscriptions if you want to keep everyone paid and (dare I say it?) make a profit.
This is where Blendle enters the picture. It is a Dutch one-click app service that creates a paywall to content unless readers are willing to pay $0.20 to read it. Err, more accurately, the New York Times, Wall Street Journal, and The Washington Post have recently entered into a contract with Blendle to roll out this pay-per-click service to charge $0.20 for each article read. The idea is that you’d visit The Wall Street Journal, see a pop-up that says your account will be charged $0.20 for each article that you read (your account would have free access to that article forever), click “yes” to accept your charges, and begin your browsing. You see three WSJ articles that catch your attention, spend a half-hour reading them, the WSJ gets their $0.60 plus payment from the advertising on the site, and then you both go on your merry ways.
I regard this system as the best idea I’ve encountered for newspaper companies to develop a viable business model in the internet age. People don’t like paying monthly subscription fees for papers, and the Blendle platform will take advantage of impulse (you can conveniently read an article with one introductory click and the newspaper companies will get their $0.20) and a sense of fairness (subscriptions are difficult business models because they payout is usually in the future whereas the article is received at the moment the payout is made). Receiving instantaneous value is what makes the transaction process seem fair.
My intuitive guess is that The New York Times and The Washington Post will have a harder time successfully implementing Blendle than The Wall Street Journal because of their reliance on news stories for content. If a bomb goes off in Syria, you can read about that topic on the internet anywhere for free. Because news items are mere regurgitations of facts, it is hard to be unique and inspire people to pay up. But if you interpret facts rather than state them, you can have a stronger buying market. A Wall Street Journal article that discusses ways to maximize the flexibility of a trust account will have a more willing $0.20 audience than a Washington Post article that tells you two officers were shot in Ferguson. Analysis piques the mind and has a sense of scarcity; news items are graffiti littering the internet playground. Blendle doesn’t have to be iTunes to start improving the viability of the online newspaper industry.
Originally posted 2015-03-14 23:18:29.