This is a follow-up to this resent post.

Selling news is not at this point a profitable long term business. News organizations large and small are laying off staff, or closing, and I, for one, am saddened. The quality and diversity of news coverage has dropped. In the late '90s I was a college student at Cal Poly SLO. My work study job was at the current periodicals desk in the library where I worked the weekend shift. Any one want to guess what the volume of patrons was at 2:00pm Saturday afternoon? When I was not helping patrons, I read some of the 25 or so newspapers we subscribed to, along with a number of weekly and most of the articles in the science and physics journals.

The differences between then and now are that I cannot find a job that pays me to read for 12 hours a week, and even if I could there would be nothing worth reading. Daily newspapers are filled with the same dozen or so wire service articles, interspersed with reprints of press releases and highlights from police logs dressed up as real reporting. What I used to love about print publications, in-depth, local reporting is gone with the loss of ad review and with it the loss of readership.

In this post I want to look at why there is no market for news today, and some of the ways I think good reporting can start t generate profits again.

Value in News

It is hard to sell someone something that they know how to get for free. Most news sources now have their content on-line at no charge. In some ways that internet's ability to reduce marginal copy costs to near zero has been a boon for news consumers. But producers have lost both subscription revenue and advertisers in the bargain. By the time a story can be written, edited and put on the web, anyone interested and connected and get the basic Who What When Where and How from twitter, or a blog, or Facebook or any other form of "Citizen Journalism."

The first three paragraphs of a traditional news paper story are simply not valuable anymore. If one paper puts these behind a pay wall there are thousands of other (better?) sources to turn to instead. The information is neither unique to the paper nor hard to obtain, particularly because I'm often using the same primary source the paper is.

So what is valuable? It's the next 500 or more words. Interviews with witnesses, officials, or participants; background, history and context that I can't get from Wikipedia or the first 10 hits on Google; statistics and research that take more then 5 minutes; Investigative reporting that needs time and well connected sources, all these are worth paying for. It is all these that have been cut from almost every newspaper in the country because they also cost money to produce.

Paying for it all

So the old ads + subscription model doesn't work. Very few papers have enough good content make subscriptions cost effective for consumers. I have three ways to the producers can pay for content. One is the NPR/PBS not-for-profit model -- free content paid for by quarterly pledge drives. There is not a lot to explain here other then to say you live and die by your reputation, and you need to appeal to an incredibly broad audience. The second is the freemium model, a few percent of your users pay for premium content which subsidies the rest of your users. Here the trick it to have some form of premium content and then a very focused niche. The Wall Street Journal or Ars Technica can make this work, so could a community paper that focused local news, but even a fairly modest city is to big to be a good niche and almost all are too small to use the the not-for-profit model.

The third model is what I think will save the news gathering industry: pay for content. It has been tried, but never well. I believe people will pay for original content if (1) they can find it, (2) they know what they're paying for, and (3) the economics work.

The days when people got their news from a limited number of sources are over. As I wrote previously I visited 350 new sites last month most of them some form of current information, and last month was not anomalous, for me. Even lesser news junkies will find most of their stories from some form of link in rather then hitting a single source. While the first 250 words in a story are not worth paying for, they are invaluable when it comes to finding the story. News aggregaters depend on this for for their content. A site which puts this information behind a pay wall simply falls off the radar, and it not like your loosing money, because no one will pay for the first few paragraphs anyway.

So what about that valuable content? Put it behind a pay wall, but tell me whats there. "Read interviews with X, and Y. See our Statistical analysis, and view exclusive photos from the scene." The problem is that for so many wire stories, if you list their value added content it comes out to be "We quoted a few publicly available press releases and got a stock quote from the press office of one official," or "the entire rest of the story is based on one unidentified source with obvious bias," In order to sell valuable content you have to have something to sell.

An how much will people pay? There are a number of factors. The two biggest competition and transaction costs. As I said above if your story looks just like the one from the AP (or is the one from the AP) I've already read it and will not pay for it. If you put something behind a pay wall it better be fairly exclusive. If I find the story I paid for up for free on your site or anyone else's, you can bet I'm going to Google a lot more before I pay next time.

Then there is transactional costs. This is an economic way of saying how much does it cost (actual and intangibles) to pay you. Current experience is that to enter credit card information one must receive about $5-8 minimum in services, otherwise its not worth the time to enter the data on my end and the cost to process it on yours. I don't care how optimistic you are $5.99 is more then anyone is going to pay for a single story. I'm also not going to buy 10 stories from a news outlet at that price because I'm unlikely to read that many from the same source.

The solution I believe we need is need is a news payment aggregater. A company to do for news what iTunes has done for music. This third party could reduce the transactional costs for a story to a point where 0.10 - $1.00 stories were practical. It could use network effects to increase readership, and use its buying power to ensure that the content it sold was worth paying for, thus building trust in the marketplace. For example, if a user who read the story later found it widely published elsewhere for free she could park that story as "available for free" at the aggregaters website and discourage others from paying for it. This in turn provides an economic incentive for producers to sell only original content. The very kind of thing users are willing to pay for.

The only piece missing is the well connected entrepreneur with the talent, vision and capital to set up something like this. When it happens, no one will need to tell me about it. The story will run for free on all my favorite news sites.