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net.wars: Free thought

by Wendy M Grossman | posted on 05 October 2009


Well, this makes you blink and check the date: the Evening Standard is proposing to drop its cover price to zero as from October 12.

Wendy M Grossman

The paper's (new) owner, Alexander Lebedev, expects the move to more than double the paper's circulation, from 250,000 to 600,000. And, one supposes not incidentally, to kick the stuffing out of the free sheets hawkers have been harassing Londoners to take for the last few years. That's how to compete with free: throw away a couple of million pounds of revenue in favour of increased distribution.

I particularly like this quote: In the same statement, Geordie Greig, editor of the Standard, called it “an historic moment and great opportunity”.

It wasn't so long ago – say, the turn of the century, nine years ago – that the critics used to lambaste Amazon.com and other dot-com upstarts for taking the view that Getting Big Fast was a good strategy, even if it meant you lost money at a rate that would scare a banker. It was even more recently – August – that Rupert Murdoch decided that news was not meant to be free, first closing his three-year-old free London title and then announcing News International would begin charging for online news.

Murdoch's notion was easily dismissed: to date, he has been consistently and persistently wrong in every online venture he's tried. For the history challenged: in late 1993, when graphical interfaces were taking over and the Web was about to explode he bought the 100,000-subscriber king of text-based online services, Delphi. The relatively modest purchase price, estimated at $3-5 million, wound up costing Murdoch hundreds of millions more in trying to adapt to the pace of technological change.

That money went on this plan: to reinvent Delphi as part of Springboard, the long-forgotten 1996-1997 attempt to fashion a mass-market news service in collaboration with first MCI and then BT. And who could forget – well, probably everyone - Currant Bun, the news service for readers of the Sun?

But Murdoch's goal is at least clear and consistent: he wants to turn the Internet into a traditional medium that, like television and newspapers offers mass-market access but a walled garden of content he can charge for. One day, if we pay insufficient attention to network neutrality and system design, he may succeed.

But if there's one thing everyone has agreed on over the last year it's that newspapers can't survive on Web revenues – that is, advertising – alone. Can a print version succeed on that same business model with far higher distribution costs? And still do quality journalism?

Based on recent history, you would think not. In 1993, The Times - Murdoch, again – kicked off a price war among Britain's quality dailies by dropping the cover price to 20p. The Independent and the Telegraph were forced to follow. The net result: The Times increased its readership by a lot, the Telegraph, and the Independent struggled. Fifteen years later, with everyone losing readers, the relative positions haven't changed much.

But cheap is not free; it's far easier to slowly raise the price back up again (as in fact has happened) than it is to cross the gap between free and not-free. People get in the habit of thinking that things they don't have to pay for aren't worth paying for, whereas they're more likely to think that something that's cheap now will cost more later. Lebedev is going through a one-way door.

There is also the question of whether the readers you get from distributing 600,000 free copies of a newspaper are the same value to advertisers as the readers you get from selling the same newspaper to 250,000.

It's hard to see how this change will be sustainable in the long run and maybe even in the short run. The newspaper business, however much it needs to be reinvented, is an established one. Dumping an entire revenue stream in an established industry is not the same as being willing to lose money as an investment in the future in a new medium that's growing like crazy. More-than-doubling distribution might slow but won't fundamentally alter the shift of classified ads (on which the Standard, unlike the Guardian, depends) from print to online.

That shift is fuelled by the ads being (mostly) free to post and instantly updated, not just by their being free for readers to see; the Internet is simply a better medium for most small ads.

But the immediate reaction on the part of many commentators is to assume that the Standard's move will put pressure on the national former broadsheets. This seems less likely: local newspapers have been the hardest hit (so far) in the move to the Web. Instead, the first to get hurt, as the ABSW pointed out in a Twitter comment, are the newsagents.

Jettisoning a significant source of revenue seems like divorce: you only do it if you're desperate. Maybe Lebedev will prove to be a genius, but it seems doubtful.

As Clay Shirky has written: "There is no general model for newspapers to replace the one the Internet just broke."


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Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).