Posted by: Bill | July 9, 2009

Business Model issue

Megan McCardle looks at the decline of newspapers revenue (and old media in general). She states that bloggers and new media are not responsible. It’s the decline in advertising revenue.  Here is the core of her post:

Journalism is not being brought low by excess supply of content; it’s being steadily eroded by insufficient demand for advertising pages.  For most of history, most publications lost money, or at best broke even, on their subscription base, which just about paid for the cost of printing and distributing the papers.  Advertising was what paid the bills.  To be sure, some of that advertising is migrating to blogs and similar new media.  But most of it is simply being siphoned out of journalism altogether.  Craigslist ate the classified ads.  eHarmony stole the personals.  Google took those tiny ads for weird products.  And Macy’s can email its own damn customers to announce a sale.

She goes on to describe how producing real news is expensive which is why bloggers tend to use other sources and profess their opinions. As the decline continues, I grow more apprehensive wondering what the creative destruction inherent to capitalism will do about it. The Huffington Post, Pajamas Media, Talking Points Memo, Politico and others like them are intriguing, but they have yet to deploy the resources to rival the reporting capabilities of a WaPo or NYT. Most of us would agree that a viable press is paramount to democracy, but if it isn’t profitable, the captialists aren’t really going to care.

My rhetoric may lead one to believe that I plan to dance on the grave of old media. With the exception of the NYT demise, I will not dance. I do think that old media didn’t have a whole lot of vision and I am not a fan of Op-Eds from these reporters whining about their own predicament, but I really worry about the need to fill this void.

*** As an aside on the topic of advertising, I think that eventually the day will come that the advertising dollars on the Internet will face a similar issue. I think that the folks at Google have known this for a long time. They have continued to rake it in, of course, but in the meantime, they are busy searching for a new source of revenue that could rival or complement ad sales. I’ve been waiting for about 4 years for them to announce plans for an OS to eventually complete with Windows and that day finally came on Tuesday. They have also continued to make progress with Google Aps and they are ramping up the enterprise capabilities of that family of products as well.

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