Newspapers: why fungibility means they’re really really really really really REALLY screwed

OK. The San Fran Chronicle has not very long to survive – either it gets bought (what do you think the chances are of someone buying an organisation that’s losing $50 million per year?) or shut down. The Seattle Post-Intelligencer is counting down from its 90 days: either it gets sold or shut down. More American papers are filing for bankruptcy. It’s really grim.

But papers will survive, won’t they? Well, look at those and you think: er, no. There’s a huge oversupply of news, and the internet is making it trivial for people to read content that has been produced anywhere. You wanted to read the New York Times? In the old days (pre-internet) that was hard. Now it’s trivial. And because newspapers discovered that paywalls don’t work – at least, in terms of getting the readers. (Obviously, they work in getting some money. But not really enough to cover the cost of producing them. Certainly not with the staffing levels that American newspapers enjoy.)

But, you say, surely the thing is that there’s lots of advertising to cover it once you get rid of a few excess journalist? Er, no. Here’s an article from the Wall Street Journal which is more than faintly worrying:

What does the Internet display-ad market have in common with Zimbabwe?

Both are printing nearly-limitless amounts of their main currency, vastly diminishing its value and undermining their future. The currency, for Web sites, is their ad inventory. And while Zimbabwe, under different management, can change course, the same isn’t true of the display-ad market. Web sites keep generating new content and extra pages on which ads can run.

That is why the sudden sharp weakness in online display advertising, which hit fourth-quarter revenue at companies ranging from Yahoo to Time Warner’s AOL and New York Times Co., isn’t just about a cyclical downturn caused by the recession.

Nick Carr sets it out very clearly: there’s an oversupply of news, and the market is correcting it ruthlessly. News is pretty much fungible (one of my favourite words – it means that if you have a pipe and stuff some of your supply in one end, what comes out at the other is indistinguishable. Sugar, oil and wheat are fungibles. And so, now, is news. On an internet scale:

Needless to say, the combined [news] production capacity now far, far exceeds the demand of the combined market.

n this environment, you’re about as like to be able to charge for an online news story as you are to charge for air. And the overabundance of supply means, as well, an overabundance of advertising inventory. So not only can’t you charge for your product, but you can’t make decent ad revenues either. Bad times.

And in agreement there’s this from Steve Smith, ex-editor of a Spokane paper:

If there is any good news in the inability of publishers to properly fund and supply content for existing websites, it is this: The “traditional” Internet newspaper is as doomed as the mass-market print variety. The era of the newspaper website designed for a desktop computer is passing and fast. The future, for the short-term anyway, is in mobility.

Where earlier, he says:

No organization can hold on to its information long enough to make it a viable commercial commodity in the digital world. Once published anywhere or in any way, the information is out there, for free, for everyone.

That’s axiomatic. Except perhaps it isn’t. (You can’t prove axioms, remember?) Newsday plans to try charging. Wow. The San Francisco Chronicle is toast, IMHO. The Rocky Mountain News is closing (or closed by the time you read this). (If you didn’t know, it’s Colorado’s oldest newspaper.) The Seattle Post-Intelligencer is counting down the days. Whoof.

And in the UK every single regional saw a fall in print sales. Is it chilly where you are too?

I’ll take you back to 2005, and a speech I gave to the NUJ about how technology would change journalism. Worst invention? The computer, I suggested. But when it comes to the survival of newspapers, it’s clear I was a little unambitious. The internet has blown a cold wind through hundreds of businesses. Now it’s the turn of the newspaper industry. And the wind is very cold indeed.

Carr again though has what you could call a glass-one-eights full upside:

As all that happens, market power begins – gasp, chuckle, and guffaw all you want – to move back to the producer. The user no longer gets to call all the shots. Substitutes dry up, the perception of fungibility dissipates, and quality becomes both visible and valuable. The value of news begins, once again, to have a dollar sign beside it.

Can’t wait, myself.


  1. You’ve absolutely hit the nail on the head – yet somehow you miss what to me is the natural conclusion and go for the “we’re all doomed” angle instead.

    You’re right to say that no-one is likely to make much money out of “fungible” news as you call it. But news doesn’t have to be fungible and nor should it be. If all newspapers are publishing pretty much the same content with little added value, it shouldn’t be surprising that they cannot compete effectively with the other newspapers and websites doing the same thing.

    Newspapers need to learn to compete more effectively in the internet age. To do this they need to differentiate themselves from the competition, just like any other business. No newspaper is exactly the same as any other, and it’s these differences that make a reader pick one publication over another. Newspaper publishers need to embrace and build on these differences, define the demographic of their readership and attract higher return targeted advertising on that basis.

    In addition, paper newspapers are largely about readers-as-audience, the web is far more readers-as-community. Publishers could do a lot more to involve their readership in the internet age than they ever could in the past, and they need to look a more innovative ways to do so.

    People can get the news from hundreds of places these days. To survive newspapers need to offer more than “just news”.

  2. Here’s a suggestion for you to chew over, Charles… There is not just an over-supply of “news”. There is an over-supply of All Media!

    Did you ever wonder, “can the UK market really support 27 different variations of the concept of Take A Break magazine?” Or “did Sony really ever need to make 117 versions of the Walkman?” (The numbers are made up, there, but “the phenomenon” is real.)

    There were thousands of young people recently who thought they could afford a computer and Cubase, thought they “might as well have a go” at making techno-dance, thought they might as well put it on one of the music-selling sites…
    – and many of them have not sold even one down-load.

    It was not just “trends being trends”; it was a global debt-fulled over-supply of “possible new brands”, and many will now disappear. New York’s seventh best restaurant guide, if it exists, simply will not make it to the 2010 edition.

    “Business news” is a market to itself; but “Sony last week gave up on Prouct No.33295” is not news that anyone gives a damn about. The molds go in the skip, and it’s history.

    So how many Web-sites are there out there which are – to an individual or to a company – “an expensive hobby which I can no longer afford”?

    “The cull” will happen in all media, including the ones which compete with newspapers, either for readers’ face-time, or for advertisers’ money. And some big news brands will live.

    And by the look of it, “take a pay cut or the whole thing goes” is what Hearst is saying to the workers at the San Fran Chronicle. But they’re not just playing hardball, for a laugh.

    With their huge national network of free Web-sites, the “big, old US media” have been committing collective suicide for years, dreaming of “grabbing future digital land” by giving nicer freebies than their rivals.

  3. I realise you were only quoting it, but the WSJ line on ad inventory is nonsense.
    The currency for websites is not inventory but audience, and while big that is finite. You can add as many banner slots as you like, but you won’t get paid a thing unless someone looks at them (or increasingly clicks on them). If you provide content that a time-pressed audience wants, you will get revenue; it doesn’t just get sliced thinner and thinner.
    The web display market is still immature, and often takes a scattergun approach. Print advertising tends to be more targeted to certain social groups or interests; as publishers get better at identifying their online audiences and advertisers become smarter in what they ask for, the cost per display will increase.

  4. This is true. I’m sick of having a choice of about 20+ results in Google for a new news story. Mainly same lines but different site. So many are competing it is just complete oversupply.