Unsustainable
Posted by Greg on March 14, 2009
Back in 1993, the Knight-Ridder newspaper chain began investigating piracy of Dave Barry’s popular column, which was published by the Miami Herald and syndicated widely. In the course of tracking down the sources of unlicensed distribution, they found many things, including the copying of his column to alt.fan.dave_barry on usenet; a 2000-person strong mailing list also reading pirated versions; and a teenager in the Midwest who was doing some of the copying himself, because he loved Barry’s work so much he wanted everybody to be able to read it.
One of the people I was hanging around with online back then was Gordy Thompson, who managed internet services at the New York Times. I remember Thompson saying something to the effect of “When a 14 year old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem.”
I had a similar thought a few weeks ago when I read this:
Classified advertising peaked as a percentage of newspaper revenue in the fourth quarter of 1997 at 41.64% vs 28.84% today. In raw numbers the decline for the same period went from $5.027 billion to $2.362 billion, or a 53% fall. In inflation adjusted numbers, the figures are $6.784 billion to $2.362 billion, or 65%.
In 1997, Craigslist was two years old, and two years away from incorporating as a for-profit company. Craigslists currently has some two-dozen employees. It may be a for-profit company, but its CEO shuns profits and has left millions on the table. Its interface, meanwhile, is clunky and not particularly user friendly (during our last apartment search, my wife and I had to resort to emailing listings to ourselves or printing out hard copies in order to keep track of which places we’d seen). And yet, this ramshackle outfit managed, in a mere decade, to decimate a major source of revenue for newspapers.
In retrospect, do you think maybe it wasn’t such a good idea for the industry to count on getting nearly half its money from such an unstable business model?
More Shirky:
The expense of printing created an environment where Wal-Mart was willing to subsidize the Baghdad bureau. This wasn’t because of any deep link between advertising and reporting, nor was it about any real desire on the part of Wal-Mart to have their marketing budget go to international correspondents. It was just an accident. Advertisers had little choice other than to have their money used that way, since they didn’t really have any other vehicle for display ads. …
The competition-deflecting effects of printing cost got destroyed by the internet, where everyone pays for the infrastructure, and then everyone gets to use it. And when Wal-Mart, and the local Maytag dealer, and the law firm hiring a secretary, and that kid down the block selling his bike, were all able to use that infrastructure to get out of their old relationship with the publisher, they did. They’d never really signed up to fund the Baghdad bureau anyway.
We assume that, because it’s been around for a long time, the newspaper business model was rational. But it really wasn’t, though that’s obvious only in hindsight.
