The Paper Chase

Takeover: In 2013, Amazon founder Jeff Bezos purchased The Washington Post for US $250 million

Readers don’t necessarily realise this, but news-papers are essentially industrial operations. As journalists, we go on and on about our commitment to the news and our quest for excellence. But the truth is that, at many newspapers, we are tiny cogs in the wheel. And at every newspaper you can think of, the cost of news gathering (including journalistic salaries) is a tiny fraction of the total expenditure.

To produce a newspaper, you need a factory. We don’t always see it that way, but that is what a printing press is. And like all factories, a press requires workers (skilled, semi-skilled and unskilled) and raw material (newsprint — the paper on which the news is printed — and ink). Once your morning newspaper is produced by the factory (i.e., printed), it becomes like every other perishable consumer product. It has to be physically carted around the city, handed over to distributors, passed down to retailers and then delivered to your home.

All this costs money, much more money, in fact, than most people are willing to pay for a newspaper. So the difference between the actual cost of producing a paper and the price people are charged for it, is made up by advertising. To get this advertising, newspapers have to set up large ad departments, offer attractive rates, make deals, etc.

In the public mind, a newspaper is a communication from journalists to readers. In reality, the journalists are a tiny part of the process. Newsprint is the single largest cost of any paper, and the salaries of the people who manage the business (marketing, advertising, circulation etc) are usually much higher than those of the journos.

As for readers, well, they are important to the business guys — but only up to a point. A newspaper has two sets of customers: readers and advertisers. And at most 
newspapers, it is the advertisers they worry about much more than the readers, which is why the guys who sell ads will make much more money than the circulation/distribution people, let alone the humble journos. In some 
markets (India, for instance), the cover prices of newspapers are so low that they virtually give them away. The profits come from advertising and so the advertiser is the key customer.

Of course, this is not how it should be. And if, say three decades ago, you would have told me that there was a way for a newspaper to reach readers without the industrial element, I would have been overjoyed. No newsprint costs? Yay! No press workers and unions! Wow! No distribution costs? Yippee! No sharing of half the cover price with distributors (news agents, bulk distributors etc)? Whoo-ee!

Except that such a day has now arri-ved. We have found a way to eliminate newsprint, press and distribution costs entirely — and no journalists are cheering. In fact, we are weeping.

That magic way ahead is, of course, the Internet. If you produce a paper only for the Net, then your only significant costs are journalistic (stories, photos, graphics, design etc). Readers should be able to pay you directly by tapping a key on their computers.

In other words, the cost of producing a paper for the Net is around 20 per cent of the cost of producing a paper for print. And returns should be 50 per cent higher because you get the entire cover price with no distributors share.

So why aren’t we celebrating? Why aren’t newspapers money-making machines? Why, in fact, is the newspaper industry in such deep trouble that great brands like The Washington Post are changing hands for a song? Well, because there was one flaw in the theory. Nobody realised that people just were not willing to pay for news.

By now, the old worries about making money from the Internet have disappeared. We know that people are happy to pay for books to be downloaded to their Kindles or other such devices. People are willing to buy movies on demand. (Hell, they still pay extra for satellite TV when there are free-to-air channels available.) Most music is now legally downloaded from the iTunes store or something like it. Niche magazines (Vogue, The New Yorker etc) continue to sell in their print versions and people are happy to pay for them on the Net too.

So why do so few people want to pay for news? Take The Guardian. In common with most British broadsheets, the print version is bleeding. But The Guardian has a flourishing online presence. And even that doesn’t help it make a profit. Most newspapers that charge for content find that people won’t even pay a few cents for news. Thousands of newspapers around the world have gone online now. Yet, only a handful make significant profits from their online editions.

If book readers can pay to migrate from print to screen, then why are newspaper readers so unwilling to do the same? It is not that people won’t read papers online. They just won’t pay to do so. And so, newspapers maintain their industrial operations, struggle to make a profit and usually (in the West, at least) fail.

I have no answers to this puzzle. One theory is that in an age of information overload, nobody needs to pay for the news. You get it all around: on social media, on blogs, on free sites, on free-to-air news TV. Nor do you need the opinion pieces newspapers pride themselves on. For every once-respected newspaper columnist, there are a hundred popular bloggers out there.

Perhaps the true lesson of the information explosion is that when news is all around you and available easily, it loses value and ceases to be a commodity you want to purchase. Perhaps a generation from now, journalists will be the exception and social media comm-entary the norm.

I really have no idea.

But one thing is clear. The end of the factory model has benefitted book publishers. Sales are soaring and books sold on the Net require no paper, printing or distributing. And feature magazines seem to do okay too.

So the problem was never the Internet model. It works. The problem is with the newspaper itself.

Perhaps, the newspaper will be remembered, like the vinyl record, as a 20^th century invention that remained a 20^th century idea.