Economics Doesn't Work In A World Of 'If Only...'

from the back-here-in-the-real-world dept

Tue, Feb 10th 2009 12:04pm — Mike Masnick

We had already explained why Walter Isaacson's "we'll just use micropayments!" model for news wouldn't work, but it seems he's still out there pitching the idea. Clay Shirky did an even better job dismantling the concept, but last night Isaacson appeared on the Daily Show with Jon Stewart to pitch the same ridiculous idea:

Stewart called him on a couple points -- noting that once something is free, you can't reasonably flip a switch and start charging for it, and also noting that news is fleeting, while music is a product people hold onto. Isaacson didn't have good answers to either points, other than a basic "if only..." Towards the end, Stewart pitched an equally bad idea (which Isaacson loved) which was that any aggregator would need to pay news publications for sending them traffic. It's the "how dare you help build our readership" business model.

But the really frustrating thing is that Isaacson doesn't seem to have a clue about basic economics (and, at times, news business models). For all his talk about the importance of getting good reporters "paid," he seems to have missed out on the reason we want good reporters to get paid: because they actually do good work. That means doing research to understand the topic they're talking about.

Isaacson didn't do that himself.

Instead, his whole idea is based on the wishful thinking of "if only..." If only the newspapers hadn't started by putting content online for free. Newsflash: they didn't. A lot tried to charge and it failed. Miserably. If only we had a system whereby people could pay just a small amount per article. Newsflash: it's been tried. People don't like it and don't use it. If you want to destroy your audience -- the most valuable resource you have as a publication -- it's a great way to do so. If only journalists could get paid. Newsflash: they do. Journalism has always been paid for via advertising rather than direct subscription fees (which mostly just handled the cost of printing/delivery, if that). It's particularly egregious early on in the interview, where Isaacson says:

"Who is going to send people to Baghdad if always, everything in journalism is free?"

Isaacson is certainly well-respected for his work in journalism for many, many years, but how can he make that claim with a straight face. Everything in journalism is not free. It's never been free. The fact that you might allow people to read it for free, does not mean that "everything" is free. Google gives away "everything" it does for free, and is quite able to make a ton of money. Why? Because it sells the "attention" of its users. That's what newspapers have always done. The difference now isn't that they're giving content away for free. It's that they're not used to competition and haven't done a good job keeping their audience around.

But, the most ridiculous thing is that nowhere in the interview does Isaacson ever give a single reason why people would want to pay for a newspaper. Instead, he just focuses on why newspapers need money. That's not how you run a business. That's not how you come up with a business model in the face of tremendous competition. You don't focus on "we need money." You focus on giving someone an actual reason to pay. Isaacson doesn't do that at all. He just focuses on the need for money, and falsely assumes that tollbooths solve that problem.

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Filed Under: daily show, micropayments, newspapers, walter isaacson

23 Comments

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Gene, 10 Feb 2009 @ 12:35pm

Ostridge
I watched in amazement at Isaacson’s almost pleading attitude. It was sad when he hypothesized that if computers and TVs were invented first that people would be amazed at a newspapers delivery and versatility. Sad.
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mobiGeek, 10 Feb 2009 @ 1:03pm

For the Canuck in y'a
Canadians may need the for viewing the clip:
http://watch.thecomedynetwork.ca/#clip137989
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Harold, 10 Feb 2009 @ 2:16pm

Inflated sense of self-worth
We seem to be locked in an economic struggle that is only exacerbated by the free-form online marketplace. It's unfortunate that we're caught in this virtual whirlpool, but we do have a new economic structure to contend with in regards to the internet.

The internet is putting a true-to-form value on all information, and individuals like Mr. Isaacson, while not wrong to look for answers, are getting caught up in a potentially inflated sense of worth. This is not to say that his achievements aren't of value, it's not to say his experience and talent aren't of value, but it is to say that his value as defined within our new online economy has either been diminished or otherwise translated.

As has been spoken to in this and other articles, it's really up to the individual to react appropriately with the changing economic times, and, unfortunately, he doesn't seem to be taking the correct paths towards helping redefine his profession. I suppose the greater question is, do we take time to correct his assumptions, or do we simply let the internet and its populous do the talking? It's a period of sink or swim for members of a variety of professions and, unfortunately, there are too many talented individuals who already have been making great strides with online journalism to worry about those who have not.
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Chuck Norris' Enemy (deceased), 10 Feb 2009 @ 2:16pm

New readership
To tell you the truth, I didn't read the NYT until it was available on the web. I can get a subscription to have the local paper delivered to my house daily. If I want the physical NYT paper I have to go to the bookstore and buy a copy. Not worth it. A lot more people now read the NYT on the web than when it was print only. I am sure they lost some subscriptions but I wonder how many eyeballs they get looking at their ads now, on the web.
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DS78, 10 Feb 2009 @ 2:29pm

Hyperlinks?
WTF? He mentions at the end that hyperlinks were created for (I'm summarizing here) the purpose of the content creator getting paid?

Just wow...
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Mike (profile), 10 Feb 2009 @ 2:47pm

Re: Hyperlinks?
WTF? He mentions at the end that hyperlinks were created for (I'm summarizing here) the purpose of the content creator getting paid?

He's rewriting history significantly, but he's discussing Ted Nelson's Xanadu project -- where there was *some* idea of content being paid for. But, it was hardly the web, and it wasn't the way Isaacson describes.

Some background:
http://www.wired.com/wired/archive/3.06/xanadu_pr.html

"In Japan, Nelson has been lobbying for a system of transclusion that does not depend on the Xanadu software. He has baptized this system "transcopyright." Transcopyright is not a technology; it is Nelson's suggestion for a contractual solution to copyright problems. Nelson argues that electronic publishers should allow anybody to republish their materials, provided that republication takes place by means of a pointer to the original document or fragment. Just as in Nelson's imaginary Xanadu franchises, publishers of transcopyrighted documents would receive a payment every time one of their bytes was accessed."
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Wesha, 10 Feb 2009 @ 2:55pm

> "Who is going to send people to Baghdad if always, everything in journalism is free?"

[Isaacson,] you moron, you don't SEND people to Baghdad! People ARE in Baghdad already! That's how blogging works! You look out of your window and blog about what you see!

*sighs* Get a clue already...
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Trails (profile), 10 Feb 2009 @ 3:26pm

I was hoping
I saw this last night, and new it was full of shit, for pretty much the points you make above, as well as the attempted artifical scarcity of digital content.

The whole time watching it, I kept thinking "I can't wait to see Techdirt shred this".

Worth the wait, ha!
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Stute, 10 Feb 2009 @ 3:57pm

Re: I was hoping
Heh.

I agree with you 100%, watching it last night I couldn't help but think "Gonna be some good reading on Tech tomorrow"
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Anonymous Coward, 10 Feb 2009 @ 4:00pm

Re: I was hoping
me too.

It was hilarious when he said "if paper publishing came after electronic publishing, it would have been a great success".
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Anonymous Coward, 10 Feb 2009 @ 4:51pm

You know, it's not just that these people and organization (RIAA, Author Guild, and the like) may or may not understand economics, it's they completely and totally have no concept of history whatsoever. Someone should really sit them in a room for a whole day and carefully explain to them the economic and political policies of Britain towards some colonies across the ocean from about 1753 to 1775 (which in many ways mirror the direction of such over the past decade). I think even the most simplistic among them knows how that turned out. Every government from ancient Egypt to the Romans to the British were all sure that the same actions would produce different results this time. Yeah they were all wrong. And so were are these people.
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Dallas IT Guy, 10 Feb 2009 @ 4:58pm

Boggling
I guess this guy never noticed that the major TV and radio networks, and all their affiliate stations, have been providing free news for the last 80 years. Good thing they don't realize their business model doesn't work!
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cram, 10 Feb 2009 @ 6:51pm

"Journalism has always been paid for via advertising rather than direct subscription fees."

"...nowhere..does Isaacson ever give a single reason why people would want to pay for a newspaper."

I find it strange that you think publishers should give people a reason to pay, especially when what they pay doesn't amount to much.

Why can't the publisher give away the paper for free? After all, he is making most of the money from advertising.
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Anonymous Coward, 10 Feb 2009 @ 7:06pm

...if only
...the music industry made music free. Nice double standard.
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Nick (profile), 10 Feb 2009 @ 7:51pm

I remember when news was delivered on carved stone tablets. These are obviously of much higher quality than flimsy, ephemeral paper. We should go back to stone tablets.

"Those of us who are print junkies are just praying for that."

You can pray or you can actually modify your business model. Soon, all of the "print junkies" will all die of old age. What then? I challenge you to make the news business sustainable after all of the "print junkies" are gone, just like the car companies have survived (or were born out of, rather) the passing of the buggy whip or the scribes who still found something to do after the invention of the printing press.

What we will actually see if most newspapers suck in this mindset die off and the local news sites who remain hyper local with a main focus in online news to take the share of available opportunities.
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Mike (profile), 10 Feb 2009 @ 10:22pm

Re:

I find it strange that you think publishers should give people a reason to pay, especially when what they pay doesn't amount to much.

Cram, you missed my point. Sorry if it wasn't clear. The point was that *if* they're going to insist that people pay, then they should at least be giving people a reason to. Isaacson does not.
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Mike (profile), 10 Feb 2009 @ 10:23pm

Re: ...if only
...the music industry made music free. Nice double standard.

I'm assuming you're joking -- but of course you know that I've never said that. I've always said that the economic forces show that that's where the market is heading, and if you're smart you can adapt to it. If you're dumb, then you can whine about it. But it doesn't change the actual economics.

But I've always backed up my economics with real evidence. Not "if only."
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cram, 11 Feb 2009 @ 6:38am

testing
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cram, 11 Feb 2009 @ 6:42am

"The point was that *if* they're going to insist that people pay, then they should at least be giving people a reason to. Isaacson does not."

Fair enough. But I think it is high time the newspaper industry stopped trying to charge people and moved to a free-copy model, because the dip in revenue wouldn't be significant. The model has been in vogue for years in the Middle East and in the neighborhood paper segment across the globe.
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Anonymous Coward, 11 Feb 2009 @ 12:15pm

"Who is going to send people to Baghdad if always, everything in journalism is free?"

As soon as I read that line, Michael Yon popped into mind for some reason. He provides some of the best, if not the best, on-ground coverage of the war and he's entirely reader-supported.
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Wesha, 11 Feb 2009 @ 12:49pm

> Why can't the publisher give away the paper for free?
> After all, he is making most of the money from advertising.

What do you mean they can't? They can and they do. Right downstairs, out there in the street, there's a whole bunch of free newspaper stands. The Onion, RedEye, some Spanish titles, etc etc.
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nasch, 11 Feb 2009 @ 1:50pm

Re: I was hoping
Same here. But why didn't Mike address Jon's other solution: add an addictive narcotic to the ink? ;-)
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ukusu aondoaver joseph, 18 Mar 2009 @ 5:51am

store
nigeria should provide job opportunity
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