Nathan Myhrvold, former CTO of Microsoft and perhaps the smartest guy around, gives his take on the future of newspapers. From Bloomberg. 

Deadline Approaches on Survival of Newspapers

By Nathan Myhrvold - Jan 22, 2012

These days, one of the saddest stories on Page 1 is about newspapers themselves. All over the country, venerable old dailies are shedding reporters, editors and other workers.

In my hometown, the Seattle Post-Intelligencer stopped its presses for good in 2009, as did the Rocky Mountain News, in Denver. In the past few years, major papers have gone bankrupt in Philadelphia, Minneapolis and other cities, as circulation and advertising revenue have plummeted. Even the proud New York Times recently needed a $250 million loan from Carlos Slim, a Mexican multibillionaire.

Just a decade ago, newspapers were still the primary conduit for local information. Where else could the neighborhood furniture store advertise a sale; the local factory attract new workers; or town residents sell their used cars or sofas? The paper used to be dropped daily on almost every stoop in town.

For much of the early 20th century, the newspaper business was both profitable and competitive. New York City still had seven dailies in 1960, spanning a full range of political philosophy and journalistic style. Movies such as “Citizen Kane” and “The Front Page” portrayed an era when driven newspapermen would do anything to get a story. The U.K.’s rough-and-tumble Fleet Street remains something of a throwback to that era, as demonstrated by the recent phone-hacking scandal -- which led to the demise of yet another century-old paper, the News of the World.

Selling the News

The great winnowing of the industry began slowly, as the rise of television siphoned off much of the national advertising business. Even then, most cities retained one or two papers operating profitably as monopolies or duopolies. Newsrooms took this privileged economic position for granted; they began thinking of themselves as selling news rather than ads. Competition based on journalism, they rationalized, would drive readership, and ad revenue would follow.

In market research I did at Microsoft Corp. in the early 1990s, I estimated that the Wall Street Journal took in about 75 cents per copy from subscribers, $1.25 at the newsstand and a whopping $5 per copy from ads. The ad revenue let them run a far bigger newsroom than subscribers were paying for. It was a bargain for readers and a boon for journalists, who were able to travel to distant assignments and do in-depth reporting.

The trouble was, the tie between excellent journalism and revenue worked only so long as the ads did. New online formats gutted the newspaper-ad business. Why pore over tiny print looking for a job in the want ads when you can tap a few keywords into monster.com, then click through and apply? Why pay a steep per-character rate for a classified when you can hawk a whole garage full of used stuff on EBay or Craigslist for free? In so many ways, Match.com, OkCupid.com and hundreds of others offer a better experience than personal ads can. RottenTomatoes.com tells you what movies to watch, Fandango.com lets you book the tickets, and OpenTable.com gets you a dinner reservation.

Newspaper websites tried offering these services, too, but it wasn’t their strength, and they failed to keep up. It didn’t help that online sites such as Google News could serve up most of the news without ever hiring a reporter; they just aggregate information from many free news sites. Newspapers’ trump card had been the local information that they alone offered, but the Internet was simultaneously better at both local and global information distribution.

At least when television burst on the scene in the 1950s, it largely spared classified and truly local advertising. It also created its own journalism; some of the revenue that television diverted from newspapers was reinvested in TV news. In contrast, the new forms of Internet advertising rarely support news gathering, or content creation of any sort. Instead, most of the ad money now goes to infrastructure technology that connects people with ads, search engines such as Google, or social networks such as Facebook.

Who Will Pay

The dilemma for early 21st century journalism is this: Who will pay for the news? This column is part of an experiment in one direction. Bloomberg makes its money providing proprietary financial information to subscribers, and this business has not been hurt by the Internet, so it can afford to offer a good old- fashioned op-ed page without ad subsidy. As the saying goes, it’s nice work if you can get it. But this model won’t extend very far because there aren’t a long list of similarly situated data providers dying to support journalism.

Filmmakers and book publishers have never relied much on advertising revenue; when we want to read “The Girl With the Dragon Tattoo,” or watch “Avatar,” we know we need to pay without an ad subsidy. Would the public be willing to pay full price for journalism, too?

A few newspapers -- the Economist, the Wall Street Journal, the New York Times -- have started selling digital-only subscriptions. It’s a first step, but they still plainly consider their print editions to be the gold standard, so they generate little unique digital content and fail to tap the full potential of online news. Tellingly, their current web revenue falls far short of what it would take to support their newsrooms. Meanwhile, most online news sites are still free, which tends to undercut the business model of those who charge.

The situation reminds me of the early 1970s, when cable arrived in our neighborhood, and the adults in my family were arguing over why anybody would pay for something they could already get free. After all, with a set of rabbit ears, you could tune in three major networks and plenty of local affiliates, all supported entirely by ads.

Quality Cable TV

Initially, cable providers offered the same channels as conventional broadcasters did, so picture quality was the selling point. Cable cut down on ghosts and snow and having to fuss with an antenna. Once improved reception got cable-TV operators going, they shifted their selling proposition toward quality -- and quantity -- of programming. Ted Turner started CNN. Others started HBO, MTV and Discovery, betting that consumers would pay for a kind of television they never had before.

It took 20 years, but the cable-TV industry prevailed. A generation grew up thinking “I want my MTV.” Today, 85 percent of American households subscribe to cable, satellite or telephone-company TV, paying an average of $82 a month, according to the research firm SNL Kagan. This revenue has been a bonanza for TV production, financing some of the best television shows ever made, all outside the original broadcast networks.

Could newspaper journalism likewise entice readers to pay for online news? People like quality journalism, so I believe that, ultimately, they can be persuaded to pay for it. But as with cable, the price will have to start low; it can then inch upward as the public gradually accepts the new business model.

The question is whether paid-subscription news sites can make the transition fast enough to make up for their plummeting ad revenue. It takes time to persuade people to pay for something they expect to get free. Ultimately, the change will happen, but maybe not fast enough to save some of the great institutions of newspaper journalism.

(Nathan Myhrvold, the former chief strategist and chief technology officer at Microsoft Corp. and the founder and chief executive officer of Intellectual Ventures, is a Bloomberg View columnist. The opinions expressed are his own.)

According to the Annenberg Center for Digital Future in five years there will be four newspapers left. Of course, they are the Center for DIGITAL Future, so take their prophesies under consideration.

Full story from New York Times here.

Newspapers: Going...Going...Gone!

By Bruce Watson

For anybody who has followed the news over the past few years (and, let's be honest, you were probably reading it on a computer), the long-awaited demise of newspapers shouldn't come as much of a surprise. But on Wednesday, the bell tolled once again for the printed word when the University of Southern California's Annenberg Center for the Digital Future offered some prophesies for the future of media. High on the list was a chilling prediction: Within five years, the report claimed, only four major daily papers will continue in print form.

According to Jeffrey I. Cole, director of the center, the four survivors will be The New York Times (NYT), The Wall Street Journal, The Washington Post (WPO) and USA Today. It's worth noting that two of these papers -- the Times and the Journal -- already charge for online content. Within the next year, USA Today also plans to start charging, which will leave The Washington Post as the only one of the big four offering its content for free.

Post executive editor Marcus Brauchli and publisher Katherine Weymouth both emphasize that the newspaper has no plans to erect a paywall in the foreseeable future. It's worth noting that the Post has weathered its financial storms better than most dailies: Its Kaplan educational subsidiary has remained largely profitable, helping to stabilize the paper's finances. Coupled with major cutbacks -- the Post has closed all but two of its regional suburban bureaus and almost halved its reporter corps -- this has sufficed to stem the loss of revenue.

Part of the reason for the Post's relative success is that it is one of the rare national papers that also has a strong local audience. In his discussion of the future of newspapers, Annenberg's Cole offered a caveat: "We believe that the only print newspapers that will survive will be at the extremes of the medium – the largest and the smallest." In many ways, the Post is both -- a paper with a huge national readership that is also widely read by its hometown crowd. As Politico recently noted, the Post has 30% market penetration in the Washington D.C. area; by comparison, The New York Times' hometown readership percentage numbers are in the single digits.

For media watchers, the demise of newspapers has become a grim joke; one website, Newspaper Death Watch, keeps a running commentary on the bleakness of the print media wasteland. While the increased online presence of many papers offers some hope for the future, lingering questions remain about what the death of papers will mean for the news. As Cole asks, "How will the changing delivery of content affect the quality and depth of journalism?" Stay tuned.

 

A recent article from MediaPost provides an interesting opinion from a top researcher in the digital field regarding the future of newspapers. Jeffrey Cole - director of the USC Annenberg Center for the Digital Future - believes that " Newspapers...have the greatest opportunity they've ever faced," in light of the rapid growth of internet usage. To read the full article, Click Here.