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Proposed Government Bailout of the Newspaper Industry

with one comment

Or, Misguided solutions that undermine healthy marketplaces
and stall the pace of change

Here is another case of an industry (newspapers) looking for government legislation and protection against a disruptive technology that challenges its business model.  The players are the dying newspapers, the Federal Trade Commission, and Google.

Here is the “get” on this strategy of protectionism against the (inevitable) re/definition of the business model for traditional journalism (read: print media)

The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers. With the Internet, that scarcity has been taken away and replaced by abundance. No policy proposal will be able to restore newspaper revenues to what they were before the emergence of online news.

It is not a question of analog dollars versus digital dimes, but rather a realistic assessment of how to make money in a world of abundant competitors and consumer choice.

“The current challenges faced by the news industry are business problems, not legal problems,” Google says,”and can only be addressed effectively with business solutions. Regulatory proposals that undermine the functioning of healthy marketplaces and stall the pace of change are not the solution.”

Truly, lessons learned by the demise of the Rocky Mountain News

John Temple, former editor, president, and publisher of the Rocky Mountain News, described and applied it to the news industry in his blog post about the lessons he had learned from his newspaper‘s demise on February 27, 2009. 

As Mr. Temple explained, the paper‘s online service was not viewed by management as providing consumer value in its own right, but rather solely as a way to support the print edition. This mistake proved to be fatal:

Why did the Rocky disappear? Looking back now on that difficult day, the word that stands out . . . is ―newspaper.

Being a ―great newspaper‖ isn‘t enough in the Internet era. You have to know what business you‘re in. We thought we were in the newspaper business. Working on the Web, you need to think of now and forever. At a newspaper, people largely think about tomorrow. Thinking about tomorrow isn‘t enough anymore. Consumers today want services when, where and how they want them, and they want to be able to participate, not just receive.

We perceived the Web site as a newspaper online, as a complement to the paper, not as its own thing. That‘s not a strategy.

Which brings me to the final lesson: Know your customers. If newspapers would spend more time trying to understand their customers instead of focused on their own internal issues – such as which newspaper department should get credit for Web revenue – they‘re more likely to be successful.

Read a summary of the debate
http://www.buzzmachine.com/2010/07/20/google-takes-the-ftc-to-school/

Read the FTC’s proposal to save the traditional business model of the newspapers
http://frrl.files.wordpress.com/2010/07/ftc_new-staff-discussion.pdf

Read Google’s response
http://frrl.files.wordpress.com/2010/07/34593118-comments-to-ftc-20-july-2010.pdf

Read a related article from the Wall Street Journal
http://online.wsj.com/article/SB10001424052748704107104574569570797550520.html

Read a related article on how corporate interests used (=”captured”) government to undermine a competitive disruptive technology that threatened them -
http://frrl.wordpress.com/2010/07/13/the-invention-of-fm-radio-and-the-power-to-stifle-the-effect-of-technological-change/

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Written by frrl

July 26, 2010 at 4:09 am

Posted in Uncategorized

One Response

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  1. The same can be said of the railroads. After about 1915 or so they also wanted government support and protection (Amtrak still does) when they were threatened by automobiles and later by airplanes.

    I can understand how it might be prudent to let a large industry down slowly to avoid a sudden loss of jobs, but if it ultimately can’t compete then it shouldn’t be propped up indefinitely in the face of innovation or competition.

    US ideology seems to swing forever back and forth between free enterprise and government control. I suppose it’s inevitable since both are quite capable of running amok and there might not be a stable equilibrium.

    Elwood Downey

    July 26, 2010 at 5:13 pm


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