Can Online Media Be Profitable?

Maui Time | December 3, 2007


TED RALL by Ted Rall


Blind Newsman Gums Internet Dog

Last week, I discussed the blind faith that is leading media executives to invest heavily in online ventures at the expense of print. This week: will the Internet ever be profitable?

NEW YORK--Americans are optimistic to a fault. Overthrow Saddam, we thought--yeah, that "we" includes a lot of liberals--and whatever came next would be better. I was skeptical. You couldn't ask for a worse government than the Taliban, yet what followed them in Afghanistan--anarchy, chaos, rape, genocide--was even worse. Which is what happened in Iraq.

Optimism is for suckers. Entropy rules the universe. In the absence of a powerful positive force to counterbalance it, things usually get worse.

Media executives are like the neocons, in their blind faith that a brighter future will inevitably emerge from the rubble of the crumbling edifice of print media. Sometimes the old order just goes away. Sometimes there is no new one.

U.S. newspapers report that quarterly revenues are up 21 percent for online, and down 9 percent for print. At first glance, it looks like new media is picking up the slack from dying old media. But total print revenue was $10.1 billion. Online totaled $0.8 billion. As a percent of overall newspaper industry revenues, online is up a smidgen over 1 percent. There's more Internet money coming in, but not nearly enough.

At The New York Times, which analysts point to as one of the most Web-savvy old media outfits, 13 million people read every day. Only 1 million read the dead trees version. But print readers--7 percent of their customers--continue to generate 92 percent of the company's revenue.

The old order is in trouble. And the Thrilling! Shiny! New! Internet can't take its place. Online evangelists are tearing down the ancien régime without planning for the occupation phase. And they're inflating another Dot-Com Bubble.

If the future of media looks like the Web does now, things are about to degenerate from grim to grisly. Media outlets are firing professional journalists, replacing them with random bloggers. Musicians with sizeable audiences are collecting insulting pittances for downloads of their albums. Some creators are soldiering on, working for free or for pennies. But they won't do it forever.

Venture capitalists are investing in "consolidators," websites like the Drudge Report and Huffington Post that link to columns and articles written by unpaid bloggers and professionals who've managed to hold on to their jobs. Creative people who actually make the product they sell, meanwhile, are receiving squat.

It's inevitable that, sooner rather than later, these intellectual property vampires will suck creators dry. Professionals with mortgages and car payments will flee for greener pastures, replaced by hacks and rank amateurs happy to work for "exposure." We're already seeing the effect as journalism increasingly suffers deprofessionalization; 16-year-old bloggers with mad HTML skillz are demanding, and often receiving, equal access to readers.

Last week, I wrote about the content-is-dead mantra. The principle that intellectual property has value, and that those who create it ought to be paid, is in mortal danger. But people are willing to pay for content on the Internet. It just has to be easy.

Would you pay for Mapquest? I'd pay a quarter or a dollar for reliable directions from the airport to my hotel in a new city. Sometimes, while researching this column, I encounter a link to an archived newspaper article that I could use, but it charges a $2 or $3 download fee. The cost isn't the problem--it's a miniscule, and in my case tax deductible, expense to make my work better. But I don't bother. I don't pay for Mapquest, either.

I don't care about the money. I just can't stand filling out all those fields.

Each website requires you to enter personal data--your name, address, credit card number, expiration date, that stupid security code next to the signature on your card, and the billing address (as opposed to the shipping address). Frequently, website interfaces are buggy; make a mistake and you have to start all over again. I'll suffer through the ordeal if it's a site, like Amazon or Expedia, that I'll use repeatedly. But an archived article? Ain't worth my time to figure out how to get them my two bucks.

There is a solution to the online payment problem, says Simson Garfinkel, a fellow at the Harvard University Center for Research on Computation and Society and the author of "Database Nation: The Death of Privacy in the 21st Century." (Disclosure: We're friends.)

"If content is appropriately priced, of an appropriately high quality, and easy to access, people will pay for it," asserts Garfinkel. "What is required is a system that is easy to use and licensing terms that are not onerous."

A universal single-click payment system won't work, he says, because it would be vulnerable to hackers. We could overlay a national ID card or credit card system over the existing Internet. One of several competing micropayment systems may become dominant, creating a market-based solution. You'd register your debit or credit card info at one place. Then, when you wanted to download a song or read an electronic book or order shoes, you'd go to the vendor's website and click one button: "Buy."

Amazon sort of does this. After you've registered, you can buy a book by clicking one button. Just like that, it's on its way. We need something similar for vendors we've never dealt with before.

The solution will almost certainly have to be technology-based. And it will require us to give up the illusion of privacy. The government doesn't--and can't--know every time you access the Internet. But they do know enough, enough of the time, to separate the Usenet Bible study group members from the kiddie porn fans (OK, so those are sometimes the same folks, but you get the point).

Newspaper editors and publishers could reverse their decline by agreeing, en masse, to charge a substantial fee for their online editions--at least as much as for print. But I wouldn't hold my breath. Avoidance of long-term thinking is what's gotten the news biz where it is today.

In the long run, despite their suicidal tendencies, I suspect newspapers will survive, and even thrive, after the current shakeout. When radio was introduced in the 1930s, many analysts predicted the death of the record industry. Instead, radio promotion increased record sales. When television became popular in the 1950s, people said radio was doomed. The radio business is bigger than ever. The Internet was supposed to kill TV.

The newspaper business will change. Three major trends ensure that. They will also make it bigger than ever.

Next Week: The bright (sic!) future of newspapers.

(Ted Rall is the author of the book "Silk Road to Ruin: Is Central Asia the New Middle East?," an in-depth prose and graphic novel analysis of America's next big foreign policy challenge.)


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