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69. Kindles, Commodities and the Newspaper Industry (May 2009)

69. Kindles, Commodities and the Newspaper Industry (May 2009)

The New York Times and the Washington Post, along with a number of other major newspapers are looking to the Kindle, hoping that this device could be the shot in the arm that they need to revitalize their profits.

How? As Wired put it in May of 2009,

“Think about the economics of a newspaper: it doesn’t scale with a hit. If Bob Woodward writes an expose that everyone reads, the news gathering organization benefits from a boost in reputation, a slight increase in circulation and some small amount of additional money paid in newsstand copies — very little of which makes its way back to the paper. But if the Washington Post runs a fantastic story by Woodward and sells a longer, more detailed version on the Kindle for $6, $8 or $10 and splits the money with Woodward, everybody wins.”

It’s true.

The news industry operates under a volume model. You make money by producing reasonably good material. No matter how good that material is, you are still going to make the same amount. While accolades and reputation drive news media to try to produce the best content they can, the economics aren’t there. Whether you get 10 thousand or 10 million views, you still have to go back out and do it all again the next day, hoping that maybe one day a book deal comes by.

Imagine if the movie industry worked like this, if advertisers paid a set amount of money for movies to be produced by a production company, with tiny performance bonuses based on the number of people who saw it. It would be completely unsustainable.

Newspaper’s value as a medium is in the production of extraordinary content. If they are going to continue to be able to support that content, they are going to need to find a way to commoditize it, and that might mean looking at their business as two separate businesses, one that produces “news of the day” and is supported by advertising, and one that produces long-form, highly interesting content that is supported by direct sales.

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