Today's news about the Media General/Berkshire Hathaway deal reveals just how dire things have become for our newspaper princes. Unable to turn its newspapers around, Media General has traded its print properties and a big chunk of its future value for $142 million in cash and enough financing to refocus its business on its television stations.
With 63 papers (along with their websites) selling for an average price of $2.25 million, its hard to believe that the valuation even comes close to covering the assessed value of the real estate involved. This is a company declaring "Take them! We don't know what to do with them!" (Here's what I like about the deal)
But what I want to talk about is actually this one graph from the NYT story linked above. This is Berkshire Hathaway boss Warren Buffett, talking to shareholders at their last meeting about the need for paywalls at their previously acquired newspaper properties:
“I don’t know of any business plan that has sustained itself that charges in one version and offers the same version free to people,” he said.
Buffett's idea is worth discussing not because it's necessarily wrong, but because it assumes the wrong answer.
I'm on the record in numerous places with my argument that newspaper companies were giving away content long before the web came along. Newspapers are in the advertising business, not the content business. It they could get you to look at their advertisements without having to pay to put content around them, that's exactly what they'd do. The problem with newspaper websites isn't that the content is available for free, it's that the advertising value of that content is so low that it doesn't make up for declining print profits.
Print subscription charges cover some portion of the cost of paper, printing and delivery, not content costs, but the paywall advocates have a point when it comes to the consumer's perspective. Subscribers think they're paying for content, even though all they're really doing is defraying overhead. So the strength of the paywall argument is a consumer-mentality argument, not an "our content has tangible value absent advertising" argument.
From that perspective, Buffett's statement has some limited validity. It argues that it's worth hobbling your web products to protect the value of your print product, an idea that's sometimes referred to as The Arkansas Model.
Here's the problem with that, and Charlestonians have been learning this lesson first-hand ever since The Post and Courier launched its paywall on May 1: Most newspaper content just isn't that unique or valuable. In addition to the websites maintained by its television news stations (who will never charge for online content), the city now benefits from a variety of local online news sources. There may be no competition for the title of "local metro daily newspaper," but there's now tremendous competition for news.
As an example, of the 18 promoted content links this hour at The Digitel (a local news and information aggregator), only one of them contained a link to a Post and Courier story, and that link was from a May 2nd update on story that was just updated today ... with a link to a story by The State, South Carolina's top newspaper.
Having done work for The Digitel, I can promise you that this is a significant change. The Post and Courier has articles about some of the same 18 subjects, and in the past The Digitel likely would have chosen to link to those pieces. But nobody links to content that's behind a harsh paywall.
So the P&C is following Buffett's advice, but who are the winners in this competition? Well, basically, everyone who used to be in competition with The Post and Courier for web traffic, particularly The Charleston City Paper, The Charleston Regional Business Journal and a variety of niche sites.
But here's the part that's most interesting: The Charleston City Paper and the Charleston Regional Business Journal are weeklies. And if you think about their approach to online content in light of Buffett's statement, that fact alone may be more important than the differences in their business models.
Think about it. As a free alt-weekly, The City Paper gives away all its content, both online and in print, which conforms to Buffett's observation even while flipping its conclusions. Meanwhile, the CRBJ charges for print subscriptions and maintains an reguarly updated, locally reported, free website. Again, the CRBJ conforms to Buffett's idea, because nobody conflates a live website and a weekly publication as being different versions of the exact same same thing.
So why aren't these companies pushing for paid content like so many metro dailies?
Because they've worked out a more competitive, more sustainable business model.
The City Paper print edition is valuable. It makes enough revenue to support a small full-time staff and pay for the original content it publishes (much of it written by freelancers). And because you can't break news very often in a weekly in the middle of a competitive media market, the journalists there never really confuse their web product with their print product. They use the web to keep people current if they've got breaking info, and they use their weekly print edition for features and content that's interesting regardless of whether or not it's published in-cycle.
The CRBJ, which has a nice print-subscription business, used to use the web to compete for timeliness with the daily paper. Now that The Post and Courier has opted to charge for its business content, local business people will have to decide whether online access to the P&C's version of local business stories is $9.99 a month better than getting the same news for free from the CRBJ.
If you take Buffett's statement in a more informed context, it really argues either for giving away everything, or making a clear distinction between your web product and your print product.
The City Paper -- and other successful, sustainable alt-weeklies around the country -- are proof that you can survive with an all-free journalism model. The CRBJ demonstrates that there's a natural partnership between branded web coverage and a less-than-daily print product. And by staying viable online, both are posititioning themselves to succeed with the next generation of news consumers. In the fight for future readers, paywalled metros have unilaterally disarmed.
Metro management teams could change their one-bundle-fits-all philosophy -- and their publication schedule -- and find success in similar ways. But as we've seen over the past few years, fundamentally changing what they do isn't typically much of an option for those guys.
My question is, how long will it take for the "Oracle of Omaha" to figure this out?
(Transparency: I worked for The Post and Courier from 1994-2008 and have done freelance work for The Digitel and the company that owns the Charleston Regional Business Journal. I write freelance articles for The Charleston City Paper. dc)