Vol. 12, No. 3,009 - The American Reporter - October 19, 2006

On Media

by Robert Gelfand
American Reporter Correspondent
San Pedro, Calif

Printable version of this story

LOS ANGELES, Sept. 26, 2005 -- The New York Times shocked and outraged its fans last week by announcing a plan to charge for its internet services. The Times gladdened its critics, angered its online readers and simultaneously underscored one essential quandary facing internet businesses.

In announcing the new fee schedule, the Times made it harder to access some of the most important liberal voices. Even the American Reporter received a complaint about the new policy: Woody Smith wrote in and summarized the issue nicely:

"I have been a registered member of the New York Times web service since the very beginnings of its website in the early '90s.

"Effective today, The New York Times is requiring a subscription to their new "Times Select" service, at a cost of $49.95/year, in order to read columns by Paul Krugman, Frank Rich, Bob Herbert, etc. This will significantly restrict public access to the writings of several of the most perceptive and influential writers on the "reality-based" end of the political spectrum."

The point is well taken. In an era where conservative apologists for fiscal insanity disseminate their views freely, every little decrease in Krugman's public voice is a loss to the liberal side.

Still, this is probably something that should not have been unexpected. The Times is not an educational foundation or a political party, but a business. It may be a business that takes on the role of political leadership and occasionally carries on social crusades, but this does not make it any less a business.

At the risk of sounding insensitive to the newly disenfranchised, let me point out that what happened was nothing new. We have seen the same story played out in other media repeatedly for at least a quarter century. There are admittedly some differences among satellite television, online music sharing and the Times' pricing, but the lessons are remarkably similar from one cycle to the next.

In thinking about this history, it is important to understand some critical differences between what we might call the intangible and the tangible. A rebuilt Chevrolet water pump sitting on the shelf in a hardware store is an example of the tangible realm. You can't make a second copy just by clicking a mouse. You have to have steel, machine tools and somebody with particular skills to do the casting and machining. The differences between the tangible realm and the digital-electronic mode are obvious.

There are also differences in the social conventions attached to each realm. To be blunt, it's harder to steal a water pump than a song or a movie or a cable tv signal, and society is harder on people who steal from automotive supply stores than on people who take cable tv signals (or this era's version, the wifi channel) without paying.

There is also a historical sequence that is being followed once again. In the era prior to radio and television, live entertainment had a direct cost. The audience member had to cough up the price of a ticket. Later, electronic information streams such as radio and television were given away. Only much later did the electronic media begin to charge consumers directly for their products. This history of alternating between free and not-free has repeated itself as new media came into being.

Even the history of technology plays a role here. The introduction of radio and television as freely distributed advertising media resulted in the creation of an installed base of machinery and business models. Lacking the need to build a mechanism for charging fees, the information highways of the day were constructed without the technology to collect money from consumers.

For the innovators of the 1970s and '80s, this created a problem. In the world of broadcast television, the goal is to give the product away (in fact, failing to find enough takers for your product signifies economic failure: we call it low ratings). Various forms of pay television including cable access came into being, but were piggybacked on the available technology of the time.

Commercial television by then had perfected the use of signal transmission via geosynchronous satellites. Suppliers of tv-for-pay adapted a technology that was not originally designed for their type of service -- signals were sent unencoded, available to anyone with the right kind of receiver. This resulted in some economic confusion: Rural viewers who had been using satellite dishes to get network television now found that they could get HBO for nothing, even though it was intended only to be sold to cable tv subscribers.

It was a situation that couldn't go on forever. If nothing else, the proliferation of satellite dishes in areas served by cable was beginning to be an irritation to the companies, and the possibility of gaining free service was a continuing temptation to cable subscribers.

Eventually the cable tv companies and content providers got tired of losing all that potential income. They developed encryption technologies (sending shows in coded form) so that viewers would have to pay. The magical decoder ring of the 1930s became the satellite tv decoder, but this time it cost more than three box-tops.

The New York Times is now in roughly the same position HBO found itself two decades ago. It produces a product for sale, but some people have been able to get it for free. The only major difference is that HBO never intended to give its product away -- the fact that people could intercept signals from geosynchronous satellites was just an accident of the way the technology developed. The Times originally gave its product away intentionally. This seems to be the crux of the current controversy.

It's not a very deep controversy; few would argue that the Times has an obligation to continue to give its products away for nothing, even if this was the practice at one time: The controversy, such as it is, does not stem from some philosophical critique of the capitalist system.

Rather, the argument seems to flow from a different level. The Times has taken on an iconic role in the current political spectrum: both the right and the left treat it as the semiofficial voice of liberalism. For example, Paul Krugman is the closest thing we have to an official opposition voice on economic issues, just as Maureen Dowd has become the semiofficial critic of President Bush.

To the liberal activist, the loss of wide availability of these Times columnists is a political loss, as our colleague Mr. Smith has pointed out. His argument was seconded by none other than Rush Limbaugh, who spoke happily on his radio show about the fact that fewer people would now be reading Times columnists.

To the liberal side, the loss of freely available Times columns is a political defeat. Activists wonder why the status quo can't be maintained.

Things probably look a little different on the Times' side of the divide. Compare the situation for the Times last month with that of HBO in the 1980s: In each case, paying subscribers noticed that it was possible to get the same product for nothing; all you had to do was use the available electronic technology.

This is a great way to lose subscribers.

For the Times, as for other newspapers, this is just one more financial problem added to a whopping great pile of woe.

Consider the revelation that came out the day following Monday's announcement of the new internet fees. As "Editor & Publisher" explained, "The New York Times Co. announced a staggering staff reduction plan Tuesday that will likely mean some 500 job losses at the company's many properties, including an expected 45 newsroom positions at The New York Times newspaper and 35 at The Boston Globe."

The newspaper industry has been losing subscribers and suffering declining ad revenues. Industry wide, newspaper owners are laying off staff. A brief glance at the Romenesko media-review site (http://www.poynter.org/column.asp?id=45) makes this painfully clear.

Considered in this light, the Times' decision to charge for a few of the choicer tidbits in its online presence seems understandable. It can be viewed as a precaution against losing paying subscribers to its formerly free internet presence, just as much as it can be viewed as an attempt to make money on the internet.

Whatever the Times' expectations, its current plight represents the essential quandary that the internet creates for the print media. On the internet, there is a huge amount of information available for free. It is more than one person or even a thousand people could read, even if they devoted their every waking hour to the task. People have developed the expectation that internet information be available freely, without charges or other hindrances. Even the most minimal barriers (such as the requirement that the reader fill out a user survey) lead to complaints.

It is hard to sell information by paid subscription in a medium where tens of thousands of sources give it away for nothing. The print media evolved in an era when magazines and newspapers could charge directly for their products, gaining income both from the cover price and from advertising revenues.

When it comes to the internet, the cover price element of the equation is missing. What's left is a developing industry which is only beginning to figure out how to cover its costs. The essential quandary for the newspapers -- the same as for the small internet sites and for the bloggers -- is this: How can I make a living with this new contraption?

The answer isn't obvious. What is clear is that the newspapers are hurting, and they are still trying to figure out how to combine print and internet operations in this new media universe.

Compounding the decision making process is the continuing pesky problem characteristic of the digital electronic media -- the fact that it is child's play to duplicate, and hence to steal, any text file. Within hours of the Times' announcement, internet users were figuring out technical tricks in the attempt at circumventing the new policy.

The problem for the rest of us is this: It costs a lot of money to keep real reporters on the job, doing the investigative work, the telephone calling and the shoe-leather-reporting that makes for real journalism. As newspapers face decreasing revenues coupled with increasing costs, the quality of journalism will inevitably suffer.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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