Our lawmakers in Washington simply don’t understand media economics.
House Speaker Nancy Pelosi is urging the Justice Department to allow certain mergers to go through, basically change the rules, to make sure that newspapers don’t go under.
House Speaker Nancy Pelosi, worried about the fate of The Chronicle and other financially struggling newspapers, urged the Justice Department Monday to consider giving Bay Area papers more leeway to merge or consolidate business operations to stay afloat.
I guess just Bay Area papers have competition from different media outlets. But apparently Pelosi is worried about newspapers all over the country going out of business, I guess she thinks there will be no one left to report the news.
“We must ensure that our policies enable our news organizations to survive and to engage in the news gathering and analysis that the American people expect,” Pelosi wrote.
The speaker said the issue of newspapers’ survival and antitrust law will be the subject of a hearing soon before the House Judiciary Subcommittee on Courts and Competition Policy, chaired by Rep. Hank Johnson, D-Ga.
For Pelosi and all the democrats allow me to explain this phenomenon in the newspaper industry. It’s called convergence, it’s a real term, used by real media people, and it’s really what’s happening to the newspaper industry.
See, I don’t think that Pelosi, or many congressmen for that matter, really understand the internet and fully grasp the way the economy is adjusting in the digital age. The fact that they don’t get it is scary, because they think that newspapers going under is a terrible event, when in reality it’s natural and regardless of what they do, it will happen.
Let me begin by explaining convergence. Put simply convergence is the transition from old media (newspapers) to new media (the internet). In this instance convergence is happening in two ways; one, newspapers are moving exclusively to the internet, and two, newspapers are moving part of their business to the internet. Step one in this process was moving part of their business to the internet, every major newspaper has a website and posts all of their print content on their website. The second step is moving all of their content on their website and doing away with the print edition.
This is the step that lawmakers don’t understand. They can’t fathom a world without a physical newspaper to read. For older generations it’ll be an adjustment, but for younger generations it’s going to be the norm.
There’s really one big reason why newspapers want to move exclusively to the web; cost. It’s costly to operate a website and a print edition, so newspapers are faced with a decision to drop one, and because printing a paper cost more than posting an article on a website, the print edition gets the boot. Not to mention it’s easier to sell advertisements on a website for a variety of reasons, mainly because you can rotate through multiple ads in one spot and the user can literally click the ad and go to the advertisers website.
For newspapers if they have to choose between being exclusively online or exclusively in print it’s an easy decision. Your content has much more potential online because there’s no geographical boundaries holding it back. With print, a newspaper is limited to a particular geographical area, and if you want to expand your area it costs a significant amount of money. When content is online it doesn’t matter where the reader is at; the newspaper will pay the same price.
The lack of geographical boundaries is not only appealing for the company, but also for the advertiser. When content is on the internet it has a further reach than simply in print, readership also has a greater chance of expansion online than in print.
To inject some media economics jargon, when newspapers post exclusively online their first copy costs are significantly reduced. Basically it costs them a lot less to produce the first copy of an article to go online than to go in print. Even better for newspapers their marginal cost is significantly reduced as well. When you print a newspaper the company has to pay a large sum of money to print the physical paper, thus increasing readership and circulation costs the company more. But when the content is online there’s no cost difference between 1,000 readers and a million readers.
So ya see lawmakers, convergence is a really easy concept. Now you can probably see why newspapers are folding. It’s not because their liberal (that’s what Bill O’Reilly wants you to think), it’s because the market is demanding it, and it simply makes more sense for their bottom lines to switch their content exclusively online.
Pelosi can do all see wants to stop it, but in this economic climate she’s simply delaying the inevitable.