Thursday, March 20, 2008

Virtually Profitable Newspapers

I need to thank Seamus McCauley at Virtual Economics for this one. Other bloggers have exposed the very dubious business models used in the Ernst and Young Report on the UK national newspaper industry, pdf here, but he brings a fine balance between derision and condemnation.

As a minor criticism, the report had based a half page spread (in a seven page report) on what appeared to a couple of simple questions to just 100 internal employees. Hardly seems appropriate for a national industry report.

But the major flaw appeared in the analysis that switching to a pay-per-click model would result in many times more revenue than the currently followed pay-per-page-view model - a fair guess perhaps, but order of maginitude improvements were justified by assuming that people would click through at the same rate on a news site as on a search site. Just ludicrous.

The report also predicts that in the real print world, paid-for newspapers will continue to decline in the face of rising free publications. That is true now, but I hope they are wrong. There are already moves to ban or limit plastic packaging - newspaper is quicker to biodegrade but look around central London in the evening and it seems clear what actually makes up the majority of street waste volume. The marginal cost of distributed paper should not be zero.

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