paidContent - Chris Anderson: Newspapers Need To Find The 'Pet For Their Penguin'
Tuesday, June 30, 2009; 1:06 PM
Wired editor and author Chris Anderson told the Guardian that newspapers need to find a “pet for their penguin” ? things that they can charge for to support journalism. When he talks about pets for penguins, he is referring to the Disney’s online game Club Penguin. This is free to play, but they have premium memberships that provide players with additional features. Based on the ideas of his new book Free, he says that newspapers must decide what they provide for free and what premium content and services that they can develop to make money.
—‘Can’t put genie back in the bottle’ As the newspaper industry has collapsed, especially in the US, publishers have begun to believe that they made a mistake 10 years ago by not charging for their content when they launched their websites. But the industry can’t put the genie back in the bottle, Anderson said. The idea that the news content should be free wasn’t “a matter of Californian, hippie philosophy,” but rather a matter of simple economics. The huge profits that media companies made in the 20th century, he said, were based on scarcity and monopoly rents ? high advertising rates that media giants could charge because publishing and broadcasting was expensive. Advertisers paid phenomenal amounts of money for access to these massive audiences. On the internet, the marginal cost of production is zero, destroying the monopoly position of the media giants. “More people write for attention than money,” he said. Newspapers didn’t decide to relinquish their monopoly. They faced new forms of competition that weren’t possible before the internet. “Competition required them to be free,” he said.
As newspapers debate their future, the argument has been pitched as free versus paid models, but Anderson argues that the real decision is free versus “freemium.” It’s not about whether to charge but choosing carefully which specialised content people will pay for and developing additional premium services. Of course, many newspapers look to the Wall Street Journal‘s model. The Journal offers most of their popular content and many exclusives for free, but they keep their specialized, niche content behind a paywall for subscribers. Referring to his theories behind the long tail, he suggested that newspapers should give away the “head and charge for the tail”. The head of the tail refers to the general interest, high traffic content, while the tail is specialized, special interest content. The Wall Street Journal model will become the model for what he called “premium newspapers,” but he was quick to add, “The problem is that there aren’t many premium newspapers.”
—‘No model works perfectly’ At the moment, publishers feel as if they are faced with crossing a chasm, he said. Print revenue is declining slightly while the web generates only about a fifth of the revenue as the print business. Online revenues had been growing quickly but from a small base before the recession but are leveling off or even declining slightly for some publications. “There isn’t a model that works perfectly” to cross that chasm, Anderson said. Traffic to sites has grown as internet use as grown, and it has allowed publications to develop a global audience. “We have taken that about as far as we can go,” he said, and asked, “Where is the traffic going to come from?”
Instead of working on growing the audience more, he believes that publishers will need to grow their offerings. Right now, Wired provides three pricing tiers: Free content on the web, about $5 for a magazine at the news stand and 80 cents for monthly subscribers. In the future, he believes that Wired will have many tiers of offerings. He compared it to Radiohead’s In Rainbows. The album was released as a digital download that fans could choose to pay for or they could buy a premium box set with CDs and two heavyweight vinyl records for £40. In total, he said, they segmented their audience providing 42 different pricing models. One of Wired‘s sister publications at Condé Nast, Golf Digest, is thinking about creating a club tied to the magazine. Members could get exclusive lessons or discounted access to courses. Thinking out loud, Anderson said: “If Wired was a club, what would that entail?”
—‘Catalysing communities’ Another possible model Anderson described was about building communities around content.Condé Nast has bought the social news site and Digg competitor Reddit. Reddit boasts a 10m reader-to-employee ratio. Needless to say, that is a great model. Wired has a blog for techie fathers called Geek Dad. When they originally set it up, they realised that they weren’t posting nearly as often as they should, but then a 45-year-old civil engineer called Ken Denmead contacted Anderson and offered to help. Denmead quickly set up an email list and a wiki for contributors. He established a Digg web so that fans of the blog could promote the site on Digg. Anderson said that he had never seen such a set of skills, and he says that this is still not what is being taught to journalism students. “He comes to lecture us on social media skills,” he said. “He still has his day job, but we’ll see how long that lasts,” Anderson said, especially as there was now a book deal.
The success of the site and the model it is built on has led Anderson to ask: “Can we become more conversation starters rather than lecturers?” The model isn’t a free-for-all but what he described as a catalysed community. While Denmead brought a lot of social media skills to the project, Wired helped him hone his writing and a bit of coaching on search engine optimisation. “There are an infinite number of topics that deserve this treatment,” he said.
—What will people pay for? All this raises a question: What will newspapers and other publishers be able to charge for? Or put a different way: What are people willing to pay for? Broadly, Anderson rejected the idea that the internet had conditioned everyone to expect content for free. “We’re training them that it’s free to try, but then we must train them to pay for what they value,” Anderson said.Many content creators believe that quality will win out, but Anderson believes that it is more about relevance than quality. He gives his children two hours of “screen time” a week. Given the choice of watching Star Wars in high-definition or Star Wars stop-action lego animation on YouTube, they always choose YouTube, he said. That doesn’t mean that it is the end of the blockbuster, but it is the end of the blockbuster monopoly, just as the internet has meant the end of newspapers’ monopolies. “We need mass, and we need niche,” he said.
Guardian editor Alan Rusbridger asked Anderson about the role of Google (NSDQ: GOOG) in this freemium world. Forty percent of the traffic to their sites comes from Google, Anderson said. “I consider that a gift, but newspapers consider it theft.” Newspapers could exclude Google from indexing their sites by making a simple change to a file on their sites, the robots.txt file. They could try to band together and charge Google to index their content. But it might be a self-defeating move. “Newspapers need to be part of the conversation” on the internet, he said. In the end, Anderson thinks that the democratizing effect of the internet is a good thing that will lead to a richer society, but he added, “I don’t deny that it will get messy.”