The New York Times Sunday magazine had a fascinating piece over the weekend by Andrew Rice about the new realities of publishing on the internet. It’s a long read, but worthwhile as a snapshot in time: the old media is dying and the new media is still struggling to be born:
For many years, newspapers and magazines operated in fairly uniform fashion, supported by two streams of revenue. The consumers purchased the product, and businesses paid to reach them with advertisements. Recessions came and went, ad pages expanded and contracted, publications started and went under — but nothing disturbed the basic model. Online economics have changed both sides of the profit equation. “It’s dawning on people that the marketplace will no longer pay the freight,” says Ken Doctor, a former newspaper executive and the author of “Newsonomics: Twelve New Trends That Will Shape the News You Get.”
Early on, almost all print publications decided to offer free access to their online content, which over time cut into their print circulation. In theory, the industry should have been able to absorb the gradual loss of paying readers. Advertising always accounted for the vast majority of the publishers’ revenues — with newspapers, 80 percent was the rule of thumb — and because publications could reach vastly larger audiences online, it seemed reasonable to expect that they’d be able to make more money from ads. But instead, online ads sell at rates that are a fraction of those for print, for simple reasons of competition. “In a print world you had pretty much a limited amount of inventory — pages in a magazine,” says Domenic Venuto, managing director of the online marketing firm Razorfish. “In the online world, inventory has become infinite.”
“Maybe this is what success looks like,” says Nick Denton, speaking of his own business, Gawker Media — a popular and profitable network of Web sites covering technology, sports and celebrity news — as well as of disruptive ventures like Craigslist, the free site that has decimated classified advertising, once a lucrative source of income for newspapers. “You can have destroyed hundreds of millions of dollars, or billions of dollars, of revenue for other people,” Denton says, “but without capturing it all yourself.”
Read the whole thing.