Who Should Pay for News

At the behest of media companies, the Australian government wants Facebook and Google to pay for traffic to news sites.  It is common practice for people today to use social media or news filters to get their news without actually paying for it.  Media companies in Australia claim they are losing revenue as a result while the consumer is happy because they get to read news at no cost.  The proposed legislation is more complicated than simply getting some sort of payment because the government also wants to ensure news outlets are not discriminated against by Google or Facebook.

I believe the discussions on this subject are immature and fail to take into account what is actually happening in the news business.  The music industry has already gone through this process and the news media is lagging behind, but still going through the same process.  So let’s look at what happened to music and I think the parallels will be easy to see.

Once upon a time people bought records.  These records were either singles or albums.  The fact music played for free on the radio only enhanced sales, despite early fears to the contrary, and as a result, record companies found it crucial to have their songs played for free over the radio.  This encouraged people to actually buy the music.

Along came the digital revolution and the internet and everything was thrown into chaos.  People could rip CDs and simply send files of songs to one another.  Platforms such as Napster, which was eventually shut down by the courts, gave people a way to acquire new music for free.  This nearly caused the music industry to collapse.  Movies soon followed and piracy was well and truly something anyone could do.

Apple stepped in to save the music industry.  Apple did two things.  First, it invented the iPod which allowed people to listen to vast quantities of music digitally.  It did more than this, however, because it also gave people the ability to create and manage playlists.  This transformed the way we listened to music.  Instead of putting albums on to the record player or into the CD player, we could listen to a song from this album, and a song from that album.  The album started to decline because people wanted to listen to only a song or two from an album without buying the whole album.  I don’t know how many times in the past I would buy an album only to find I only liked one or two songs.  The second thing Apple did was create iTunes which was a music store which allowed people to buy one song or an album if they wanted.  It cost US$0.99 per song most of the time.  Yes people could get things for free, but since the songs were not that expensive, and since iTunes made it so easy for people to download and buy, people bought.

Apple’s contribution to the music industry saved the industry, but did not last too long.  Eventually, iTunes moved from a buying service to a subscription service.  For a monthly fee, people could listen to whatever they wanted when they wanted.  Pandora and Spodify probably led the way in this area and after the dust settled, iTunes and Spodify seem to have emerged as the winners.  A subscription service gives the consumer endless choices of music as well as the ability to explore newly released music, while providing musicians and record producers with an income, although I think the income is much smaller from song sales now.  This has led to touring emerging as the primary source of income for musicians instead of record sales.

Now let’s look at news.  Back before the internet and social media, people used to buy news albums.  News albums came in the form of newspapers or magazines.  With the advent of the internet, the way we consume written news changed.  Just as with music, people wanted individual songs (articles) instead of the whole album.  Why should I buy an entire newspaper with tons of articles only a small number of which interest me when I can simply go to the article I want?  Why limit myself to one album or magazine?  What if I want different perspectives on the same story.  Would anyone go out and buy The Age, The Australian, and The Herald-Sun to get different perspectives on only one or two stories?  A politician might just to get a read on how they are playing in the press, but the average consumer would never do this.  And why should they?

So people clicked on this article from that magazine and that article from this newspaper and so on.  This is where we are today except a lot of what we consume is free.  What the industry needs is an Apple to step in and restore some sort of order.  Given what we have learned from music, the first evolution of iTunes model won’t work for media.  People are not going to buy one article for 99 cents unless it is a specialty article, like one from Nature magazine for example.

Speaking personally, there are only a few publications I would be willing to subscribe to.  These are The New York Times, The Washington Post, and The Atlantic.  Aside from highly specialized journals, that’s it.  These three I mentioned are very strong brands in the US and can probably survive with the old subscription model, but even they are struggling. 

But if there was a giant media store like iTunes or Spodify for music, or Netflix for video, people might be willing to pay a monthly fee for that.  I probably would.  So instead of all the smaller players needing to have their own pay walls, this large media store could have one pay wall and links to articles and stories could lead to articles behind that one pay wall.  Facebook and Google would simply need to authenticate.  This would only work if the news store was inexpensive along the lines of a Spodify, Apple Music, or Netflix monthly subscription. 

What does all this mean?  It means media companies should grow up, stop acting like children, and understand how the market has shifted and adapt to it.  Forcing legislation through never really works well and the end result will mean that Australians become isolated on social media.  This is because both Facebook and Google have said they will simply block all news links to Australian subscribers.  So once again, Australians will lag behind because Australian business is too stupid and lazy to deal with free market forces.  I find it fascinating that people like Murdoch scream about the need for less regulation until he wants regulations to help him.  Then suddenly not only does he want more regulation, but he wants to cram it down everyone’s throat.

I think the government should step out of this, and let market forces solve the problem.  One of the features of a free market society is that things change, and when they do, those who adapt survive, and those who do not, die off.  The fact is, people do not want to buy newspapers.  They don’t want to subscribe to them unless they are exceptional, such as the New York Times in the USA.  That is reality.  Trying to legislate a different reality is not only ineffective and silly, but it is doomed to failure.