Should News Be Free?

My team has been running an online survey for a while about a new product we’re building. At the end of the survey there’s a space for open-ended feedback.  “Anything else you’d like to say?”  I love reading the comments in that section, people have some great ideas and it’s fun to see where the resonances are. 

One thing that always surprises me though is how many people write in that space “news should be free” or “news wants to be free” or some variant of that idea – still, in 2013.

I think some of these people have a misunderstanding of what online advertising pays these days, and imagine it to be a river of plenty that news websites can just tap into and walk away from.  Others may not consider how much time and expertise goes into making good news and what the costs are for that.

But regardless of the source, one thing this sentiment totally misses is this: when news is offered for “free”, it pushes the quality of that news down over the long run. And conversely, when news is paid for – done correctly – it pushes the quality up over time.

How does that work?

“Free” news is of course news that relies on advertising to pay the bills.  When your whole revenue stream is based on online advertising, your revenue equation looks roughly like this:

revenue = (number of eyeballs x price per ad view) – cost to produce news

As with all businesses, the desire is always to maximize that number on the left.  To do that, you have to fine tune the equation on the right. The one thing that is out of your control to change in that equation is price per ad view – that’s set by the marketplace (and it’s low!).  So if you’re a business producing news, you’ve got two vectors to work with to increase revenue: number of eyeballs and cost to produce news.  The winning strategy, revenue-wise, is to get as many eyeballs as humanly possible, while cutting the cost of production to zero, or as close as possible.

Taken to the logical conclusion, the result is news that costs nothing to make and follows a formula to capture as many millions of people as possible.  Here’s the headline from the top of this morning’s news section of BuzzFeed, for example:  This Russian Police Choir Cover Of ‘Get Lucky’ Is Delightfully Bizarre.  What it is: a video discovered on YouTube, given a catchy title and reposted to BuzzFeed as news.  That’s the best, most profitable news in the free news world. It cost almost nothing to make and it’s going to get a lot of eyeballs.  That’s what the “free news” revenue equation pushes you toward.

When people pay for news on the other hand, the equation looks like this:

revenue = (price consumer pays for news x number of consumers) – cost to produce news (plus additional ad revenue if relevant)

Here it might seem like there’s the same temptation to cut production costs to zero, but in fact there isn’t, because the vastly overriding concern is that if the product is not good enough the customer wont pay us anything at all.  The result here is an ever-continuing conversation within the organization about how to make the news better without making it more expensive to produce.  Not how to make it stickier, but how to make it something people will open up their wallets for.  That creates a cycle of improvement that continues over time.

So on one hand you get “how do I make this for less while getting more people to click on it” while on the other hand you get “how do I make this good enough that more and more people will pay me some of their hard-earned money for it”.  These are two simple feedback loops that drive news in very different directions over time.  And they’re the two questions being played out across the internet right now in the news world. 

So the answer to the question “should news be free?” is: it depends on what kind of news you want. Ultimately both kinds of news have a healthy place in the world. But which path your news organization goes down, and which one you consume yourself, determines what kind of news you’re getting at the end of the day.

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One Response to Should News Be Free?

  1. Jared says:

    Nice breakdown of how the math encourages certain behaviors. This is too often overlooked by people who are like, ‘just grow the audience and money will happen.’ I wrote down some of the thoughts I shared over lunch with you on this subject at jaredranere.com.