Tuesday, February 10, 2009

The value of news begins, once again, to have a dollar sign beside it

The essential problem with the newspaper business today is that it is suffering from a huge imbalance between supply and demand. What the Internet has done is broken the geographical constraints on news distribution and flooded the market with stories, with product. Supply so far exceeds demand that the price of the news has dropped to zero. Substitutes are everywhere. [..]

In this environment, you're about as like to be able to charge for an online news story as you are to charge for air. [..]

Now here's what a lot of people seem to forget: Excess production capacity goes away, particularly when that capacity consists not of capital but of people. Supply and demand, eventually and often painfully, come back into some sort of balance. Newspapers have, with good reason, been pulling their hair out over the demand side of the business, where a lot of their product has, for the time being, lost its monetary value. But the solution to their dilemma actually lies on the production side: particularly, the radical consolidation and radical reduction of capacity. The number of U.S. newspapers is going to collapse [..]

As all that happens, market power begins - gasp, chuckle, and guffaw all you want - to move back to the producer. The user no longer gets to call all the shots. Substitutes dry up, fungibility dissipates, and quality becomes both visible and valuable. The value of news begins, once again, to have a dollar sign beside it.
- Nick Carr, Misreading newspapers



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