News business needs new revenue model: study
NEW YORK (Reuters) - U.S. news organizations are feeling pressured to find radical new ways to make money as their financial outlooks worsen despite embracing new technology, a study released on Monday said.
One way to do it may be to charge Web users for news in a way they cannot avoid -- their Internet access bill, said thestudy called "State of the News Media 2007."
"The hope that Internet advertising will someday match what print and television now bring in appears to be vanishing," according to the study, published by the Project for Excellence in Journalism, a Washington, D.C.-based nonprofit group affiliated with the Pew Charitable Trusts.
News outlets, particularly U.S. newspapers, were able to rely on advertising and subscriptions for years, and have staked high hopes on their online sales eventually eclipsing weaker print revenue.
That may not work out, however, said Tom Rosenstiel, the study's supervisor and the group's director. The amount of online advertising dollars is still rising, "but now there are growing doubts about how much of that will accrue to news," the study said.
"The people on the countinghouse side have got to come up with a new plan," said Rosenstiel, who used to cover the news business for the Los Angeles Times. "The audience is migrating but the advertising probably never will in sufficient amounts."
With more people expecting to get news for free on the Internet, publishers may need to consider forming consortiums to charge for online news, the study said.
"The increasingly logical scenario is not to charge the consumer directly," the study said. "Instead, news providers would charge Internet providers and aggregators licensing fees for content."
Rosenstiel acknowledged that this approach, similar to the cable television model, could result in more expensive Internet access bills. "It's either that or journalism shrinks in America," he said.
Figuring out how the news business will survive is the most pressing question on the minds of publishers as well as investors. But Wall Street's patience is limited, and newspaper stocks have been falling steadily for several years.
Publishers are trying to cut expenses through layoffs, outsourcing and changing what they cover, even as they try to get more revenue through new technology and local coverage that they think will attract more advertisers.
This has led to the sale of several large papers to private buyers. Two U.S. mainstay newspaper companies, Knight Ridder and Pulitzer, were swallowed up by rivals. A third, Tribune Co., is considering bids for all or parts of the company.
Longtime newspaper analyst John Morton said newspapers must invest more in new technology. While most newspaper executives realize that, it has not proceeded as quickly as it should have, he said.
"The newspaper business has always been a laggard on spending in research and development," he said.
