Hays Press-Enterprise Lecture
The University of California, Riverside
February 4, 2008

Thank you. It’s a great honor to be giving this year’s Hays-Press Enterprise Lecture and to be doing it here at the beautiful campus of the University of California Riverside.

And it’s a special honor to be doing it at the behest of Robert Decherd, someone I’ve admired as a journalist and media entrepreneur for more than 35 years.

My admiration for Robert began when he was the president of the Harvard Crimson, a publication that was very, very worthy and even more earnest. I confess that I was not on the Crimson. I was instead on the Lampoon, a humor magazine that was somewhat less earnest and far less worthy.

I hope that this difference in our respective pedigrees is not reflected too obviously in the remarks I am about to give. For my topic is, alas, a serious one.

The crisis in journalism has, during the past few months, reached meltdown proportions. It is now possible to contemplate a time in the near future when major towns will no longer have a newspaper and when magazines and network news operations will employ no more than a handful of reporters.

There is, however, a striking and somewhat odd fact about this crisis. Newspapers now have more readers than ever. Their content, as well as that of newsmagazines and other producers of traditional journalism, is more popular than ever – even among (in fact, especially among) young people.

The problem is that fewer of these consumers are paying. Instead, news organizations are merrily giving away their news for free. According to a Pew Research Center study, a tipping point occurred last month: more people in America got their news online for free than paid for it by buying newspapers and magazines. Who can blame them? Even an old print junky like myself has quit subscribing to the New York Times, because I read it online for free.

This is not a business model that makes a lot of sense. Perhaps it appeared to make sense when web advertising was booming and when every half-sentient publisher could pretend to be among the clan who “got it” by chanting the mantra that the ad-supported web was “the future.” But when web advertising declined in the fourth quarter of this past year, it began to feel that this was the future only in the sense that a steep cliff is the future for a herd of lemmings.

Newspapers and magazines traditionally have had three revenue sources: newsstand sales, subscriptions, and advertising. The new business model relies only on the last of these. That makes for a wobbly stool even when the one leg is strong. When it weakens, the stool is likely to fall.

In the last few weeks, we’ve seen a variety of local papers shut down completely, the Tribune Company file for bankruptcy, Lee Enterprises face delisting from the New York Stock Exchange, and Gannet and other companies announce another round of year-end layoffs of 10% or more.

Henry Luce, the founder of Time, disdained the notion of giveaway publications that relied solely on ad revenue. He called that formula “morally abhorrent” and also “economically self-defeating.” That was because he believed that good journalism required that a publication’s primary duty be to its readers, not to its advertisers.

In an advertising-only revenue model, the incentive is perverse. It is also self-defeating, because eventually you will weaken your bond with your readers if you do not feel directly dependent upon them for your revenue. Newspapers will end up producing a lot of sections about gardening and home improvement, which advertisers want, and getting rid of their book review sections, as the Los Angeles Times and Washington Post have done.

When a man knows he is to be hanged in a fortnight, Dr. Johnson said, it concentrates his mind wonderfully. Those fortnights are upon us, and I suspect that 2009 will be remembered as the year that newspapers, followed by magazines and other content creators, realized that further rounds of cost-cutting will not stave off the hangman.

One option for survival, which is being tried by some publications such as the Christian Science Monitor and Detroit Free Press, is to eliminate or cut drastically their print editions and to focus instead on their free websites. For many publications and consumers that makes sense. It will, and should be, one of the waves of the future.

That approach, however, still makes a publication totally dependent on ad dollars. So I am hoping that this year will see the dawn of another option that some news organizations might pursue. It’s a bold, old idea: getting paid by users for the services they provide and the journalism they produce. If this happens, the advertising implosion of 2008 will have the benefit of birthing a business strategy that permits publications to become more beholden to their readers.

This notion of charging for content is an old idea not simply because newspapers and magazines have been doing it for nearly four centuries. It’s also something they used to do at the dawn of the online era in the early 1990s. Back then there were a passel of online service companies, such as Prodigy, CompuServe, Delphi, and AOL. They used to charge users for the minutes that they were online. It was in their interest to keep them online for as long as possible. As a result, good content was valued. When I was in charge of online media at Time back then,  every year or so we would play off AOL and CompuServe. The bidding one year reached a million dollars for our magazine and bulletin boards.

Then along came various tools that made it easier for publications and users to venture onto the open internet rather than remain in the walled gardens created by the online services. There were various protocols for posting and finding content on the internet. They had funny names, such as Gopher and Archie, and prosaic ones, such as File Transfer Protocol and the World Wide Web. I remember talking to Louis Rossetto, then the editor of Wired, in a lobby of New York’s Waldorf Astoria during the 1994 National Magazine Awards lunch. We discussed ways to put our respective magazines directly on the internet, rather than on AOL or CompuServe, and we decided that the best way was to use the hypertext markup language and transfer protocols that defined the World Wide Web.  Wired and Time both made the plunge onto the web the same week in 1994, and within a year most publications had as well.

We were inventing things such as banner ads, so we didn’t try very hard to impose subscription fees. And thus we abandoned getting paid for our content.

One of history’s ironies is that the concept of hypertext – those links that are embedded on a web page – had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content. He wanted to make sure that the people who created good stuff got rewarded for it. In his vision, all links on a page would facilitate the accrual of small, automatic payments for whatever content was being accessed.

Instead, the web got caught up in the ethos that information wants to be free. Other folks who were smarter than we were avoided that trap. For example, when Bill Gates noticed in 1976 that hobbyists were freely sharing the Altair BASIC code that he and his colleagues had written, he sent an open letter to members of the Homebrew Computer Club telling them to stop. “One thing you do is prevent good software from being written,” he railed. “Who can afford to do professional work for nothing?” 

The easy internet ad dollars of the late 1990s enticed most traditional newspapers and magazines to put all of their content, plus a whole lot of blogs and whistles, onto their websites for free. But much of the ad dollars ended up flowing to groups who did not actually create content, especially not journalistic reporting, but instead piggybacked on it: the search engines, portals, and aggregators who compiled pages of links and pointers.

Another group also benefitted from this system where content, reporting, and information was all posted for free: the internet service providers, including the big telephone and cable companies. They get to charge customers $20 to $30 a month for access to this trove of free content and services.

It was not in their interest to facilitate easy ways for newspapers and other media creators to charge for their content. Thus we have a world in which phone companies make it easy and expected for kids to pay up to 20¢ when they send a text message, but it seems technologically and psychologically difficult to get people to pay 10¢ for a magazine, newspaper, or newscast.

Currently, a few newspapers – most notably the Wall Street Journal – charge for their online editions by requiring a monthly subscription. When Rupert Murdoch acquired the Journal, he ruminated publicly about dropping the subscription fee. But Murdoch is, above all, a smart businessman. He took a look at the economics and decided it was lunacy to forego the revenue -- and that was even before the online ad market began falling. Now his move looks really smart. Paid subscriptions for the Journal’s website were up 7% in a very gloomy year.

But I don’t think that subscriptions should be the only way to charge for content. A person who wants a copy of one day’s edition of a newspaper or is enticed by a link to an interesting article is rarely going to go through the cost and hassle of signing up for a subscription under the current payment systems. The key for attracting online revenue, I think, is coming up with an iTunes-easy, quick micropayment method. We need something like digital coins or an E-Z Pass digital wallet – a one-click system that will permit impulse purchases of a newspaper, magazine, article, blog, application, or video for a penny, nickel, dime, or whatever the creator chooses to charge.

Admittedly, the internet has been littered for the past 15 years by micropayment companies that have failed. Remember Flooz, Beenz, CyberCash, BitPass, Peppercoin, and DigiCash? Barely. Many tracts and blog entries have been written about why the concept can’t work because of mental transaction costs and the like.

But things have changed. “With newspapers entering bankruptcy even as their audience grows, the threat is not just to the companies that own them, but also to the news itself,” wrote the savvy New York Times columnist David Carr earlier this year in a column endorsing the idea of paying for content. This creates a necessity that ought to be the mother of invention.

In addition, the two most creative digital innovators have shown that a pay-per-drink model can work when it’s made easy enough: Steve Jobs got music consumers (of all people) comfortable with the concept of paying 99¢ for a tune instead of Napsterizing an entire industry, and Jeff Bezos with his Kindle showed that consumers would buy electronic versions of books, magazines and newspapers if it could be done simply.

What internet payment options are there today? Pay Pal is the most famous, but it’s cumbersome and has transaction costs too high for impulse buys of less than a dollar. As usual, the denizens of social network sites such as Facebook and MySpace are leading the way by using systems such as Spare Change, which allows them to charge their Pay Pal accounts or credit cards to get digital currency that they can spend in small doses. Similar services include Bee-Tokens and Tipjoy. Twitter users have Twitpay, which is a micropayment service for the micromessaging set. Gamers have also been pioneers in purchasing digital currency that can be used for impulse buys during online role-playing games. PaymentOne and Paymo are trying to enable people to make micropayments that get put on their phone bill. And real-world commuters are used to gizmos such as E-Z Pass, which somehow zaps out electronic change and deducts it automatically from their prepaid account as they glide through a highway toll booth.

If I ran the New York Times, Wall Street Journal, or Los Angeles Times, I would take the lead by creating my own digital coin purse or micropayment E-Z Pass and try to get other content creators to use it as well. Or I would work with a company such as Amazon, Pay Pal, Google, Apple, or Microsoft to partner in creating one. I would at the same time also start accepting the best of the existing micropayment systems. Just as stores take multiple credit cards, sites should accept multiple micropayment systems.

The ideal micropayment system would be so easy to use that you’d hardly think about making an impulse purchase. I see no need for itemized accounting. Indeed, the lack of itemized bills floating around would make it particularly appealing to those who purchase things a bit more titillating than the Wall Street Journal.  Those who wanted an itemized bill could use a premium service that provided that.

Under a micropayment system, a newspaper might decide to charge 2¢ for an article, or a dime for that day’s full edition and website access, or  $2 for a month’s worth of editions and web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough. Subscribers to the physical version of the paper could get the online version for free. There certainly should be no collusion among media companies, and competitors should be free to charge any price they wanted, or nothing.

The system could be used by all forms of media: magazines and blogs, games and apps, TV newscasts and amateur videos, porn pictures and policy monographs, the reports of citizen journalists, recipes of great cooks, and songs of garage bands.

This would offer a lifeline not just to traditional media outlets; it would also nourish and encourage all sorts of citizen journalism and blogging. Citizen journalists and bloggers have vastly enriched our realms of information and ideas. But most cannot make much money at it. As a result, they tend to do it for the ego kick or as a civic contribution, and they tend to be from the more privileged elite. A micropayment system would allow regular folks, the type who have to worry about feeding their families and paying their mortgages, to supplement their income by doing citizen journalism that is of value to their community.

Choosing to charge for content is merely one of many options that could play a role in sustaining a diverse media mix in this country. Many newspapers and magazines – and bloggers and citizen journalists – would decide to remain free, or rely on a tip jar for voluntary donations, or be subsidized by public-interest organizations or rich owners. That’s fine. The more competing business models there are, the healthier the resulting media mix will be.

But a micropayment system would provide another option. Newspapers that felt their daily output was worth a dime – and whose readers felt that way – could end up charging a dime, and thus be more likely to survive and even thrive. The people at these papers would also wake up each morning with the worthy incentive to produce a paper that people thought was worth at least a dime.

When I used to go fishing in the bayous of Louisiana as a young boy, my friend Thomas would sometimes steal ice from those machines outside of gas stations. He had the theory that ice should be free. We didn’t reflect much on who would make the ice if it were free, but fortunately we grew out of that phase. Likewise, those who believe that all content should be free should reflect on who will open bureaus in Baghdad or be able to fly off as freelancers to report in Rwanda under such a system.

Over the past few weeks, for example, I’ve had a deep interest in what was happening in Gaza and how it might affect the status of Hamas. I’ve turned to the smart and nuanced reporting of Ethan Bronner of the New York Times, Griff Witte and Jonathan Finer of the Washington Post, and Ashraf Khalil if the Los Angeles Times. They are all deeply informed about the region. They are brave and industrious about getting to Gaza City and the various villages further south. And it is valuable to me as a reader and, I think, to the world at large that their newspapers are willing – and able – to pay their salaries and expenses so that they can feed our desire for independent information.

So I hope that 2009 will be the year when a few good newspapers and other creators of valuable content start charging. I say this not because I am “evil,” which is the description my daughter slings at those who want to charge for their content or music or applications on the web. Instead, I say this because my daughter is very creative, and when she gets older and produces some really neat and valuable stuff, I want her to get paid for it rather than coming to me for money or deciding that it makes more sense to be an investment banker.

I say this, too, because I love journalism. I think it is valuable and should be valued by its consumers. I think we need it for the health of our local communities, our national democracy, and our world. The Knight Foundation recently created a commission hosted by the Aspen Institute that detailed "the need to sustain local, public service journalism, whatever the business model." I feel that’s true of all journalism.

In this new digital age, the definition of journalism is changing. It is no longer something that is carved in stone and handed down from on high by a priesthood of practitioners and mainstream media companies. It can come in forms that are, thankfully, more personal and opinionated and filled with attitude. It has the ability to be more interactive, wikified, collaborative, user-generated, and to blur the distinction between the anointed journalist and the citizen consumer.

But certain defining attributes of journalism should be unchanging. These core values remain central to the journalism that we as a human community need. Journalism must try to be credible. Its practitioners must be open-minded and honest as they gather and convey information, whether from the Gaza strip or our local city halls. We, the reader and consumer, must be able to trust them – to know that they are trying to serve us rather than some hidden agenda. They must aim for the truth. “The notion there is such a thing as the truth has gotten kind of a bad rap over the past 30 years,” Kurt Andersen said at an Aspen Institute conference this past summer, “but I still think that the pursuit of the truth is what needs to drive journalists.”

Why? Because the proper goal of good journalism should be to serve the reader.

Which brings me back to my hope that this year will be the one when micropayments catch on and readers begin paying for the journalism they want. That way, journalists will again be beholden mainly to their readers, rather than catering increasingly to advertisers or other agendas. I suspect that we will find this is actually liberating. The need, even in the online realm, to be valued by readers – serving them first and foremost rather than relying only on advertising revenue – will allow the media once again to set their compass true to what journalism should always be about.