The New Yorker’s James Surowiecki has some interesting things to say on the future of revenue-generating newspapers: “News You Can Lose.”

The money quote:

“The blogosphere, much of which piggybacks on traditional journalism’s content, has magnified the reach of newspapers, and although papers now face far more scrutiny, this is a kind of backhanded compliment to their continued relevance. … But people don’t use the Times less than they did a decade ago. They use it more. The difference is that today they don’t have to pay for it. The real problem for newspapers, in other words, isn’t the Internet; it’s us. We want access to everything, we want it now, and we want it for free. That’s a consumer’s dream, but eventually it’s going to collide with reality: if newspapers’ profits vanish, so will their product.”

Note, of course, that Surowiecki’s article is offered for free, in its entirety, on the New Yorker website before most subscribers’ issues arrive in the mail. It’s not unreasonable for subscribers (like me) to ask, “Why the @#$% am I paying for a subscription to this @#$% magazine when everyone — including me — can read it for free online? I’m canceling my @#$% subscription right now!” (I have endowed my hypothetical subscriber with Tourette’s.)

Granted, a New Yorker subscription costs less than I spend on Girl Scout cookies in a year — the sub price is something like $0.50 Zimbabwean per issue — but when the advertisers see declining subscription rates and start getting nervous about running their nice big expensive ads, that’s the big drain plug right there.

What’s true for newspapers is true for magazines as well: if we want to avoid getting what we pay for, we’re going to have to start paying for what we get.

It’s that @#$% simple.

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P.S. — Not long after writing this, I read a recent article by the very-smart Paul Graham in which he bandied about the word “free” in a way that made me cringe. I feel increasingly uneasy about how fast and loose we play with that heavily-loaded word, particularly when it comes to “free” newspaper and magazine articles on the Web. And so I found myself composing the following observations:

1. “Free” is qualified. While an article might be free for readers, it certainly cost the publisher something to create and make available. Whether it’s server and bandwidth expenses, staff salaries on project time, or the writer’s travel expenses and the phone bills he racked up doing interviews, expenses were most certainly incurred.
2. The customer is the one who pays. If the advertiser is the only one giving the publisher money, he’s the only one that the publisher has to worry about pleasing.
3. Therefore, no pay = no say + no stake. And we citizen-readers cannot afford to lose either.

I know this is all Business 101 stuff, but a lot of people are forgetting that capitalism is a closed cycle. Anemic revenue from online ads is causing advertisers to grumble ever more loudly. The current model is unsustainable, and it can’t be levitated by chanting articles of faith (“Om mane the web has changed how business is done peme om”) ever more fervently.

Newspapers and magazines of the world: make the readers your customers.

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P.P.S. — Obviously, current subscription prices alone can’t sustain publication costs, online or in print. But subscription prices are being kept artificially low because 1) the balance is effectively being subsidized by advertising revenue (at least for now) and 2) they have to be low enough to entice more people to subscribe, so that the publication has nice big numbers that it can wave in front of (all together now) the advertisers. Potentially a nasty Catch-22 there.

So what are the alternatives?

• Periodicals that rely solely on subscription revenue (like the specialty weeklies published by BNA, for example) have subscription costs in the thousands of dollars. I can’t afford to pay that for daily news.
• The key online news sources I read on a daily basis are government-funded (BBC and CBC), although that means British and Canadian taxpayers are subsidizing my reading habits.
• Sources like ProPublica are making a go of grant-supported publication, but that model is slow in catching on.
• Some papers have long been owned — or are now being saved — by wealthy families motivated at least partly out of a sense of noblesse oblige plus ginormous helpings of stock. But wealthy families aren’t uniformly consistent in obliging their communities with their noblesse.

What does that leave us with? From what I’m seeing, online ad revenue is probably the most volatile of the options. The options that seem to last the longest are the ones that can sustain either no tangible ROI, or an indirect one, or a significantly reduced one (e.g., governments, philanthropies, and wealthy patrons).

That’s not really a sustainable economic model, is it? So much for the “information economy.” Oh, wait, I forgot, the Web 2.0 people have already declared victory on that one and moved on to winning the “attention economy.” Yeah, that looks like another slam-dunk Mission Accomplished in the works.

So is it possible for us to envision and accept that some things just aren’t going to make enough money to sustain themselves, yet are still necessities? Wait, we call those “social services.” And traditionally we have looked to the nonprofit sector to support those.

But at the moment, in the nonprofit sector, methodologies that tell organizations they should expect to get something tangible or measurable in return for their generosity are in vogue. While I believe there’s nothing inherently wrong, and arguably a lot of right, with taking this approach, I also believe there’s an inherent risk in monetizing nonprofit ROIs. Every day, nonprofits have to choose between funding programs whose only ROI is the warm-n-fuzzy of knowing they helped someone in need, and programs whose ROI can help balance the books for their chronically underfunded organization. What would happen if Jimmy Carter were to suddenly announce that he’s not going to build any more houses until he starts seeing some serious back rent?

I don’t pretend to have an answer to this profound and challenging dilemma, but it does mean that right now an organization whose venture stands to lose money — like, say, a newspaper — has less of a chance of getting money out of the sector that was established primarily to support precisely those sort of ventures.

From what I can see, that’s the impasse at which we find ourselves. There are no bad guys or good guys, just a lot of non-converging agendas.

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P.P.P.S. — Via Romenesko, I see that the nonprofit ownership idea recently received some prominent play in a New York Times op-ed. Several of the responding comments raise a couple of good points. In increasing order of good-point-ness, they are: 1) where will the money come from? and 2) will ethical strictures limit the scope of coverage?

The answer to the first good point is: good @#$% question. Necessarily from lots of sources, all of which will have their own issues and axes, which will result in quite a tapestry of news — papers that do advocacy journalism, papers with unabashed political slants, papers that cover city council meetings and reprint the trash pickup schedules, papers that cater to specialist demographics, and so on. Wherever there’s a gap in coverage, someone can try to raise money to start up a news site/paper to fill that niche. This sounds familiar . . .

The answer to the second good point is: depends on the type of nonprofit, I would think, but hey, I’m no expert and maybe this is something that needs to be laid down first. I don’t know enough about the ins and outs of 26 USC 501 (which defines the different kinds of nonprofits), so the question is, have there been any relevant legal tests in this area? I don’t know, and I’ll have to poke around. But either this is something that will have to get tested in court, or else Congress would have to propose the creation of a new kind of 501 nonprofit specifically designed to support the publication of newspapers. Yeah, I know, that opens up a whole new can of @#$%. Get the lawyers and the lobbyists involved. Great. We’ll end up with the Code of Frankenstein. If there could just be some sort of blanket recognition of “the sacrosanctity of editorial prudence” or some other lofty statement.

But I don’t think we have to go there. I mean, hell, the Corporation for Public Broadcasting is a nonprofit and they support news and investigative programming that cause a lot of people’s knees to jerk uncontrollably (“I disagree with your thesis and therefore fear for our future and for our children and so must silence you.”), and the grant-supported Pro Publica is doing some of the balls-out best investigative journalism out there today. So there has to be a way to do this.

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