The Medium Run: May 2009

Here's the best case against paid news content. It's two sentences long:

"We tried that. It didn't work."

But there's a powerful rebuttal to that case, one that grizzled online-news veterans (like my man Steve Yelvington, linked above) miss: The economics have changed since last time.

No, consumer desires haven't changed since 1996. Sorry, Al, they wouldn't pay for traditional newspaper content online then, and they won't now. But local media incentives have changed since 1996.

The real question: whether those incentives have changed enough to force newspapers to make the crucial shift that could keep them alive -- a shift to niche products.

If you want to understand how newspaper incentives have changed, you need to understand the following short story from the great Northwest.

It's a story about hog fuel.

Hog fuel is a byproduct of papermaking. It's basically a bunch of tree scraps that get left on the mill floor because they aren't even good for turning into pulp. Paper plants, like this one in my old hometown, produce hog fuel by the metric ton; they can't avoid it.

What do you do with a nearly worthless byproduct? Maybe you could find some odd use for it. But that'd take a lot of work: gathering it, measuring it, marketing it, lining up buyers and shipping it to them. And for what? Obviously your workers' precious time would be better spent on the operation that makes the real money: paper.

No, it's much easier to find some use for hog fuel that costs nothing. And that's exactly what paper mills do: they burn it. Hog-fuel furnaces offset a huge share of many paper plants' substantial electricity bills. It's a cheap and effective way to dispose of something you've got too much of.

But what if paper suddenly ceased to be so profitable?

What would happen to your hog fuel then?

You'd still have a mill that's very good at chopping up trees. But suddenly, you'd start looking closer at your hog fuel. You might start looking for those obscure hog-fuel markets. You might start chopping your logs a bit differently to maximize the value of that hog fuel. You might even start researching how to turn hog fuel into something really valuable, like ethanol -- research that would have never been worthwhile before.

You've got incentives you never had before to make hog fuel valuable.

Hog fuel is Web content. Paper is -- well, paper.

In 1996, when the print product was gushing cash, the rational thing to do with newspaper content online was to throw it up for free. Unlike with paid online content, which requires a helpdesk, a sales effort, and maybe even some changes to the production process, the marginal costs of free content were minimal.

The newsroom was already churning out a metric ton of content, after all. So what if it wasn't optimized for online readership? Hire a kid to hit CTRL-C/CTRL-V for an hour or two each morning, and you'll get some cheap exposure, a hunk of cheap online ad sales and a cheap feeling of progress.

But now, the paper market has dried up.

It's time to figure out what to do with all this crap we've been leaving on the floor, kids. We can squeeze money out of it. We just have to change the process a bit.