The continual plaint in newspapers around the world is that the news media are in big trouble. Au contraire: what's in trouble is their monetization model.
In a nutshell: when you buy a newspaper with a circulation of, say, one million copies, you are not paying a cover price equal to one millionth of their production costs. Far from it — you may well be paying less than 10% of the actual cost of the newspaper. It's not hard to see why. A paper with 64 pages of news coverage and editorial contains on the order of 60,000 words of text — maybe more. Paying people to write those words costs money. Even a harried journalist, cranking 'em out by regurgitating press releases (rather than pounding the pavement, talking to people) isn't going to be producing much more than five pieces a day, running 300-1000 words. It takes twenty writers to write the content of those pages, and another half-dozen editors to ensure the typos and solecisms and potentially libelous misstatements are spotted before it hits the typesetters (again: ever tried to lay out 64 pages in a hurry?) and then the press. That's about 30-40 staff, plus management, minimum — a more realistic figure would be 200 bodies (the word rate and editorial figures I pulled out of my ass are insanely intensive). Pay £0.50 per copy per day for 330 days a year, with a 1M circulation, and the paper would only net £180M a year, before printing and distribution costs for 330 million lumps of dead tree are taken into account.
The real profit centre in newspaper publishing isn't what you, the customer, are paying for; it's advertising revenue. I haven't worked on a newspaper. I have, however, written regularly for newsstand magazines. In the USA, to take advantage of bulk printed matter shipping rates mags and newspapers were required to have at least 20% editorial/non-advertising content by page count. The other 80% is ads. My rule of thumb when I was writing for Shopper was that they were getting around five times as much revenue from the advertisers as from their paying readers: when software and computer component advertising spend went online post-1998, it was a disaster.
These days, a lot of newspapers look to cut their overheads by reducing their actual journalist and editor head-count — after all, these folks aren't contributing much to the bottom line (which is advertising sales) — and running news straight off the syndicated wire feeds.
This is the kind of move that looks sensible on a balance sheet, to a bean-counter who's wondering where the profits have gone. By axing 80% of the journalists and 50% of the editors, our hypothetical 40-person newspaper can in principle save 30 payroll entries, or on the order of £900,000 a year. But in the long term, it's insane: it's the kind of move that cuts one or two percentage points off the bottom line, but pisses off the subscribers. Subscribers are the lifeblood of a periodical; the number of subscribers directly dictates how much money the advertising sales department can charge their customers. So a spiral of decline triggered by a loss of advertising sales frequently leads to cuts elsewhere — in editorial and other content — that drives away subscribers and causes further drops in advertising revenue. And with the internet competing for advertiser's marketing budgets, that's a recipe for catastrophic decline.
There's another side-effect of the internet, though. The internet is business-model neutral; it's like the postal service, or the telephone — all it does is put suppliers in touch with consumers. The revolutionary new quality it adds is that it cuts out middlemen — if a supplier can make their existence known to a consumer, there's no need for wholesaler warehouses, distributors, and a pavement-pounding sales force.
(You knew I was going to say that name sooner or later, didn't you?)
Google's revenue stream is predicated on their success as an advertising company first and foremost. Remember DoubleClick? They're part of Google.
Google's business model is to monetize all internet content by slapping advertising on it and positioning themselves as the most convenient find-everything-at-your-fingertips gateway. The more high-quality content, the better; hence the drive towards free email, digitizing books, syndicating blogs via Google Reader, and so on. If all content is available over the internet via Google, then all content is monetizable. Content producers who expect to be paid by end-users for access to their content are inevitably going to come into conflict with Google, because this restricts the number of end-users who will see the content, and hence contribute to Google's revenue stream.
We all like free content. And we all like to be able to find things conveniently on the web. But I'm increasingly having a problem with the "information wants to be free" viewpoint — because it ain't necessarily so, depending on how you define "information" and "free". Bandwidth is in the process of becoming so cheap it might as well be free, at least by the standards of the 1990s, let alone any earlier decade. Information is another matter, though. Not all information is created equal, and the cost of compiling and producing something new is disproportionately high. I write books for a living, and take roughly 6-12 months per book. If I can't earn a living at it — if you wave a hypothetical magic wand and make all information free, thereby disintegrating the publishing, music, and commercial content industries overnight — I'd probably not stop writing fiction but I'd have to do something else to earn a living, and therefore I'd have less time to write fiction, and consequently you'd have fewer of my stories to download.
This doesn't really interest Google, of course. I've occasionally wondered what I'd say if someone at Google offered to hire me to write fiction and release it under a Creative Commons license; it's an attractive proposition from my side of the table — my two goals are to earn a living, and to reach as many readers as possible. There are only about 1000 full-time genre SF/F novelists, and the same number of part-timers; Google could in principle afford to pay every novelist currently active in the English language out of the petty cash. (Except maybe JKR and PTerry. And Dan Brown.) But it ain't going to happen. Google runs on quantifiable data, and the one bit of data I can offer them is that as a data source, including all overheads, I cost on the order of one US cent per byte. Given that the crappiest spam blog is as useful to Google as the greatest virtuoso symphony performance or the Nobel prize winning novel, if it generates the same number of advertising click-throughs, they'd do just as well to spend the money on automated spambots. They've got my backlist to draw eyeballs and advertising clicks (the Google Book Settlement is a crock: by opting out of it, all I'd achieve would be to reserve the right to sue Google — that's not a realistic option from where I stand). Even if I never write another word, my existing corpus is out there and much cheaper than 5.5 cents per word. So my profitability as an advertising host is minimal. Google isn't going to save content creators from the burning wreckage of their distribution industries.
So what's left?
Far be it from me to back Rupert Murdoch's all-out threat to pick a fight with Google over the News International paywall. I think he's onto a loser — it's hugely ironic to see the mogul who used to regularly phone Arthur C. Clarke for advice about the future of media clinging to an obsolete 20th century business model. Unless he radically reverses the trend towards syndicating content off the wires and hires a buttload more journalists, and starts providing content worth paying for, his policy doesn't stand a chance of working. Worse, in picking a fight with Google he's picking a fight with those news media who don't play by his rules. The BBC has a public-service remit and arguably can't set up a paywall around their news (hence Murdoch's recent overtures to the Conservative Party in the UK, who will likely form part of the next government and who are not friendly towards the BBC). The Guardian is run by a trust and has picked as its target the goal of becoming the planet's leading left-wing news portal; ideologically and practically they're Murdoch's direct opposite. As long as Google can leverage news sources like these, the Murdoch paywall is going to have an uphill struggle.
If they're smart, News International's managers might start to roll back the damage of 30 years of complacent lard-assed journalism — hire new investigators, train them to go for the throat and chase the scandals, and start raising hell. A combination of targeted micro-news coverage and turning over rocks to see what's underneath could pay off. The Daily Telegraph started an avalanche running in the UK last year with their series of explosive revelations on the subject of MP's expenses; there hasn't been anything like it in the USA this century, as the insider-culture of the Washington beltway has captured the journalistic corps. When the press cosy up to power, the result is a culture of collusion, and both news and open and accountable government suffer.
However, I don't expect them to do that — if nothing else, it's going against a generation of entrenched newsroom practice. And hiding behind a paywall isn't a workable solution for a jobbing novelist in the age of ubiquitous online copying, because I don't have the subscriber/advertiser dynamic that a news corporation can count on to pad out the bottom line. So, what to do?
Paper books are going to be around for a long time to come, but I'm betting on the ebook cannibalizing the mass-market paperback by 2020 at the latest — which is where half the paper book revenue stream comes from. Hardcovers pay much better than paperbacks, but far fewer people are willing to pay for them. Paperbacks pay the author roughly 7-10% of the cover price of a £7 or $8 book. But the ebook shift is potentially catastrophic: ebook royalties are typically in the 15-30% range, but the cost of e-goods in general is being deflated towards the $1.99 price point by the App Store model pushed by Apple and their competitors. Amazon aren't helping either — increasing the publisher's cut sounds good, until you realize that the proposed $9.99 cap on ebooks replaces the high-end $24 hardcover. Not only does it mean less royalties for the authors, it means less money for the publishers — or, more importantly, their marketing divisions.
Here's a hint: if I wanted to spend my time marketing my books I'd have gone into marketing. I'm a writer. Every hour spent on marketing activities is an hour spent not writing. Ditto editing, proofreading, commissioning cover art, and so on. This is what I have publishers for. It's called "division of labour", and it's why self-publishing — unless you're an instinctive sales/marketing genius — is a Really Bad Idea™ for most writers.
So I'm trying to figure out what constitutes a workable business model in the post-Google age for someone who wants to earn a living by writing.
I'm not much of a public speaker — unlike Cory Doctorow I find speaking exhausting, and worse, I can't write while I'm travelling. Maybe a hybrid business model would make sense for some writers: a full range of posable action figures based on the characters in their books, backed up by a manga serial and some themed casual gameplay. But I'm not convinced that's where I want to go, either. What I really need is some kind of subscription model that makes the disintermediating depradations of Google strictly irrelevant. So this leads me to ask what new business models exist that I can monetize and that aren't going to (a) be devalued by Google, (b) undercut by infinite free bandwidth, or (c) require an old dog to learn new skills (like cat-emulation, or screenwriting)?
Some data for your analysis: traditional industry estimates suggest that there are four readers for each book sold. Many of my readers overlap, so my best guess (which is a stab in the dark) is that I have an English-language audience of around 100,000-200,000 (of whom some read one book and won't be coming back, and some will read everything I produce ... via the library). Of course, I sell far fewer books than that. I do know that 3000 of you bought "Missile Gap" for $35 — a novella that cost 50% more than an undiscounted hardback — so we can use that as an approximation for the size of my dedicated fan base. Finally, if I aim to maintain quality, I can probably average 200,000 words of fiction per year. (250-300,000 in a good year, 150,000 in a challenging year.) That averages a single 600-700 page novel, or two 300 page novels, or six novellas. And I am not in the movie/TV/comic script business at this point in time.
Suggestions on the back of a
postcard blog comment, please.