Wednesday, January 27, 2010

Network TV offers lessons for newspapers

Have you heard about the demise of network television? No, it’s nothing insidious like a government mandate or special interest wrangling. It has everything to do with economics.
Many of us still get all of our television — for free — over the airwaves. We get the networks, NBC, ABC, CBS, Fox and CW along with public television through the use of an antenna. What the current economic recession has caused network television executives to realize is that their business model has some problems. Over the past couple of years, their advertising revenue has suffered because of the recession. And that’s a big problem because 100 percent of their revenue comes from advertising.
Right now, network television is looking longingly at their cable television cousins and seeing that cable receives not one but two sources of revenue — advertising revenue AND “subscription” revenue.
Cable channels (AMC, The Discovery Channel, TNT, etc.) not only receive revenue from advertisers, they also receive “subscription” payments from cable customers who pay a monthly fee for the privilege of having these cable channels piped into their houses.
So while advertising revenue declines in a down economy, cable channels are much more stabilized by their other revenue stream from subscribers. Network TV is much more vulnerable to the vagaries and ups and downs of the advertising climate.
“What in the heck does this have to do with newspapers?” you may ask.
Newspapers have been acting too much like network television when it comes to their web sites. Newspapers have been posting everything for free for anyone with an “antenna,” i.e., an Internet connection, to come along and consume their product. To subsidize that effort, newspapers sell ads on their web sites. The biggest problem with that is that online advertising revenue does not even come close to paying for all the expenses of reporter and editor salaries, phone bills, utilities, travel expenses, etc., that go into actually creating those stories that everyone is reading for free.

So what's the solution? Find out in my Editor's Notebook in this week's Kuna Melba News.

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