The Bad New Math of Saving Newspapers

This is the year of new ideas for saving newspapers! Unfortunately, the main solutions seem to be plagued the one thing that led most people into journalism in the first place: lack of math skills.

There are two basic ideas that dominate the discussion of how to rescue the flailing newspaper industry. Everything is more or less a variation on these themes. The New York Times is the paper everyone really wants to save, so it's the easiest example to use. Let's explore!


Idea: Charging For Online News
Star advocate: Steven Brill, journalistic entrepreneur and thinker
Details: Brill wrote a big long memo recently on how the New York Times can save itself. In a nutshell: The NYT's site gets 20 million unique visitors a month. If they each pay $1 per month to access the site, that's $240 million per year. Multiply that figure for any pay rate you want. This cash will save the paper.
Problems: First, how many of those 20 million users will actually pay for the site? Take out those who just wander in off Google searches, and casual non-news junkies, and the majority of everyone else, who are willing to settle for free news of a lower quality (look at local TV news. Most people are happy to settle for free news of lower quality). Maybe 2 million paying customers? Say you got 2 million to pay $2 per month. That's about $50 million a year. Not close to the NYT's $200 million+ newsroom budget—which doesn't include what the paper also has to spend on non-newsroom costs, which is also significant. To cover the NYT's newsroom budget alone at $2 per month, you need more than 8 million paying customers. Not likely. If you increase the fee, you make it that much harder to draw in customers. If you assume 2 million people will subscribe, they each need to pay $100 per year for the site. Also not likely.

Idea:
The Endowment Model
Star advocate: David Swensen, Yale's star money manager
Details: In an op-ed, Swensen figures that a $5 billion endowment earning 5% a year would cover the NYT's newsroom budget, and it could operate as a nonprofit. Future: ensured.
Problems: 1. As previously mentioned, $200 mil is only the newsroom budget. Covering the paper's full budget for everything would require more cash. 2. A 5% annual payout sounded conservative a year ago. Now, who really knows when we'll again be living in a world where that figure is safe to assume? It sounds like a princely sum these days. Investment losses for an endowment would still hurt the newsroom budget. Just like what's happening to Yale now, for example. 4. Even assuming all goes well, where do you get a $5 billion endowment for a company worth less than a billion dollars?

And for micropayment advocates, see here.

Until questions like these are answered, newspapers are still where they've been for the last five years or more: in a place with no good ideas for the future.

[Note: David Swensen is probably good at math. And I personally think the NYT will have to charge for its website sooner or later, although I don't know how they'll make the math work out. I am not good at math. Pic: Flickr]