When I was a student at Williams College, about a million years ago, my Econ 101 professor, Randy Bartlett told us that the basics of economics could be understood by two axioms:
1. There is not such thing as a free lunch
2. You can’t grow bananas in Central Park
Now, it seems, the first axiom has gone out the window.
The web delivers stuff for free all day, every day. You are, after all, reading this for free. But this is only the tip of an iceberg that seems destined to sink a lot of the ‘basics’ of economics, and turn a lot of businesses on their heads, or out the door.
The New York Times is running a piece this morning on Craig Newmark, the founder of Craig’s List. In case you have been living on the moon for the past decade (and maybe he is even there by now), Craig’s List is an online classified website that offers people the opportunity to sell, buy, hire, rent or just about anything else. And it is free.
And because it is free, and easy to use, and global and online, it has undercut the classifieds business out from under newspapers. And classifieds used to be the backbone of newspaper incomes. If you are old enough, you will remember those pages and pages of half-inch listings selling cars and houses and help wanted, you will also notice that they are for the most part missing from the daily paper, or greatly scaled down.
At the same time as the Times is running a profile of their competitor, blog.pmarca.com, the blog site for Netscape founder Marc Andreessen is running a piece entitled “Inaugurating The Times Deathwatch”. How timely. Andreessen quotes the following fairly shocking statistic from Media Daily News:
Separately, the [New York Times] reported that December ad revenue dropped 25.2%. Excluding an additional week in December 2006, ad revenue declined 12% for the month.
…[W]eakness across several national [advertising] categories including health care, books, technology products and transportation hampered results in the month. Classified ads, the traditional lifeblood of newspapers, saw steep declines in help-wanted, real estate and automotive sales. [Craig, you bad bad boy…]
“To date in January, the percentage decline in advertising revenue is trending similar to that of December…” said Janet Robinson, chief executive of New York Times…
The New York Times, so I understand, looses 200 subscribers a day.
So perhaps the price we are going to pay for a free Internet is the loss of newspapers.
In the future, how are we going to pay for the journalists who make the content that actually sells the papers?
And, what the web does to Newspapers today, it is going to do to Television journalists tomorrow, (or perhaps this afternoon).
The good news is that the demand and appetite for news, particularly for local news, seems strong. The local advertisers are there. But the model has to change to meet and match the metrics that the web offers. And the first metric of web-based distribution is that it costs nothing to put news or information or classifieds (as Craig Newmark so well proves) into hundreds of millions of homes 24 hours a day for free. And there is on one who would say that Craigslist has no value. Who here would turn down a 10% equity stake in Craigslist? 1%?
But it is a new model.
And newspapers (and local TV stations) would do well to move as fast as they can to embrace it.
This is no time for halfway or half hearted measures.
As I look out my kitchen window this morning, I almost expect to see bananas growing in Central Park.
Not yet… but I keep looking, and perhaps with global warming, this too will come to pass.