An American who wants to read daily news in a portable and easily readable format generally has very few choices, all in preprinted format. He can purchase that day’s edition of one or perhaps two local newspapers (all but a dozen of the nation’s 1,500 largest cities have only one). Or, if he wants to read only international and national news, he can purchase the NYT, WSJ, and USAToday if those are locally distributed. He will probably choose to purchase an edition of the local papers, because those give him a package that includes local news.

In other words, he has very scarce choices; one or two if he wants a complete package or, at most, one to five if all he wants is international and national news. The economic principle of Supply & Demand means that he’s going to put a relatively high value on those scarce services. He is probably willing to pay $0.25 to $1.00 per day, or between $180 to $800 annually to receive routine delivery of that information.

However, the principle of Supply & Demand yields a quite different outcome if he wants to the news online. Like 73 percent of his fellow Americans, he probably has Internet access, likely broadband. That means he has immediate, if not entirely portable, electronic access to all of the world’s newspaper, news magazines, and news broadcaster (sites containing news texts). His faces not a scarcity of suppliers, but a surplus, a surfeit, an overabundance.

The principle of Supply & Demand means that this overabundance is going to plunge the value he’s willing to pay to read that news online.

Early this decade, surveys of consumers by newspaper economist Mike Donatello found that most were willing to pay something for access to newspaper Web sites. However, what they were willing to pay was no more than $1 per month (the median was closer to $0.50), which is far lower than publisher were willing to charge. (These surveys were done before most Americans had broadband access, so I’ll bet that what they’re now willing to pay is even less because they now have even more immediate access.) The sheer difference between what the sellers want to charge and what the buyers are willing to pay means that there isn’t now any effective market for newspaper content online. It’s Economics 101.

Moreover and very importantly, the sheer abundance of online news choices that the average American enjoys effectively ‘unpackages’ the traditional newspaper’s package of international, national, and local news (an effect first noted by business writer Evan Schwartz in his book ‘Webonomics’).

Because the average American has access to every news outlet’s Web site, it’s unlikely he’s going to use his local newspaper’s site for everything, unlike in print. for examples, if he wants to read international news, he’s more likely to visit the Web sites of NYT, CNN, or BBC. If he wants to read national news, he’s more likely to got to NYT, ChiTrib, or WaPo. If he wants to read financial news, WSJ, Fortune, or Forbes. If he wants sport news, ESPN, Sporting News, etc. He’s likely to visit his local newspaper’s site only for local news — the only form of content that other sites don’t offer. Thus, the value he perceives for his local newspaper online is reduced not only because of the abundance he has to other choices, but because the local newspaper becomes ‘unpackaged’ until only its core competency of local news remains, a fraction of its traditional package.

Truly portable electronic reading devices — lightweight, wireless, and with screens larger than 5×7-inches, capable of displaying video and multicolumlar, complex graphical layouts beyond what HTML can provide — will help make teh value of online newspapers slightly closer to that some Americans still perceive in the newsprint versions — which isn’t saying much in an era when there are fewer and fewer Americans still giving the newsprint editiosn that value. Furthermore, such portable devices won’t solve the traditional newspaper package’s ‘unpackaging’ problem online.

So, with all due respect to the pioneering Roger Fidler, the ultimate solution isn’t to make the electronic editions more paperlike and portable. It’s to revise the traditional package of newspaper content so to overcomes the online ‘unpackaging’ caused by consumers’ overabundance of choices. That’s why I advocate Individuated (individually customized editions) editions. Regularly delivering those to consumers eliminates their need to hunt and gather the information each individual wants from an overadundance of Web sites and provides far more value per consumer than the 5 to 8 stories fewer and fewer of them might read in the traditionally packaged editions.

Some people today pay $600 a year for delivery of the physical paper. I may be wrong, but as far as I know exactly 0 people today pay $600 a year for an online only edition of the Times.

I want to get back to my thought experiment which I discussed at an early post entitled:

It’s Crazy: You’ll Pay $500 for a Newspaper, But Zero for News

Here it is in an nutshell with different numbers:

People will pay up to $800 a year for news on paper.

So what are they paying for the news or the paper?

We know that if you try to provide people with a paper with just advertising and coupons, they will not pay for it.

But they will pay for a paper if it has news on it and ads and coupons.

That would lead me to believe that news has some worth to the people who buy the paper.

So why does news have exactly zero worth if it is not on paper?

Could someone please explain that to me.

Here is what I think, with proper marketing, a proper reading device and a proper strategy, people will pay for digital news that is not on paper.

Schadenfreude is the taking of delight in others’ misfortunes. I neither take delight in the newspaper industry’s misfortunes nor is that industry others.

I am a fifth-generation newspaperman whose family had been publishing a printed daily continuously since 1877. I’ve delivered paper, run presses hands-on, sold ads, covered town governments, edited the paper, purchased its newsprint, published it, and sit on its board of directors. I’m also a former executive of Reuters and of the old UPI. Nowadays, I’m a professor at one of the world’s best J-schools (the Newhouse School in Syracuse), where I teach media management.

I do understand first-hand the importance of daily newspaper journalism in general, and investigative journalism in particular. I also worry if there will be daily newspaper industry in which the Crosbie family’s sixth generation (now in high school and college) can be part.

Ifra, the world’s largest organization of daily newspapers, remarked in 2006, “Vin Crosbie is widely regarded as one of the most outspoken and expert critics of how the newspaper industry worldwide and particularly in the United States has responded to the digital media revolution. But no one disputes that his is a critique borne of dedication to the newspaper tradition.”

So, if I appear blunt when I state: ‘Sorry, NYTCo, McClatchy, Media General, Lee, Scripps, Belo, etc., but you blew it and it’s now too late.’ I not engaging in schadenfreude, unjustified blame, or exaggeration. Those companies’ recent years’ annual reports, plus the stories their publications’ business pages report about their own industry, state what I say far better than I can.

Indeed, it’s troubling that newspapers whose editorial pages have called for the sacking of CEOs in the automobile and financial industries aren’t calling for the firings of their own industry’s CEOs. The evaporation of equity values and market capitalizations in America’s version of Fleet Street have been as great as in Detroit or on Wall Street. The heart of our industry’s problem lies not in its newsrooms but in its executive suites.

It’s sad because those things are not mutually exclusive, but what will get completely left by the roadside is the kind of expensive, labor intensive investigative watchdog journalism that cannot be replaced by secondary-source analysis and punditry. That kind of journalism is hugely important, but it absolutely depends upon original reporting for its very existence. Home delivery and overpaid sports columnists might not be that critical to the fabric of society, but ask an online pundit working at home in his drawers whether he’d be willing to spend a year combing through health insurance data or calling reluctant sources in Washington just to get a story.

“I told you so” is all well and good, but instead of trying to prove how smart we all are for discovering the Internet, we might try to figure out how not to lose the single most important, and totally unduplicated, form of journalism in society today. Without it, we’ll all find out just how rough things can get.

Quite right. The third part of my ‘Transforming American Newspapers’ essay – a part that I withheld posting – basically says that newspaper companies should have developed Individuated Media (http://en.wikipedia.org/wiki/Individuation#Media_Industry_use_of_Individuation ) rather than cling to Mass Media services.

During the 1990s, they should have noticed that the New Media, now the basis of the 21st Century’s media industries, is individuated and not based upon sending the same package of content to every customer. Due to tunnel vision, institutional inertia, and other reasons, newspaper companies failed to see what Google, Amazon, Facebook, and so many other ‘pure play’ companies did. (The mistake was also at the root of Terry Sempel’s misguided attempt to turn Yahoo! into a Mass Media company.)

It is now too late for many, if not most, American newspaper companies. The transition they needed to make cannot be done overnight; it would have required ten years of work that they should have started in the late 1990s. Instead, they simply spent the time attempting to transplant their Mass Media practices into New Media.

Moreover, their senior management’s myopia or hubris led their companies to believe that they could simply, and presumably overnight, ‘adopt whatever the successful business model is, once someone develops it’. It was a strategy about as likely to succeed as my trying to adopt the successful model Heidi Klum overnight.

The successful business model has always existed, but was ignored by the newspaper industry. Newspaper companies instead sought some alchemy that might let their Industrial Era (i.e., Mass Media) business model and business practices succeed in this individuated Information Era.

Sorry, NYTCo, McClatchy, Media General, Lee, Scripps, Belo, etc., but you blew it and it’s now too late.