Friday, February 27, 2009

The High Cost of News Reporting - Rocky Mountain News

From tomorrow Denver will have only one newspaper. The Rocky Mountain News said that it will cease publication after tomorrow. They are not talking just about stopping the print edition, they will cease news reporting, print or online.
The story reported in Rocky Mountain News website says why they decided not to go to online only version:

Mark Contreras, vice president of newspapers for Scripps, said the math simply didn't work.
"If you cut both newsrooms in half, fired half the people in each newsroom, you'd be down to where other market newsrooms are today. And they're struggling," he said.
As for online revenues, he said if they were to grow 40 percent a year for the next five years, they still would be equal to the cost of one newsroom today.
It goes to show that news media is a high fixed cost operation. The fact that online version has a marginal cost of $0.00 is immaterial, they still need the news room to report news.
Can they go to a fee version? Not at this juncture. Once you give away  a service for free, customers are not going to value it enough to pay for it at a later stage. According to their cost estimates the total revenue (subscription plus Ad ) has to be at least $100 to break even. A tall order.
So can free work for all the other Web2.0 services?

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