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  • Writer's pictureBart Melton

The business model is broken and always has been.

This week, in a move that has been coming for months, Alden Global Capital purchased Tribune Publishing. Alden is often called a vampire for how much it bleeds its media companies dry.

We also see Australia trying to pass a very poorly thought out law to prop up its failing media by forcing large tech companies to pay for links to those media companies. Facebook has responded by shutting off all linking in Australia or that points to an Australian company. Facebook has been widely criticized for the "extreme measure", but to be honest (if unpopular), it is correct. The law makes about as much sense as taxing computer manufacturers to combat global warming because electricity is generated by coal.

Both of these things highlight one thing. The business model for digital publishing is just broken. It has been for 25 years. Ads haven't sustained the industry since ever. Revenues for publishers overall are down 75% in the last 25 years. Ad revenues will continue to drop in the coming years.

Subscriptions are not going to save the publishing industry. The ads and subscription models have been tried for the last 25 years. What has been the result? Media closures, media consolidation, and firms like Alden Global Capital circling the dying and licking their lips at the thought of bleeding another carcass dry. The system DOES NOT WORK. There are a handful of the largest conglomerates and biggest names that are doing well and there is the rest of the industry hanging on by their fingernails. That situation is not going to improve with the current business model(s). To think differently is deluding yourself. The history, since the internet became a real thing in the 90's, tells us it is delusional. The publishing industry has relied on ads and/or subscriptions for 25 years, continually doubling down on it, and has lost every single year. Things aren't going to improve by doubling down, yet again, on proven failure. If it wants to survive, the industry needs to accept that truth. The path to survival, aside from being eaten by a larger conglomerate, is through pay-per-article. It is simple math. Digital ads for print typically pay about $1/1000 users. Even with 5 ads on a page, you are at $5/1000 users. With pay-per-article, you get $10/1000 users for every $0.01 you charge. That means if you charge $0.05 per article, you earn $50/1000 users. At $0.01, even if companies lost half of their audience, they would still make $5/1000 users, just like 5 ads on the page. But my subscription!!!! Pay-per-article and subscriptions are not mutually exclusive. Research says only 5% of users will ever subscribe and that pay-per-article options have little to no effect on subscriptions. Publishers can try to monetize the other 95% or they can just ignore all of that money while the vultures circle lower and lower. The current digital publishing model is an abject failure. It is time to acknowledge and accept that. It is also time for a new business model. A business model that is very successful in places like China and India. Or companies like Alden can keep feeding as the industry slowly dies off. Choose wisely.

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