“Free is too expensive”

That’s yesterday’s line from Les Hinton, who oversees NewsCorp’s American operations such as Fox News and the Wall Street Journal, to newspapers.  They cannot, he explained to the World Newspaper Congress, simply give away the content they create.  “News costs,” said Hinton.  “Quality costs.”

His boss, Rupert Murdoch, has already promised that his online properties will being charging for content, and Hinton encourages others to do the same.  Some outlets have been able to do that – Roll Call, National Journal, and the Wall Street Journal charge readers for online access, and ESPN’s website has certain sections which require a subscription fee.  Google is obliging, making it easier for subscription sites to appear in news searches without giving away all of their content.

But as any armchair economist can tell you, as the price of a product increases the demand goes down.  So media entities which charge for their online content will naturally have fewer readers.  Hinton claims that “such a business model has to mean one of two things: Either there is no demand for the content or there are substitute suppliers of that content sufficient to drive the price almost to zero.”

And indeed, there are substitute suppliers of that content.  When the New York Post begins charging me to read about the New York Yankees, I will simply get my Yankees news from the Daily News – or River Avenue Blues, or MLB Trade Rumors.

Does that mean selling news is a bad business model?  Not necessarily.  By charging for news content, media outlets may wind up with an audience that is smaller in numbers but higher in quality.  For instance, a widely read blogger may find it worth his or her while to subscribe to news sites to stay informed and have the best blog content possible.

If the media outlet hits revenue goals which allow it to produce good content, and the blogger attracts enough readership to sell advertising, everyone hits the metrics they care about – and everybody wins.

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