Newspapers Need Less Paper, More Kindle to Survive, Says Madrona’s Tom Alberg

4/27/09Follow @xconomy

The death spiral of the newspaper industry is one of the big business stories of 2009, right up there with the free fall of the U.S. auto industry. It’s especially close to my heart as someone who learned the journalism trade at newspapers (including The Seattle Times) before taking the online leap. So when Greg and I met Tom Alberg of Seattle’s Madrona Venture Group at his office last week, I made sure to pick his brain on what newspapers must do to survive.

Alberg is the first to admit he doesn’t have all the answers, but he’s as good as anyone to ask for a fresh view of the future of this business. He was one of the pioneers in the cell phone industry at McCaw Cellular, before he became a venture capitalist in the mid-90s and placed an early bet on Amazon.com. He also cares deeply about Seattle, having spent most of his life here as a graduate of Ballard High School.

More recently, Alberg has put a personal stake into the media business. In April 2007, he led a group of prominent angel investors, including former Seattle mayor Paul Schell and UW professor Ed Lazowska, to found Crosscut. That Seattle-based local news site failed in its original for-profit business model after about 18 months, but has since converted to a nonprofit setup that allows for some ad support and reader donations, like PBS or NPR.

Newspapers, which play a vital watchdog role that citizens need in a free society, have got to stop giving away their content for free, Alberg says. Prominent blogger Alan Mutter calls this the news industry’s original sin on the Internet in the mid-90s.

“Newspapers should charge for their online version,” Alberg says. It’s a risky strategy that could drive away many readers, he admits. But newspapers could find creative ways to soften the blow on customers, and gently nudge them into actually helping pay for the content.

How to do that? During this transition period to a new model, newspapers like The Seattle Times should slow down the financial bleeding by stopping print publishing seven days a week, Alberg says. They would be wise to follow the lead of the Detroit Free Press, which now only delivers the published version to subscribers’ homes on the most advertising-lucrative days of the week—Thursday, Friday, and Sunday. The other days, Alberg says, newspapers could distribute their content on a paid subscription basis via the Kindle, iPhone, or online.

“If someone subscribed to the three-day print version, maybe the other versions should be free and maybe they should even receive a free or subsidized Kindle from The Seattle Times,” Alberg said in a follow-up e-mail. He added this was his personal view, not on behalf of Amazon. Of course, there would be plenty of hand-wringing about this being a loss for society, which he dismisses. “I don’t know if it’s all bad to have a three-day version of The Seattle Times. We’d still take it, and it probably could be supported by ads,” Alberg says.

While those cost-saving measures were going on, newspapers could also do a better job of targeting ads online to niche audiences, Alberg says. He also read the trenchant analysis in January by Silicon Alley Insider, which calculated the New York Times could save money by stopping the presses, and sending all subscribers a Kindle. But he didn’t go so far as to say this is what newspapers ought to do.

Like all investors, Alberg personally relies on multiple sources of journalistic information to stay up to speed on what’s happening in the world. He skims the print versions of the Wall Street Journal, New York Times, and Seattle Times every morning at home. “I like the newspaper,” he says.

That said, his personal habits have changed in the online era. He said he likes getting the newspaper content through his Kindle, which he pays for. It came in particularly handy for scanning the New York Times on a recent visit to Moscow, ID, where his son attends college, and he figured he might have to go on a scavenger hunt to find that paper on a newsstand.

Big national papers like the New York Times and Wall Street Journal certainly have their own problems with the expense of paper, ink, and distribution, combined with the mass migration of advertising to the less lucrative world of the Internet. But they will likely find a way to adapt to a new model because they have such strong brands and readership bases, Alberg says.

The bigger concern is with local papers, like The Seattle Times, which have played a traditional watchdog role over public officials that national media will never play in local communities. (He particularly cited the excellent work many years ago of Shelby Scates, a former P-I columnist known for digging in his day, as well as reporters who exposed a police bribery scandal in Seattle in the ’60s and ’70s.)

Alberg doesn’t believe that Internet search algorithms like those powering Google News will ever replace editors and reporters who do that kind of work. The computers don’t have the creative thinking processes to dig up all the information readers want and need—much of which will always be concealed from public view. When has a computer ever met a source in an underground parking garage, after all?

“There’s an important role for editors and people who are full-time reporters. The auto-aggregating devices aren’t good enough,” Alberg says. “You need editors to make news judgments, and need reporters who will find out when city officials are stealing money,” he says.

But if newspapers don’t figure out a 21st century business model fast, the consequences will be dire. “It’s a real danger that most city newspapers will disappear, at least in their printed version,” Alberg says.

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