Tell this man about economics

Take a look at this, it’s the opening pars of a story by W. E. Hussman Jr in the Wall Street Journal. I thought this was a reputable paper that employed writers who actually know a thing or two about economics and business (at least from a pro-capital perspective).

But this is just nonsense. How can something that’s “free” be a commodity? Being a commodity implies, nay demands, that it also have a price. This was something that Adam Smith worked out over 150 years ago and Karl Marx built a whole thesis around. Read this for yourself:

How to Sink a Newspaper

By Walter E. Hussman Jr.

One has to wonder how many of the newspaper industry’s current problems are self-inflicted. Take free news. News has become ubiquitous, free, and as a result, a commodity. Anytime you are trying to sell something that becomes a commodity, you have lost much of the value in providing that product or service.

Not many years ago if someone wanted to find out what was in the newspaper they had to buy one. But not anymore. Now you can just go to the newspaper’s Web site and get that same information for free.

The newspaper industry wonders why it is losing …

There is a real issue here, the declining value of advertising income in newspapers and an unstoppable fall in circulations as readers migrate to the net. So, the issue of free content on the web is of concern to newspaper proprietors and managers around the world.

I was talking to Rick Neville today, he’s the deputy CEO of APN newspapers in New Zealand, about these very issues. He has quite a sophisticated view and, as an ex-journo and editor, understands both sides of the news business. Rick pointed out that one reason Rupert Murdoch is interested in buying the WSJ is because it has a very successful high-end online subscription service that adds value to a newspaper subscription and that is attractive to a high-value A-B demographic audience.

Rick says that in the future newspapers will be for a small, elite, market and that the rest of the rabble (my word not his), will make do, or get by with online content.

You might remember from earlier posts that APN is moving most of its sub-editing operations out of house to an Australian company call PageMasters that is setting up in Auckland.

Rick was open about the possible damage to the APN news brand and acknowledges that mistakes will be made. He’s not really happy about it when he’s got is journo’s hat on, but he’s also in charge of the economic health of the company and shareholders are demanding a better return on their investment. The cost-cutting is part of that schema.

This is the real political economy of news, and from Rick Neville’s perspective, it’s about keeping the newspaper afloat. His insights are much more useful in this debate that pages of “insightful” crap from some wally on the WSJ who doesn’t even know fundamental economic definitions.

How to sink a newspaper? Easy! Just continue to employ idiots like Mr Hussman and eventually the weight of the dross they produce will send you to the bottom of the ocean of ink.

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