How do newspapers flourish in the digital world?

It’s not a news story–doesn’t really rise to the level of newsworthiness–but people do seem to be talking more lately about the death of newspapers. Recently even Eric Schmidt of Google discussed how newspapers must find a mixture of advertising, micropayments, and regular subscriptions to fund their futures. To me, all this talk about how newspapers collect money is misplaced. Instead, I think newspapers must think about how to flourish by remaining relevant in the new digital world.

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Gee, really? Advertising and subscriptions? Who’da thunk it? Micropayments are just a high tech version of newsstand sales, just for individual articles. But the newspaper business is not in trouble because they don’t know how to charge. They in trouble because no one knows why they should pay.
Newspapers aren’t the first media business threatened by technology. Radio didn’t die with the advent of TV. It changed. When people stopped listening to Gunsmoke and started watching it, what did radio do? It started airing wall-to-wall music, news, and talk. It was the end of one era, yes, but the start of another. Newspapers face a similar situation, where they must face their problems in order to change.
Most newspapers suffer from the same problem as many local businesses struck by the Internet. They discover that their main advantage was that they are local. Your local mattress store doesn’t really have the best quality, the friendliest service, the widest selection, and the lowest prices, despite what the sign says. In truth, they were just the closest to your house. On the Internet, every mattress store is equally close to your house and they all deliver right to your house. To compete on the Internet these old line businesses must find some real differentiation.
Newspapers have the same problem. Every one of them syndicates their stories from AP and Reuters, their columnists in many cases, and their comics from King Features. They are all the same. You can read the same story in hundreds of papers every day.
In their hometowns, that’s worth something, because you can’t buy any of a hundred papers, but on the Internet you can read every one of them. Now some newspapers truly have unique content–the Wall Street Journal, the New York Times, and the Washington Post don’t have much to worry about. But most newspapers, including many owned by the same companies that own those papers, are in trouble, because they have no real differentiation.
Except one. They do have local news. Some newspapers are following the trend of hyperlocal news, where they work hard to run down every story on each little town school board meeting, expressly because that content is unique.
There’s no way to know whether people’s appetite for that kind of news will save newspapers, but I think if they hire some of the bloggers with strong local opinions, and they tell their stringers to shoot videos of their stories, they have a good chance, because they’ll be delivering content that some people want and can’t find elsewhere.
But if they think that they can do what they’ve always done and just tell themselves that they’ll make it all up in micropayments, I think they are kidding themselves. It’s not about how you get paid. It’s about why someone would pay you.