Newspaper Proposes A Levy On Broadband To Save Quality Newspapers

UK newspaper The Guardian threw a curveball this week with a proposal to add a £2 monthly levy (c $3) per customer on broadband providers.

This levy, to be distributed to news providers, “would solve the financial problems of quality newspapers”. At first glance this might sound a reasonable proposal – but is it as altruistic as it first appears?

Figures from the Audit Bureau of Circulations reveal the scale of the problem for print media: circulation of every top 10 UK newspaper has fallen dramatically over the last 5 years. Tabloids suffered an average 20-25% decrease whereas ‘quality’ dailies averaged about 35% decrease – even more serious considering that they started off with far lower circulations anyway.

However, this levy proposal comes from The Guardian – a newspaper which dropped out of the top 10 a decade ago and which is consistently loss making. It also suffered the largest decrease in circulation (44%) of any major UK newspaper over the last 5 years.

Put in context, it appears that decline is at least partly due to Guardian readers simply choosing to switch to a better newspaper…

The Guardian propose that the levy is “distributed to news providers in proportion to their UK online readership”. This is a flawed (and immensely self-serving!) method – the best way to save newspapers would be to distribute a levy in proportion to their print circulation.

An analogy would be a levy to help bricks and mortar shops survive in the face of online competition – but instead of distributing the levy based on the number of physical shops, distribute it based on the volume of their online sales. A chain of book shops with 1000 high street outlets would receive almost nothing whilst Amazon (if they opened 1 physical shop) could grab over 90% of the funding – and that is supposed to save book shops on the high street how exactly?

No, the reason why The Guardian chose this particular method is obvious. If the levy was distributed based on print circulation, they would only receive about 2% of the subsidy because their sales are so poor – in 2012 its average circulation was less than 10% that of the top selling newspaper.

Whereas, by a happy coincidence, the Guardian’s online offering just happens to be the second most popular British newspaper website – so their proposed method for distribution would instead gift them around 20% of the cash, equal to £100m a year.

Quite a handy ploy and more than enough to offset their annual losses of £33m – with a nice profit thrown in for good measure.

Funding Alternatives?

Another solution to offset print media losses and save newspapers could be to concentrate more on the development of newspaper websites. The Daily Mail (the UK’s second biggest selling newspaper) recently became the world’s most popular online newspaper, beating the New York Times according to comScore figures.

It may not yet make a profit (due to setup costs for its online US operation) but it is assumed to be close to break-even at least. Coupled with a daily newspaper circulation of almost 2 million it could have a healthy future – without the need for a levy on hard pressed consumers.

It is less clear if online paywalls are a possible long-term solution, even for the most specialist of newspapers. After the UK’s Times and Sunday Times newspapers introduced paywalls for their websites in 2010, visits to their online sites fell by 87%.

Even though subscribers to the print versions of the papers receive an online subscription as a result, the move also did nothing to plug the holes in their newspaper circulation – sales of The Times newspaper decreased more than 20% since 2010.

Conclusion

The Guardian’s readership appears to be voting with their wallet – circulation is disappearing twice as fast as most competitors. Their time could be better spent on investigating why their website is so popular whilst their newspaper is so patently not.

The proposal for a broadband levy makes little logical or practical sense – why not also add a levy to help postal companies beat those pesky email services or to help DVD rental stores outlive Netflix etc?

Trying to subsidize a loss making industry in steep decline would be doomed to failure – there is certainly no point taxing everyone to save a newspaper that no-one wants to read.

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