Is the Washington Post about to spoil the NY Times’ big payday?

Last week Washington Post CEO Donald Graham, addressing a financial analysts conference in New York, said the Post has no current intentions of erecting a paywall to charge for his newspaper’s online content, making it one of the few papers not planning to do so. This comment was only lightly reported in the media, but it is earth shattering in the newspaper industry and especially for the NY Times which had announced it would begin charging for content in 2011.

For the past three years, newspapers have struggled with declining advertising and circulation with ad sales down on the order of 10 to 25% each year. Losses like this render their business model unsustainable. They have rued the day they decided to give away their internet content for free, and yearned to put Humpty Dumpty back together with a fee based system. But it’s not that easy. Should any direct competitor continue to provide free content, the one charging is committing suicide.

In December 2008, shortly after the election, Stanford journalism professor Joel Brinkley got the ball rolling by penning this gem:

Now, here's my idea: The newspaper industry should ask the Justice Department for an antitrust exemption that would allow publishers to collaborate on a decision to begin charging for their Web sites. No paper would have to charge, and each paper could determine its own price. But if most papers in a region - San Francisco, Oakland and San Jose, for example - began charging for Web access at more or less the same time, many readers would likely subscribe.

An unsympathetic Tim Burden on his journalism blog Printed Matters comments on Brinkley’s proposal and puts it more succinctly (emphasis added):

Brinkley implicitly understands that unless all news sources start charging at the same time, everyone will just go to the free sources, killing the paid ones quick-fast. So he proposes a government-sanctioned cartel.

It didn’t take the administration long embrace the concept. In mid-March 2009 Attorney General Eric Holder told Reuters he was willing to consider loosening antitrust enforcement of the newspaper industry. While couched in terms of production and distribution cooperation between newspapers, those familiar with the industry know these are back burner items. The only issue that counts is getting unanimity on the online paid content issue. But coordinating between competitors is an anti-trust violation that can land publishers in jail. Did newspaper publishers take Holder up on his pass? It appears so.

In late May 2009, Atlantic.com’s James Warren broke the story that the NY Times and major newspaper chains were attending a secretive and unannounced meeting, entitled: Shhhh. Newspaper Publishers Are Quietly Holding a Very, Very Important Conclave Today. Will You Soon Be Paying for Online Content?

He goes on: Here's a story the newspaper industry's upper echelon apparently kept from its anxious newsrooms: A discreet Thursday meeting in Chicago about their future."Models to Monetize Content" is the subject of a gathering at a hotel which is actually located in drab and sterile suburban Rosemont, Illinois; slabs of concrete, exhibition halls and mostly chain restaurants, whose prime reason for being is O'Hare International Airport. It's perfect for quickie, in-and-out conclaves.There's no mention on its website but the Newspaper Association of America, the industry trade group, has assembled top executives of the New York Times, Gannett, E. W. Scripps, Advance Publications, McClatchy, Hearst Newspapers, MediaNews Group, the Associated Press, Philadelphia Media Holdings, Lee Enterprises and Freedom Communication Inc., among more than two dozen in all. A longtime industry chum, consultant Barbara Cohen, "will facilitate the meeting."One hopes it displays the same sense of purpose as, say, troubled world leaders did at Yalta in 1945 or, in a rather less respectable sector of the economy, beleaguered mob bosses did at a legendary Apalachin, New York, confab in 1957. Read it all. It will curl your hair.

Enter the Washington Post, which, it appears, was not a participant in the Chicago meeting. It has pretty much avoided the paywall issue in the past other than to say it has no plans for paid online content, similar to last week’s statement. It has become the spoiler, especially for the Times. Both have significant national and international coverage and following. If the Times goes the pay route and the Post doesn’t, online Times readers will gravitate to the Post, jeopardizing the Times’ reputation as the “newspaper of record.”

With the Post a holdout, something concerns me. It is the possiblity the administration is pressuring the Post to conform. The Post owns a substantial interest in Kaplan, a for-profit college operation. It is a highly profitable enterprise that contributes heavily to the Washington Post Co’s bottom line. Since this summer Kaplan and other for-profit colleges have been viciously attacked the in same way as the health insurance companies and bankers. And in at least one case it has led to a downgrading of Post stock. Coincidence? Maybe.

My guess is the Post is not being an opportunist. I think it has more to do with the legal aspects. While Holder may signal an easing of anti-trust enforcement, the law is the law. Another administration might not be so tolerant, and two years is not that far away. And there still remains the potential for civil suits that Justice can’t control.

Note: The last two paragraphs have been edited (12/15/2010 3:00pm).