Almost a year ago, on March 23, 2009, Advance Publications announced that it would shut down The Ann Arbor News later that year. Ann Arbor Chronicle publisher Mary Morgan wrote a column about that announcement: “Why We Grieve The Ann Arbor News.”

James "Jay" T. Hamilton's book, "All the News That's Fit to Sell" is available on Amazon.com. (Image links to Amazon)

It would be fitting and proper to think back and reflect, ponder, and meditate again on the closing of The Ann Arbor News. But in that column, Mary writes about “moving toward a future in which the landscape of [her] life has unalterably shifted.”

So this month’s Milestone is more about moving forward than looking back. And that’s one reason we’re throwing Chronicle readers a curve ball: Flouting the usual alternating batting order for editor and publisher, I’m stepping to the plate two months in a row to take a hack at the Monthly Milestone.

To make this column easier to read, I’ll tell you what’s coming – I’ll be concluding with a straight sales pitch. [If you're not a fan of baseball then, for crying out loud, be a fan of spring ... spring training games start in a few weeks.]

The pitch I’ll make is informed by a trip I made to Washington D.C. a couple of weeks ago. At the invitation and expense of the Miller Center of Public Affairs at the University of Virginia, I attended a session of the working group they’ve established there on media and governance. It’s a group that includes representatives of the Federal Trade Commission and the Federal Communications Commission – they’ll be putting together a report for Congress on existing and new media, and their role in providing information on governance issues.

I shared with the group our experience here at The Ann Arbor Chronicle. But greater than any value I provided to them, I’m certain, is the value I took away from the meeting. This column is mostly what I learned from Duke University professor of political science and economics, James “Jay” Hamilton, who had also been invited to address the working group.

Before diving into Hamilton’s presentation, here are some bullet points extracted from the briefing memo on the Chronicle, which I’d prepared for the Miller Center working group. I drew a distinction between newer online readers of news and information and “veteran” online readership – people who’ve been reading, writing, commenting online and using tools like browser bookmarks and RSS readers for the better part of the last decade:

Expectations of Veteran Online Readership

• Rapid access to information. Getting the nugget of news fast is really important to these readers. Why? Because technology makes it possible.
• Simple and brief presentation. We’re told repeatedly that, according to market research, people don’t want to read more than a hundred words at a time. Why? People value breadth. It’s a function of the technology – when there’s such a huge volume of information accessible using digital technology, it fuels a need to condense, and summarize.
• Unfettered ability to express opinion everywhere. Robustness of comment threads are seen as a metric of success. Readers expect online publications to invest considerable resources in managing and moderating comments.

Flouting Expectations of Veteran Online Readership

The Chronicle flouts each of those expectations. Some specific examples:

• We’re slow. A story we write about a city council meeting on Monday evening might not be published until Thursday.
• We’re verbose. We’ll write 4,000 words about a meeting of the Downtown Development Authority.
• We don’t care much (only some) about comments.

In the briefing memo, I outline how the same technology that underpins the expectations of veteran online readers also allows us to pursue our editorial mission. One example is the fact that for an online-only publisher, there is no “news hole” to fill on a printed page. From the point of view of technology, then, there is no pressure for a typical story to be published any sooner than when the reporter is done writing and an editor is done editing it.

But does it pay to be slow and verbose? Or rather, can it pay to be slow and verbose? This is the kind of question that Prof. Hamilton, as an economist, is equipped to illuminate. Hamilton’s book, “All the News That’s Fit to Sell” certainly helps shed some light on it.

One of the first observations that Hamilton made at the working group meeting was this, though he did not phrase it exactly this way: You can sell the same news online that everyone else is selling, but only if you’re willing to set the price at zero.

Here’s why. Let’s say that companies selling news and information decide to restrict the availability of that news and information to those who pay them for it. For online publishers, this means setting up a system – a “pay wall” – that prevents readers from getting access to articles on the website unless they pay for that access. Once that system is in place, what is the cost to the company of adding one more customer?

It’s basically zero. That’s partly a function of the fact that news and information is a public good, not a private good like a glass of water. Public goods, like news and information, can be consumed by multiple people without preventing other people from consuming those goods. A private good like a glass of water is not available to others once I drink it.

So the cost of adding one more customer to an online pay-for-news system is zero – you don’t have to produce “more of” an online news article in order to accommodate additional readers. This cost of adding one more customer is what economists call the “marginal cost” of production. And that’s important, because in terms of economic theory, here’s something that economists know: In a perfectly competitive market, price will equal marginal cost. So a realistic estimate is that the price of online news and information will equal the marginal production cost … zero.

One point that Hamilton highlighted is that this conclusion is “path independent.” That is to say, the reason the price for online news and information has to be zero is not because people have over the years come to expect free access and it’s too late to change their habits. Otherwise put, it wouldn’t make any difference if we went back to the early days of the Internet and established, by convention, that all content must be protected behind a pay wall. An economic theory of online news and information suggests we’ll always get a market where price equals zero.

Conclusion: You can’t charge a price for online news and information in a competitive market.

Even though we don’t and won’t charge a price for Ann Arbor Chronicle content, there’s an important lesson here. The conclusion that price equals zero depends on the idea that the market is competitive. It’s only a perfectly competitive market if every producer of news and information is offering the same news and information. It’s therefore in The Chronicle’s best interest – from the point of view of economic theory – to continue to offer our readers the kind of detailed and comprehensive coverage that we do, because it’s not available elsewhere.

But readers don’t think in terms of economic theories. Readers have information demands, and their willingness to pay for information hinges on whether their demands are being met. Hamilton distinguishes among four kinds of information demands – those of consumers, producers, entertainment seekers, and voter/citizens.

By consumers, Hamilton means people who are thinking of purchasing some product, and are looking for information about which merchants are offering it for the cheapest price, or about which product has the best safety record. Information about cheapest price or safety represents a benefit to consumers they can’t otherwise get. By producers, Hamilton means people who need the information to do their jobs. If it’s your job to look for legal precedents, you would get a benefit from having access to information about court cases. By entertainment seekers, he means mostly what it sounds like – information that provides the benefit of being simply fun.

So for the first three categories, it’s pretty clear that you don’t get the benefit if you don’t get the information. And if you want the benefit, you might be willing to pay for the information.

But what about voter/citizens? What benefit do they get from the information that might be available? Here, Hamilton draws on the work of Anthony Downs in describing “rational ignorance” – it might be perfectly rational not to  invest time and effort in  becoming better informed about civic and public affairs. Becoming better informed about public affairs offers only a small prospect to an individual of getting a benefit – say, of affecting public policy through their one vote.

So what kind of person does perceive a benefit from getting  public affairs information? Hamilton identifies three Ds: (i) people who get a benefit because they feel it’s their duty; (ii) people (political junkies) who benefit from the information because it’s a diversion; and (iii) people who enjoy the drama surrounding such information.

If the three Ds are the kind of people who might be willing to pay for information about civic affairs, then the bad news is that the three Ds are a fairly small set of people.

Here’s two reasons I do not see this as a dream-crushing fact. First, there’s an additional, fourth D that makes the set of people a little bit bigger: People who want to delegate the work of being informed about civic affairs to someone else. These are people who take comfort from knowing that someone is attending the meetings of public bodies and writing down what’s said and making some kind of sense of what happens there.

Second, a locally-based news organization like The Chronicle doesn’t require the kind of massive infusion of revenue needed to sustain layers of executive management and a financial return for out-of-town owners.

Still, our revenue needs to grow, in order to bring additional working journalists on board and to ensure that The Ann Arbor Chronicle will persist as a permanent part of the Ann Arbor media landscape – even after its local owners’ eventual demise. Revenue from Chronicle voluntary subscriptions helps support owners who are themselves working journalists, as well as our freelance writers.

To all Chronicle readers who have already subscribed voluntarily: Thank you. To those Chronicle readers who prodded us to make subscribing voluntarily an option: Thank you. To those Chronicle readers who suggested that what we should be selling is journalism: Thank you.

And to those readers who opt to subscribe voluntarily now: Thank you.

That’s my pitch. Play ball!