Here’s what little I know about David Sullivan — he’s a journalist in Philadelphia — I believe a copy editor — and primarily a person of print lineage — and new to blogging.

And in his first week of blogging about the newspaper business — and keep in mind, Sullivan is a newsroom guy, not a business-side guy — he’s pretty much nailed the very issues we’re all grappling with, such has how do we really measure audience, what is our real online audience size, what is our audience worth, how do we compete with free, and where our competitors come from and what they do.

And all of that in this one intelligent post.

Most importantly, he notes that a family-owned paper in Watertown, NY has dropped it’s pay wall on its web site (a significant act to contemplate for the cranky old journalists who think everybody should pay for everything).

The Watertown Daily Times operates in an isolated market — almost an hour north of Syracuse and hours away from anywhere else. Watertown, like most of outstate New York, has had hard times, but the Times as still managed to keep (in 2007 Year Book) a daily circulation near 29,000, down from 37,000 10 years ago — not as hard a decline as a lot of papers, but still in the 2o-to-25-percentish range.

The Daily Times, being a family owned newspaper and thus having neither stock analysts nor corporate overseers, decided to put the Web content behind a wall. Last week it threw up its hands and dropped the wall. Victory for the Web!

In a way. The Times subscription Web site had 1,000 paid subscribers. Which means 29,000 households took the print paper and 1,000 took the Web site, meaning — 7,000 of the circulation loss was people who simply had no use for paying for the Watertown Daily Times in any form.

David points us to a local news aggregation site that appears to be in direct competition with the Watertown paper, newzjunky.com. It’s success (more on that below) is object lesson for newspaper sites that fail to take the web seriously.

Newzjunky.com dominates the WatertownDailyTimes.com both in audience and advertising. It has way more local information than most local newspaper web sites, and all of it free, and none of it coming from the Daily Times (not a single link to a Daily Times article).

Newsjunky.com has managed to secure obits direct from funeral homes as well as other hyperlocal information. From their it acts as a super aggregator of links to other news sites with stories it believes will interest its audience (not just local news).

As I said, NewsJunky.com dominates the WatertownDailyTimes.com. Look at this chart from compete.com:

Never before have I seen a newspaper.com get trounced in its own market by any competitor — not even a TV station. NewsJunky.com has twice the traffic, and is growing faster, than the local daily’s news site.

Sullivan notes that even with NewsJunky.com giving it all away, there are still 27,000 households in Watertown willing to pay for home delivery. Fine. But according to compete.com — which I believe tends to under count audience, but is also measuring non-local audience (and one more caveat to that: numbers I’ve seen from Belden Associates suggests that 80 percent of a newspaper.com’s traffic is local) — more people visit NewsJunky.com on a monthly basis than subscribe to the newspaper.

If that doesn’t put a nail in the coffin of the “people should pay for our news” argument, I can’t imagine what will.

So if our only chance at survival is to give news away for free, how do we survive? Obviously, advertising is going to be a big part of it (though not necessarily advertising as packaged goods media has traditionally sold). Any such model requires much larger audiences than we’re currently getting. And, so, again, I refer you to this piece by Kevin Kelly about unlocking true economic value online. And here again is my own post inspired by Kelly.

UPDATE: Additional thoughts immediately after posting.

First, I bet NewzJunky has a fraction of the staff — lower overhead - than the Daily Times. It may, in fact, be a one-person operation.

Second, to those who object the idea that sites like this can only exist thanks to MSM (look at all the links to other news sources), well, then, yeah, and your point? Not all local information requires reporters (look at Everyblock) to gather. Even if the MSM sources all go out of business, sites like NewzJunky still have a sustainable business model. And when MSM sites go out of business (if they do), all the more audience and advertising for sites like NewzJunky. More revenue means more staff for original reporting. Even if such a site isn’t staff as well as the daily newspaper it put out of business, the daily newspaper is still out of business. This is how disruption works.

The point is — ignore the concept of sites like newzjunky at your own peril. Feel free to marginalize the threat in your own mind, and say, “it can’t happen here.” Tell that to the publisher in Watertown.

UPDATE: In an e-mail, Jim Romenesko passes this along: “NewzJunky was founded by one of my early tipsters (starting 1999), a guy named Stephen Smith. He *is* in fact a news junkie who, I believe, runs the site on his own. I don’t hear from him as often these days probably because of his increased workload and success.”

Interesting stuff from Vin Crosbie (when does Vin ever write something that isn’t interesting and insightful?) on paid content:

People would be willing to pay a subscription fee for a service that delivers news to them online; but not for a service that doesn’t exactly meet their needs and interests, that sends exactly the same package of news to everyone. Paid content isn’t dead; just payment for the traditional ‘one-to-many’ package of content is.

While it isn’t necessarily wise to base business decisions on individual experience, I can’t imagine ever paying for a customized news service.  I can’t keep up with all the free content I should keep up with now.  That said, I wouldn’t want a service that whittled it down for me, cause I think I’ve whittled it down for myself as much as can be done intelligently.

But maybe more general news consumers would in fact appreciate such a service.

Can an existing media company provide it?

And read what Vin says about a major weakness of newspapers as a general interest product in the age of niche interests — hint, just duplicating it online is a bad strategy (like I said before).

File this under “content wants to be free:” TechCrunch reports that Yahoo! is moving away from premium services.

Nothing will be shut down; however, people and money (marketing dollars) are moving to other areas of Yahoo. The company will focus on free content over premium services, which are not performing well (music subscription sales in particular are said to be lagging).

While I applauded NYT’s dismantling of TimesSelect as a paid service, I have thought some premium services make sense, such as WSJ.com and ConsumerReports.com. The nature of the businesses lent themselves to subscription models.

However, if Yahoo! can’t make a go of it selling music online and sees little future in paid content, you have to wonder if eventually free just wins completely.

Mark Potts seems to confuse the idea that believing paid content models are a bad idea with some sort of romanticism about journalism.

Never mind, that expecting people to pay for general news is, simply put: A bad idea.

Ironically, it’s the journalistic romantics who most often scream, “oh content is worth something! People should pay for it, damn it!”

It reminds me of the homeless man on the street corner asking passersby for spare change. He has no more leverage over their pocketbooks than the journalists whining about free content. They used to say, “You can’t get blood from a turnip.” You can’t pry open a pocketbook that is determined to stay closed, no matter how much you might wish otherwise.

Wishing has never made for good business plans.

Look, it’s a tough reality, but either we figure out how to make our online revenue through advertising or we’re screwed. Paid content is just not an alternative. Mr. Potts sites examples of seemingly successful paid content sites, but all prove how hard it is to make paid content work, because all are specialized verticals with little competition (possible exception, ESPN, and I question the level of their success). They are also sites that are national in scope.

There is no evidence that local online news drives the kind of broad based passion needed to convince substantial numbers of people to subscribe it.

Sure, people subscribe to the print edition in substantial numbers, but as we’ve discussed before, they’re really only paying for delivery, not the content. Users do pay for delivery online, just not to the newspaper company. They pay it their broadband provider.

Like Mr. Potts, journalism long ago lost it’s romantic grip on my soul. To me, this is a simple business calculation.

Previously: Reasons why paid content is a bad idea

Apropos of nothing, I want to hit on the paid content debate one more time.

In many post, but particularly this one, I’ve listed a number of reasons why paid content for news is a bad idea.

Here is more of the same, but restated: People won’t pay for information. Entertainment, yes; information, no.

If you accept the the premise that there are two types of content, informational content and entertainment content, it’s clear that paid informational content — such as news — is facing a much harder go of it than paid entertainment content.

People will pay to subscribe to HBO, but let’s see CNN try that model. You and I both know, that if CNN wasn’t bundled in with other channels, people wouldn’t pay for it (not in significant numbers). People still pay to see movies in theaters (one of the top activities of young people), and games, of course, are a big deal. but every type of paid news service is suffering (though there are exceptions, such as the New York Daily News).

I’ve wondered how high-priced paid newsletters are doing this days. There was a time when I subscribed to the Kiplinger California Newsletter, but with blogs out there like Rough and Tumble, why would I need it now (not to mention that I no longer live in California!)?

Such premium newsletters used to be a big business, but I would like to know how they’re doing now.

For example, within my own industry, with my corporate position, I would be the exact target audience for a $1,200-per-year newsletter subscription. But in a blog-driven, RSS-fed information world, why would I pay for media news and information? I get more for free (and high quality) than I have time to read now, so why pay for something that isn’t likely to tell me anything I don’t already know? I can tap into some of the smartest, best informed minds in the industry any time I want, and all for free.

The mixed bag in paid content trends: music, where CD sales fall and there is more free music than ever, but music still sells; and books, where informational books continue to sell.

With music, the greater diversity of choices and distribution outlets favor the consumer, driving down prices.

With books, we’re still seeing ways in which digital distribution is disrupting traditional informational book channels, whether it be encyclopedias or computer programming reference books.

The only time I buy an information book now is either the author has struck on a great premise (exhibit A, The Long Tail by Chris Anderson); or online resources haven’t yet caught up to the specialized interest I need. Here, my example would be a book on New York gardening I bought recently. I can find lots of online information about gardening, but more general that what I needed to start out my New York gardening experience.

Even with these variants and exceptions, the paid model for information content is on the wane.

Advocates of paid content can’t be happy to know that the two big “success stories” of paid news are in jeopardy. If Murdoch succeeds in acquiring WSJ, expect the paid walls to come down. And rumors are the NYT is about to drop TimesSelect (which as we’ve discussed before isn’t really working).

When I hear or read of newsroom types advocating paid content, it’s clear that the main impetus isn’t research or careful thought, but more, “we should force people to pay, damn it, because what we do is important and special”

But in looking at digital distribution trends, it’s clear that the power to force people to do anything, especially with their money, is a pretty dumb business plan.

We need a well informed society. If we are going to continue in that mission its going to mean: Free content. It’s going to mean free content that is easy to obtain through multiple platforms and channels (not just our own) and often in segments that are shorter, more digestible and linked to alternative view points than what newspapers have traditionally offered.
The future is free. It is distributed. Now we just need to figure out how to pay for it.

Here’s more evidence that people won’t pay for online content: CNN is killing Pipeline as a paid site.