Making online media pay: Demand Media vs. The Texas Tribune

Bruce Watson

This has been a tough year for the media business: as august newspapers and magazines like the Seattle Post-Intelligencer and Gourmet have closed their doors for good, other outlets are scrambling to develop strategies that will guarantee long-term economic survival while allowing them to continue producing quality content. This month, Rupert Murdoch entered the fray, going toe to toe with Google (GOOG) over advertising revenues and access to News Corp.'s (NWS) online newspapers. As he tries to work out a revenue-sharing scheme with Microsoft's (MSFT) Bing, it will be interesting to see how the Internet's low-cost distribution structure ultimately affects the production of news and other media.

Traditional newspapers and magazines use three revenue sources -- subscriptions, newsstand sales, and advertising -- to fund highly expensive news-gathering, writing, and editing operations. While some publications like Murdoch's Wall Street Journal have managed to make paid content work, most Internet sites provide content for free, which puts funding solely into the hands of advertisers. The question is whether Internet ads can generate enough revenue to fund media production.

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