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Wednesday, February 11, 2009

And I thought pharmacies had problems ...

In yesterday's New York Times Michael Kinsley had an article ("You Can't Sell News by the Slice," Tue, Feb 10, 2009) detailing the woes that prevail amongst the newspaper crowd. Seems they lose money on every paper due to paper and ink costs (not to mention employment, rents, health care, etc), and advertising dollars, normally their sweet spot, are spiraling down the toilet. In a previous issue, Walter Isaacson, former managing editor of Time, had advocated "micropayments" on the Web issues of newspapers, allowing a paper to accrue a nickle or dime for a "click" on an article. Kinsley says even that income wouldn't amount to enough to save the papers. Seems they are dinosaurs awaiting extinction where a few will inevitably survive as evolved journalistic forms on the Web.

So why does this concern me? It just strikes me as being parallel to what pharmacy went through a few decades ago, when it allowed insurance companies to give them a micropayment per script in exchange for taking the plans in the stores. Of course pharmacies lost money (and still do) on every prescription, but the thinking was that if you also sold the patient (now a customer) a tube of toothpaste then you'd get a profit. So pharmacy became a loss leader (as well as a lost leader). Like newspapers are now.

Pharmacies now sell medicine and charge for that medicine. But the salaries, the electricity, software, hardware, employment costs, these are losses. I remember reading of a study by Rite Aid back in the early 1990's I think, where an empty vial would cost a pharmacy about $6. That is without any medicine in it. Just an empty vial. Nowadays it's probably more like $10. So when Walmart (and all those copying their program) sells drugs for $4 and claims that it is still making money, well, they're lying. But that's their business plan and they're welcome to it. But they are lying.

So pharmacies sell a content--drugs--and give away information free. Newspapers are trying to charge for information while giving away their content--paper and ink. Inevitably more and more information will find its way to the Internet, so there is only the information. But that is where everything is supposed to be free.

I'd hate to be the owner of a newspaper now. That's almost as bad as being a pharmacist.

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