Everything is free now
That's what they say
Everything I've ever done
Gonna give it away
Gillian Welch, "Everything Is Free"

Newspaper stocks are in the crapper. I know about this because my wife works for McClatchy Newspapers, which closed Friday somewhere around $20.50 a share. A couple years ago you would have had to pay upwards of $75 a share for the stuff. That's not good.

Record companies aren't doing well, either. While most of them are part of major conglomerates--looking at stock prices won't necessarily tell you anything--they're bringing down their companies. In fact, most major labels are shitting money at astounding rates. Things are so bad that Sony has hired Rick Rubin, the pre-eminent producer of our time, to run the business side of things. That's really not good.

Economics is pretty clear on the whole supply-and-demand thing. The more people want a product, the more it costs. The idea being that greater demand reduces supply. But the Internet provides a limitless supply. Which means that the product must be free.

This is the conundrum facing both newspapers and big record companies. They have valuable products that are in high demand. And it's really easy to get those products for free. And that fact is not changing any time soon.

The future looks better for newspapers, mostly because newspapers never relied on sales to make money. Newspaper sales are expected to cover costs, and advertising sales drive often ungodly profits--Wall Street isn't impressed unless a newspaper company has profits of 30 percent. Newspapers are hurting not because of falling circulation (which is happening, but at a very slow rate) but because Craig's List has pretty much emptied out Classified sections across the country.

I know about this, too. We sold our house in Durham in two days--the week before Christmas. We put an ad on Craig's List, a couple came by, the couple made an offer--we sold the house. Really, really easy. No Realtor fees, and because in North Carolina requires all sales to be overseen by a lawyer, no extra fees of any sort. I think Craig's List is great. It's kinda hurting my wife's business, but it's still great.

The Internet has cheapened the price of information, from actual news to advertising--classified and otherwise. But these things still aren't free. Newspapers are slowly beginning to figure out how to leverage their significant caches of information. It's possible that newspapers may cease to be printed someday (an environmental improvement, to be sure), but newspaper organizations will be around for a long time. No one else is better at getting the information that feeds the blogosphere and other Internet communities. Newspapers simply need to figure out new ways to get paid.

Same goes for the record companies. Some, including Rick Rubin, believe that subscriptions are the way to go. Consumers pay, say, ten bucks a month and they can listen to whatever they like. It's a nice idea, but if lots of people really wanted to do that, satellite radio stations Sirius and XM wouldn't be chomping at the bit to merge. I think the record companies need to find a Plan B or even Plan C.

Of course, independent record labels are thriving with the advent of the Internet. Amazon and smaller retailers like CD Baby (which specializes in self-released albums) have made it profitable to keep even modest-selling albums in print. File-sharing seems to have actually spurred more sales for some small labels. And weekly newspapers (alternative and "mainstream") are making more money than ever. One reason is that those newspapers are free. Bigger circulation means higher advertising rates. Suburban weeklies are monstrous cash cows, and some of them even provide solid news. I wouldn't put the Gazette, which lands on my lawn every Wednesday morning, up against the Post in general, but it does a pretty good job with Montgomery County news. And, y'know, that's where I live.

Daily newspapers and big record labels have a lot of work to do. But I wouldn't count them out. Major industries don't go away overnight. When challenged, the successful manage to change and survive. Some even get bigger. Back in 1950s, the Washington Post was a relatively small local paper. Philip Graham married the daughter of the owner, became publisher and started the paper on the arc it is still traveling. That wasn't even 60 years ago. Now the Post is one of the most successful (and largest) papers in the country. In the next few years, some papers (and, more likely, newspaper chains) will figure out better ways to make money without diluting their product. Maybe dailies will become free, though home delivery will still carry a charge. That's my prediction.

What I'm saying is that economics hasn't been turned on its head after all. Products in high demand will, eventually, demand high prices. Solid news and good music in the home are two of the greatest products of the 20th century. I don't think they're going away any time soon.

Jon Worley almost minored in economics, but he decided to take a course on the New Testament instead.