Disrupted News

New York Times fast facts and future

2010-04-27T14:01:00.000-07:00

So, my love affair with the New York Times continues despite my rapid expansion of consciousness in alternate news sources. I just feel at home when I am exploring the world through their website. So, I will devote a post to recent happenings at the New York Times company, accompanied by my commentary of course.

So, the good news... the NY Times posted a quarterly profit in Q1 2010! Hold the champagne though, total revenue dropped by 3.2 percent. Unsurprisingly, the decrease was driven by loss of print advertising revenue (down 12%), and mitigated by an increase in digital revenue (up 18%). About.com (Owned by the NYT Co.) posted stronger ad gains than the digital news division (up 30% and 11.2% respectively). With these trends likely to continue, it is not hard to see the day that the majority of revenue will come from digital advertising. This fact will prompt the company to make the very real decision whether the high fixed costs of printing are warranted.

Of course, I see opportunity here. Printing technology has already advanced to the point we can print a 300 page bound book in under 4 minutes. While still expensive, we know what happens to the price of a technology. If you want a paper, pull up the printer ready version and print it out at the office, the newsstand, coffee shop, or even at home if it becomes cheap enough. Thus, the Times has just exported the costs of printing, hell, they can even own the machines and lease them out for a profit.

Onto the next topic... the ipad application. Initially, an editors choice edition has been offered for free, soon to be followed by a premium paid subscription model. So far reviews have pretty consistently placed the free app below expectations set by the Times leadership. Slideshows, sharing, and navigation have not attained revolutionary status, but I'll give them some time to develop the paid model before I pass judgment. But really, the developers need to wow customers with some features that have never been seen before.

Again, I am tempted to put my ideas in the pot... I really want an easily navigable, comprehensive, and commented/tagged record of all the articles I read. There are many times when I spend 15 minutes finding an article i read three weeks ago so I can remember the details or send it to a friend. Also, while we are on sharing... a great way to get wider adoption of the premium ipad app would be drag and drop sharing with other paid users. I can just point to your name and that article will pop up in your reader when you sign in... way better than emailing! The algorithms or friends that recommend articles will create a valuable reason to use the paid model.

Moving right along...Ken Doctor wrote an interesting piece called "New York Times Local 2.0?" on paidcontent.org and his blog. The NY Times is planning to offer a local edition in 10-15 markets "relatively soon." I was intrigued... local digital advertising is much more lucrative: Joel Kramer of the MinnPost reports he gets $15/thousand impressions for local and $0.50/thousand for a national audience (pg 10). The times could easily set up some local reporters, put those stories front and center for IP addresses in that city only, and sell some intrusive but lucrative local advertising. I just thought, "FINALLY!" I almost screamed when I read further and found they are planning to PRINT local editions. Why? Why? Why?

The Times has such a great brand, fantastic content, and wide internet readership... They are the Titanic chugging through a huge storm, well positioned to make it, but not guaranteed. I just hope they will start making smarter little decisions that will actually get them to the other side. If they don't, I will tell my grandkids stories of the time I spent with the Times... of course they will have no idea why they couldn't see the writing on the screen.

Building the wall

2010-04-20T13:43:00.000-07:00

First of all, (Eric Schmidt and) I don't think that paywalls are the solution to the financial problems at news organizations. Subscriptions have never been the main revenue source for newspapers... it has always been advertising. Steve Yelvington claimed at a recent University of Minnesota Conference on New Economic Models for News, that "journalism never had a business model of its own." (pg 9) Linking businesses and customers was the real revenue generator; "journalism" attracted the customers, and customers attracted the money. My thoughts are that news organizations will either need to become better at linking businesses and customers, or find another value proposition to latch onto.

But since there is so much talk about paywalls these days, I thought I would address some of the many moving parts to setting one up.

First order of business, what kind of paywall do you want? There are multiple models: all content is behind a paywall, some content is behind a paywall, or users get a set number of articles before hitting a paywall. With all content behind a paywall, the publication is likely a scholarly journal (like this MIT article I was denied access to) with a niche market and highly unique content. Many newspapers have experimented with having select content available for subscription, including Times Select and the Pittsburgh Post-Gazette. The times announced it is planning to move to the third model in 2011. I think it has a chance to be moderately successful, but will not be the silver bullet that slays their financial woes. They will be walking a very fine line between generating additional revenue and losing advertising revenue. A good illustration of the fragility of the model is the Paywall game. It allows you to enter in your assumptions and estimates (guesses) for consumer behavior at the foot of the wall. Small changes in subscription and readership loss (<10%) href="http://www.malcolmcoles.co.uk/blog/paywall-marketing/%20" target="_blank">Malcolm Coles points out that the screen the site uses to inform users that they have just run into a wall can have a big effect on their consumer behavior. Personally, I do not want to see that little lock icon anywhere I click... and I don't think I am alone. Visually appealing paywall pages that actively promote the value of the site within will be part of a successfully crafted wall. Newspapers are now selling the content, they would be unwise to ignore the huge body of human wisdom surrounding good salemanship.

Another issue to consider is search engine listing. Google has policies against displaying certain content to their web indexers and different content to users going through the link. If a site has a subscription model they require the First-Click-Free model, where users get to view that article in totality, but any subsequent clicks will hit the wall. I have personally gamed this system by reading one article, finding the next article I wanted to read, and then entering its exact name into a google search to return for my "first" time. The 25 extra seconds it took me were well worth not paying infinitely more than FREE.

And no paywall post could be complete without an honorable mention to Rupert Murdoch, hard charging his way into the subscription model with the Times and the Sunday Times of London. He has claimed that if he can get just 5% of current readers to pay 2 pounds per week, he can generate 6.24 million pounds per year. But he does not mention how much advertising revenue would be lost from losing 95% of your readers. I cannot imagine this glaring fact has escaped the attention of such a shrewd businessman, but can imagine his anger at losing money has caused him to gamble.

The die have been cast, all that remains to be seen is who picks up the money off the table... newspapers from the other side of a paywall or new organizations on this side. I know who I'm betting for... do you?

Non-profit news

2010-04-14T18:48:00.000-07:00

Creating non-profit news outlets is an increasingly popular idea in the journalism world (There are far too many examples to link to here). Since a well functioning "press" is essential for a functioning democracy, the thinking follows that news production is a quasi-public good. This post will address 1) legal issues for non-profit news, 2) operational issues at non-profit news, and 3) the potential size of the footprint of non-profit news.

First and foremost, non-profit news outlets face several unique legal issues. (Full disclosure: I am not a lawyer and never will be... this analysis is intended to provoke discussion, not conclude it.) A tax-exempt 501c3 organization faces restrictions on both activities and revenue generation. The organization must have a mission that is "charitable" (not necessarily aimed at the poor) and devote the majority of it's resources to fulfilling that mission. One of the more successful non-profit news organizations, the MinnPost, states its mission "is to provide high-quality journalism for news-intense people who care about Minnesota." This may not seem particularly charitable or educational, but there is precedent for "investigative journalism" to attain non-profit approval. There is also legislative movement to explicitly allow qualified news organizations 501c3 status. For more in-depth information, read Harvard lecturer Marion R. Fremont‐Smith's analysis of the legal issues facing non-profit news. In short though, it seems like journalistic missions will be sufficient.

Perhaps more importantly, non-profit organizations are prohibited from endorsing political candidates or engaging in lobbying activities. This will limit the scope of opinion pieces, and relegate non-profit news to less political news gathering activities. This contradiction between investigative journalism to inform the citizenry and the apolitical necessity of tax-exemption is VERY important in this debate. Anyone predicting that non-profit news will become dominant must explain this in far greater detail than I have seen yet.

Legally, non-profits also have restrictions on revenue sources. There are complex restrictions, but my (inexpert) interpretation is that they have to get at least 1/3 from donations, and non-mission revenue must be insignificant. This has serious implications for non-profits seeking stability through earned revenue, which includes advertising. They will have to walk a fine line, and must take extra care when designing a growth and sustainability strategy.

To illustrate a presumably legal and working strategy to creating non-profit news, let's look at the MinnPost more closely. Capital to establish the organization started with $850,000 from four foundations. For operating capital in 2009, they generated $217,000 from advertising (36% increase over 2008), and $458,000 from member donations (29% increase over 2008). They throw a successful annual fund-raising event called the MinnRoast. Members take pride in being branded news-junkies. But perhaps most importantly, they produce high-quality journalism with a cost structure that has the strong potential to be supported through operations (earned and donated).

Other organizations usually mentioned in the same breath as the MinnPost are The Texas Tribune, Pro Publica, and more recently Fair Warning. Check them out to see how quality news can be delivered by smart, motivated, and dedicated leaders.

As for the future footprint, non-profit news will probably play a significant, though non-dominant role in journalism. Unlike the Newsosaur, I don't think that it needs to entirely replace for-profit journalism to exist; it just needs to carve out a sustainable niche. My views are far more in line with John Thornton, who also sees a future of the model when the right people are at the helm. There is certainly no silver bullet the evolving issues in news, and there is no reason to think this won't be a piece of the puzzle. Just like in any other dynamic industry, there will be lots of failures and a few successes; those successes will then become indispensable to readers, and life without them will be unimaginable.

The future of local news

2010-04-11T19:32:00.000-07:00

The well documented decline in newsroom capacity at local newspapers has lots of journalists scratching their heads... It also has lots of journalists and businesspeople scratching the surface to see what is underneath.

In early 2009, Leonard Witt won a $1.5 Million grant from the Harnisch Foundation to start the Center for Sustainable Journalism at Kennesaw State University in Georgia. One of their projects, Community Supported Journalism Northfield, is a pilot project that is exploring the potential of small local news operations. A Representative Journalism (Rep J) reporter has been assigned to the Northfield area to report on local issues through her blog. The concept is to create a community of independent reporters, citizen journalists, community members, and media organizations that collaborate to decide which stories are relevant.

The funding is to come from voluntary payments of members of the community. While it is far from assured that revenues will actually be sustainable, this model has distinct advantages over the Miami Herald experiment that failed earlier this year. In Northfield, funders will have input into the content of the local media: suggestions, meeting times/invitations, photos, etc. Second, with a much smaller city, there is a good possibility that the online community can actually strengthen local ties between leaders and citizens. Thus, the voluntary payment model is not just pasted on top of the old newspaper model, it is actually creating new value in local news.

Another group that is experimenting with "crowdfunding" of local news is spot.us located in larger cities in California. They use a different, and perhaps more appropriate model for generating contributions in larger cities. Journalists propose a story, and solicit funding from people who would like to see that story created. This model borrows heavily from the successful donation models of donors choose and kiva. There are several draw backs as I see it though... sensationalist and politically charged articles might be easier to fund, time sensitive stories are less likely to receive funding in time, and there will be a lower volume of completed stories.

Finally, a Google Advertising Operations executive, Tim Armstrong, has backed a site called Patch. The company is dedicated to creating participatory communities in the suburbs as the metropolitan newspapers cut back operations on their peripheries. Patch has a centrally located staff in New York City that designed and operates the common platform of each communities' "patch" (San Ramon, CA and Garden City, NY). There is a small professional staff in each community, and non-staff members can comment or post events to the calendar. Funding will come primarily from advertising (Google Executives in Advertising Ops are reportedly good doing that). With centralized sales and operations, no print overhead, and the economies of scale in promoting a patch network, the site has a fighting chance to provide local news coverage.

Check out these three options for local news, and let me know what you think of the format of the site, or the viability of the business model. Hyperlocal news has great promise, and the race is on...

Why the internet will not fail...

2010-04-09T14:47:00.000-07:00

A friend of mine posted this link, "Why the internet will fail," as his g-chat status, and I got a good long laugh out of it... then I got a good long think out of it. Three Word Chant posted this article from Newsweek in 1995. When you parse the issues that Newsweek brought up, they were serious flaws in the internet that simply had not been solved at the time. Among the issues raised are ineffective search, lack of secure money transfers, and lack of human contact. Each of these problems have been solved by Google, Paypal, and social media sites.

Newsweek saw the present much to clearly and saw the future much too dimly. The people in journalism who see the present decline in journalism as apocalyptic, see the world in much the same way. The smart ones will see the problems as they are (journalists won't be able to make money, commodity news won't be produced, and readers won't know who to trust), but search for solutions...

I certainly don't claim to know how all of this is going to shake out, but I have more faith in the creativity and perseverance of humanity than to think that these are insurmountable.

Federated Media is a site that is tackling the first issue: journalists and money. They handle the advertising for some of the largest sites on the web, including News 2.0 sites.

Metblogs (a federated client) is providing local news in over 50 cities around the world. They use 10 to 20 volunteer contributors in each city to provide an interesting alternative slant on issues that only pertain to that city. Even Pittsburgh made the list!

Who do you trust? That is a tougher question, and one that is constantly evolving. Is it primarily based on how many other people read it, credentials of the author, diligence of citations, or the fact that they agree with what you already think? I am very curious what new research, and new models will come out in the future.

So, fret not... The internet is not going to limit the information that people have access to... it is increasing it at an accelerating rate. The problems we see are solvable, and the people working on them are SMART(er than me).

The Miami Herald drops the ball

2010-04-06T07:39:00.000-07:00

I originally started this blog because I was frustrated that I could not send a voluntary payment to the New York Times. Since that time, my views on the subject of newspaper economics have developed substantially, but I was still excited to learn that The Miami Herald started to accept online donations in December of 2009. While it seemed a perfect experiment for my project, I was deeply skeptical of their methods.

1. There are two ways to message a "voluntary payment": donation or pay-what-you-want. As for-profit businesses, I don't think that newspapers have any business calling it a donation (long associated with charitable non-profits and tax-deductibility). Steve Outing, one of the few people who I have found who has advocated for an optional payment system, calls this the "tip jar" model. Unless you are a public or non-profit company, these requests are extremely weak. Labeling it as a donation elicited this derogatory report from an NBC Miami correspondent. After researching this matter and surfing the comment logs, I assure you that the outrage was not limited.

2. Perhaps more importantly though, the interface was horrendous. In order to donate, a reader had to click a link, and then proceed to enter all of their credit card information each time! How annoying. According to... me... one reason that the Apple app store is successful is that it is so easy to just touch the buy button. Consumer behavior is something that cannot be ignored when executing a new model like the online donation system.

Full Disclosure: While I did initially assess the Herald's efforts as sub-par, I also knew (through HuffPo) that the "experiment" has been stopped. Unsurprisingly, The Herald's effort did not generate substantial revenue.

Kachingle has an interesting idea, although I have not fully assessed how profitable/widely used they are. They have users who register a payment method with them, and can contribute to participating blogs or websites quickly and easily. The Miami Herald could have used this service, or a similar service. One of the major benefits of to the Herald of using a third party provider is that the Herald would be conferring significant benefits to Kachingle (Users and exposure)... and could use this to bargain for better terms or even money back! The lack of imagination in execution is astounding.

So newspapers, please don't half-ass a roll-out again, or two months later the Huffington Post is going to gloat.

The belated i-pad post... with a twist

2010-02-22T13:42:00.000-08:00

By now I am sure that everyone who takes the time to read blogs, including this one, has read extensively about the release of the Apple i-pad. In my quest to look back and post something about its release, I quickly googled "Apple i-pad newspaper" (sans quotes). The first link was to a Pittsburgh news aggregator called pittsburghlive.com. I now live in Pittsburgh, so I felt a little pride that the current center of the intersection of the i-pad and newspapers was nearby. It reported a Pittsburgh Tribune-Review article describing the new device and the New York Times application. The Times application is everything I would expect, but nothing more. The twist is that neither apple, the new york times, or any other newspaper had the privilege informing of this news. A website that relies on google to direct traffic to their site instead of prestige has figured out how to become number one. Searchability is more important than name recognition for commodity news.

P.S. The article is well written and comprehensive. It was exactly what I was looking for for my quick fix of i-pad newspaper news.

Social Media Push-Pull

2010-02-20T08:43:00.000-08:00

Last night I edited a communications strategy for my sister who works for a large philanthropic foundation. She is trying to use social media tools to better connect with donors, non-profits, and other foundations. She wants to raise awareness of her organization and the projects on which they are currently working.

I made a connection just a few moments ago to a nytimes article I am reading about public policy think tanks.... I have not even finished it, so profound was my urge to write this post. It describes two different models of think-tank: those that are started to challenge the orthodox structure of their party and the strategy (Heritage and Democratic Leadership Council) and those that were started to publish research and reports to support the party leadership (Center for American Progress). The former two changed the direction of their parties strategy, while the latter is called a "high tech message machine" for the current party leadership.

So the question is thus posed... Are internet tools best used to push an organization's work out to the world? Or are they best used to incorporate outside ideas to change the direction of the firm? I think that organizations are hoping for the former, but if they are unwilling to incorporate the latter, they will be sacrificing a major gain from internet marketing.

I am going to recommend that she try to use these tools not just to push, but also to incorporate disparate ideas into the organizational strategy. Use online tools to have people nominate their favorite new non-profit, profile their brilliant friend, and share ideas to improve the foundation world. Gathering contributions will empower people to participate and improve the organization. A communications strategy is no longer, "what are we telling them, " but is now, "What are they telling us!"

Interview with Rob Patterson - Insights and Predictions

2010-01-21T15:42:00.000-08:00

I had the pleasure of speaking with social media consultant Rob Paterson last Wednesday. In 2005, Rob was instrumental in fostering the cultural change at NPR that resulted in a new organizational approach to journalism. Through one year of meetings and group exercises, NPR changed is focus from broadcast to engagement. If you have ever listened to their numerous and high-quality podcasts, you have witnessed the fruits of the change.

Our conversation ranged over many topics, but our shared passion for grappling with "the future of news" kept us on task.

We agreed that newspapers as an institution are in trouble, at least partially as a result of their emphatic defense of the professional journalistic culture. I then asked if there are any newspapers that can make the cultural changes you advocate? Rob's response was, "It's too late!" They would need to disengage from print and reengage with digital media in order to remain relevant. No newspapers have the financial cushion to survive this transition.

To describe the reforms to date at newspapers, Rob used an analogy to naval warfare at the time the steam engine was being developed. Ships were built in modern styles with modern materials, but still engaged in battle at extremely close range. We can all imagine what would happen if a modern battleship waited until it was 10 feet from its target to fire. The New York Times seems to have all the modern trappings, but the organization is still set up to produce high-quality, high-cost journalism supported by print revenue sources. A quick and dirty analysis of the New York Times 2008 Annual Report revealed that online advertisements only represent 17% of their ad revenue 10% of total revenue. This information was not presented, so I derived it using revenue figures from 2007 and 2008 and the percent change of print ads (Down 16.7%) and online ads (Up 8.7%).

Our talk then turned to the future... the fun part. While most newspapers are no longer producing the content they once were, news has not gone out of style. This leaves us with a lowered barrier to entry for other players. In a digital world of infinite content, content is no longer what is valuable; finding relevant information is. The NY Times is still a great website for a snapshot of world events, but it could be better if they incorporated more content not produced in-house. New news companies will emerge that both provide more high-quality content and have their costs in line with internet revenues. By leveraging other companies with extensive resources who stand to gain from the new order (Read: Google and Apple), they can gain a strong foothold.

I immediately thought of the Lawrence, KS website that uses an automated technology to gather and organize most of their information. Just compare the website with the LJ World, think of massive difference in cost structures, and guess who will be around in 5 years. I predicted it will be the smaller cities that lose their news sources first that will develop the new way of doing business. Rob's response was, "The most interesting place in Chaos is the edge." That's exactly where I want to go.

To a hammer, everything looks like a nail

2010-01-19T18:21:00.000-08:00

In my first few weeks of research, I have spoken with a diverse set of people about my project. My only conclusion thus far about the future of news is that everyone sees it going in a different direction.

My friend who is interested in machine learning started talking really fast about how data mining can be used to automate news collection (django). To see an application of that technology, go see what's happening in Lawrence, KS.

My TA who is pursuing his PhD in economics pulled up an article that creates a mathematical model to describe whether or not the internet is cannibalizing print business. That particular article predicts that the two channels can be complementary, but two facts lead me to discount their findings: 1) It was written in 2001 and 2) newspapers have run into serious financial trouble in the interim.

To a veteran news executive Alan Mutter, aka the newsosaur, the intersection of news and technology is viewed through a lens of institutional preservation or lack thereof. The postings mostly document the ways newspapers can leverage technology to remain relevant. But he does note in this post, well actually a repost of a few comments, that there are certainly those see the newspaper industry as an obstacle and not the answer. As I read blog after blog, often the most instructive pieces can be found in the comment section because they come from consumers, not producers. He decided to reject all anti-media posts after this one, and I think that is a shame. I hope that people will react as passionately and honestly on this blog.

The Nieman Journalism Lab produces content from multiple sources of very smart people all looking for solutions. The about us page lays out an approach that I can really get behind: solutions focused and optimistic. I do think they would do well for themselves to include more non-journalism affiliated contributors though who have a different perspective on the industry.

The answers to lots of questions about the future of news/information will likely come from those who consume the information instead of those who produce it because the line has blurred. Barriers to entry have been lowered, adoption can be viral, and a great idea has lots of promise to transform into new institutions (just ask Google).

It is hard to leave one's bias at the door... but I hope to do just that with this blog. By listening to smart people from many disciplines, a more complete picture will form because it includes all potential stakeholders... everyone!

Inspiration and Evolution

2010-01-14T11:48:00.000-08:00

Inspiration:
I am a self-admitted New York Times junkie. I read anywhere from 5-25 articles on nytimes.com everyday. I place a high value on this information... For a graduate student, high value = about $5. But with all the newsroom cuts and talks of lost revenue from subscriptions and ads, I know that the Times could use that $5. Eureka! The solution to all their fiscal problems lay in an optional online payment system. Simple... Right?

Not so fast.

Evolution:
At each stage of my research, the concept grew and grew. New online news outlets without traditional newspaper cost structures, competing non-advertising revenue sources, and internet consumer behavior all entered the picture. I came to realize that coming up with a short-term solution to newspaper finances should not be my focus.

Instead, I chose to join the network of people who appreciate the truly disruptive nature the internet has had on our society. Professional journalism still has a role to play in our society, but how will it be created, financed, and delivered? This blog is my attempt to make some sense of the changes taking place, contribute to the analysis of new tools and solutions, and to engage with people who have already staked out a leadership role in this growing community.