USC Annenberg Online Journalism ReviewUSC

Gut Check Time for New Media
Gleaning lessons from the shakeout, as hard cash replaces high concept

All the rumblings on the new media landscape over the past few weeks have made online journalists and Internet executives understandably skittish. Layoffs at, New York Times Digital, Salon,,, NBC and elsewhere have raised the specter of a massive retreat from new media.

A closer look suggests that external factors played a role in most of these decisions: the News Corp., for example, needs cash to make a play for DirecTV; CNN's cutbacks were dictated by the merger of America Online and Time Warner.

To be sure, there are trends to be found amid the rubble. While traditional media companies are not lowering the flag on their Web operations, they are consolidating operations, tightening budgets and pulling their Internet units closer into the fold. The response makes sense in the wake of Wall Street's continued pummeling of all things Internet-related.

For mainstream media companies, then, the focus has shifted from high concept to hard cash. Community portals (Koz), knowledge networks (Abuzz), city guides ( may flourish one day, but that day has not yet arrived. For better or worse, Show me the money is the new mantra heard in corporate corridors.

This has its advantages. But it poses dangers, too. More about those in a moment.

On the positive side, the era of Internet speculation — with all its attendant gold-rush goofiness — is over. Nick Rogosienski, vice president of interactive media at in Minneapolis, says of the actions taken by his counterparts at big media chains: 'Honestly? They're a bunch of mopes. They're adjusting to a market that they started to chase too late. It was nonsense, fueled purely by greed. Spinning off a division because it was in vogue for 12 to 18 months is not a smart strategy. Now these units have to stand on their own.'

With dot-com fever now just a hazy memory, we may be in a transition period, a time when the industry takes a breather before deciding where it wants to go. Call it a new media gut check. If the digital news business is indeed a marathon and not a sprint, media companies can now more sensibly set their sights on long-term goals. Do they really want to be a portal? A local Yellow Pages? An Internet service provider? A Zagat's knockoff?

Recalls Rogosienski: 'Three or four years ago you had a big push in the industry with Zip2 and CitySearch and newspapers thinking they can sell $100 a month Web sites to local businesses and all you needed were 80 salespeople to sell it. We looked at it and said, 'That's crazy.' And in the end, that model never panned out.

'In the meantime, at the Star Tribune we're burrowing local. We charge clients $5,000 and $50,000 and $100,000 to create Web sites and build strategic value for businesses. And after we build it, we don't just walk away, we stick around and become a consultant on how to promote it.

'Last time I looked, the Internet is still a business, profits still matter and the principles haven't changed,' he says. Call it Midwestern values, or plain old common sense, but the approach works. Rogosienski says is profitable, with a staff of just under 80 people, 25 of them in editorial. Not only that, they're not seeing the downturn in online advertising evident at other sites, primarily because the site targets local brick-and-mortar advertisers.

A return to basics, then, is one byproduct of the current shakeout, as some of the more wild-eyed experiments come crashing back to mother Earth. Other lessons to consider:

? ? Consolidation: We have a winner in the long-running tussle over integration vs. separation. CNN and Fox took a hard look at their Internet divisions and made the hard call that it wasn't working. From an organizational and conceptual viewpoint, bringing the new media folks under the wing of the broadcast divisions just made sense.

? ? Layoffs: Being employed by a new media unit at a traditional media company provides little more safe harbor than working for a pure-play Internet content site. On the other hand, online workers have greater skill sets and thus more employment options if the budget ax falls.

? ? Multimedia future: For students and online journalists in the trenches, take a close look at the memo issued by Eason Jordan, CNN's top news honcho. In part he writes: 'CNN newsgatherers must be multi-skilled and meet the requirements of our TV, radio and interactive services. No longer will a newsgatherer work only for TV or Radio or Interactive. Correspondents whose expertise is TV reporting must know how to write for Interactive and provide tracks for Radio — and deliver for them as needed.'

The future face of news is digital

Which brings us to the dangers mentioned above.

Robert Niles, an online journalist for a major publication, says: 'I fear that companies are integrating not to bring new media innovations into old media newsrooms, but simply to cut short-term costs by abandoning any effort to innovate. As a result, companies are dumping employees with substantial knowledge of Internet history and technical innovation in favor of others who can accept doing things 'the old way.' '

That's the risk of the recent trend toward 'convergence programming,' a combination of broadcast and interactive elements. Done wisely, integrating the online and broadcast staffs at CNN (or elsewhere) should pay logistical dividends while maintaining a high level of journalism. Optimally, the journalism — not the particular medium — should be the primary consideration in online news.

But huge potential downsides loom for companies considering a similar course of action. If a news organization uses consolidation as a subterfuge to rein in the free spirits in the Internet division, if the online staffers feel disempowered and irrelevant to the news operation, if the Internet component becomes a mere afterthought — then the resulting journalism will suffer irrevocable damage.

It's hard to argue against tightening the faucet on the Internet unit during a down cycle. But if the media clamp down too hard, they'll be back in a familiar position: behind the curve.

Looking out at the turmoil rocking the Internet industry, media companies will take away the wrong lesson if they conclude that they should abandon core Web efforts. If they believe that shovelware (repurposed content) is the answer to their problems, they're mistaken. If they rely on tired formulas instead of innovative thinking, they'll fail. If they believe that new media will be just a bit player in their company's future, they're misreading the signs. And if big media retreat too far, cut too much or pull back too fast, they will surely regret it over the long haul.

Yes, online profits matter. But so does vision. The Wall Street Journal knows this, which is why they're willing to sustain short-term losses for long-term growth. The Miami Herald, meantime, fires its only online reporter after eight short months. Fiscal prudence, or lack of patience?

As the startribune's effort suggests, there are many roads to online profitability. Some media companies' Internet initiatives will bear fruit. Others won't. We may be at the end of a wild era of experimentation, but other new ventures — news radio on demand, news alerts through wireless devices, opportunities in broadband and interactive TV — lurk just around the corner.

How will media companies respond to that challenge?

Digital journalism isn't going away, regardless of market gyrations or advertising downturns. Building a successful online business isn't just about streamlining head counts, clamping down on expenses and monetizing traffic. It's about building a superior product, one that holds a tangible benefit to consumers.

As the Internet continues to grow, news will become increasingly digital. The only question is who will deliver it to our doorsteps — and, more to the point, our PCs, wireless devices, interactive set-top boxes, Internet appliances and personalized newspapers printed in the home?

There's still a lot of work that remains to be done. Old media have yet to embrace the openness and interactivity of the Net. They still resist bringing readers into the news dialogue. The print folks can learn much just by hanging out with the folks in the online department.

Looking ahead at news delivery over the next decade, Michael Oreskes, the editor in charge of electronic content at the New York Times, says, 'We've been developing our continuous news capability, so that the print newsroom now produces updated news on the Web site throughout the day. We hope to extent that conceptually beyond text to audio, video and photography. Further down the road we're looking at wireless, broadband, other digital forms — all of it.'

Oreskes' new role requires him to plan like a business manager, but he hasn't lost his journalistic bearings. 'I see it as the central challenge of my generation of journalists to ask the question: How do we preserve and extend the high quality of journalism so vital to society in a time of sweeping changes in the way in which journalism is delivered?'

It's a question we would all do well to ponder.