For all those hopeful newspaper managers, searching for a new revenue model that will save good, old-fashioned newsroom journalism, I have a message for you:
You’re wasting your time. Please, stop. There is no new revenue model for journalism.
This isn’t to say that publishers cannot change the way that they’ve operated in past media to secure their future online. But they need to look beyond looking for radical new ways to charge customers for their work.
There are three ways – and only three ways – that publishers can make money from their content:
1. Direct purchases, such as subscriptions, copy sales and tickets
3. Donations, including direct contributions and grant funding
Let’s break ’em down:
Many publishers are looking longingly toward paid content to move their bottom lines back toward pre-Internet profit margins. But a publication’s ability to charge for its content, and the amount it charges, increases in direct relation to the amount and detail of unique information it provides in that content.
Walk into a bookstore and compare the prices of newspapers, magazine and books. Newspapers go for a few quarters a copy, magazines for a few bucks and books, typically, for at least $10-20. Newspaper and magazine circulations also are dropping, suggesting that they remain overpriced in the current information market.
Without a home-delivered hard copy, the commodity information available in most newspaper has no financial worth to most readers. The more detailed information and original narratives in some magazines have small ($1-10) value for some readers. Books remain at the top of the price scale, offering longer and more detailed narratives written in unique and (one hopes) compelling voice.
Because of this, no one is going to be able to craft a paid content model that elicits significant payment from more than a handful of readers for commodity news. And, despite what “proud parents” in the newsroom might think about their work, almost everything produced by all U.S. newspapers and broadcast newsrooms falls into that category.
Magazine publishers might have a better go with paid content online, but again, the revenue model is not changing online – though the price point within that model may change in response to increased competition. But most magazines are finding that their content barely rises above the commodity level now established in the online market.
I can think of only one for-profit publishing entrepreneur who’s managed to make a paid content model work in print and online – and he’s launched a successful television broadcast for his publication, too. (And, no, it’s not Steven Brill or Rupert Murdoch.) I’m surprised that I’ve never seen Cook’s Illustrated founder Christopher Kimball at any online publishing conferences; he’s the only one in the business who seems to know how to make paid content work. (For what it’s worth, OJR profiled Kimball’s Cook’s Illustrated back in 2005.)
Despite fears about the death of advertising, I say that there will always be people willing to pay to gain access to others’ audiences. That, distilled, is the definition of advertising.
Social media may provide a new ways for retailers and other business to speak directly to customers and would-be customers, but as anyone who’s started a Twitter feed with no followers can attest – building an audience is hard. Buying access to an established audience that you’re not now reaching is, for businesses with money, a far easier way. Advertising endures.
Online, advertising takes new forms – from banner ads to interstitials to affiliate links – but none of these forms are fundamentally different from any form of advertising that has come before. They remain a way for a publisher to sell access to its audience to another. So long as a publisher builds an audience, it will have the ability to rent access to it to advertisers. At which price point the publisher will be able to do that will depend upon the audience, and the amount of competition also reaching that audience.
PBS and NPR pledge drives represent obvious forms of donation revenue for publishers. So do grants awarded to non-profit publishers. Online innovators, such as spot.us, have adapted this form with “crowd-funded” reporting for individual stories. And does anyone remember the Amazon Honor System?
But allow me to suggest that much of what has passed for advertising has been, in fact, donation funding. For an example, I’d classify the majority of the ads my wife and I book on our violin community website this way – the advertisers don’t particularly care about click-throughs or their ROI [return on investment]. They advertise with us because they want to support the community and they understand that we need income to keep it going.
We can access donation funding in our advertising because we know the people running the music schools and violin shops who advertise with us. Many of them participate on the site and maintain relationships with others in the violin world through it. If we hadn’t developed these personal relationships, the advertising relationship we would have with those organizations would be reduced to a simpler ROI equation – they’d figure out how many sales they made from the clicks off their ad and decide if those sales justified the ad’s cost.
Just like those business owners and managers whom we don’t know personally do.
I suspect that as newspaper and TV and radio station ownership consolidated among a handful of corporate chains – and Main Street businesses sold out to, or shut down because of, national retail chains, the personal relationships that news publishers used to have with advertisers have been severed. As a result, a good chunk of news advertising has moved from what was essentially donation funding to strict, ROI-based advertising.
Given that most businesses take a short-term view toward ROI, and discount the long-term branding value of advertising, this switch is making it tougher for news publishers to close, and maintain, sales.
Smart publishers need to revive and repair personal relationships with potential advertisers and funders, in an effort to increase donation funding to their publishing efforts.
What’s changed, and what hasn’t
By reducing the barrier to entry for new publishers to almost zero, it has vastly increased the number of competitors reaching any given publisher’s audience. The Internet also has enabled new ways for publishers to solicit and receive money through each of these three methods (e.g. spot.us’s crowdfunding).
But the Internet hasn’t changed that these are the three ways to make money from content.
Publishers must take a sober look at these three options and decide how best to maximize their income opportunities within them. For most, that means abandoning thoughts about paid content, and instead working on the other two means, such as finding the most effective forms of advertising within their publication (and turning off readers with overly aggressive ads is not effective over the long term). More importantly, I would suggest that publishers work to cultivate their relationships with their community, to maximize the amount of donation income that they can receive, either in direct donation or via advertising campaigns.
At that point, it’s time to take a hard look at the other side of the ledger, and work to find a publishing and production model that allows a news publication to live within its current income means. That’s where the real change will happen in news publishing – the expensive, labor-intensive, manual newsroom model will give way to new, distributed, communal reporting and editing models, ones that are now being forged by journalist entrepreneurs.
I wish that news businesses, foundations and journalism schools spending resources on searching for new funding models would abandon those futile efforts, and instead redirect that funding toward cultivating and studying innovation in news gathering and production. And in doing that, I wish that industry would quit looking to print editors and broadcast station managers for leadership and instead look toward online publishers and editors who are making nascent efforts work.
Unfortunately, too many print and broadcast veterans don’t want to change their production model. So they instead devote their time and energy toward getting someone to fund another doomed quest to look for their revenue model Holy Grail.
There is no new revenue model for journalism. That’s why we have to find new production models that work.