Newspapers' supply-and-demand problem (Why you should quit doing what everyone else is)

February 25, 2009 by

A lot of bits have been spilled over the apparent absence of a viable business model for news on the Web to replace one that no longer works for print. The ad-supported model doesn’t seem to work, but clearly neither do pay walls. There’s even talk of micropayments again (hello, 1998!).

I’m no economist, but I think the problem comes down to this: The Internet is a single, efficient market governed by the laws of supply and demand*. Because there’s surplus ad inventory online — particularly low-grade inventory — prices are falling. But what if the surplus inventory is largely the result of a glut of duplicative content? Would the problem go away if news organizations simply stopped doing about half of what they do and focused on the stuff nobody else is producing?

Consider a scenario: Newspaper A posts a local scoop to its website. The story is picked up by other news organizations. It’s rewritten, repackaged, sent out on wires, and within hours that story or some version of it — sans additional reporting — is on a hundred different websites. Much of this duplication is automatic, but some of it is done by human editors. (See Google News any day for an example of this.) Best-case scenario, a few of those sites actually link back to Newspaper A.

Now let’s say most of the duplication stops. Because there are fewer versions of the story, more eyeballs now find their way to the original scoop on Newspaper A’s site. Good. But aren’t many of these additional eyeballs just single-page, out-of-market visits that have little value to advertisers? Maybe, but if Newspaper A is sticking to its core mission of covering local news, it will be able to deliver an audience that’s more cohesive on the whole — and therefore more sellable — than if its content is all over the map.

Those of us who have worked for years in online news remember a time when repackaging news from all over was a large part of what we did. At some point most of us figured out it was a waste of time. But sadly, there’s still a lot of duplication going on in mainstream media websites, in part because it’s seen as necessary for a newspaper to be a broad and semi-comprehensive sampling of the day’s news and information.

Well, no more. You want comprehensive? Go to the BBC.

If newspaper bosses are serious about preserving the kind of journalism that makes newspapers great, here is what they must do right away:

  1. Stop wasting time on stuff other people are already doing. This means focus obsessively on local or topical content. The era of the newspaper as bundler of many varieties of content is over. If you cover a community, do nothing that doesn’t relate to that community. If you cover a topic, do nothing that doesn’t relate to that topic.
  2. Stop syndicating valuable content to other websites. Let them link to you. (And for goodness’ sake, link out. Do it for the karmic rightness of it all, or do it because it adds significant value to your own content. However you justify it, putting your stuff squarely into the clickstream is essential to staying relevant. You can’t just be the endpoint.)
  3. Scale back or cancel wire service agreements. They’re not helping your online product and they might be stealing value from your own content. I have a lot of respect for The Associated Press and the work that all wire-service journalists do, but I just don’t think the AP’s ownership structure and funding model make sense anymore. (If Reuters can thrive as a standalone news organization, maybe AP can too. But newspapers can no longer afford to subsidize the creation of content that doesn’t benefit them directly.)

Am I saying I think newspapers can increase the value of their content to advertisers simply by reducing inventory, the way OPEC does for oil? No (and we can see how well that strategy’s worked for OPEC recently, too). Ad inventory, unlike oil, is not a fungible commodity. This isn’t about reducing inventory in general. It’s about reducing low-value inventory: all those impressions from random walk-ins who aren’t a sellable audience because they have nothing in common.

We talk about the newspaper’s unique status as a profit-driven public trust and the threat that ongoing structural changes pose to that fragile duality. But how big does a newspaper actually need to be in order to fill the public service role we ascribe to it? Could the Los Angeles Times effectively and profitably cover Los Angeles with, say, 300 journalists (half its current staffing level)? My guess is it could, if that’s all those 300 people did.

I feel for my dedicated and talented industry colleagues who have lost jobs in the U.S., the U.K. and elsewhere. This disruptive event is clearly a painful one for journalists. But if newspapers make smart choices this year, maybe it won’t be a crisis for journalism.

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* Most of what I’m saying here has already been said by various people, so it shouldn’t sound particularly radical. After I started writing about supply and demand, I noticed Nicholas Carr’s thoughtful piece along the same lines. And of course, Jeff Jarvis and others have been making the case for linking over syndication for years.

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New business models for news are not that new

December 17, 2008 by

With online ad revenue down for the second quarter in a row and newspaper industry indicators suggesting that 2008 is going be the worst year yet, the frenzy continues for a new business model for news publishing that will magically boost revenue and stop the financial bloodletting.

But innovation is sorely lacking in the new business models proposed; the truth is that many of them have been around since the early 1900s.

In 1923, historian James Melvin Lee outlined in his History of American Journalism alternative business models that newspapers had tried to remove themselves from dependence on advertisers and circulation growth and that now seem strangely prescient: the endowment model, the municipal news model, an adless newspaper, religious news, and what can only be called the “bazooka gum” approach to circulation.

Even before Pro-Publica could be imagined, our predecessors were strategizing how to create an endowment-supported newspaper. Hamilton Holt, editor of the New York City Independent outlined what such a model would look like to other newsmen at the first National Newspaper Conference at the University of Wisconsin-Madison in 1912.

The endowment model immediately had its critics – with much the same response we hear today. James Kelley of the Chicago Herald argued that an endowment newspaper was an “impossibility” for only the “people” could truly endow journalism without it being disinterested. In other words, whoever provided the cash was likely to have the dominant influence.

Lee worried that the endowment model was championed by academics and was unlikely to work because no one was willing to front the cash. He wrote, “The nearest that the endowed newspaper has come to a realization in America was a promise of Andrew Carnegie to be one of 10 men to finance such a venture. It would take just about ten men of Mr. Carnegie’s wealth to establish successfully an endowed daily newspaper.” Looking around in today’s news environment, the St. Petersburg Times stands alone as an independent, endowed print newspaper.

Lee mentions another curious model that seems strangely reminiscent of the turn toward hyperlocal blogging: the municipal newspaper model.

Los Angeles in 1912 had evening and daily newspapers, but it also had the first, and possibly only Municipal News. Financed by the city of Los Angeles, 60,000 copies were distributed by newsboys and to homes. It was under the control of a municipal newspaper commission, composed of three citizens who served without pay and who were appointed by the mayor. They were to hold office for four years and were subject to recall and removal by referendum.

The mayor, the city council, and political party that had more than 3% of the vote were guaranteed column space. Financial support came from an appropriation of $36,000 set aside by the city of LA. Ad revenue was a second stream of income, but the newspaper did not support any major department store ads. Civic minded, it had a special student section.

The Municipal News was truly hyperlocal – it didn’t truly compete with any LA papers because it didn’t cover national or state news or carry wires. Lee is unclear on how long it actually lasted, but was voted down by the city council due to cost.

Some newspapers in the early 20th century tried to do without ads entirely. On September 28, 1911 the Day Book, an adless daily newspaper appeared in Chicago. It began with only 200 copies and sent personal agents of the paper to subscribers to generate revenue. Eventually, circulation got up to 22,938, but when the price was raised from one to two cents and the cost of paper increased due to World War I, it died a few short months later. A major downfall – the lack of department store ads failed to attract women readers.

Still, Lee suggested that people ought to be willing to pay for quality and that adless papers could be a reality: “The adless newspaper may possibly be a part of the journalism of to-morrow, if fifty thousand people will be willing to pay ten cents per copy for their daily paper and will agree not to cancel their subscription orders even through displeased with the presentation of the news or offended at the editorial policy adopted by the editors.”

One form of news that was increasingly popular was a turn toward news financed by religious organizations. Lee dismisses most of these for being too narrowly focused on spreading religion to attract a broad audience, with one exception – the Christian Science Monitor, which kept its religious news to the back and even then was noted for its international outlook. Other religious newspapers are still running strong: The Desert News, affiliated with the Church of Jesus Christ of Latter Day Saints, acts as a competitor to the Salt Lake Tribune. And the Washington Times‘ conservative stance pursues its agenda from the Rev. Sun Myung Moon’s Unification Church.

The Christian Science Monitor is reinventing itself as we speak as one of the first major dailies to switch from print first to an online daily with a print weekly. Lee’s refinement of religious newspapers as a distinct model may be reflected in the Monitor’s bravado: perhaps religious newspapers are hotbeds of innovation.

The final model Lee proposes and dismisses is what can only be called the Bazooka Gum Model and reeks of the gimmicks and cereal box circulation efforts ad departments have tried for years to boost revenue.

For Lee, these efforts were a lost cause. He told the sorry tale of the 1905 United States Daily of Detroit, which offered people little trading stamps that they could exchange for things like bicycles if they collected enough. Coupons failed to bring in enough circulation – and the newspaper died after 68 days.

A return to our history books provides a useful warning and reminder: we don’t have the answers yet. We didn’t have them in the 1920s, and we’re still searching for them now.

But even without answers, news innovators of times past were willing to experiment. We should take our cues from the past, and consider new business models as opportunities for our industry rather than signs of its failure.

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Hunt for a new media business model: The radical is no longer so radical

October 24, 2008 by

Thursday’s conference in New York on New Business Models for News reminded me of an adage I used to read in The Des Moines Register: “There is no solution. Seek it lovingly.”

As you’d expect, the gathering at CUNY’s journalism school produced no Eureka! moment that announced itself as the solution for what ails most media companies. (As if on cue, newspaper companies were reporting third-quarter earnings declines of 16-19 percent throught the week.)

There was some news on the seek-it-lovingly front, however. Our host, the dynamic Jeff Jarvis, said the meeting of about 100 new and old-media folks marked significant progress because there were no head-in-the-sand protests from mainstream veterans about the need for a new business model. Nobody flinched even at prescriptions like getting rid of editors, dumping the story forum, or banishing newsrooms. (I don’t mean everyone agreed with those ideas. But comfortable with the idea of radical change? Clearly.)

My “no-solution” adage works in another respect. There probably won’t be A solution. There will be solutions. Maybe one will come from Samir Arora, CEO of Glam, whose only slide was a world map turned upside down and who described how networks, not content, could be the new king. Maybe it’s David Cohn and his spot.us vision of journalism paid directly by citizen-assigning editors. Maybe it’s Adam Bly, who’s showing a new version of how print (“Seed” magazine) and Internet (scienceblogs.com) can feed off each other in the world of science. In coming weeks I’ll be looking at some of these startups as well as others.

But next Monday in OJR I’ll start a weeklong look at another proposed solution: online-only community news sites like MinnPost and The Voice of San Diego. I’m probably attracted to this ilk of startup because it mostly resembles what I’m used to — a news organization that reports on a wide swath of community issues and interests. Some people think this something-for-everyone approach won’t survive the Web’s imperative of fragmentation, and/or won’t compete with the intensity that comes when committed participants, as opposed to dispassionate observers, are the ones telling the story. But for now, whether it’s a two-person shop at Batavia, N.Y., or a larger operation at St. Louis, these sites (some nonprofits, some for-profits) are growing in numbers and audience.

The players here are so vast that I’ll pick off only a slice of them. But this is interesting territory — a bunch of journalists, many of them former mainstreamers, trying to create community news beachheads online. I’ll be interested to hear your reaction and learn new examples of how these sites are faring.

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