The business model for news is and always has been broken and Rupert Murdoch can't fix it

In his remarks to the Federal Trade Commission’s hearings on Journalism and the Internet, held at the beginning of this month, Rupert Murdoch made some characteristically bold statements about his views on the future of journalism.

In Murdoch’s world, the new model of journalism is one where people pay for journalism online.

Murdoch said: “In the new business model, we will be charging consumers for the news we provide on our Internet sites. The critics say people won’t pay. I believe they will, but only if we give them something of good and useful value. Our customers are smart enough to know that you don’t get something for nothing.”

Murdoch is right when he asserts that the old model based on classified advertising is a failure, but he is wrong to suggest that people will actually pay for news. They never have paid for general interest news – not really, anyhow – and there’s little to suggest that this historical precedent will change.

Murdoch is sitting pretty because he can charge for specialized content. His mix of financial news brings a product to a specialized audience that couldn’t get this information elsewhere. Other financial news outlets remain similarly well-positioned, such as Bloomberg and Reuters, where information provided really does equal financial decisions.

But general interest news faces a different reality. As far back as Walter Lippmann, writing in Public Opinion, it was abundantly clear that news readers were fickle and not willing to pay for news.

It’s worth noting in-depth the astute observations Lippmann made that are still relevant today.

“Nobody thinks for a moment that he ought to pay for his newspaper. He expects the fountains of truth to bubble, but he enters into no contract, legal or moral, involving any risk, cost or trouble to himself.”

“He will pay a nominal price when it suits him, stop paying whenever it suits him, will turn to another paper when that suits him. Somebody has said quite aptly that the newspaper editor has to be reelected every day.”

Lippmann’s words are increasingly relevant when it is not just newspapers competing for the attention of fickle customers but a wide variety of blogs and aggregators and personalized RSS feeds that scan news. If one newspaper starts charging, another newspaper source can easily be found that does not. The observation that in a competitive news environment, brand loyalty is a misnomer is an important one – especially now.

Lippmann makes some other key distinctions worth mentioning about the attitude between the reader and his news source. First, readers believe that news should be free, “supplied gratis” and that readers “expect the newspaper to serve us with the truth however unprofitable the truth may be.” In other words, don’t look to readers to start paying for expensive investigative stories.

Maybe the dearth of investigative news will continue to inspire public radio-style donations for to continue to produce crowd-funded journalism. But Lippmann was careful to note that most people don’t think of journalists in the same category as they do other institutions, such as public schools, law, medicine, religion, or engineering, for example.

In journalism, the business model works like an anti-business as far as the news organization is concerned, since the reader pays for the product below cost. Readers also expect journalism to be held to the ethical standards of journalism is compared ethically along with a church or a school.

But a church is supported by collection and subsides, and schools supported by the taxpayer or tuition fees, so people are paying, in a sense for a product. And, Lippmann argues, you can’t compare journalism to law, medicine or engineering, because the consumer is actually paying for the service.

As Lippmann smirks, “A free press, if you judge by the attitude of the readers, means newspapers that are virtually given away.”

The business model is broken, we know that. And it’s always been broken – as far as the reader has been concerned – no reader has ever paid for their full share of what it takes to actually produce that day’s newspaper. And now we give content away for free.

So therein lies the dilemma – we expect the truth to come for free, but it comes at a price. And without anyone paying for the truth, how will it be delivered to news consumers?

[Editor’s note: OJR will not publish on Friday, due to the Christmas holiday. But we will be back next Wednesday.]

Where does news come from?

Time after time again, people who want to save newspapers claim that newspapers are the primary source of news. But is their claim actually founded on anything other than self-importance?

I love newspapers. I want them to survive, in some form, but it’s important to investigate where the truth in one of the linchpins of the “newspapers need to survive argument” comes from.

Tom Rosenstiel explained this before the Joint Economic Committee hearing on “The Future of Newspapers: The Impact on the Economy and Democracy,” on September 24, 2009:

In every community in America I have studied in 26 years as a press critic, the newspaper in town has more boots on the ground–more reporters and editors–than anyone else–usually than all others combined. A good deal of what is carried on radio, television, cable and wire services comes from newspaper newsrooms. These media then disseminate it to broader audiences.

When we imagine the news ecosystem in the 21st century, the newspaper is still the largest originating, gathering source.

Rosenstiel’s not the only one to make the claim. It’s a common one. John Carroll used to say that 80 percent of news came from newspapers. Len Downie and Robert Kaiser similarly claimed that newspapers were the originators of most content for most broadcast and cable news. And many studies of online blogs show that much of the linking originates from mainstream media, often newspapers.

But are newspapers where it all begins? In an online world, that’s only sort of true.

A study coming out of USC Annenberg of 250 news websites looks at where these sites are bringing information from – whether they are citing the AP or citing their own journalists. Though the analysis isn’t complete yet, initial results seem to suggest that wire services are providing the bulk of news online.

The study, as explained by Annenberg doctoral candidate and researcher Matthew Weber, takes a systems approach. This means that the researchers were taking a look at who was providing information for the network of news organizations, who was doing the filtering for the news organizations, who was collecting the information and from where – and how it was being passed on.

“If you take a systems approach to the news industry, the people who are providing the raw material are predominantly wire services,” he said.

Weber did find that newspapers still are where consumers make their first stop. And while they add their own content, newspapers are also acting as filters – were also bringing in articles from the AP, Reuters, AFP and the like.

“The ‘system’ start with the wires, and ends with the aggregators. Newspapers are jammed in the middle, competing for air,” Weber explained via e-mail.

But when it comes down to who is creating the content for news sites, the organizations providing information were “almost exclusively wire services,” according to Weber.

So wires, in this case, seem to be increasing importance in the news architecture of the online world – and newspapers aren’t the first stop that they used to be, though they do help sort information.

But in some sense, wires have always played an important role that has often been ignored by those who like to say that newspapers have set the news agenda and uncovered the most important stories.

When I was an intern covering cops at the Chicago Tribune in 2003, often my assignment came not from the scanners but from the now-defunct City News Service, a wire service owned by Tribune Co. that sold breaking news to the highest bidder in the local market. The City News Service in Los Angeles, not owned by Tribune, still serves a similar purpose.

Even if we disregard these pre-Internet wires that only operated in a handful of cities, it’s still unfair to say that newspapers set the agenda for the rest of the media in a city. Certainly newspapers often did the rigorous work of providing a detailed account which was then recycled on local news, but television news has never aspired to be anything but a recycling of newspaper headlines even in its golden era.

Cronkite saw his viewers still reading a paper, and today, local news also doesn’t kid itself about being entertainment. The two mediums work more complementary than as leader and follower than we might hope to suggest in our case for news survival.

But there’s a whole other element to where news comes from that has also been ignored in an online context – the world of blogs and online communities – and how this then sets an agenda for newspapers to follow.

Chris W. Anderson, a Nieman blogger and assistant professor at the College of Staten Island – CUNY, has research that suggests that it’s important to look not just at newspapers but at the whole news ecosystem- which includes everything from news to activist communities.

Anderson doesn’t question the macro-level assumption that journalists report and bloggers comment. But he notes that it’s a little more complicated when you look more closely at specific news instances.

Calling them news “blips,” Anderson said, “You’ll have an early period that most journalists wouldn’t call reporting where information will be released in niche spheres of the blogosphere.”

One example he gave was of reports of activists arrests. But it wasn’t that reporters were reading these activist blogs that this news happened to make it into the mainstream newspaper or news media. Instead, journalists got their tips from “being good reporters,” taking cues in the traditional way, perhaps from police or press releases or shoe-leather reporting.

From his observations at the Philadelphia Inquirer and the Philadelphia Daily News, Anderson said, “It’s a misnomer to think journalists are just sitting around reading blogs.”

But once journalists did report on these news blips, these blips were then circulated into the larger blogosphere. But the blips required a certain level of bubbling up to the surface from the niche level of social media, something that happened in traditional ways.

Twitter might make a good case of how newspapers aren’t the first and only source of news, especially on a hyperlocal level. Newspapers may be hoping to compete on the hyperlocal, but this strategy may be questionable especially in cities with actively wired bloggers and tweeters who may have the first claim on news.

My old neighborhood in LA is a Twitter neighborhood. Local stores and restaurants were on Twitter, as are many residents and more active bloggers. We all routinely kept the neighborhood hashtag #DTLA in our posts when commenting about our home. Sure, the bars marketed drink specials to us, but the #DTLA hashtag was the first source of news when the 2009 Lakers celebration got out of hand, then followed by TV and the LA Times. Twitter users provided great on-sight reportage of the Michael Jackson funeral at the Staples Center, often going beyond what mainstream media had to offer.

Did these events wind up back in the newspapers? Sure. But the most active concentration of rumors and new bits of information were coming from a niche community – in this case, the #DTLA one, and in Anderson’s case, the activist community.

Perhaps, instead of staking the claim for newspaper survival on the fact that newspapers provide the first stop of news and set our agenda for what it is we care to talk about, those making the case might start to make a more nuanced argument.

Maybe it’s not as compelling to say that newspapers are the great facilitators of democratic dialogue and discourse instead of the source of all that is news, but it seems to reflect the burgeoning reality of our digital era.

Staking out newspaper survival in Web analytics

This is part two in a two-part series on Web analytics and the future of news. [Part one]

The news industry is caught in a destabilizing position – each newspaper is going to have to come up with its own unique algorithm to give advertisers a sense of their audience.

The new metric that advertisers increasingly care about is something called “engagement” – how users are actually interacting and spending time with the site. But because each newspaper website offers unique content, there’s no blanket measure for creating a uniform “engagement” score for the news industry from different points of comScore or Ominture data.

“We can’t boil it down to X percent of unique users plus your time on site plus page views,” said Alan Segal, director of audience development at the Atlanta Journal-Constitution.

He explained that the formula in Atlanta would be different from elsewhere. “Engagement for us looks different for us versus the New York Times,” Segal said. “It depends on your market and what the goals are and how you interact with your community.”

Why engagement? Because it’s a more robust way of looking at the world than just uniques, page views, visits, or clicks per minute.

As Alex Langshur, president of the Web Analytics Association, said, “Measures that reflect audience engagement are more valuable than metrics that just measure raw numbers.”

He explained to me that looking at something like unique visitors alone would be a comparable analogy to looking at Lehman Bros’ balance sheets – everything looks the way you want it to, but it doesn’t tell you what’s really going on.

“In the media space just looking at things like number of visits or number of page viewed don’t tell you a lot about the level of engagement that people have,” he said.

The other problem, as we addressed here, is that unique, page views, and visits can all be, as Segal said, “gamed.” Here’s a closer look.

Unique Visitors: Messy for a number of reasons. As USC Annenberg lecturer Dana Chinn said, “It’s a deeply flawed metric. It counts computers and not people, so it’s over counted and under counted.” That means that, for instance, one person can check the LA Times on three computers – still one user, but it registers as a unique visitor from each computer. Meanwhile, computers from Web cafes or libraries that are used by multiple people are likely to undercount.

Uniques also require that users install a cookie into their computer. “All the research shows that people delete cookies or on a regular basis reject cookies,” Langshur said.

Page Views: Also problematic but absolutely crucial for advertisers. Page views are literally the number of times someone loads a single page of an Internet site.

Langshur said page views are difficult to standardize because of the variety of ways of presenting content. In addition, newspapers could create artificially inflated page view counts by breaking up text, or deflated counts by having a special project’s features all loaded on to one page.

Nonetheless, page views are important for advertisers, so news organizations need to understand how to reconcile with the fact that page views are not standardized with the fact that advertisers want to know how many people are seeing their ad.

“From an advertiser’s perspective, page views are important as this is tied to the number of impressions they might generate for their ad.” Langshur said. “Impressions are important, and depending on the type of ad space used and the ad type served, the first critical step to generating click-throughs.”

Visits: This is another confusing term, but the Web Analytics Association has tried to provide a clear definition to help people understand exactly what this means. This is their definition:

“A visit is an interaction, by an individual, with a website consisting of one or more requests for a page. If an individual has not taken another action (typically additional page views) on the site within a specified time period, the visit will terminate by timing out.”

At this point, 30 minutes seems to be the agreed upon standard – especially by the Interactive Advertising Bureau, which is attempting to create consistent definitions for advertisers. However, you can also change your analytics software to change this time.

But here’s where things get complicated, according to the Web Analytics Association:

“However, in the case of sites where interaction consists solely of file downloads, streaming media, Flash, or other non-HTML content, a request for this content may or may not be defined as a ‘page’ in a specific Web analytics program but could still be viewed as a valid request as part of a visit. The key is that a visitor interaction with the site is represented.”

Content using Ajax, Flash or widgets isn’t captured as page views by most Web analytics programs, either.  This leads to undercounts in page views – which is definitely a problem for ad-supported online publishers.

Visits, according to Langshur, may get closer to engagement, but “a visit on its own does not define engagement,” and visits need to be taken into account with everything else a user does on the site.

Problems with the reporting agencies: A crop of agencies, new and old, have rushed to the Web analytics market for newspapers – some common names include Omniture, comScore, Nielsen, and Google Analytics.

Segal and Chinn point out some problems with the data collection. comScore and Nielsen rely on panel data — a really sophisticated sampling method of the behavior of a selected group of individuals. This is problematic for news organizations for few reasons, but primarily because most businesses aren’t particularly keen on having their employees set up trackers on work computers, and that’s where lots of online news reading takes place.

Then, these numbers don’t match up with Omniture or Google Analytics data – which don’t use panel software – and these companies in turn may not take into account the idiosyncrasies of individual websites.

What’s a news organization to do?: If the answer lies in engagement, as we have suggested, this means that news organizations are going to have to come up with their own specific measures for tracking audience behavior and making a valid claim that resonates with advertisers. Gone are the days when a single measure could account for it all, and gone are the days when newsrooms could take a single snapshot of the industry all at once.

Engagement is only a starting point. But it gives news organizations and advertisers a sense of how people are actually using their sites – and it’s a uniquely customizable opportunity that allows news organizations to sell their strengths.

Chinn said, “The Web is trackable.  Audiences are knowable. It is up to each advertiser and to up to each Web publication to know what their audiences are and what to provide for advertisers.”

Engagement, then, will be a “measure of myriad things based on the kinds of products that a website has,” she said. “There’s all kinds of talk on what is the algorithm for engagement and the truth is that ‘It depends.'”