Much of the current dialogue on the future of journalism consists of someone proposing a model and then a group of people having a heated argument on the relative merits and impossibilities of adopting said model. The end result is almost always a stalemate, a waste of time, or both, depending on one’s perspective. This is not to detract from the several comprehensive and well-researched reports: that is simply the level of discourse among most of the blogosphere pundits.
I decided to take a cue from my case interviews and business degree to hopefully offer a new perspective: what are the strategic constraints on news institutions and how do those lend insight into the direction of opportunity?
This question is far harder than it initially appears. Because journalism is such a multi-faceted field, editorializers come from disparate backgrounds and hold drastically different sacred cows. These sacred cows are left undiscussed in favor of concrete issues like “how do we make paywalls work?” [1]
As a hypothetical situation, I will take the perspective of a business executive working at a large metro daily. My goal is to maximize NPV/shareholder value as a for-profit news organization buffetted by the digital age. Philanthropic or public policy viewpoints do not interest me: I am not concerned with the state of the industry or journalism as a public good, only the state of my institution. I have no sacred cows:
My constraints are typical for an established news organization:
The point of this case study is to try to answer the question of how to monetize effectively without holding any sacred cows.
From even a first-year business student’s perspective, the answer seems blatently obvious. This is a classic portfolio case interview question, usually lobbed as a softball.
We regard our dying newspaper property as a cash cow, with high market share and revenue but declining profitability and negative growth rate. We need to use this cash cow to fund expansion into alternative product lines (question marks) that complement our current competitive strengths with the hopes of one day turning them into high growth, high market share assets (stars). [3]
The tricky part is choosing the correct product lines to expand into. What potential markets compliment our organization’s strengths in a copy-paste digital age?
It becomes immediately obvious that the venue we have to compete in is the world wide web. Our competitive strength is currently content creation and the web is the growing preferred marketplace for content consumers.
The Pew Research Center’s Project for Excellence in Journalism frames the current state of our business problem eloquently:
The study… captures an industry in the grips of two powerful, but contradictory, forces. On one hand, financial pressures sap its strength and threaten its very survival. On the other, the rise of the web boosts its competitiveness, opens up innovative new forms of journalism, builds new bridges to readers and offers enormous potential for the future. Many editors believe the industry’s future is effectively a race between these two forces. Their challenge is to find a way to monetize the rapid growth of web readership before newsroom staff cuts so weaken newspapers that their competitive advantage disappears. In recent weeks—after this survey was completed—a new round of newsroom cutbacks, made against a backdrop of steadily deteriorating advertising revenues and rising production costs, intensifies the difficulty of the challenge.
They arrived at this conclusion through surveying the intuition of thousands of newsroom editors. We arrived at it through business deduction. In either case, the $64000 question remains the same: how do we monetize our content online?
Happily, I am now in my home park. My strengths and training are in web technologies, and, to a certain extent, how to market and monetize online. [4] First, I will give a brief overview of the interaction between our embedded strengths and weaknesses and inherant features of the online medium. Next, I will highlight what seems to be the most important synergies to consider. Lastly, I will provide a concrete action plan.
This model highlights the reason why existing news institutions are in trouble: their core strengths might have aligned with opportunities back in the print age, but look completely backwards in this digital age. Put another way, assume you are trying to maximize profits online and have the choice to either inherit the strengths (content creation) and weaknesses (existing costs) of a newspaper or take the blank slate of a technology startup. Why would you ever choose the newspaper? [6] The strengths that you’re paying for are negated by the medium’s inherant features. This is the uphill climb that is facing news organizations.
There are still ways to win. As such a new medium, the internet’s frontiers are largely unexplored: new business models are appearing daily. Additionally, the total size of the pie seems to be expanding. As technology becomes better at targetting and tailoring experiences, new niche and long-tail opportunities open.
Here is one vision [7] for how the news organization of the future will operate:
Several entrepreneurs are already following a shadow of this business model. For example, this site simply sells e-books about parrots and makes a profit of over 400,000 dollars per year.
The first thing that’s remarkable about Parrotsecrets is how it came about. The owner of Parrotsecrets, for one thing, doesn’t even own a parrot. Rather, the owner set out to find a niche in the information economy that could be filled with eBooks as sold here. The first step in the development of Parrotsecrets, then, was to identify the frustration of Parrot owners.
This is exactly where we’re running with this idea. Give journalists basic business and technology training and send them on their beat looking for opportunities to make people’s lives better. That, fundamentally, is what people will pay for. And journalists happen to be the ideal delivery mechanism.
While the costs of technology drop towards zero and individual developers leverage more useful tools, the cost and difficulty of marketing has remained constant. It is not creating websites that is difficult. It is knowing which websites to create! This is the area we will specialize in.
The sites we create do not have to be about parrots. They can range anywhere from commerce sites for small businesses to message boards for a retirement community to collections/remixes of previously-printed articles for a research analyst/company. If it takes less than a week to develop, go for it.
So you have the basic gist of where I’m going with this problem. But this is one of many solutions. The vision I outlined above would work tremendously well in a news organization where journalists are passionate about working with technologists (and vice versa). Other organizations might tend towards creating expertise in branding, data-mining, user experience, or even a mix. It depends on the individual company’s culture.
To take a step back and summarize, we have walked through a hypothetical case study that could plausibly apply to any of many news organizations. But it is not the individual solution I am trying to highlight. What I am trying to get across is that current dialogue is centered too much on how to monetize existing content. To survive in the next century, news executives will need to think more similar to technology startups.
To make this more concrete, I am in the process of creating several concrete proposals to various news organizations. They can be found below, as I complete them.
…LIST…
\1 This is my largest frustration with the quality of discourse. How can we talk about “how” if we cannot even agree on “why”? Much of the writing today would quickly become moot if we could at least agree on why we are disagreeing.
\2 However, we cannot afford to disregard our journalists as a potential source of competitive advantage.
\3 As an aside, this yield an interesting observation. Because newspapers have typically been the sole source of revenue for their dynastic owners, they have tended to convert cash cows into dividends instead of alternative product lines. The fallacy of this approach seems obvious in retrospect.
\4 This also exposes my own biases. It might be the case that new stars will emerge from non-web assets.
I realize that SWOT analyses are passé, but they communicate a rudimentary understanding of a situation quickly, opening the doors for more detailed analysis.
\5 Audiences tend to identify with and are loyal to the aggregator’s brand, not the original content creator. There is probably an interesting essay in this somewhere.