Archive for April, 2011

Hard economic lessons for news

Monday, April 25th, 2011

I’m working on a talk that I hope will become the canonical link to my essential message about the business rules and realities of news. I continue to be astonished at the economic naiveté I hear in discussions of the business of news. (Look at this comment thread and and this one.) Here is my answer, the basis of a talk — to be delivered in tweets, in the model of John Paton — and a lesson for my classes. Work in progress. Thoughts so far; please join in….

RULES FOR BUSINESS MODELS

* Tradition is not a business model. The past is no longer a reliable guide to future success.

* “Should” is not a business model. You can say that people “should” pay for your product but they will only if they find value in it.

* “I want to” is not a business model. My entrepreneurial students often start with what they want to do. I tell them, no one — except possibly their mothers — gives a damn what they *want* to do.

* Virtue is not a business model. Just because you do good does not mean you deserve to be paid for it.

* Business models are not made of entitlements and emotions. They are made of hard economics. Money has no heart.

* Begging is not a business model. It’s lazy to think that foundations and contributions can solve news’ problems. There isn’t enough money there. (Foundation friend to provide figures here.)

* There is no free lunch. Government money comes with strings.

* No one cares what you spent. Arguing that news costs a lot is irrelevant to the market.

* The only thing that matters to the market is value. What is your service worth to the public?

* Value is determined by need. What problem do you solve?

* Disruption is the law of the jungle and the internet. If someone can do what you do cheaper, better, faster, they will.

* Disrupt thyself. So find your weak underbelly before someone else discovers it. Or find someone else’s.

* The bottom line matters more than the top line. Plan for profitability over revenue, sustainability over size.

REALITY CHECKS FOR NEWSPAPERS

* Circulation will continue to decline. There can be no doubt.

* Cutting costs will reduce product quality and value, which will further reduce circulation, which will further reduce ad revenue. A vicious, unstoppable cycle.

* Low-cost competitors and abundance will continue to reduce the price of advertising.

* Local retail will continue to consolidate, further reducing ad revenue. Blame Amazon.

* Classified categories—real estate, auto, jobs, merchandise—will continue to become more self-sufficient. They will need market mediators less and less.

* There’s a cliff coming: the end of a critical-mass of circulation needed to maintain inserts. That will have a big impact on newspapers’ P&Ls and will take away a primary justification for still printing and distributing paper.

* Some readers are not worth saving. One newspaper killed its stock tables, saved $1 million, and lost 12 subs. That means it had been paying $83k/year to maintain those readers. In creating business plans, the net future value of readers should be calculated and maximized.

* Once fixed costs are sliced to the bone, they will rise again. Cutting alone does not a business strategy make.

* “The newspaper model is broken and can’t be fixed.” Says John Paton.

DIGITAL RULES

* Scaling local sales is the key challenge. Google will pick low-hanging fruit from the 6 million businesses that have claimed their Places pages. Facebook’s fruit will be businesses that use its free Deals. Each will use distant sales. Groupon and Patch will attack the challenge with the brute force of local sales staff.

* There will always be new competitors. For content, attention, advertising, and advertising sales.

* You no longer control the market. You are a member of an ecosystem. Play well with others.

* Abundance will drive down prices in digital even more than in print. That’s the lesson Google tries to teach media (and government).

* The question about pay walls is whether they are the *best* way to make the *most* money. It’s not a religious matter. It’s a practical question of whether circulation revenue will net more than equivalent advertising, whether one can afford to give up audience and growth, what the costs are to support pay.

OPPORTUNITIES

* Scaling local sales is the key opportunity. I think the answer will lie in productizing services for local merchants (across all these platforms — not just selling them space in a media site but also helping them with Google Place pages and Foursquare and Facebook deals and Twitter specials) and establishing new, independent, entrepreneurial sales forces. The key challenge then will be holding down the cost of sale and production.

* There is huge growth potential in increasing engagement. Facebook gets roughly 30 times the engagement of newspaper sites, Huffington Post’s engagement is also a multiple of newspapers’. If we are truly community services, then we must rethink our relationship with the public, becoming more a platform for our communities, and that will multiply engagement and, with it, audience, traffic, and data. We have not begun to extend and exploit the full potential of the value news organizations can have in relationships with their communities: more people, more value, more engagement equals more value to extract.

* There are still efficiences to be found in infrastructure. If the presses and the distribution and sales arms of papers are not in and of themselves profit centers, they should be jettisoned and their tasks outsourced. If other tasks — including editorial tasks — can be consolidated, they should be.

* Journalists should do only that which adds maximum value. That’s not telling the public what it already knows. It’s not exercising ego. It’s not production. It is reporting, vetting, curating, explaining, organizing, teaching…. Do what you do best and link to the rest.

* There is growth to be found in networks. The more members there are in the ecosystem, the more content there is to link to (without having to go to the cost of creating it), the more opportunities there are for free promotion (links in), the more opportunities there are in aggregated and joint sales. See our work on new business models for news in the local ecosystem at CUNY.

* There are efficiencies to be found in collaboration. Working with the community and with other members of the ecosystem enables a news organization to specialize and increase value and to do more with less.

* There are other revenue streams worth exploring. Local bloggers are making considerable shares of their revenue in events. Newspapers are going into the real estate business and are also selling merchandise.

* We have not begun to explore new definitions of news.

: Note: I rearranged a few of the rules and combined two into one for better organization.

: Was mit Medien translates these rules into German. And translated again.

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In a dog’s net

Sunday, April 24th, 2011

Cool ideas tucked into part one of this CBC Ideas series about how (we think) dogs think: Dogs, they say, think in maps informed with their smell. They sniff and resniff a location to find out what has been there and they sniff the air to tell the future: to discover what will be here or where they will go next. Thus, they say, dogs have a different sense of “now.” Unlike our eyes, which take in what is visible and apparent at this moment, their noses can sense the past — who and what was here and what’s decaying underneath — and the future of a place — what’s coming, just upwind. Dogs are microprocessors, they say, and their noses feed their data bases.

It strikes me that the net — particularly the mobile net — is building a dog’s map of the world. Through Foursquare, Facebook, Google, Twitter, Maps, Layar, Goggles, and on and on, we can look at a place and see who and what was here before, what happened here, what people think of this place. Every place will tell a story it could not before, without a nose to find the data about it and a data base to store it and a mind to process it.

On the same show, canine Boswell Jon Katz argues that dogs respond to changes in their map: “hmmm, those sheep aren’t usually there and don’t usually do that and so I’d better check it out to (a) fix it or (b) update my map.” Dogs deal in anomalies. So do data-based views of the world: we know what happened in the past and so we know what to expect in the future until we don’t. Exceptions and changes prove rules.

/squirrel

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When I was the ghoulish gawker

Saturday, April 23rd, 2011

princess-di people coverBy popular demand (well, one tweet), here’s the tale of my journalistic function during the last big royal wedding, of Chuck to Di.

At People magazine, I was assigned to write obits for the couple in case an IRA attack struck the wedding. Recall that London still fell victim to sporadic terror and there was no greater symbol of British rule than its crown. It also helped that People’s editor then, Pat Ryan, came from an Irish family and was ever aware of the great struggle.

It happened to be that the wedding occurred on the morning People went to press. So I wrote, as I remember, variations on the theme: Charles dead, Diana dead, both dead. The obits were set in type on pages with appropriately fond photos. The pages were made into plates that were set aside the presses. If the worst happened, the order could go out — “Stop the presses!” — so the plates could be installed quickly and deliveries to the newsstand would be hardly delayed.

All that was missing were the facts of the event, if it happened. So I had to be at work criminally early that morning, sitting in Pat’s office, watching the wedding, ready to write a tight lede with whatever horrific details ensued so that could be set in type (typesetters — how quaint — awaited) and a new black plate could be transmitted to the plant (where the other colors awaited).

Why me? I was a newspaper guy and thus the fastest writer in sight. Magazine people looked down their noses at us newspaper people. We weren’t up to their high gloss, rough-hewn tradesmen that we were. When I applied at People, they were dubious, having never hired the likes of me. They insisted on a tryout and, though insulted, the boyhood dream of conquering Gotham beckoned, and so I acquiesced. The first morning, I was given a reporters’ notes and turned them into 120 lines of trivialized type by lunch. I asked for the next; they had nothing. Next day, same routine and ditto for the rest of the week. At the end, they hired me. My boss at the San Francisco Examiner, Jim Willse, said at the news of my departure for New York: “What, tired of journalism?”

Upon my arrival at People, another grizzled vet, Cranston Jones (there were two Joneses at People, neither a Bob; the other was Landon — one Princeton, the other Yale) pulled me aside and roundly scolded me for my tryout. “Don’t you ever do that again!” he instructed. I was ignorant as to my sin — and afraid to ask more — until a writers’ meeting soon afterwards, where Pat told us all that we had to do be more efficient and get up to writing one story a week. Five a week was, you see, unheard of.

I was a newspaper guy. I’d learned to write fast. As a rewriteman (sorry, not a rewriteperson), I used to write on “half books” — half-sized sheets of paper and carbon paper. We’d write a graph at a time and then — ah, this was my very favorite part of newspapering — yell “COPY!” and the poor slob one year younger and one rung down from me would have to run over to tear the book apart and distribute copies around the newsroom so the process at the heart of newspapering — the sacred production timetable — could get a head start on editing and typesetting and composing my fine opus.

I remember working rewrite on an Indiana prison break at the Chicago Tribune when I turned to the news editor, Ralph Hallenstein, to ask how much more he wanted. Ralph never stopped smoking. He’d fill a large ashtray every night, and until their game was discovered, the editors on the next shift held a “ghoul’s pool” and counted Ralph’s butts. Ralph died of lung cancer. When I asked Ralph this night, he took a pneumatic drag of his cigarette, exhaled three-alarms’ worth of smoke, and rasped over at me, “Find the nearest period.”

That’s how I learned to be fast. When computers came in, that didn’t change. I was the first the newsroom to use them because, as I sat on the midnight shift in 1973 waiting for someone in Chicago to die a horrible death so I could write a story under the rotating slugs “slash,” “crash,” “slay,” or “burn,” I was bored and started using the strange green-eyed monsters that scared everyone else (that, you see, is how I came to like technology and that’s what got me here today). Even on computers and to this day I write fast so I know I can finish in time and so I have a structure and then I use all the time available to edit. I edit more than I write. (Except sometimes on this blog when I just hit “publish” because, what the hell, I can always edit later. That explains the abundance of typos you find — evidence of my fallible humanity.)

So anyway, I sat there that morning on the 29th floor of Time Inc.’s building, staring at Pat’s surprisingly small TV in her office, taking notes to have ready the kinds of specifics Time Inc. editors so loved to jam into sentences like falafels into a pita: Don’t just tell me the bomb exploded the carriage; tell me the color of the horseman’s bloodied hat. But nothing happened, thank goodness.

As soon as the wedding was over, as I recall, the plates were ordered destroyed so no one would see what pessimists we were. At a newspaper or wire service, writing obits in advance is good form. It’s an honor, even: Your impending demise is worthy of a timely report made ready and held for release — “HFR” is boldly written atop such copy. I wish I were important enough to have an HFR obit done of me. Indeed, I’ve long said that the only fringe benefit of working for a newspaper is getting your obit in it. Except now I may outlast papers. Obits are at the heart of what newspapers do.

But at a magazine — even People magazine — writing an HFR obit for HRH was seen as rather distasteful. Actually, for a long time, magazines weren’t fond of death. Time Inc.’s publications didn’t believe in death as a cover story until John Lennon made it into People’s cover and sold like mad. Soon, People was obsessed with that I’ve called bodily fluids journalism: the diseases, affairs, births, and deaths of the famous. I joked that we should have just changed the name to Dead People magazine.

Sixteen years and many, many People covers later, Diana did die. And now, 30 years after the wedding I didn’t cover, William and Kate are to be wed. That’s what led me to Twitter this morning to recall my macabre duty way back when. I was saying how little I care about this event — as, I think, is the case with most Americans. Still, networks and magazines will demand we give a shit and spend a fortune doing so. I dared disdain the royals in a tweet and — it took only a minute for Brits to fall into my trap — I was scolded by those who said they cherish the royals as symbols of endurance. I see them as symbols of privilege. I prefer symbols of change and opportunity.

But still, I wish William and Kate a happy and lovely marriage … and long lives.

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Who’s afraid of Arianna Huffington?

Sunday, April 3rd, 2011

The New York Times has been gunning for The Huffington Post lately, which makes me wonder what exactly Arianna Huffington has done to scare or anger them so. Or perhaps that’s the wrong question. Given that our enemies are often those we don’t understand, I wonder what The Times fails to grasp about HuffPo. That then leads to the question of what The Times can learn from this Post.

Felix Salmon has done a skillful job covering this one-way war, this schoolyard taunting in two posts. Times Executive Editor Bill Keller wrote two columns and a blog post going after Huffington—once directly; once without (as Salmon puts it) the intellectual honesty to link to and allow his readers to judge those he criticizes; and once defensively, after Huffington called his bluff. Times staff loyally picked up Keller’s spitballs to lob their own. Media critic David Carr wrote and then killed a tweet sniping about Arianna that he later conceded was “tasteless.” Andrew Goldman didn’t so much interview Huffington for The Times Magazine as he acted like a parody of a TV prosecutor trying to bait a cagey witness—or perhaps it is better described as a comic homage to Joe McCarthy trying to elicit confessions of leftness. Then Salmon points out that The Times snagged a HuffPo scoop without credit. Just now Carr delivers a glancing blow to Aol/HuffPo, reading into a defection a defeat.

What is The Times’ problem? I think it’s that they do not understand what makes Huffington Post successful and they lash out at the unknown. Here, I suggest, is what The Times and Keller don’t understand about HuffPo. Here is what they think is wrong with it:

* Huffington Post is not content. Content is what content people make; if they don’t make it, it’s not content. That, I believe, is The Times’ cultural view of HuffPo: It cannot be content because the likes of The Times have not made it (no matter how many Timesman Huffington hires). That, I theorized, is why The Times and other media temples did not start their own HuffPo’s or buy the original: It’s not real. Even if The Times were to give it credit for the one-third of HuffPo that is content—by dozens of journalists—they’d still say it’s diluted by the other third that is aggregation and the last third that is comment. And that leads to…

* Conversation is not content. When I had Henry Blodget speak with my class on new business models and disruption, he praised HuffPo for its understanding of the value of conversation. In The Times’ view, conversation is what they enable—no, tolerate—when readers chatter under articles once they are finished. As I learn in every damned meeting with news folks I ever have, comments have cooties. All they can ever hear from the vox populi is the voices of the trolls. Blodget and Huffington have a broader sense of the conversation. That was Arianna’s essential insight when she gave celebrities a place to speak; that is conversation. That was Henry’s insight when he learned to listen to what people were talking about so he could join in and add to their conversation. Which leads to…

* Aggregation is cheating. The Times thinks aggregation is not content. Worse, they are coming around to Rupert Murdoch’s view that it is theft. As Jay Rosen tweeted, seen from the readers’ point of view, aggregation is helpful; it adds value to coverage. Indeed, that’s why The Times does aggregate and curate. But when looking for enemies, it’s best not to look in the mirror. I talk (a lot) about the link economy and how there are two distinct creations of value online: the creation of content and the creation of a public (née audience) for it. Aggregators, curators, and commentators bring audience—and value—to content. If the recipient of those links can’t build a relationship of value with the people who are clicking, that’s their problem. At CUNY, I will soon finally have the time to start a research project on the value of links and how to optimize it. I’d like to see this debate about aggregation between The Times and HuffPo occur on economic rather than emotional terms and hope to inform that discussion with facts.

* Free is offensive. Here’s another area in which The Times is coming to side with—gasp!—Murdoch. Now that it has a meter—and without a proven economic basis for it (not yet)—Times people must put the case again, in emotional terms of entitlement: Readers *want* to pay. Readers *should* pay. Times content *deserves* payment. People who question the strategy are demonized. (David Carr attacked me on NPR over just this … we’ve since hugged and made up; this is what I really have to say about the Times’ meter.) Huffington created value—we know the exact amount, to nine figures—out of getting people to write for free (because they wanted to and found value in). She’s cheapening the valuable work we journalists perform, isn’t she? No, like her free writers, she’s valuing something else. She’s valuing the relationships she has with the people formerly known as an audience.

* Left is not right. Goldman’s desperate effort to get Huffington to admit—CONFESS, I SAY AGAIN, CONFESS!—that she’s—gasp!—liberal, taken with Keller’s paeans to himself and his kind of journalism, were as revealing as they were disingenuous. I find Arianna, too, disingenuous in her efforts to sidestep the word the way Roger Ailes won’t own right. All of them want to dump us, the people, in these two buckets, left and right, but they are above classification. The Times’ real problem is not that Huffington a liberal but that she is an advocate of a point of view. So she tweaks The Times for WMDs and upholding antiquated definitions of objectivity and balance.

* Fun is not allowed. Journalism is serious business. It’s no place for kittens.

In my class, I’ve had my students pick a target to disrupt with a new business (after doing that, they’ll turn around and act as the disrupted company to craft a defense—it’s a lesson in finding opportunity in change). The class picked their target: Huffington Post (when I thought they would have picked The Times). Last week, they presented research and what struck me was the difference in engagement at both sites. HuffPo users generate 18 page views per month on average. The Times is defining only a small slice of its uniques—10%? 20%?—as that engaged, at 20 pageviews per month. I say The Times would have better used the $30-40 million reportedly spent on its meter finding ways to better engage its public—multiplying pageviews (fourfold or more?) and consequent ad revenue—while finding new ways to exploit these deeper relationships (data, commerce, events….). The Times knows it needs to increase engagement; that’s the industry’s favorite conference buzzword. The irony of The Times’ meter is that when it succeeds at engaging a once-casual reader, their reward is a wall. That is an economic and strategic question.

How could The Times increase engagement? By learning from Huffington Post rather than snarking at it. Aggregation has value for readers. Conversation is engaging. Fighting for the people—which is what newspapers did, in their good old days—is the most meaningful way to engage with a community. Fun is fine.

I am reminded of the schoolyard, when the boy nasty to a girl and some sage adult would see that he really just had a crush on her and didn’t know how to say it. OK, Bill and Arianna, kiss and make up.

: See also Jonathan Stray, who calls for a paid content API. I’d broaden that (as above) into a means to exchange value for both content and audience however that value is then exploited.

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