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October 14 2010

14:30

The Newsonomics of replacement journalism

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Finally, we’re seeing light on the horizon. Journalism hiring is picking up.

The second half of the year has so far produced TBD’s hiring of 50 in Washington, Patch’s push to pick up 500 journalists across the country, and the new alliance for public media plan to hire more than 300 journalists in four major cities, if funding can be found in 2011. In addition, the brand-name journalist market has suddenly flowered, as everyone from National Journal to the Daily Beast to Bloomberg to AOL to the Huffington Post to Yahoo compete for talent. These are bigger numbers — and more activity — than we’ve previously seen, though they build on earlier hirings from ProPublica to California Watch to Bay Citizen to Texas Tribune to MinnPost and well beyond.

It’s a dizzying quilt of hiring, in some ways hard to make sense of, as business models (how exactly is Patch’s business model going to succeed? what happens when the foundation money dries up?) remain in deep flux. Yet, amid the hope, now comes this question: Are we beginning to see “replacement journalism” arriving?

Replacement journalism, by its nature, is a hazy notion. We won’t see some one-to-one swapping for what used to be with something new. Replacement journalism will though give us the sense that new journalism, of high quality, is getting funded, somehow, and that the vacuum created by the deepest cut in reporting we’ve ever seen is starting to be filled. It is an important, graspable question not just for journalists and aspiring journalists welling up in schools across the country, but also for readers: Are we beginning to see significant, tangible news coverage in this new, mainly digital world?

So, let’s assess where we on, on that road to replacement journalism. Let’s start with some numbers. Take the most useful census of daily newspaper newsroom employment, the annual ASNE (American Society of News Editors) census, conducted early each year and next reported out at its April 2011 conference. ASNE’s most current number is 41,500. That’s down from 46,700 a year earlier, from 52,600 in 2008 and from 55,000 in 2007. So, over those three-plus years, that’s a loss of 13,500 jobs, a 25-percent decline.

As we consider what’s been lost and what needs to replace it, we’ve got to look as much at possible at reporting. That news-gathering — not commentary (column or blog) — is what’s key to community information and understanding, fairly prerequisite in our struggling little democracy. While we don’t know how many of those 13,500 jobs lost are in reporting, we can do some extrapolation. Using that same ASNE census, we see that a little less than half (45 percent or so) of newsroom jobs are classified as reporting, while 20 percent are classified as copy/layout editors, 25 percent as supervisors and 10 percent as photographers and artists. So — while not undervaluing the contributions of non-reporters — let’s say, roughly, that half the jobs lost have been reporters. That would mean about 6,750 reporting jobs lost in three years.

Okay, so let’s use that number as a yardstick, against a quick list of journalist hiring:

  • Investigative and extended enterprise reporting: It’s tough to come up with any one number for investigative or long-form reporting in newspapers or in broadcast. We know that many newspapers and broadcasters have cut the investment in staff here, though, through the carnage of staff reduction. (One indication: “The membership of Investigative Reporters and Editors fell more than 30 percent, from 5,391 in 2003, to a 10-year low of 3,695 in 2009″, according to Mary Walton in the American Journalism Review.) Into this breach have come the new ProPublica, the restyled Center for Investigative Reporting (with its California Watch, most notably) and the growing Center for Public Integrity in Washington, D.C. They are joined by smaller centers from Maine to Wisconsin to California. Loss: Probably in the high hundreds. Gain: Probably in the small hundreds. Net: We’ve seen real high-quality replacement journalism, but need more, especially on the community level.
  • Washington, D.C. reporting: Dozens of D.C.-based reporting positions have been lost over the last several years, certainly, and the number may stretch into the hundreds. For awhile, the biggest news was that the Al Jazeera bureau was among the fastest-growing. Now, of course, there’s the goldrush in government-oriented reporting as the newly emboldened (and funded) National Journal group and Bloomberg Government add a couple of hundred positions, and join Politico in the D.C-based fray. With both new efforts still in formation, we’re not clear what kind of reporting they’ll do. If it’s mainly government-as-business (Bloomberg’s seeming model) and/or if it’s mainly behind pay wall, then then this new stuff will be less replacement-like. Covering public policy implications for all of us nationally, and the particular impacts on those of locally, is a key, yawning need. Loss: Significant. Gain: Substantial. Net: Unclear we see the words on our screens in 2011.
  • Hyperlocal reporting: The biggest news here is Patch, of course. With 500 sites in various stages of rollout, we can’t yet assess how much new reporting — and of what quality, what depth — will be added back, replaced. Add in the redeployment of many metro staff reporters from Hartford to Dallas to L.A., and the fact that smaller community dailies and weeklies have weathered the storms better than bigger papers. Loss: Uncountable, but real across the country. Gain: With Patch and with the re-attention of metros to smaller communities through staff redeployment and blog aggregation, it’s now substantial. Net: One of the most promising areas in replacement journalism.
  • Metro-level reporting: The devastation seems clearest here, with newspapers like the San Jose Mercury News cut to 125 newsroom staffers from 400 a decade ago, and many other dailies down by 50 percent or more. The bulk of cuts, as well chronicled by Erica Smith at Paper Cuts, appear to be at metros — and they are continuing; witness recent job losses in Sacramento and Miami and at USA Today. On the positive end of the ledger, the TBD-Bay Citizen-Voice of San Diego-MinnPost-Texas Tribune-Chicago News Cooperative parade has added real journalistic depth in selected markets. Yet, unless they grow substantially from the dozens they are — the public media push, though only in formation, is the most promising here — there’s a low replacement ratio. This is the biggest conundrum in front of us: how do we maintain current newsroom staffing of 340 at The Boston Globe or 325 at The Dallas Morning News, against the ravages of change? Loss: Huge. Gain: Spirited and of noteworthy excellence. Net: Biggest gap to fill — and the gap may be widening still.

“Replacement journalism,” of course, is a tricky term, and maybe only an interim notion — a handle that helps us from there to here to there. By the very nature of digital and business disruption and transformation, we have to remind ourselves that the future is never a straight line from past to future, and that it will offer us great positive surprises as well as continuing disappointments. William Gibson’s enduring line sums that up: “The future is already here. It’s just not evenly distributed.”

Photo by Matt Wetzler used under a Creative Commons license.

September 30 2010

17:00

The Newsonomics of journalistic star power

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Maybe it’s a trend, or maybe it’s a bubble, but Jim Romenesko’s blog is chockablock with high-level journalist movement. The Newsweek Six are on the auction block, sought by eager bidders, as Time Warner solidifies its relationship with Fareed Zakaria, making him a wholly owned, cross-platform phenomenon, and Howard Fineman gets tapped on the shoulder by The Huffington Post, soon after it hired away The New York Times’ Peter Goodman.

Daniel Gross jumps from his long-time Slate home to Yahoo Finance. The National Journal makes acquisition after acquisition, this week reeling in Dave Beard, the well-respected editor of Boston.com, where he joins numerous other veterans (AP’s Ron Fournier, Newsweek’s Michael Hirsh, The Atlantic’s Marc Ambinder, Fox’s Major Garrett, among them) who’ve recently made a switch. After an apparent flirtation with AOL, Kara Swisher and Walt Mossberg stay safely in the News Corp bosom, while AOL spends its bonus dough on TechCrunch, buying a brand and an established news operation.

Other well known journalists are also suddenly fielding calls of interest — and often moving on to new adventures. Bloomberg’s been hiring pedigreed journalists by the dozens, for Bloomberg Government and other initiatives. Patch is snatching many of its regional editors from daily newspaper ranks.

What we’re seeing is a market develop. This is market that newly prizes talent, but a certain kind of talent. Most of the hiring is at the minor star level, though the lumens emitted vary. How do you measure — critical to digital success — the light?

First off, the hiring companies believe they know sustainable models of building businesses on higher-quality content. That may seem basic, but when we look at the much of the newspaper, broadcast, and consumer magazine worlds, that belief is flagging. They look at well salaried, professional staffs and see high “cost structures,” which are harder to justify, given current levels of advertising and the lack of successful digital revenue models.

We know that Yahoo and AOL, increasingly competitive with each other, believe they’ve found a working formula to make good content pay profitably. Tim Armstrong, AOL’s CEO, talks about “sparking a content revolution.” His formula, and Yahoo’s, is fairly straightforward, and borrows its commandments from the Demand Media bible. It’s all about the efficient ad monetization of content, with analytics — know the nature of the content, target the reader and align the advertiser — that seem to grow better week by week (see The Newsonomics of content arbitrage).

(AOL, ironically, is milking its online access business — yes, lots of people still think of AOL and Internet service as the same thing — drawing 43 percent of its revenue from it. That’s similar to newspapers milking the print business for as long as possible, as they can make the inevitable digital transition. By that comparison, AOL’s lifeline is much shorter, with a 25-percent 2Q drop in customers paying for that access, while most newspaper companies’ circulation revenue down only in low single digits.)

The newsonomics of the star hires is intriguing. Think of these “star” hires as individual SKUs, “products” whose value can be estimated against the customers they bring in the door. Those conversion customer metrics are evolving. Counting pageviews is the simplest way. Take those views at whatever (premium?) rate you can sell them, and you’ve got a first number. The intangibles are how many new unique visitors the Zakarias, Finemans, and Grosses bring with them from their old haunts. How many of those new customers become regular customers of the outlet? That gets you to some annual and/or lifetime value metrics. As metrics are collected and tested, we’ll see some more science brought to what is now a star-search art form.

There certainly are other intangibles. What is Yahoo News exactly? What is HuffPo? What is AOL? As they define themselves as legitimate news companies, the new stars bring cred — and legitimacy. In addition, they are magnets to other, lesser-known talent, signaling, “it’s okay to come here.” There’s economic value in that, too.

Notably, few established legacy brands are hiring new top-end talent; Time’s Zakaria hire is a smart, though unusual one, enabled by the Newsweek uncertainty and Time/CNN linkage. For the most part, legacy news companies’ growth scenarios are borrowed, curiously, from those now hiring those stars: multiplying the amount of content available under their brands, harnessing amateur and lower-cost stuff from local bloggers, licensing from Demand Media and aggregating content through FWIX, Outside.in, and OneSpot. They’re the ones paying heed, at least indirectly, to Wikipedia’s Jimmy Wales’ observation that hiring six-figure columnists in this time is silly: “The best of the political bloggers are easily the equal of the opinion columnists at the New York Times. I don’t see the added value there and question whether a newspaper should be paying large sums of money for that any more.”

The hirings at the National Journal and Bloomberg point to a different kind of business model. Those companies have found niche models involving significant reader and/or enterprise payment, and now are building out, and around, those businesses. They, too, believe they can make a new business out of superior content.

It’s complicated, and there are more than two phenomena happening here. Yes, some players that have built successful enterprises — think Yahoo, AOL, Huffington Post — on non-professional staff content (through aggregation, pro-am sites, and more) are now adding the pros at the top, to reinforce brands and put faces on them. At the same the high-cost, pro-based enterprises are going the other way.

It’s not an equilibrium, nor will these models meet in some neat middle, but there’s some sense of coming at a similar solution from two ends of the spectrum. It’s a blend of old and new, expensive and cheap, and no one yet knows the best formula.

Arianna Huffington explains it as a maturation, and indicates the hiring of pros was part of the original Huffington Post plan: “From the day we launched, it was our belief that the mission of The Huffington Post should be to bring together the best of the old and the best of the new. Bringing in the best of the old involved more money than we had when we launched. But now that our website is growing, we’re able to bring in the best of the old.”

The likely result of these moves? By 2015, news companies will pay top dollar, and pound, euro and yen, for top-end talent, and they’ll pay as little as possible for good-enough newsy content that fills many topical and local niches. Over the next several years, the most successful media brands will have mastered better the economics of pro-am journalism.

Infrared image of a star cloud courtesy of NASA.

August 26 2010

16:00

The Newsonomics of news orgs surrounded by non-news

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

The Washington Post Company has been much in the news recently, but not because of its flagship paper. It’s making news around its other holdings. It has shed Newsweek, staunching a $30 million annual bleed. More importantly to the company’s finances, its Kaplan “subsidiary” has been much in the spotlight, under investigation by the feds, along with other for-profit educators, for fraud around student loans.  Those inquiries have rocked The Washington Post Co.’s share price, sending it to a year-to-date low.

The Post’s case has also refocused public attention on how much the company is dependent on Kaplan revenues. Those revenues now amount to 62 percent of revenues, and 67 percent of profits. It became clear to even those who hadn’t been watching closely that the Post was more an education company than a newspaper one, though the family ownership of the Grahams clearly intend to use that positioning to protect and sustain the flagship paper.

The Post case is not an isolated one. Fewer news companies are, well, “news” companies in the way we used to think of them. More news operations find themselves within larger enterprises these days, and I believe that will be a continuing trend. It could be good for journalism — buffering news operations in times of changing business models — or it could be bad for journalism, as companies whose values don’t include the “without fear or favor” gene increasingly house journalists. That push and pull will play out dramatically over the next five years.

Let’s look, though, at the changing newsonomics of the companies that own large news enterprises.

Here’s a chart of selected companies, showing what approximate (revenue definitions vary significantly company to company) percentage of their overall annual revenues are derived from news:

News Corp.: 19 percent (newspapers and information services); 31 percent (newspapers and broadcast)
Gannett: 94.3 percent (newspapers and broadcast)
New York Times: 93 percent (newspapers and broadcast)
Washington Post: 21 percent (newspapers and broadcast)
Thomson Reuters: 2.3 percent (Media segment)
Bloomberg: <15 percent (non-terminal media businesses)
AP: 100 percent (newspapers and broadcast)
McClatchy: 100 percent (newspapers and broadcast)
Disney (ABC News): <14 percent (broadcast)
Guardian Media Group: 46 percent (newspapers)

The non-news revenues may be a surprise, but here’s one further fact to ponder: News, over the past several years, has continued to decline in its percentage contribution to most diversified companies. Given all the trends we know, it will continue to do so. Movies, cable, satellite, and even broadcasting all have challenges, structural and cyclical, but overall are all doing better than print and text revenues.

News Corp., the largest company by news revenue in the world with publications on three continents, is a great example. After all, although it is eponymously named, it is not really a “news company.” With only one in five of its overall dollars coming directly from traditional news, it’s much more dependent on the success of the latest Ben Stiller comedy or the fortunes of a blockbuster than on the digital advertising growth of The Wall Street Journal or the paid-content successes — or failures — of The Times of London. These matter, of course, but let’s consider the context.

In February, I wrote about the “Avatar Advantage” that News Corp.’s Wall Street Journal held in its increasingly head-to-head battle with The New York Times. At that point, Avatar had brought in $2 billion in gross receipts for News Corp., whose 20th Century Fox produced and distributed the movie. Now that number has grown by $750 million, to $2.75 billion in total. News Corp. shares that revenue with lots of hands, but what it keeps will make an impressive difference to its bottom line — and to what it can pour into The Wall Street Journal, as CEO Rupert Murdoch desires.

Compare that financial flexibility with the Times, and it’s night and day. The Times Co.’s total 2009 revenues: $2.4 billion, less than Avatar itself has produced. The Times is all but a newspaper pure play, deriving about 5.5 percent of its revenue from non-news Internet businesses, like About.com, after shedding TV and radio stations and its share of the Boston Red Sox.

It may be a one-of-a-kind pure play, in that it is the leading standalone news site and reaches vast audiences globally. Yet its pure-play nature can feel like a noose, which was tightening in the depth of the recession and only feels a lot looser now. The Times’ planned paid-content metering system, for instance, is a nervous-making strategy for a company with relatively little margin of error. Compare that to the revenue trajectories that News Corp.’s London papers may see after their paywalls have been in place for a year. Whatever the results, they’ll have de minimis impact to News Corp. fortunes.

Likewise, McClatchy — another newspaper pure play, like MediaNews, A.H. Belo, Lee, and a few others — is now betting wholly on newspapers and their torturous transition to digital.

While Gannett is heavily dependent on print newspapers, in the U.S. and UK, it has been benefited by the 13 percent of its revenues that come from broadcast. Broadcast revenues — buoyed by Olympics and election-year advertising — were up 18.6 percent for the first half of 2010, while newspapers were down 6.5 percent for Gannett. Broadcast may be a largely mature medium, too, but for the print news companies that haven’t jettisoned properties gained in an earlier foray into broadcast diversification, it has provided some balm. In addition to Gannett, MediaGeneral and Scripps are among those holding on to broadcast properties.

For the bigger companies, the consequences are more nuanced. I call these large, now globally oriented (in news coverage, in audience reach and, coming, in advertising sales) The Digital Dozen, twelve-plus companies that are trying to harness the real scale value of digital distribution.

The Digital Dozen’s Thomson Reuters is a great example. Until 2007, Reuters was a standalone, a 160-year-old news service struggling with its own business models in this changing world. Then, with its merger with financial services giant Thomson, it now contributes less than a tenth of TR’s annual revenue. That kind of insulation can be a good thing, both as it figures out how to synergize the Reuters and Thomson business lines (a complex work-in-progress) and to allow investment in Reuters products and staffing, even as news revenues find tough sledding. Meanwhile, its main competitor, AP, may have a strong commercial business (broadcast and print) worldwide — but it’s a news business, with no other revenue lines to provide breathing room.

National broadcast news, too, has seen rapid change, and much staff reduction in the past few years. GE, one behemoth of a diversified company, is turning over the NBC News operation to another giant, Comcast. ABC News is found within the major entertainment conglomerate Disney.

Meanwhile, Bloomberg — getting more than eight out of 10 of its dollars via the terminal rental business — is moving aggressively to build a greater news brand; witness the Business Week acquisition, and its push into government news coverage, formally announcing the hiring of 100 journalists for its Bloomberg Government new business unit. Non-news revenue — largely meaning non-advertising dependence — is what may increasingly separate “news” companies going forward. So we see the Guardian Media Group selling off its regional newspapers to focus, as its annual report proudly announces, on “a strong portfolio [of non-news companies and investments] to support our journalism.]

Journalism must be fed — but inky hands will be doing less and less of the feeding.

Image by John Cooper used under a Creative Commons license.

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