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January 19 2010

20:00

The Search for a New Revenue Model in Journalism

My writing on PBS Idea Lab was introduced to me as a way to publicly discuss the growth of Spot.Us, my Knight News Challenge project. I've received kudos for being honest in my blog posts. I'm comfortable talking about where Spot.Us is falling short, and where we are exceeding expectations. I think we are doing a bit of both -- and trying to adjust to succeed more and fall short less. Hey, that's the nature of iterative projects, which I've always said needs to be at the heart of Spot.Us as a new concept.

So let's keep that bit of honesty alive in this post in order to talk broadly about journalism. (If you just want the updates on Spot.Us, scroll down to the bottom.)

Robert Niles at OJR wrote two recent, fantastic pieces. In the shadow of The Economist's article proclaiming this to be "The year of the pay wall," Niles wrote "there is no revenue model for journalism" and that "doing journalism is an act of community organizing."

Doing journalism as an act of community organizing is something I've been writing/thinking about for a long time -- ever since Assignment Zero first failed. (Its failure only becomes more beautiful and poetic with hindsight). But I want to focus on Niles' first point.

"There is no revenue model for journalism."

That's not an easy thing to say. Probably not good cocktail conversation at a journalism mixer. But let's entertain Niles for a minute.

He says there are three main ways publishers can make money.

  1. Direct purchases, such as subscriptions (or pay walls), copy sales, and tickets
  2. Advertising
  3. Donations, including direct contributions and grant funding

Niles then proceeds to break down the three and concludes, "Publishers must take a sober look at these three options and decide how best to maximize their income opportunities within them."

Others might disagree with Niles and cite a plethora of other revenue streams (see: How to turn journalists into profit centers), but I don't think we can outright dismiss Niles's point of view by dreaming up other revenue streams outside of these trusted few.

Keep in mind the tone I mentioned earlier: Honesty, both the good and the bad. So let's take a good long look at just the headline. Certainly, Niles didn't mean there were no revenue streams. He simply meant there is no new revenue stream to pluck out of the sky aside from those main three.

But let's take his headline to the extreme for a minute. We can keep these three revenue streams and, as the trends show, entertain the idea that journalism just isn't sustainable. That's what I did in a thought experiment while witnessing the back and forth banter of two friends on Twitter, an exchange that was archived by Deanna Zandt

My response to 'journalism mimics art' in full was captured in a bit of a rant:

....a hard cold truth might be that [journalism] isn't sustainable.

But you know what - even if journalism isn't sustainable in that classic sense it doesn't mean it will disappear. There are plenty of endeavors that have NEVER been sustainable in the true sense of the word.

I use poetry as an example. Poetry in and of itself has never been sustainable in the way we might think of other goods and services.

Are we afraid poetry will die? No. Has it ever even been scarce?

I think we could extend this [lack of sustainability] to almost all of the high arts (as opposed to pop arts).

One of Clay Shirky's most profound and popular posts about newspapers had this to say:

The expense of printing created an environment where Wal-Mart was willing to subsidize the Baghdad bureau. This wasn't because of any deep link between advertising and reporting, nor was it about any real desire on the part of Wal-Mart to have their marketing
budget go to international correspondents. It was just an accident.

And while we all agree with the wisdom of this, we seldom take Shirky to task. If Wal-Mart won't subsidize journalism, somebody else must step up. But perhaps whoever that is won't have profits and sustainability in mind.

I'm not proposing that we just give up, all join co-ops and grow dreadlocks (although that would be cool with my internal hippie). What I am suggesting is that, in this age of experimentation, which we all agree is happening, there are certain assumptions we make that steer the direction of our thought.

One of those assumptions, and I claim this all the time, is that there will always be a market for news and information. That marketplace is in flux and hard to pin down at the moment, but people want accurate and thorough news and information. If this assumption is true, then journalism will be sustainable once we figure out the marketplace again and how to "sell" the news.

Compare this to poetry, where there is little demand. There is no robust marketplace and poetry is not "sustainable" in the true sense of the word. Instead, it is traditionally professionalized through patrons of the arts.

The Relative Importance of News and Information

In conversations with people that conduct audience research I've come to realize that news and information is not as important to the average reader as it is to folks like you and me (bloggers, journalists, news junkies, etc).

Here's what they tell me: two times a week. That's how often people have the urge to dive into civic issues at the local level. Of those two times it's unclear whether or not news and information is even desired, or if it's just the urge to tutor the kids at your local school, or do some public gardening, etc.

I wonder how often people feel the urge to hear poetry?

I don't claim to know any truths about the value of journalism and original reporting. Hey, I'm biased! I'm just suggesting that, as journalists, when we have this discussion we should recognize our bias and tendency for over-valuation.

In that vein, I want to follow this train of thought to an extreme. For me, it's often helpful to think in extreme examples and then determine the factors that lead to one or the other extreme. I could very easily write a blog post where the value of news and information is compared to food (three times a day, please) instead of poetry. Following that path would give us different conclusions.

So fear not! No truth has been discovered in this post -- it's just an attempt to shake things up.

Spot.Us Updates

1. The Redesign is making progress -- It's always slower than you want it to be. But so is transportation. One day, we'll just be able to snap our fingers and, presto-insto, be somewhere new.

2. Pitches are coming in and going through the pipeline -- We still need to figure out a better way to keep pitches on a deadline. A last resort would be to start deducting money from pitches that go past deadline, but that is a last resort. I'm sure there are other measures we can put into place to make sure deadlines are met. By the way, the newest pitch comes from a very cool Peter Byrne who wants to investigate the UC Regents.

3. The iterative process continues.
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January 06 2010

17:26

Advertisers Still Prefer Print to Online

A rare bit of good financial news for journalism points once again to the difficulty of financing online media.

PaidContent reported this week that Politico raked in more than $20 million last year, finishing with operating profits of about $1 million.

That's the good news. But as Molly Fischer wrote in the New York Observer, Politico's print publication -- something few of us outside the Beltway ever see -- accounted for 60 percent of operating revenues. This was the case even though the paper version has an estimated circulation of 32,000 compared to the more than 3 million unique visitors estimated to visit the website every month.

As Fischer said, "Even if Politico's success testifies to print's demise, print advertising remains the best way to make money."

Politico, of course, is fortunate enough to have both a print and web presence. Those of us at web-only publications (such as Gotham Gazette) cannot help but be frustrated by seeing ads -- and revenue -- going to print publications that may have fewer readers and weaker content.

People like seeing their ads on coffee tables -- particularly on the mayor's coffee table, as an ad salesperson told me when I wondered why Gotham Gazette did not get more image ads from unions and advocacy groups. So far, it seems, even the people at Politico have not been able to break that habit.

December 03 2009

18:40

FTC's Hearings on Journalism: Why?

As everyone knows, the nation's scam artists, monopolists and market-riggers have all gone into hibernation during the worst economic crisis since the Great Depression. This has given the Federal Trade Commission the breathing room it needs to intercede in an arena where its role is, at best, unclear.

This week, the commission held a two-day workshop entitled How Will Journalism Survive the Internet Age? -- the purpose of which is "to explore how the Internet has affected journalism."

There's been lots of blogging, Tweeting and journalizing about it. Some people think it was a valuable exercise. I question that, especially the FTC chairman's announcement that the situation might well call for government intervention.

The event came under the FTC's Office of Policy Planning. Here's its mission:

The Office of Policy Planning assists the Commission to develop and implement long-range competition and consumer protection policy initiatives and advises staff on cases raising new or complex policy and legal issues.

One of the Office of Policy Planning's primary roles involves competition advocacy, submitting filings supporting competition principles to state legislatures, regulatory boards, and officials; state and federal courts; other federal agencies; and professional organizations. The Office also organizes public workshops and issues reports on cutting-edge competition and consumer protection topics, addressing questions of substantive antitrust law, industry-specific practices, and significant national and international policy debates.

In addition to the Office of Policy Planning, several offices throughout the Commission, including the Bureau of Competition's Office of Policy and Coordination and the Policy Studies unit within the Office of the General Counsel, also provide policy advice.

This has what to do with journalism, exactly?

Ah, we learn more in a Federal Register Notice (also PDF-only, naturally). The notice observes, in a promising start, that the Internet has created unparalleled possibilities.

The commission could have stopped there, and not bothered to hold the workshop. It could have recognized that we're in the early days of a transition from one set of business models (most of which have not been very competitive) to an emerging, hyper-competitive sphere. There's never been more reason for optimism than there is today, given the massive amount of journalistic and business experimentation going on all around us.

But the commission staff and many speakers found much to fret about, spurred in large part by the incessant whining of the newspaper industry in recent times. (Could it also have been influenced by the fact that the FTC chairman is married to a Washington Post opinion writer? No, this obviously had absolutely no bearing on anything.) The commission has discovered that the advertising model which once supported many kinds of journalism has eroded. Quoting several economists, the workshop notice says "public affairs reporting may indeed be particularly subject to market failure."

Market failure? What about the market failure -- which as far as I can tell never got any attention from a succession of FTC people during the past half-century -- of the monopolies and oligopolies created by media organizations during that period? The public affairs journalism was, for the most part, a modest spinoff of the extortionate advertising prices they charged when they had near-absolute market power to charge anything they wished. Only when there's real competition does the FTC get interested.

The commission, inevitably, is asking for opinions on whether federal taxpayers should subsidize journalism more directly than the indirect subsidies of low postal rates for print; giveaways of publicly owned airwaves (spectrum) to broadcasters; the odious "Newspaper Preservation Act" granting partial antitrust immunity to community newspapers, etc. Several of the speakers are surely going to rise to that bait with a loud Yes. (Believe it or not, meanwhile, the commission is asking if Congress should give journalism-related businesses even more antitrust immunity. Good grief.)

There's only one subsidy that makes sense, only one that wouldn't put government meddling squarely into the practice of journalism, an inevitable result of the direct subsidies being pushed by well-meaning but misguided media thinkers. It's not on the agenda, however.

Taxpayer-assisted infrastructure -- especially the postal system and low rates for sending publications -- helped create the newspaper business, and enabled a lot of other commerce. Bring forward that logic to high-speed Internet access for all Americans, and enable the 21st Century communications infrastructure for all competitors.

As it is, we're moving toward a market failure of frightening proportions, as the telecom industry clamps down, or threatens to, on people's ability to use Internet connections as they see fit. We're moving toward a media business consolidation that would terrify make any real champion of open markets: a cable-phone duopoly. Maybe the FTC could poke its nose into the truly scary potential of the just-announced Comcast buyout of NBC Universal? That would actually be useful.

The Federal Communications Commission has jurisdiction over telecom, and is looking at the issue. But when it comes to how journalism will thrive in (not just survive) the Internet age, this should be high on any list of competitive issues of interest to agencies that push for competitive markets.

The word "broadband" was nowhere to be found in the FTC's planning document. Coming from an agency that says it wants to promote competition, that spoke volumes.

(Cross-posted, with updates,from Mediactive.)

December 01 2009

15:54

The Challenge for Non-Profit News Organizations

Non-profit status is often cited as an exciting new option for struggling local news outlets. ProPublica, MinnPost, and the Voice of San Diego are inspiring examples of non-profit startups, while the Christian Science Monitor, NPR and other organizations are all long-standing examples. It's not difficult to see that old and young non-profit platforms alike are among the leaders in news innovation.

I agree that there are many upsides to the non-profit path, but it also carries significant management risk. The business environment of non-profits is often deeply misunderstood, even by the managers of tax-exempt companies themselves. More worrisome, boards are frequently ill-equipped to understand the strategic or operational specifics of non-profits, or even unable to read the peculiarities of their balance sheets. (Board Source is a great place to go for those looking to help their boards through some of these challenges.)

For news outlets, non-profit status would eliminate some of the negative pressures of shareholders looking for high margins at the expense of the essential role of news as social glue in a community. But while they don't have a mandate to generate shareholder value, non-profits do have a mandate to deliver measurable social value. Non-profit status is not a pass on the imperative to innovate, no matter how noble your cause, nor how deep your moral certitude.

To fulfill the responsibility that comes with their tax-free status, non-profit news outlets must fight to prove their measurable worth to society. If they fail, and many will, the creative destruction of the social market should sweep them away to make room for new rising social entrepreneurs to take their place.

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