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April 03 2013

18:50

The newsonomics of the Orange County Register’s contrarian paywall

angel-stadium-cc

Get your hot dogs. Get your beer. Get your newspaper. Step right up.

As Opening Day comes to the Big A in Anaheim on Tuesday, you can now expect to hear that barker’s call in Orange County. In what is fast becoming one of the most-watched experiments in newspapering (to use a quaint term), the Orange County Register innovates in a new way, aligning one hallowed American pastime with another.

Hundreds of newspapers have announced paywalls, as the Register is doing and a smaller subset is embracing “membership” as a way of redefining subscription. The Register, though, is making membership more meaningful with a just-completed deal with the many-named Los Angeles Angels of Anaheim. Starting tomorrow, “Register Connect” members — that is, seven-day subscribers — get a perk unlike any other in the newspaper world: free tickets to Angels games. That may be an actual game-changer — giving new meaning to the idea of “all-access.”

The new offer is just part of the Register’s aggressive, contrarian approach to paywalls, which is a central piece of its readers-first, invest-in-content staffing strategy (“The newsonomics of Aaron Kushner’s virtuous circles”). It’s a strategy that reaches beyond the groupthink that has long characterized much of the industry. Let’s look at its approach, including the ticket giveaway — its pros and the cons, its potential brilliance and what could dull the strategy. Let’s look at the newsonomics of the Register’s new paywall, one run by younger, sure-of-themselves non-newspaper people. Let’s also consider how much the Register’s new approach reminds us how first-generation, how 1.0 the current pay systems in fact are. Over 2013, we’ll see twists, turns, and nuances, as even paywall stalwarts like the Columbus Dispatch and Dallas Morning News tell us about previously unannounced changes in their own paywalls.

Aaron Kushner and Eric Spitz, CEO and president respectively of Freedom Communications, which they bought out of bankruptcy last year, have diverse business backgrounds. You’ll find a smattering of greeting cards, beer, unfast food, horse-racing technology, and moving services on their resumes, and they bring that experience to the problems and opportunities of the modern newspaper company. You get the sense that they love to zag when others are zigging — which helps explain their pride in announcing their paywall.

“We’re doing four things that are totally unique,” Spitz told me this week. Those four are interesting, certainly, but they bury the Register paywall lead. The Register is doing two things that others have done, but are doing differently — putting up a hard paywall and making much more of the membership idea than peer pioneers have yet done with it. First, though, a quick run-through of Spitz’s four unique forays:

1. A paywall without discounted digital access

The Register will charge one price — a dollar a day or $365 a year. Get digital or print or both. “We are truly agnostic. It’s our job to get you the content anyway you want. It’s kind of like HBO GO.” Why one price? “You are not paying for the paper — you are paying for the content.”

Most papers charge less for digital-only access, often 50 to 70 percent of the print price. Many have found that non-print readers won’t pay print-like prices for digital-only; some, like The Dallas Morning News, have actually lowered their digital-only prices, as they’ve found low incidence of fully paid print readers “trading down” to digital-only.

In the abstract, the Register’s reasoning makes sense. In practice, expect that few non-print readers will fork over that much money, initially, for tablet and smartphone reading. In the long term, of course, publishers want readers to pay for the content, not the package. In the long term — with production, printing, and distribution costs largely gone and subscription rates close to what they were in print — news publishers would be greatly more profitable. That’s the long term, though, and the path there is foggy. Yes, The Wall Street Journal can charge 83 percent of its print price for digital, and the Financial Times 87 percent (or 113 percent), but those are business-specific anomalies in the print trade.

2. Time-based digital access

If you pay $2.40 for Sunday print only, you get digital access only on Sundays. The Register, true to its agnosticism, is literally matching print and digital access. (You can also buy Thursday-Sunday for $5.60 a week, with matching digital access.) It’s agnostic — and it’s literal. One could argue that The New York Times’ scheme — cheaper for Sunday print + digital access seven days a week — better meets its business needs and consumer psychology. But the Register’s approach is a great test to watch.

3. Day passes

For any 24-hour period, you can pay $2 for access — access that gets you, in effect, two days worth of Register stories. The daypass idea is one that hasn’t much been tested in the U.S., with the Memphis Commercial Appeal trying but apparently dropping it. TinyPass, the company powering Andrew Sullivan’s Dish paywall, says daily access is more popular overseas and for video, selling live events and sports videos. The idea: sampling. Potential upside: day-passers move to full subscriptions. Potential downside: Comparing a $365 commitment to a $2 commitment, many readers opt into day passes.

4. All archives open to the public

The last 90 days of the Register’s content is considered current and covered by the paywall. Any content older than that is open to the full public. Why? “It’s the current content that readers most value,” says Spitz. Undoubtedly true, but it seems to me that archives — a continually undervalued asset by most news companies — have more value that can be exploited.

But it’s the membership program — one that’s not unique in the industry — that will catch the headlines.

Most newspaper membership programs offer free ebooks (The Boston Globe), coupons (The Day in New London, CT) and retail discounts (Los Angeles Times). Some invite members to community events or to visit the editorial staff. The Register wants to go bigger. It approached the Angels, located 10 minutes away, with the idea of better using the empty seats the Angels couldn’t sell. The Angels found themselves sitting on almost 600,000 empty seats last year over 81 games. Put another 7,000 butts in those seats each night, even without getting paid for the ticket, and the club is pulling in another 10 bucks or so on Chronic Tacos, garlic fries, and overpriced Corona.

The perk is available on a first-signed-up, first-served basis to the Register’s 124,000 seven-day subscribers, beginning 72 hours before each game. Forty-eight hours before the game, the Angels, through Ticketmaster, release available seats. Register Connect buyers can nab four tickets, for a service charge of $5. Within a year — subject to going to the end of the electronic queue after landing some tickets — fans can claim as many as 96 tickets a season.

“We’re looking to execute at scale,” Spitz explains, noting that lots of membership perks are good, but few are likely to move the needle of buying and retention. The Angels’ ticket program is that touch of likely brilliance. It is a scale play — and one I’ve been looking for as I’ve heard about the various membership initiatives rolled out over the last two years.

Further, it acts on the power of media. The Register, though shrunken in circulation like the rest of its metro brethren, still throws a lot of weight around town. It retains the power to pull off a big deal with the local baseball franchise — and one that comes at relatively low cost to the newspaper. (The high value/low cost here parallels the Register’s precedent-setting “golden envelope” program, in which it gave those same seven-day subscribers a $100 “check” for “free advertising,” a check they could endorse over to their favorite charity. That program will now be offered “at least twice a year” as well.) A couple of decades after airlines embraced variable pricing — selling off commodities whose value was destroyed by time — the practice is getting to be standard in lots of industries. Newspapers, with their market power, then are well positioned to create a variable pricing marketplace — with their member-subscribers at the center — and the Angels deal leads the way there.

“For your $400 a year, we’re going to deliver you far more than $400 in value,” says Spitz, underlining the allure of “membership.” To make membership more than a card-in-the-wallet afterthought, Spitz says Register Connect will include a key fob — a literal “key to the city” — to facilitate greater use.

Finally, there’s that hard paywall. It’s the biggest enigma of the Register plan. Come to the Register site, and you can get any non-staff-written story — wires and syndicated content, which makes up 40 percent of the content overall — but you won’t get more than “a headline and a sentence” of local stories.

It’s been the meter — with its flexibility and open site sensibility — that has fueled the paywall movement. Yet the Register, two years into modern paywall history, is going with the hard wall. Why?

Spitz says the Register wants to be clear that paying customers get everything — all access on all devices — and that others don’t. You are a customer — or you’re not. You’re on the Register bus, or you’re off it. There’s a certain purity to the thinking; it certainly slams shut that loophole we’ll come to see as plain weird — readers paying several hundred dollars for print or nothing for online. The metered model has largely closed off that stark choice for real readers of any publication. The Register, though, wants to make it even clearer: Pay your $365 a year — either for print or digital or both — and you get the content. It wants to reinforce its buyers’ smart choice.

The move means that the Register will surely lose more pageviews than if it went with a meter. Figure that it will lose 20-30 percent of them, where new metered paywalls lose about half as much. “We don’t care about monetizing eyeballs,” says Spitz, talking about the small incremental ad value newspaper sites get from marginal readers.

I asked Spitz if he had talked with The Dallas Morning News, one of the few U.S. sites to go hard paywall, and he said he had. “The number one thing we take away from them is the most significant value of the paywall is that if someone signs up — a print subscriber who signs up for the paywall — they become 50 percent less likely to attrite [drop their subscription]. The most important value of a paywall as it turns out is you are telling your customer that they are not stupid for buying something their neighbor is getting for free.”

Ironically, publisher Jim Moroney of the Dallas Morning News tells me that his paper is likely moving to a metered model: “We’re pretty certain that’s part of our strategy. How do it is the question.” Today, the Morning News does what the Register is about to do, offering for free access all the non-staff content, but making local stuff inaccessible to non-payers. Why the likely change? In a word, sampling. Moroney believes that he’s secured his core readers — at a high price of $36.95 a month for seven-day print + digital — but knows he needs to crack a code to bring in new, and younger, readers. The hard paywall is a barrier to sampling.

Phil Pikelny, the Columbus Dispatch’s CMO (“The newsonomics of pressing innovation”) is even blunter about the need for a meter:

Pre-2006, we had a hard wall at Dispatch.com. “It was an unmitigated disaster. While other news sites offered all free content, we [who only offered a free home page, free classifieds and free obits] were only able to attract 6,000 paying subs at the height of our ‘success.’ I’d say that thinking retarded our digital growth by three years. No matter what ‘we wish would happen,’ the simple fact is that people only pay for the value they perceive in a product. A website visitor looking at eight pages a month obviously derives little value from the site visited that infrequently. Obviously no pay scheme will win them over. I personally think a hard wall is so restrictive that the website immediately falls into the no-perceived value pile for too many people in the market.

Pikelny, like Moroney, is among those now looking at second-gen paywall notions: “We’re working on a dynamic paywall. Our thought is to eventually move to five free pages a month [from 10]. However, on those webpages where we have the heaviest revenue from advertising (and some of our most robust traffic) we are considering dropping the paywall altogether during certain dayparts. In other words, our home page and OSU sports pages might be without metering from 8 a.m.-10 a.m. and again from noon-2 p.m. The rest of the website would stay metered at all times. When we lower the meter to five pages a month, we might not lose those who don’t see ‘value’ in paying for our site since they will turn to us for headline or breaking stories without hitting a paywall.”

(At the Newspaper Association of America’s April 15 “Strength of Digital Subscriptions” session, Pikelny, the Star Tribune’s Mike Klingensmith, Gannett’s Laura Hollingsworth, and Press+’s Gordon Crovitz will join me for a session I’m moderating.)

Spitz says he, too, believes, in sampling, and that the Register will do that three ways: (1) the $2 day pass; (2) by providing seven days of free access with any fresh email signup; and (3) by pushing five to ten local stories in front of the wall at any one time.

Maybe, that will work. I’m dubious. Hard paywalls, no matter their intent, create a psychological barrier for readers, as The New York Times’ TimesSelect proved years ago. It doesn’t matter how clever you are; readers don’t like running into walls. That’s going to be especially true as news publishers confront the next challenge of paid digital readership. Properly, they’ve focused on their core print readers, extending them into higher-priced all-access.

That makes sense, but doesn’t provide enough growth, and those readers are averaging almost 60 years old. How are they going to convince younger, not-habituated-to-paying readers to join the paywall revolution?

For the Register, that’s a huge question. It’s down to 124,000 seven-day subscribers, with its official audited reporting pointing to 160,000 daily circulation. On Sunday, that number is 280,000, but it’s unclear how many of those are fully paid. Kushner and Spitz inherited a crazy-quilt of pricing when they took over the Register in June 2012. Their ability to weave a new rational pricing structure will make or break their out-of-the-box strategies.

Their all-in approach is refreshing, and as long as they’re prepared to quickly fix the moving parts that squeak, their model has a chance of success.

Photo of Angel Stadium by socaltimes used under a Creative Commons license.

April 24 2012

13:57

Human-assisted reporting, mass intelligence, and mobile mobile mobile: What we learned at ISOJ

After attending a conference like the International Symposium on Online Journalism, it can be hard to pinpoint just one major takeaway. ISOJ features a mix of quantitative academic research, practical insights, and data from media companies like CNN, The Los Angeles Times, The Dallas Morning News, and Google News — all assembled by the ace team of Rosental Alves and Amy Schmitz Weiss.

You can check out our complete liveblog from the event; ISOJ has posted recaps of the symposium’s sessions; and Alf Hermida did his usual stellar job blogging everythign in sight. But we also wanted to distill some of what got us thinking.

A future of focused brands

What will newspapers and media companies look like in the future? Richard Gingras of Google News said news outlets will continue to move away from being general-interest publications and become more of a “stable of focused brands.” As alternative news channels like Twitter and Facebook continue to grow, and as more and more people get their information on-the-go, Gingras said news companies spend too much time worrying about their home pages and not enough about their article pages. He said he wouldn’t be surprised if there comes a time when a media company opts not to have a homepage at all. (Gingras’ comments echoed the themes in his TechRaking speech, which we shared on April 12.)

Embrace human-assisted reporting

Ben Welsh, who mans the Data Desk at The Los Angeles Times, is a big proponent of using computing power to make reporters’ lives easier. That includes letting robots do some of the writing. (Here’s an example of the kind of stories that algorithms write for the Times.) He also gave one of the most succinct and passionate calls to action of the conference. You can watch his talk here.

Appeal to “mass intelligence”

The Dallas Morning News is shifting the focus of its reporting to appeal to a “mass intelligence” audience rather than a general one, according to publisher Jim Moroney: “When I say a mass intelligence audience I don’t mean elite,” but instead a readership that wants daily intelligence about the community that fits specific interests. (Moroney credits this Economist article for the term.) The Morning News is trying to differentiate itself in two ways: By shifting its production to fit devices like tablets, and by shifting its reporting with a plan they call “PICA,” which stands for Perspective, Interpretation, Context and Analysis.

Take time to play in the news sandbox

Louis Gump, vice president for CNN Mobile, said the company was slow to launch its iPhone and iPad apps because it wanted to figure out the right way to use its vast collection of video and images. CNN provides widely differentiated experiences; consider how different the iPad app looks from the iPhone app from the mobile site from the desktop site. CNN’s iPad app is among the top 10 free downloaded apps, with more than 19.5 million U.S. users in February 2012. Even with that success, Gump said CNN sees the iPad app and other mobile apps as a “sandbox” to test how the audience responds: “You can’t choose between mobile web and apps — like two wheels on a bike, you need both.”

“Survival is success” in online news startups

Rasmus Kleis Nielsen, who coauthored a report on the climate of online news startups in France, Germany, and Italy, found a culture similar to its U.S. equivalent. He said former reporters are trying to address perceived gaps in traditional media coverage but struggling to find and grow niche audiences, let alone generating enough revenue to thrive. For the companies he studied, the majority are not breaking even, and most operate at a loss. (Download the report, which goes deep on nine case studies, here.)

The Carvin Factor

In analyzing the tweets of NPR’s Andy Carvin during the Arab Spring, University of British Columbia professor Alfred Hermida found that Carvin overwhelmingly quoted activists, bloggers, and alternative voices. While almost half of Carvin’s tweets and retweets came from people on the ground, they made up just about a quarter of his sources, with the rest being mainstream media and official institutions. In other words, his tweets served as a major amplifier of lesser-known sources. Hermida questioned how this sourcing structure could have influenced the framing and coverage of the events of the Arab Spring.

Build something beautiful

Creating a tablet app is not just a box for news organizations to check. Many of the panelists at ISOJ talked about resisting the urge to transfer web-based design principles to smartphones and tablets. Pedro Doria, digital platforms editor at O Globo (Brazil), showed us how the paper reintroduced the concept of an “evening edition,” providing an update to tablet readers at the end of the day. It’s rich with videos and photos — that what tablets are good at, Doria said — which keeps people in the app longer, and it features content specially designed for a lean-back evening mode of reading. Since the launch of the p.m. edition, Doria said the average time spent daily in the O Globo iPad app jumped from 26 minutes to a staggering 77 minutes.

Don’t just build something beautiful

ISOJ’s all-star data panel made clear there’s a distinction between art and data that sometimes gets blurred at the expense of user experience. Pretty graphics must provide context and useful information to be journalism. Here’s an example that University of Miami lecturer Alberto Cairo gave of data that’s lovely but ultimately not useful.

Execution is key

It takes more than a killer idea to achieve greatness in the newsroom. As Moroney argued, “culture eats strategy,” and he acknowledged it as an area where his paper still had plenty of room for progress. Moroney said that means filling a newsroom with more Tiggers than Eeyores. That drew laughs and tons of retweets, although some said that wasn’t fair to Eeyore.

Mobile will just keep getting bigger

Okay, so we didn’t need a conference to tell us that. Just today we learned more than half of Facebook’s 901 million monthly active users uses it on a mobile device. The Dallas Morning News will shift more of its development resources to tablets, promising a groundbreaking app within a year. And while News Corp. was criticized for its single-platform strategy with The Daily, William Hurley — whose company helped design the iPad newspaper — said someone had to go first. Last year, The Daily was No. 3 on Apple’s list of top grossing apps, behind Smurfs’ Village and Angry Birds. Before diving into mobile, Hurley said, news organizations should consider their audience’s needs. Start with looking at access logs to see what devices people are most commonly using to visit a website.

There’s a big world out there

Conferences like ISOJ are a good reminder to sometimes-gloomy U.S. journalists that journalism is well, even thriving, in other markets. Globally, journalists face a slew of different challenges — fellow attendees from places like Argentina and the Philippines reminded us that FOIA protections aren’t universal. But it’s also an environment where international news companies with a bit of money to spare are doing interesting things — which means there’ll be interesting lessons for American companies to bring back from abroad.

April 20 2012

19:32

Local media as news for a mass intelligent audience

The afternoon keynote at ISOJ was by Jim Moroney, publisher & CEO, Dallas Morning News, and chairman of the board, Newspapers Association of America

He started off by insisting there was a connection between the two aspects of the title of his talk, Becoming The Economist of Metro Newspapers and the Pursuit of the Tablet Audience. 

Moroney said the goal of journalism remained the same – an informed public that can make wise decisions to govern itself.

But what had changed was the dramatic fall in print advertising, halving between 2007 and 2011 to $20.6bn.

“We are no longer publishing to a mass audience,” said Moroney. We are publishing for a “mass intelligent audience”, a term he borrowed from The Economist.

Moroney doesn’t mean publishing for elites but for smart people who are interested in the world around them.

The mass intelligent audience reads the Atlantic or the New Yorker, but also mix in US Weekly, Pop Idol or The Simpsons, he said.

The basis of there business is based on the existence of a sufficient audience for intelligent reporting, curating and aggregating of hews and information.

He pointed to the success of Harry Potter, HBO and the King’s Speech as evidence there was a market for smart content.

The value of content is measured by relevance and differentiation.

Today, who, what, where and where are commodities, said Moroney. You have to have breaking news but you cannot win on this particular kind of news.

In his view, the value today is in the how, why and what does it mean for me.

At the Dallas Morning News, they use the acronym PICA: Perspective, interpretation, context and analysis.

What it means for the newsroom is a need for beat reporters, columnists and subject matter experts, said Moroney. It also means going deep into certain subjects and focusing on 10-12 categories to go deep.

The problem facing newspapers is declining print advertising revenue, and Moroney does not believe that digital publishing will be enough to support journalism. Instead there is a need for models to cross-subsidize journalism, beyond advertising.

The experiment going on, said Moroney, is finding ways to have audiences pay for journalism.

And with that comment, he switched to talking about the opportunities offered by tablets.

Figures suggest that people will read long-form on tablets. Moroney cited a figure showing 43% of tablet news readers regularly read in-depth articles.

But for now, 92% of the news audience in the US is still using the web, rather than smartphone or tablet apps.

Moroney’s strategy is focused on a smaller audience that will pay for high-end journalism and that this audience will be accessing the news on a tablet, and for now, that’s the iPad.

April 12 2012

15:12

The newsonomics of small things

If the news business were sexy enough (it’s not) to fuel Hollywood or Bollywood filmmaking, we might envision this wake-me-from-the-dead screenplay: A publisher (I’m thinking Tom Hanks, now almost old enough to look sufficiently weary), lured by the sirens on the Isle of Profitos, falls into a deep, deep sleep.

Awakened 10 years later, he finds his golden egg of a business withered, an ellipse of uncertain provenance or fertility, halved in size. He pokes around the egg — surely the once-thriving thing can be revived somehow. Finally, after what seems like years, he gives in to nature, and set outs to find a new, big golden egg.

Yet search as he might, through forest, beach, and urban landscape, he can find none. All he finds is little eggs. They seem puny. Egg analysts calculate that these little finds will never reach the size of the prized golden egg, and advise they be discarded. They are no replacement for that big golden egg.

But maybe, say a couple of advisers, you need to learn how to assemble a bunch of those golden eggs. Some will never grow big, to be sure — but some may thrive, and if you add three or four of them together, maybe they will begin to approach the size of that golden egg.

That’s the news industry today.

Until recently, the holy grail was summed up in two words: replacement revenue. Now the jig’s up. No matter how fast you shovel digital dirt into the chasm of print loss, you can’t recreate the past; you can’t fill the hole. Now, though, we see new foundations being set and fresher building — with more realistic expectations — begun. The change is a huge one. Where once top newspaper company execs eschewed new initiatives as too small with which to bother, the awareness that the old business simply is never coming back has almost sunk in.

Meinolf Ellers, managing director at dpa-infocom, crystallized the Small Things phenomenon for me last month. At a Moscow conference of MINDS International, a five-year-old network of 22 of the world’s news agencies, he invoked Steve Jobs and talked about “getting small things right.” People have talked about the Apple founder’s attention to small product details, to doing fewer things better and to pricing some things low (think iTunes songs at the uniform and now ubiquitous price point of 99 cents). Start small, get it right, and then maybe if the universe aligns, get big.

For Ellers, one of the best forward thinkers in the news business, thinking small works, for now, on at least two levels.

He thinks of the lessons of the digital gaming industry (“The newsonomics of gamification”) and how luring in customers step-by-step — first with freemium techniques, and then with low (yup, 99 cents) incremental pricing — builds customer engagement and purchasing.

Secondly, he thinks of it on a more global level: “What we all see — newspaper publisher or news agency — is that the bundle is eroding, losing its power. The more we see the bundle losing market share and reaching the end of its lifecycle, the more we have to work on smaller, fragmented products that, not each by each, but overall, can compensate. That’s the strategy.”

So, let’s call it the newsonomics of small things, with a nod to Mr. Jobs and to Meinolf Ellers’ realization. Let’s focus on Small Things as opposed to Big Things — meaning traditional advertising and circulation, the long-in-the-tooth double-digit contributors to newspaper company revenues.

It would be great to replace those-end-of-lifecycle business lines with other Big Things, but those are few and far between. Google developed the Next Big Thing of paid search advertising, and continues to dominate that $40 billion global industry, with 76 percent market share in the Americas and 94 percent in EMEA, according to Covario, an large, independent search marketing agency. AT&T and Verizon replaced their cycle-ending landline business by going Triple Play, adding broadband and cable to their revenue lines. Facebook cornered the market on a little segment called global social connectivity. Newspapers have been searching in vain for two decades for such Big Things and have come up short.

So let’s touch on six Small Things — each now a small egg, at best a single digit contributor to overall revenue. Then let’s toss in a couple of Wild Things, fliers of businesses that might work.

We can turn our eyes to Texas to see at least half of them, an indication of how fast the Small Things movement is accelerating.

In Houston and San Antonio, Hearst has been leading the marketing services push, among newspaper companies. In Dallas, the Morning News is making a significant business of in-sourcing, becoming a major printer and distributor of Old World print, at the same time it is launching (with Hearst) its own marketing services foray. In Austin, the Texas Tribune has created an events business model, widely, if quietly, being studied and adopted in various parts of the country.

In Morning News publisher Jim Moroney’s sum-up of his push, I think we see a common thread among these and of Small Thing moves: “Print editions are not going away anytime soon. So take the extra capacity of your print facility and bring in as much commercial broadsheet or tab newsprint work as you can. There’s no reason to have idle capacity.”

In a word, capacity. What kinds of skills, knowledge and abilities do you have in your company, assets that can be used newly and differently? What kind of job needs to be one by someone who has the budget and has no go-to supplier…yet?

Let’s look at those six Small Things, just as first examples, through the lens of capacity and revenue potential.

Marketing services

That push (“The newsonomics of 8 percent reach”) is indicative of the fastest-growing digital ad line for many news publishers. Hearst Media Services and its Local Edge push, Tribune 365, Gannett Local, Advance Digital, and McClatchy are among the many companies plying this territory.

John Denny, VP of marketing for Advance Digital, recently spoke in Boston to the Kelsey Interactive Local Marketing East Conference. He outlined well the value of the marketing services push: “[There's a] growing importance of ‘services’ in the world of marketing priorities for businesses. That money is now shifting from what has always been viewed as ‘advertising’ (whether traditional or digital media) to a whole host of growing priorities including search engine optimization, social media optimization, blogs, and content marketing.” Every merchant faces the same kind of blur of too many choices — digital marketing choices — and some will take a newspapers’ help in sorting them out.

Talk to marketing services execs and they’ll tell you that today marketing services revenues — money paid by local merchants to publishers who help them with their advertising, in addition to any ads those merchants buy on publisher websites or in the paper — amounts to at least 10 percent of overall digital ad revenues. Some are pushing that number towards a quarter or a third of the total; several say they expect marketing services to account for half of all digital ad-related revenue within three years.

Capacity use: Makes great use of newspaper brand equity capacity. While many companies employ a separate (from their own ad selling) salesforce, some company infrastruture can also be used.

Revenue contribution: 1-3 percent of total revenue in 2012; could reach 10-15 percent by 2015.

In-sourcing printing and distribution

From recent quarterly reports, figure that the Morning News (good interview with publisher Moroney in News & Tech) is now getting close to using the full capacity of its printing and distribution resources. You won’t find a Morning News thrower with a single paper; they toss USA Today, The Wall Street Journal, The New York Times, and a couple other titles.

Capacity use: Rather than outsourcing, more common among daily papers, the insourcing is making almost full use of the Old World asset.

Revenue contribution: Figure about five percent of Morning News revenues, with fair margins, are derived from insourcing.

Custom publishing

Journalism companies know how to create readable content, though we often take that for granted. In London, the Press Association, the AP’s cousin, is building a substantial business in bespoke — or as Yanks would say, custom — publishing. News agencies, of course, are native B2B industries. They are used to selling the same content stream — the wire — to many comers, a good business for a long time, but now threatened as their newspaper customer budgets decline.

So Tony Watson, PA’s managing director, has now extended that B2B publishing customer relationship. Working with top portal customers, providing them unique content they can monetize, he’s grown that business more than 50 percent year over year. It’s still small, but growing rapidly, as newspaper revenue contributions to his budget decline markedly in the UK recession.

Watson isn’t alone, but custom content marketing — whether performed by an auxiliary staff or the core one — is nascent in much of the news industry.

Capacity use: For Watson, that’s what it’s about: using PA’s “significant product development capability” — though the agency is careful to avoid conflicts of interest.

Revenue contribution: Low single digits at this point, but could make up 10 percent within three to four years. In addition, it’s a cousin to commercial content creation, noted under marketing services.

Events

Newspapers have long sponsored bridal fairs and the like. What we see in Texas Tribune’s new event model (“For the Texas Tribune, events are journalism — and money makers”) is connecting public service journalism with worthy civic events that make money. CEO Evan Smith told me that he expects $900,000 in revenue from events sponsorships this year, plus attendee income. I hear a lot of ferment among publishers wanting to borrow the model.

Capacity use: While the events staff is focused on that work, the piggybacking on the Tribune’s excellent journalism doubles its value.

Revenue contribution: Maybe about 20 percent now — a big number for a start-up finding its model — and could grow to around 33 percent, while supporting other revenue lines like site sponsorship and membership.

Syndication

California Watch, now newly expanded with the CIR/Bay Citizen merger, has smartly considered itself largely a B2B business, a new wire for a new time. Its stories reach hundreds of thousands of print, online, and broadcast news consumers.

Capacity use: That’s the once (and future) beauty of the wire business. Produce once, customize a little, and distribute many times over.

Revenue contribution: California Watch stories are still underpriced, contributing less than 10 percent of the organization’s revenue. With scale and a greater track record, it may be able to wring closer to 20 percent of its revenue from syndication in three years.

Ebooks

Last week, I wrote about the coming explosion of ebook publishing by news and magazine publishers; in the past week, I’ve heard from many more publishers whose ebook plans I hadn’t known about. Getting into the ebooks business — or “mining the archive” — is becoming mainstream. Ellers’ dpa is one of those stepping up its business, out of its News Lab. It will soon produce ebooks on both wacky subjects and the historically significant, like the 1972 Munich Olympics killings of Israeli athletes.

Capacity use: Excellent. Content is already paid for, edited, and largely ready to go.

Revenue contribution: Tiny in 2012; at least five percent by 2015, if publishers execute well.

A couple of Wild Things that could become Small Things:

Journalism company journalism schools: College education is going digital and virtual anyhow, so why can’t journalists (and marketers) get into the business. The Guardian is tiptoeing into it, and you can imagine what a diploma from The New York Times or Wall Street Journal might be worth. Journal Register is already retraining its own staff at its Digital Ninja schools; why not go bigger?

Professional services: Several publishers have told me how they idolize the Financial Times for its pricing schemes, product initiatives, and intensive use of analytics. As the FT goes forward, and at least some other publishers get proficient at newer parts of the business, professional services — or, to use the old-fashioned world — will make sense for some.

Overall, it’s much better to move into the future with a half-dozen revenue streams — even if some are now just trickles — to stick with only two big-but-slowing ones. It should be more lucrative than selling the same old things. And maybe more fun, too.

“As a news agency guy,” says Meinolf Ellers, “I’m used to being disrupted. Now I can be the disruptor [with ebooks] to the book industry.”

September 15 2011

15:00

The newsonomics of 1, 2, 3, 4

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

Ah, the joys of print — and real world — serendipity.

Arriving in Berlin to speak at the annual Medienwoche, part of the IFA 2011 content-meets-tech conference, I took a post-flight stroll around my hotel. I picked up a Wired U.K. at a local newsstand (newsstands chock-full of magazines and newspapers seem ubiquitous in Germany, their big-city absence in America made more noticeable). It’s a good issue, exploring the top digital entrepreneurial hotspots across Europe, from a U.K. perspective.

Across from p. 82, my eye caught a house ad. It was selling all things Wired U.K., but selling them in a customer-centric way I hadn’t before seen. Reproduced below, you see how it focused on how customers may variously access Wired. It speaks “multi-platform,” “multimedia” and “news anywhere” much better than those compounded nouns (which, when you think of it, are starting to sound like multisyllabic German constructions).

It’s masterful in telling the reader simply, and with a bit of fun, what the Wired U.K. brand stands for, how you can pick your timeliness (now to annual), mode of ingestion (reading, listening, or attending conferences) and more.

In a second bit of terrestrial serendipity, it turned out that Wired U.K. Editor David Rowan was speaking at IFA two hours after my talk. He and his art director, Andrew Diprose, had already supplied a digital copy of the house ad. I told him how well I thought the ad captured a business model in the making, with a clear customer-centric approach. He thanked me for the comment, and added, “It’s just something we tossed together when we had an extra page.” Well, it may have been, but it shows how this Wired crew is thinking of their business, eating some of the digital dog food it dishes out in each issue.

The ad had particular resonance this week as I’ve been thinking about the question on everyone’s minds in the newspaper and magazine businesses: What’s the new business model — that hybrid print/digital or digital/print — going to look like? It’s clear to everyone at this point that while print has a significant role for as far forward as we can see, it’s receding in importance, and revenue, and that digital is the growth engine on which to focus.

It’s one thing to say that and quite another to say what the new business model will look like. How much revenue will come from what, when, and who?

Now approaching 2012, we see that 2011 has provided a few clues to that new business model. No one, though, even the world’s digital revenue news leader, Oslo-based Schibsted (with 30 percent of overall revenues driven by digital) will tell you that even the industry’s leader has not yet found a big, sustainable model able to support a large newsroom.

Let me propose a model I’m testing out, as we watch the rollicking developments in the industry. As paid digital-access plans roll out weekly, as Digital First becomes not just a catchphrase but a company, as tablet development moves to the front burner and as the TV business continues to outpace both newspapers and magazines, what are the common threads we can see?

It’s purposely a simplified, bare-bones structure. I call it the newsonomics of 1, 2, 3, 4 and welcome flesh to be added to the skeleton — and/or chiropractic adjustment as well.

It’s 1, 2, 3, 4, as in:

  • 1 brand
  • 2 major sources of revenue, advertiser and reader
  • 3 products: print, computer, and mobile
  • 4G, as in the coming of faster connectivity

Let’s look at each one, briefly:

1 brand

The first decade-plus of the web was all about collecting, bringing things together. That meant major wins (63 percent of U.S. digital ad revenue in 2011 is going to Google, Yahoo, AOL, Microsoft — and Facebook) for those who aggregated. The act of collecting (curating if you prefer) was rewarded at the expense of those being aggregated. Now, as we approach 2012, we’re seeing a major re-assertion of brand, and its primacy.

Steve Jobs’ tablet-launching assertion that search is so yesterday was part sales pitch, part prophecy. The app is nothing if not the re-ascendance of brand, encapsulated in a few pixels. These tiny apps — from ESPN, The Atlantic, Time, the Guardian, and Berliner Morgenpost to The Boston Globe, The New York Times and the Wall Street Journal — all convey new promise. That promise has found a business model — all-access — to accompany. After years of wandering in the wilderness of customer confusion and self-doubt, news companies are saying: “You know us, you know our brand; you value us. Pay us once and we’ll get you our stuff wherever, whenever, however you want it”. Call it “entertainment everywhere” or “news anywhere,” or “TV Everywhere,” major media are now re-training their core audiences to expect — and pay for — ubiquity.

News companies are following the lead of Netflix, HBO, and Comcast (Xfinity), all now basing their hybrid old world (TV/cable/post office) and new world (smartphone, tablet, computer, and connected TV) on the same simple idea. In the first digital decade, news and entertainment was atomized by aggregators, dis-branded, as readers and viewers often flipped through Google, YouTube, or Yahoo without knowing who actually produced news or entertainment.

Now, we see brand re-emerging to signal top-of-mind awareness — and to earn those one-click credit card payments. These are friendlier brands, attempting to leverage and master the new social curation of news and entertainment.

2 major sources of revenue, advertiser and reader

For that first decade plus of the web, news publishers relied on one revenue source — digital advertising. That’s been like wheeling into the future on a unicycle, lots of careening and too little forward progress. As publishers have taken a long-term view of the business, the conclusion from Arthur Sulzberger and Rupert Murdoch to Dallas’ Jim Moroney and Morris’ Michael Romaner has been the same: We have little hope of creating a successful digital business without robust digital reader revenue. Reader revenue doesn’t have to be mean only digital subscriptions. Schibsted and Australia’s Fairfax are pioneering “services,” with Schibsted’s story-aided weight-loss programs prototypical. Newbies Texas Tribune and MinnPost are showing how reader-attended events are moneymakers. The tablet will spawn lots of new one-off paid reader products.

And advertising doesn’t mean just selling space. Most major news chains, from Advance to Gannett to Hearst, are becoming regional ad agencies, selling and re-selling everything from deals to Yahoo (or in Advance’s case, Microsoft) to search engine marketing to Facebook and Google to local merchants large and small. The New York Times pulled Lincoln “ad” money into digital circulation push. Sponsorships are coming back in a big way for mobile.

So, two revenues, tried, true, but twisting new. Will they be 50/50 supports of new models? Too early to say, but they provide us the rivers and tributaries to build new revenue stream models.

3 products: print, computer, and mobile

“Online,” of course, was first re-purposed print. Too much of mobile is, again, re-purposed online. Yet, the smarter all-access players, mostly national, are looking at their audience data and seeing how different usage is by device or platform. There are new products — MediaNews’ TapIn is emblematic — that are made for the tablet, with even smartphone utility in question and desktop a distant third. We’ll see three distinct ways of thinking about product: print, lean-forward desktop/laptop and lean-back tablet/on-the-move smartphone. Newspaper print becomes just another platform. This triad becomes more than a smart way to think about product development — it becomes a way of measuring costs, revenues, and metrics like ARPU.

4G, as in the coming of faster connectivity

Only in the last couple of years have we passed 50 percent broadband access in the U.S., which currently ranks ninth worldwide at 63 percent of households. We’ve forgotten the days when pressing on the play button on a website’s video player was a crapshoot. Between buffering and bumbling of all sorts, video only sometimes worked. Now, take a look at the just-launched WSJ Live on the iPad, and you see how far we’ve come. 4G is now on the mainstream horizon, and with it comes the higher valuing of news video. That’s a challenge for text-based newspaper companies, most of whom have taken only first steps to becoming truly multimedia companies. You can see the 4G glow in the eyes of John Paton’s new Digital First Media company. I’m told his New Haven Register now outproduces the local TV stations in digital video news creation; few newspaper peers can yet say the same. With ad rates for news video are still markedly higher than for text stories, any successful model must put video at the center of new products.

So, it’s 1, 2, 3 and 4, good tests of evaluating new company strategies — from the inside or out.

January 27 2011

16:00

The Newsonomics of do-over

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

You remember do-overs from your childhood, right? On the playground, something went awry in a game, and you just called do-over: Reset the game, reset the clock. It’s one convenience of childhood that seldom makes it way into adult life. Yet that’s just what newspaper company owners are hoping to do in 2011. I thought of calling this post “The Newsonomics of inflection point,” but that seems too high-minded. Do-over is more apt to the emotions undergirding decision-making in early 2011.

Tuesday, in speaking to a group at USC’s Annenberg School of Communication, one graduate student heard my description of the paid-content landscape and asked a great, simple question: “I don’t understand why now, after news being free all these years, publishers now want to be paid for it. Why now?”

Indeed. Why now?

There are two reasons, I think. One’s economic, and it first got big, public voice at the Newspaper Association of America session in San Diego, two years ago this month. There Rupert Murdoch and Dean Singleton laid down the gauntlet: Google was stealing content, and readers needed to start paying. It was a public expression — pushed to the forefront by the deep recession — of what had become a private realization; the exchange rate of print ad dollars for digital ad dimes didn’t seem likely to change. Simply, there wasn’t — as far as the eye could see — enough money in digital advertising to sustain large news enterprises, long-term. The other reason is emotional: What we do is valuable, so people should pay for it — though as the grad student pointed out, most of the reader payment has gone to paper and distribution costs, not to feeding journalists.

If 2009 was a period of emotional as well as economic depression for those in the industry, 2010 was one of simmering hope, which the glimmer of tablet emergence stoked. Now, in 2011, we’ve got a convergence of factors beginning to create a new sense of where traditional news publishing may go. They may, collectively, provide an inflection point, a point at which the news industry sees itself differently and consumers are suddenly confronted by numerous paying choices. Together, these factors offer a newsonomics of do-over, the ability to unwind what many call the original sin of giving away news content for free, and creating a new business model for how news is distributed and paid for.

There are four factors that have pushed us to this point, in early 2011:

  • Tablets certify the mobile, news-anywhere era: Until recently, if you asked publishers what business they were in, they’d tell you the newspaper business — and online. It’s been a two-part business, anchored in print (still 85 percent of all revenues) and moving at glacial speed “online,” meaning desktop/laptop. The smartphone began to change that mindset, but hasn’t produced significant new revenue for news publishers, even though they’ve made efforts to create some smartphone products. It’s been the emergence of the tablet, with its promise of real new revenue, that certifies what I’ve called the News Anywhere model. Arthur Sulzberger’s outlining of that manifesto Sunday at the Digital Life Design conference in Munich is as good a statement of it as any: “Wherever people want us, we must be there. That’s our commitment to be there on the devices, including paper — paper’s fine — devices and paper for as long as people want.” Now all news publishers, some pushing forward at warp speed, others being pulled along, are moving into a true multi-platform world.
  • A metering system that says you can have your cake and eat it, too: It’s not a paywall, it’s a hurdle, says Journalism Online. Set the hurdle at 10 or 20 pageviews a month, and 80 percent or so of your visitors will never even see it. Capture half the rest of those frequent visitors, and you’re started a new digital reader stream. And, by the way, if you do it right, your digital ad revenue can keep on growing — that’s your own major hope for any ad growth at all — because your traffic won’t decrease by any more than 10 percent. In a nutshell, that’s The New York Times’ strategy, as well.
  • Apple’s push and shove: Unannounced, publishers are moving forward with what Apple has told them. Apple is pushing them to align their web access strategy with their tablet strategy, saying if you want to retain direct customer relationship and revenue, you can’t offer all this stuff for free on the desktop and just charge for the tablet. That’s the push, and the strategy is shoving publishers, both salivating for tablet revenue and afraid that the tablet will hasten print readership decline one way or the other, to align their access strategies, from print to desktop to smartphone to tablet. That’s all-access, and it’s coming to be the prevailing industry model.
  • The rise of public equity: PE owners, as evidenced by their rising influence at MediaNews, are now pushing their publishing enterprises to innovate faster, embrace mobile, and get busy with new revenue streams. The all-access, news-anywhere model is a natural for them as well, offering the potential of enough new money to build new companies of sustainable profitability — and that’s their only ticket to cash out by 2015.

Put it altogether, and the do-over looks eminently reasonable.

Yet it’s no slam dunk, and we’ve got to wonder how the theory will play out in practice. The tests are now coming fast and furious. The Wall Street Journal has switched to multi-platform, all-access pricing recently. The New York Times will do the same soon, adding its meter. News Corp.’s The Daily tests out consumer willingness to pay for a new, native news product, while Ongo seems to have stumbled out of the gate with an underwhelming presentation and too small — and haphazard — a list of initial news suppliers as it asks news consumers for $84 a year. The Dallas Morning News will lead U.S. metros into this new world. Journalism Online will power a good five to six dozen newspaper sites — most are metered, most getting ready for the tablet — by mid-year, as well.

Though it all makes good economic sense to the industry, some — how many? — consumers find work-arounds more appealing than publishers expect. As daily publishers have cut back and back, we’ve seen an explosion of new news content, from top-drawer regional startups to hundreds of native hyperlocals and Patches to great niche sports sites and more entertainment and lifestyle feature content (hello, Demand Media IPO!) than anyone can stomach. There’s lots of free news content still out there, and planning to be out there, from the Reuters and Washington Posts to the GlobalPosts and BBCs and U.S. public radio stations/websites. It will be fascinating to see how the non-paywall news suppliers organize themselves — consortiums are in discussion — to offer alternatives to this very do-over strategy.

August 05 2010

14:00

The Newsonomics of the fading 80/20 rule

[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.]

Jim Moroney thinks he may be on to a new formula. It’s not as great — not nearly as profitable — as that old newspaper formula, but it’s one that may sustain his company into the future.

“The Dallas Morning News now gets 38 percent of its revenue from circulation, 54 percent from advertising, and 8 percent from contract printing plus,” the Morning News’ publisher tells me.

Those numbers are a far cry from the way it used to be for newspaper companies. They long used one of the many 80/20 rules out there: 80 percent of their revenue came from advertising, and 20% came from circulation.

Now, as ad revenue has been on a precipitous decline — down from almost $50 billion in 2000 to $24 billion in 2009, and still sliding a bit more — that old formula is out the window.

While the digital news world seems consumed with conversations about paywalls and memberships, it is old-fashioned print circulation revenue that is the gainer in the post-80/20 formulas. Sure, advertising’s ski slope decline has greatly altered the 80/20. So has, though, the significant up-pricing of both subscriptions and single copies over the past three years.

At the Morning News, Moroney — aided by research from consumer products company The Modellers — took monthly subscriptions from $18 to $30, in one fell swoop. Many other publishers have upped prices, though most have done it more gradually. Pick up a slim copy anywhere in your travels, and you see it now costs 75 cents or a buck; it used to be the “25-cent or 35-cent?” discussion that consumed executive committees.

The impact of the pricing moves is still uncertain. Short-term, they seemed to work. Though circulation continued to decline, circulation revenue was mildly up. The central notion: Get those with the newspaper habit to pay more of the freight, figuring that few would drop the newspaper because it cost two Grande Mochas more.

As we look at last quarter’s financial reports, we have to wonder how the up-pricing of circulation will work. As many companies showed a decline in circulation revenue in the second quarter as showed an increase.

A few of the numbers:

  • McClatchy: down 2.5%
  • Lee: down 4.4%
  • Gatehouse: down 2.5%

Moroney’s own company, A.H. Belo, of which he is an executive vice-president, reported a 6.6-percent increase. Additionally, The New York Times Company reported a 3.2-percent increase and Scripps a 4.5-percent increase (from 1st quarter data; 2nd not out until Aug. 9). Significantly, I think, each of those companies may have done a better job of minimizing newsroom cuts and reinvesting — at least a little — in that now higher-priced product.

While the jury is out on the stickiness of price increases, it’s clear the old 80/20 rule is gone.

Broadly, in research I conduct annually for Outsell, we track the global moves in ad, circulation and digital revenue. In 2009, circulation revenue was up more than a point over 2008 to 41 percent. Significantly, Japanese publishers continue to get a majority of their revenue from circulation, while much of Europe and UK see their percentages in 35-45 percent range.

ln the U.S., let’s just pull some data from the second-quarter reports. They show:

  • New York Times: Circ: 40%, Ads: 53%, Other: 7%
  • Scripps: Circ: 28%; Ads: 67%; Other: 5%
  • Gatehouse: Circ: 27% , Ads: 71%, Other 2%
  • Lee: Circ: 24%, Ads: 70%, Other: 6%
  • McClatchy: Circ: 20%; Ads: 76%, Other: 4%

Several factors will continue to push and pull the new ad/circ breakdown.

For one thing, we’re moving into an era of “reader revenue,” one that will roll up print subscriptions, single print copies, digital pay per view, digital subscriptions, all-access (across platform) subscriptions, memberships and more. For a next generation of reader revenue, tablet access is the big prize in the sights of publishers; witness, for instance, the likelihood of a News Corp. “iPad division.” Further, advertising will continue morph greatly, as digital marketing replaces some of that spend, enlarging and changing definitions.

Finally, don’t forget “other.” For A.H. Belo, it’s 8 percent now, but growing at at 35-percent clip. As news companies find “other” ways to make “other” revenue, we’ll see new formulas begin to make sense.

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