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November 18 2010

15:00

The Newsonomics of news anywhere

[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.]

Facebook isn’t trying to replace Gmail or Yahoo Mail — it’s just trying to bring a little order to our world, right? This week’s Facebook Messages announcement is stunningly simple, and in line with the next phase of the web, both overall and for news.

Take MSNBC’s description of Facebook Messages:

Instead of dealing with the dilemma of reaching people via e-mail or direct message or SMS, all of these will be combined, so that you’ll be able to reach someone the way they prefer to be reached, without you having to think about it. ‘All you need is a person and a message,’ said Andrew Bosworth, director of engineering for Facebook.

That’s the next web (r)evolution in a nutshell. It’s a unified theory of messaging. And it can be easily extended into the unified theories of TV, movies, shopping — and news.

Make a few substitutions, and you’ve got “All you need is a person and a movie,” or “All you need is a person and a shopping list” or “All you need is a person and the news.” For news creators, and aggregators, it’s a big thought that will be play out more dramatically in the tablet-inflected world of 2011. Only those who grok its meaning and execute properly may make digital reader revenue a reality.

In short, it’s about simplification, about interconnection, about consolidation, and it’s a principle that is beginning to — and should — form the foundation of the much of the next-generation thinking about the news business.

Though we’ll continue to see a panorama of new digital services and products, much of the early digital vision has been built out. We may live in a find-anything-anytime-anywhere world, but it’s also a digital fumbleathon, as we bounce from mobile apps of three distinct platforms, mail and preference settings, interminable demands for passwords, multiple hard-to-combine “friend” and contact lists, Twitter decks, Facebook walls, RSS feeds, preference popups, security hiccups — not to mention TV remotes and cable guides that seem like visitors from a distant analog planet.

Facebook Messages says: We get it. We’ll make it easier for you to keep in touch with those you want to stay in touch with. We’ll see how well Facebook delivers on that promise, but it’s the right one for our age. We can see its echoes multiplying.

On Wednesday, HBO announced that its HBO Go initiative will make HBO available through digital devices for its cable channels subscribers by year’s end. That initiative is part of parent Time Warner’s TV Everywhere push, which likewise says: You paid us once. Now get what you paid for wherever you want it. It’s the unification of the premium TV business, as cable companies are starting to see unprecedented churn, given piecemeal availability of programming through the Internet, legally or illegally.

Comcast is making a similar promise, as it newly announced app promises to connect up its customers’ experience. The app’s functionality is rolling out over time, but will ultimately allow viewing of all Comcast’s Xfinity content via devices, plus provide programming services, such as remote DVR taping, and let an iPhone replace that dreaded remote — borrowing a little bit from Tivo, a little bit from Sonos.

Netflix, of course, grasped the concept earlier, as CEO Reed Hastings has noted (“Six Lessons for the News Industry from Reed Hastings“): “We knew that the DVD business was temporary when we founded the company. That’s why we named it Netflix and not DVD by mail. We wanted to become Netflix.” Netflix’s current promise: “Unlimited TV.” You guessed it: one relationship with the brand, and you get what you paid for however you want it.

Where are the news promises? Well, the first generation has been Yahoo News. Remember your first time seeing all those wondrous headline links from the BBC, the Post, the Hindu, and CNET all in one place? First-generation aggregation was cool, but we haven’t really progressed much beyond it, though we’ve seen nuances, with personality added to aggregation (HuffPo) and some regional aggregation (Seattle Times, TBD.com). We’ve seen some good smartphone apps and a few new iPad apps. Come 2011, we’ll begin to see more News Everywhere experiences.

The first big one in the U.S. should be The New York Times. The Times will launch its metered pay system early in the year. If tech issues can be solved, expect paying customers to get access — aiming toward seamless, but likely with a few wrinkles — across devices, an intending-to-be-unified reader experience. The Times’ Martin Nisenholtz explained recently: “It’s not just about the website anymore. It’s about all of the brands where you can read the Times…it’s about the website, smartphones, the slates, iPad…it’s a hugely different world than it was five years ago.” So, the Times will say give us a single price, and we’ll let you read about you want of the Times where you want, recognizing you across digital experiences and — nirvana — allowing you to keep track of what you’ve shared and read, and with whom, without you having to recall whether you sent that story to your best buddy on your iPhone.

I’ve called that approach All-Access, and I think it’s the news industry version of TV Everywhere. So far, the best example of all-access pricing is the Financial Times, upon whose experience the Times’ model is built. Its “newspaper + online” top-of-the-line subscription allows full digital access plus the paper for one price.

The Everywhere notions seem friendly — and they have to be consumer friendly to be successful — but they’re actually quite darwinian. How many entertainment and news brands will we pay for? Only a handful, probably, especially at premium rates. So in the news business, that battle means only a few brands win the reader revenue sweepstakes, unless a Hulu-for-news proposition (AP’s digital rights clearinghouse expanded; a second life for Rupert Murdoch’s Alesia?) succeeds big-time.

To win, news companies will have work on the principle of the Field Theory. No, not the unified field theory, though unification of message and of service is fundamental. It’s the Sally Field Theory, which you remember the 1984 Oscars speech: “I’ve wanted more than anything to have your respect…I can’t deny the fact that you like me, right now, you like me!” Well who wants renewed respect than newsies? Who keeps talking about the trusted brand relationship that newspapers have long had with readers?

If news companies want to “own” the news customer (and be able to mine his data deeply), then they, large or small, newly minted or history-encrusted, have to bring their games to a new level. For the Times (or the Journal), the current breadth of content may be sufficient, if the execution manages to bring a little delight of ubiquity to paying subscribers.

For local news companies, the bar is probably a different one. Yes, they’ll have to put their tech development in high gear (many are woefully behind on tablet apps, just as the devices explode under this year’s Christmas trees), but they’ll also have to up their local value proposition. That means not just repurposing their own staff’s local news output, but really reaching out to community blog aggregation, broadcast partnership, working Yelp-like guide magic (probably through partnership) and/or creating a new level of digitally enhanced local shopping experiences. It’s unclear how much limited local news across devices is worth to news consumers.

News Anywhere, or unified news, or All-Access, whatever we want to call it, demands the singular focus, product development and messaging that Netflix, HBO, Comcast, and Facebook are bringing to it. Those are all skills that have been problematic in the news industry. Yet, here we are, in a new age, in a mobile news age about to unfold, giving the journalism, and journalists, another chance to get it right.

August 12 2010

14:00

The Newsonomics of TBD

[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.]

Thirsting for good news, the welcome given TBD.com by news observers has been a bit overwhelming. In a desert of too-scarce good news about the news business, TBD represents one of the potential oases, like its smaller — and largely nonprofit — counterparts from San Diego to Austin to the Twin Cities to New York.

Most of the first appraisals have focused on the site’s product innovations. Let’s now take an early look at the size of this possible oasis and the unique business model under it, to gauge what kind of a test it may be. Let’s look at the Newsonomics of launching what is the nation’s first combined local online news startup/24-hour news channel.

That combination is the most basic to understanding the business of TBD, informing both TBD’s cost structure and revenue models. If TBD turns profitable within two to three years, it may become a prototype for digital/video/TV city-based news businesses.

While there may be two dozen or more metro news channels in the U.S, none has yet combined with a online news site to the extent that TBD is doing. The only parallel may be Cablevision’s News 12, its longstanding Long Island/Connecticut/New Jersey-oriented station that got a new cousin when the parent company bought Newsday from Tribune in 2008. In a post on that acquisition, I noted the potential synergies in the deal:

  1. Joint ad sales.
  2. Synergistic news-gathering and production.
  3. Monetizing cable-produced news video through Newsday’s site.

Since then, we haven’t seen a lot of that synergy in New York, as the cable news site and Newsday.com remain separate, with those who don’t subscribe to either having to pay for direct access. A cursory look at the sites doesn’t betray much sharing, but there may be more under the hood.

It is those three principles, though, plus an all-important fourth one — promotion — that should define this next, and bigger, experiment, as TBD.com and TBD TV (which has been rebranded from the former NewsChannel 8) take flight.

Let’s look first at the costs of TBD. TBD has added 50 new positions, all additional to the approximately 50 jobs ported over from the former NewsChannel 8. Jim Brady, TBD’s general manager, outlined the 50 for me: “About 30 doing news, including 15 reporters, six editors, two senior editors, six community engagement people. Another 20 doing tech, sales, product, and design.”

That tells us that the nut for TBD is about $3.5-4 million, salaries and operating costs combined. It needs to find new revenue — exclusive of what the former NewsChannel 8’s sales staff of seven brought in — to get to profitability. Profitability is a key goal for this for-profit company, and one key to proving out the model for use in other metro areas. The cost side is one of the areas that distinguishes the TBD experiment; it’s two to four times bigger than most of the local online news startups we’ve seen.

Key to our understanding here is that TBD — the website and the cable news station — is one organization. Brady is in charge of the P&L of it, though he has a dotted-line relationship to the ad sales heads. While it adds costs to do 24-hour cable news as well as 24-hour digital news, it offers more revenue opportunities as well.

The key synergy: a kind of virtuous circle of promotion to stoke growth of audience and advertising dollars.

“They have the big megaphone [of promotion],” points out Phil Balboni, now CEO of startup GlobalPost, but also a veteran of New England Cable News, which he built and operated. “They can push TBD on every program. Within a short period of time, they will get great brand awareness.” So, yes, TBD TV pushes people to the website, but TBD.com also pushes people to the cable news channel. And WJLA, the ABC7 affiliate also owned by Allbritton, promotes both. JLA’s been the second-ranked station in the broadcast market.

The idea: Big promotion drives in samplers. Then the site must convert a good 20 percent of them to regular customers.

So what does TBD need to get to profitability — and make itself the model to match? Let’s quickly look at the two big qualifiers, audience and sales.

A big audience: Let’s remember that TBD starts with a significant audience, though one far smaller than WashingtonPost.com, just to drop a name. It gets traffic from both WJLA and the former NewsChannel 8; both of their former websites now point to TBD.com. According to Nielsen, WJLA pulled in about 327,000 unique visitors and 1,516,000 page views in July, while NewsChannel 8 appeared to attract a small fraction of that.

Make no mistake: Gaining attention in a crowded media marketplace won’t be simple — and is one of the reasons for the fast-out-of-the-chute TBD Community Network of 129 bloggers.

The Post is formidable competition. It is a premier regional website (built by Brady and others) and in a June Nielsen report, showed a 5.27-percent increase in unique visitors year over year, to 10,089,000 unique visitors and 106,387,000 pageviews. It zigged — up — while the news category zagged down 2.74 percent overall for the same period.

So figure that TBD.com needs a web audience of between 10 and 20 million page views a month at some point in the next 24-36 months to get to profitability. That’s a fifth to a tenth of the Post’s online audience, which, we should keep in mind comes more from outside D.C. than in within it.

Significant new revenue from both TBD.com and TBD TV: The revenue will be mainly advertising. As a for-profit, TBD.com is taking a different route than non-profits MinnPost and Texas Tribune, for instance, both of which are focusing strongly on membership and corporate/institutional sponsorships. The nonprofits are thinking that maybe a third — or less — of their revenue will come from traditional “advertising.” For TBD, though, it’s all about the sale of advertising. Just as TBD TV is critical to TBD.com site promotion, its own revenue growth will be key.

Figure that as much as 30 percent of new revenue generated out of the new enterprise could come from new TV revenue; to the extent it does, the site’s growth could trend more to the 10 million monthly page views, than 20 million, and still be profitable.

Brady says a new online-only sales staff of four will drive both online-only and bundled sales, working with the established sales force. “You start with a sales force that has relationships with an auto dealer, for instance, ” says Brady. “You don’t need a million uniques to get a meeting with them.”

The questions here are familiar ones for local broadcasters and for newspaper publishers: How do you a traditional ad sales staff — one mainly used to selling “time” — to sell the web effectively? How do you blend the online-only sales force with TV-oriented one? How much do you emphasize online-only sales, or continue a focus on bundling with TV time?

It’s a complex sell, combining sales of space, time, and pay-for-performance advertising. “They need to sell four or five different kinds of advertising,” says Arul Sundaram, an industry consultant who formerly was vice-president of strategy for Internet Broadcasting, which has powered dozens of local broadcast station websites. Beyond selling cost-per-thousand display advertising, Sundaram ticks off various pay-for-performance (largely search-based), video, and mobile ad products that the operation should learn to sell as well.

Pioneering models is a tough business. As the news business looks for new models, the man of the moment is man behind the TBD curtain, Robert Allbritton, CEO of his eponymous company. Allbritton’s gotten credit for seeing, and seeing through, Politico, his first web venture, to on-again, off-again profitablity. Importantly, he’s been credited with allocating sufficient resources, even in cash-negative startup times to create journalistic products that attract audiences.

As Phil Balboni sees it, Allbritton’s move, especially in this economic climate, is “a gutsy statement.” In 2010, especially, no guts, no glory.

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