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June 03 2010

20:00

Articles of incorporation: Nate Silver and Jim Roberts on the NYT’s absorption of FiveThirtyEight

Big news today: Wonderblog FiveThirtyEight is moving on up, to The New York Times. Later this summer — probably in early August — FTE’s statistictastic posts will be found in the politics section of nytimes.com.

So, yes, blogger-gone-mainstream, in the manner of an Ezra Klein or, at the Times, a Brian Stelter. Except there’s a key difference between the bought-up-blogger phenomenon and Silver’s arrangement with the Times: The paper hasn’t hired Silver, per se. Rather, it’s licensed FiveThirtyEight, the blog — and only temporarily, no less. As Silver put it in a post announcing the acquisition earlier today, “The partnership agreement, which is structured as a license, has a term of three years.”

That agreement makes the terms of deal, even beyond the acquisition itself, a noteworthy thing in a world of ascendant bloggers and portable brands. (The Freakonomics blog, which moved to the Times in 2007 under a similar brand-licensing arrangement, is the clearest analog we could think of, although Andrew Sullivan’s peripatetic blogging also comes to mind.) As Jim Roberts, the Times’s digital editor, puts it: “It is unusual — there’s no question. Certainly, for the newsroom, I can’t think of anything like it.”

And that makes the negotiations involved in the partnership — those that have already occurred, and those still to come, as FiveThirtyEight integrates into the NYT and vice versa — both tricky and, at the same time, rather fascinating. When two brands plan to marry, who determines the rules of engagement?

Negotiating a partnership

On the one hand, “the fact that it’s a licensing agreement reflects the fact that, in the long run, we retain flexibility,” Silver told me. “And in the short run we retain a certain amount of control over voice and the type of content and material that we cover.”

At the same time, though, “I don’t want to convey the impression that we won’t be subject to New York Times editorial standards. It will be different in the sense that their philosophy is that everything that goes up on their website has to be read by another set of eyes — and I don’t count as that set of eyes.”

As Roberts told me: “We are an edited news organization, and so Nate will be edited — and his contributors will be edited, as well.” The details of that are still being worked out, but “it’s not like we’re just pulling this thing over and letting it run. It will be integrated into our political website, it will be integrated into our political voice, and [Silver] will be working with editors on the national desk and our Washington bureau and political operation.”

And the integration works both ways. “I also think that we can help him take his blog to a new level,” Roberts says. “There’s a real startup quality to FiveThirtyEight. And we’ve got a giant infrastructure here of graphics editors, multimedia producers, interactive technologists — a lot of people who are big fans of Nate Silver and FiveThirtyEight, who are really eager to work with him. They’ll make his blog better — and I hope we can incorporate some of his insights in different ways in other parts of the website.”

“It’s significant that we’re organized under News rather than Opinion,” Silver points out. That implies, he says, “that there’s going to be more rather than less integration in terms of the overall voice of what the Times is saying. Rather than being “an island within The New York Times,” Silver says, “I think it’s going to be one of the many stations that people pass through as they commute around the site.”

The partnership, as any good one will, should benefit both parties. FiveThirtyEight has “a devoted following of people who I think are kind of like-minded in terms of their interest in our reporting,” Roberts points out. For Silver’s part, he gets the broad readership of the Times — and prime real estate under the banner of the nation’s paper of record. The three-year term of the arrangement will allow FiveThirtyEight to cover the upcoming elections of 2010 — they’re currently building a new model to try to forecast the House and Senate midterm outcomes, Silver says — and 2012. In the meantime, it will also allow Silver to apply his model-driven approach to sports, pop culture, and other arenas. (His post on KFC’s delightfully disgusting Double Down sandwich is FiveThirtyEight’s most-trafficked post of all time, he told me.) “So I think you might see a different version of the website in 2011 than you do in 2010,” he says. Ultimately, “I think we’ll continue to surprise people and evolve around a number of different dimensions.”

The Amtrak platform in Boston

The partnership began ten weeks ago, when Silver and Times magazine editor Gerry Marzorati ran into each other while waiting for an Amtrak train in Boston; the initial idea was that Silver would write some pieces for the magazine.

“Within the course of a couple of days,” though, says Roberts, “we were thinking much bigger. I don’t know if we knew at that moment that [incorporating FiveThirtyEight] would be the outcome — but…when we met him and saw that there were just some natural fits, it felt really good.”

Still, “it really took a lot of time to hammer this out,” Silver notes. The Times wasn’t his only suitor; there were other offers from other outlets. “It wasn’t an auction; it wasn’t all about the money, or anything like that,” he says. “We had interest from different people, who represent very different kinds of propositions as far as what they think about media.” Though he won’t go into detail, he notes that “the offers were also very different — not just in a quantitative sense, but a qualitative one. So it just took a lot of time to sort through.”

And: “It was a competitive situation up until the very end.”

Now that the deal’s been done, though, the partnership can really begin. “I know they’re excited, and I’m really excited,” Silver says. “So now we get to do the fun stuff: start to work on the design of the blog instead of working out the contractual deals.”

[Image via jdlasica under a Creative Commons license]

February 25 2010

17:00

The Newsonomics of profit: Google’s and newspapers’

[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.]

Last Friday, Google finalized a modest acquisition. It bought On2, a video compression company for $124.6 million. A few days earlier, it bought reMail, a company put together by Google alums that has perfected a better email app for the iPhone, price undisclosed.

In the few months before that, it bought social search startup Aardvark, display ad tech company Teracent, collaborative real-time editor AppJet, VoIP provider Gizmo — and, most significantly, mobile ad network, AdMob, the latter for $750 million, in November.

Basically, Google’s been buying up companies at at least the rate of monthly, as CEO Eric Schmidt had bluntly forecast last September.

Of course, Google can buy lots of companies. That buying power is a rare commodity these days, especially if you compare it to what newspaper companies can do.

Google’s buying profit derives from its out-sized profits. Those profits reached almost $2 billion in the fourth quarter of 2009 alone, and totaled $6.5 billion for the year — and that the year of the Great Recession. Yes, Google hit the pause button as the country and the world tottered on the economic brink, but ticked the play button quickly as soon as it was clear the worst was over.

Google’s acquisitions in the last six months total something more than $1 billion.

Now let’s compare Google’s profit to that of newspaper companies.

Gannett — the largest news company in the US and second worldwide after News Corp — reported total revenue of $1.5 billion in the fourth quarter, and profits of only $133.6 million in the same quarter. Of course, the fourth quarter was Gannett’s best. For 2009 overall, profits totaled $441.6 million, after special items were taken out. That’s less than a half billion dollars in profits, or about 7% of what Google earned. And that’s the biggest U.S. news company.

The New York Times eked out a yearly profit of $19 million. McClatchy, a gain of $54 million. Media General, a loss of $35 million.

Positive or negative, those are all small numbers. They all point to the same reality: newspaper companies’ place in the business world is greatly reduced. They simply don’t have the wherewithal to acquire businesses that will be the building blocks of tomorrow’s growth. Their low profit numbers are proxies for their reduced horizons, their reduced reporting impact and their reduced institutional and community clout, as well, though those are issues for another day.

For Google, its profit has allowed it to lay the groundwork for growth. Its financial performance is hugely impressive today, but almost all of its revenue has been based on desktop/laptop paid search. As many have said, it’s a one-trick pony, but with the best trick found in the 21st century digital business. It knows that business is maturing, so we can see the theme in its company-a-month buying spree: mobile, social, video. That combo, what I call the new trifecta for this digital decade, anticipates where digital use — and ad spending — is going. Google is not only providing us pictures of our urban topography through StreetView, it is laying new roads for its own highly profitable future.

February 22 2010

15:00

Footnoted.org: A solo investment news site gets acquired, but its founder says the web’s no sure bet

Michelle Leder likes to joke that she is the first journalist to have been fired by email. In 1998, her editor at the Poughkeepsie Journal shot her a note to say that her job on the business desk would not be waiting for her when she returned from abroad.

Since then, she’s been a pioneer in other trends in journalism — and her outlook on the field has stayed equally dry. In 2003 she launched what has become a popular investment site, Footnoted.org. She runs posts on nuggets of interesting information pulled from the fine print of securities filings for valuable investor news. This month Morningstar purchased the site for an undisclosed sum. Leder will continue to run the editorial side and contribute content. Morningstar will sell subscriptions to her premium content (some content will remain free). And the site’s staff is already starting to grow post-acquisition; Bloomberg’s Theo Francis just announced he’s joining the staff.

The investment research firm sees value in her investigative work, particularly Leder’s ability to find useful, “actionable” information. “I think there’s been a discussion about whether information has been commoditized or not,” Morningstar’s Kunal Kapoor told me. “Some news may have been, but that’s just half the story.”

From covering acquisitions to being one

As for Leder’s story, it’s an Internet startup fairy tale of sorts: a journalist’s hobby site grows into a relevant read and a someone swoops in with a checkbook to buy the place up. Leder can hardly believe it herself. But she hesitates calling it the type of model that can be easily recreated.  She mentioned attending a recent Jeff Jarvis lecture where she thought he overstated the sustainability of an ad-only model for new blogs, and the number of bloggers who have been successful running ad-only sites, pulling in $100,000-$200,000 a year. “I just think that’s delusional.”

Leder, who has always run her site from a spare room in her house, said a startup like hers needs a safety net, in her case, it was her husband. “It obviously helps if you have a spouse or a significant other with a steady job…There were some months I made next to nothing.” Leder says the job involves no “fancy lunches” and she says if you don’t need office space, don’t get it. “Keep your expenses low. You’re going to really need that money.” In the summer of 2008, Leder hired her first (and until now only) employee, a researcher, Sonya Hubbard.

Leder launched the site as a promotional companion to her book, Financial Fineprint. “It was a way for me to continue that discussion,” Leder said of the site. The blog’s readership grew as she continued posting new content, attracting an audience ripe for advertisers, including hedge fund managers, and other investors. It was then she saw the site as a business opportunity in itself, and she turned to advertising. Soon after, she added on a syndication model, selling reprints and original content to places like the New York Times’ DealBook and Minyanville.

Trying a freemium model

In October 2008, Leder took a gamble on a new business model. “It became clear to me that advertising was never going to sustain the site,” she explained. While keeping a portion of her content free, she launched a secondary product called FootnotedPro, which contains exclusive information for investors. The 40 issues per year’s price: $100 per month, $1,000 a year or a la carte $250.

Her goal was to sign up 100 subscribers. She said that she fell just short of that, but did pretty well. (She would not disclose her exact number of subscriptions, citing an agreement with Morningstar.) ”You can’t be afraid to take that leap,” Leder said, “You need to be thinking about the business side. You’re the publisher. You have to do it.”

Still, she says she’s looking forward to letting Morningstar handle selling the subscriptions from now on. “I’m really good at reading SEC filings and finding nuggets. I’m not really good at selling subscriptions,” Leder laughed.

She hopes over the next year she’ll hire one or two more business journalists (she’s got 20 years of business journalism experience under her belt) and perhaps an analyst. ”There’s so much content out there,” Leder said. “People recognize quality.” High quality includes authenticity, which she said matters to her readers.

Her most important words of advice: ”Have a backup plan.”

December 16 2009

22:30

The Year in Digital Music and Predictions for 2010

As 2009 comes to a close, and the music industry shifts focus to 2010, it's worth looking back at some of the noteworthy events of the past 12 months. This is also the right time to look ahead and predict what will happen next year.

For some in the business, this year brought trouble after trouble; for others, 2009 was a time for growing revenue, relevance and positioning. Whichever end of the spectrum you are on, there have been few dull moments for digital music this year. And next year promises even more change and growth.

Innovation and Acquisitions Abound

A number of high-profile acquisitions in recent months have shifted the digital music landscape.

Apple's recent purchase of streaming/download service Lala has sparked much speculation. Articles from the New York Times, PC World, and Apple Insider have discussed possible reasons for the purchase, and most tend to focus on the creation of an Apple-powered music streaming platform.
Lala

Unlike iTunes, Lala allows users to stream music they own from the web, effectively creating an anything/anywhere platform. It would give users the ability to listen to music via the web and mobile phones without having to download the content to different devices. There's still a scramble for a sustainable streaming model, and Apple wants in.

This is interesting on its own, as it adds a dimension to music consumption that is basically the opposite of how iTunes was built from day one. But this is only one part of why industry players are talking; everyone loves drama, and this story has plenty.

Just one month prior to Apple's acquisition, Lala made headlines as one of the key partners in the new Google Music service. Lala, along with a number of other partners, now powers streaming music search results through Google. When a user searches for music on the search engine, the option to stream the song (as well as purchase, get lyrics, and find tour dates) appears at the top of the results. With Apple's buyout of the company, people are left to wonder what may come of this service.

MySpace was also busy on the acquisition front, recently absorbing two music streaming services, iLike and imeem. Each of these companies had built a solid user base, but had not found the profitability investors expected. A buyout wasn't a surprise. Speculation abounds here as well: Both of these companies offer enhancements to what MySpace currently provides, but they do not bring anything particularly new or unique to the table.

iLike

That said, these deals are not without their own drama. iLike has powered Facebook's most popular music service for years, so this acquisition creates an interesting relationship between MySpace and Facebook. There are many other music applications on Facebook, so this development probably won't be significantly disruptive.

The same can't be said for imeem. It built its massive user base by allowing fans to create streaming playlists and embed them across the web. Bloggers and others relied on these players, as did web technologies such as twt.fm, which allowed users to easily tweet a link to an imeem-powered streaming track.

These services immediately broke last week when, without warning, MySpace completely pulled the plug on the imeem service. All traffic to the imeem.com domain now points to MySpace Music, and all backend access to the site (via its APIs) is turned off. This has created unhappy fans, bloggers, and developers.

Is innovation flourishing, or is the herd thinning out? These were only some of the more high-profile acquisitions this year. Expect to see more in 2010.

Direct-To-Consumer Continues Ascent

Another important trend this year was the continued emergence of a hyper-charged direct-to-consumer business model. Companies such as Topspin, Audiolife, Nimbit, and Reverb Nation are enabling artists to interact with -- and sell to -- their audiences in many new ways. I wrote about this topic in a MediaShift article earlier in the year.

The idea of direct-to-fan goes back decades. Massive value can be created when an artist engages their audience directly. This has been demonstrated for years at concert merchandise booths, and online in the form of things such as newsletters and e-commerce using PayPal.

Nimbit The difference, and the reason this topic is on people's minds, is that technology has quickly propelled the D2C marketplace both downward and forward. Direct-to-fan has always worked well for large bands, or for artists with momentum. Now, small artists -- if, and only if, they are creative and good -- have the tools to recreate this revenue stream at their level. It doesn't mean every garage band can quit their day jobs, but it does mean more artists have new opportunities to make a living.

Forecasting, marketing, commerce, distribution, customer service, analytics, and deep fan engagement are all now available to artists at any stage of their career. This year saw some highly innovative and often successful campaigns run by emerging artists. In 2010, more artists will embrace this model, which means a lot of noise and competition. It will be more of a challenge for the brilliant acts to shine through.

What Else is Next

A few more thoughts about the year ahead:

  • 2010 will be the year of analytics. Digital marketing and sales departments have been cobbling together metrics for years. Many things are trackable, but it's often impossible to access the data or find the means to implement structured analysis. Platforms such as Next Big Sound, RockDex and BandMetrics are looking to fill this need. As APIs and data sources continue to open up, these services will get better and better.
  • The conversation about an ISP tax for unlimited downloads will continue. The big players working to combat piracy will continue to focus on this.
  • Spotify is still gearing up for a U.S. launch, but in light of imeem's troubles, the ad-supported streaming model is under further scrutiny. There are fundamental differences in their ad structures, but ad-supported is ad-supported.
  • I am curious to see where advertising on Twitter. The Huffington Post has one idea, trying to sell ads into feeds.

There are many more things on the horizon. I'd love to hear your thoughts on the state of the digital music industry, and what's next.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

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