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August 30 2010

18:16

The AP and Google reach a licensing renewal agreement — here’s what it might mean for their relationship

This afternoon, Google and The Associated Press announced that they’ve struck a new licensing deal that will allow Google to continue posting content from the news cooperative. The renewal is an extension of the agreement between Google and the AP that goes back to 2006 — the one that permits Google to host AP content on Google properties (Google News, most prominently). The agreement, depending on whose statement  you read, will both “create a better user experience and new revenue opportunities” and allow the companies to “work together in a number of new areas, such as ways to improve discovery and distribution of news.”

The deal comes after months of often tense back-and-forth between the two media behemoths. With their 2006 licensing contract — which arose from an AP threat to sue Google for the content it was aggregating through its search algorithm — expiring in January, the question of whether or not a renewal would come about in the first place has been an open one. In as late as October of 2009, CEO Tom Curley denied that the AP was in licensing-contract renegotiations with Google, saying, “We haven’t talked. We haven’t talked with them in any serious way.” Then, for several weeks this winter, after the contract had expired, AP content stopped appearing on Google’s interface — a situation that ended in February with a “sort of temporary detente.”

So what might we read into today’s renewal announcement? I spoke with someone familiar with the terms of the agreement, who provided me with a bit more background on the deal and what it might mean. In the absence of precise information about the terms of the renewal — about which both companies are currently keeping mum — probably the main shift of note here is the change represented not in the terms, but in their tone: a move on both sides away from “vendor,” and toward “partner.” There’s reason to think, in other words, that the licensing agreement is more than simply a contract renewal, and more even than another detente: that it marks a change in the overall relationship between the two trend-setting media organizations. Us-versus-them becoming let’s-work-together.

If so, that’s a significant shift. Google has been on a partnership kick of late, going out of its way to work closely with media organizations in a way that integrates news content with news platform. The biggest examples — Living Stories, Fast Flip, Editor’s Picks, etc. — suggest a Google that is trying to mend fences by way of breaking them down: working actively and intimately with news organizations, rather than positioning itself as a mere platform, detached and impassive. And the AP, for its part (perhaps in response to the 10 percent drop in revenue, and 68 percent drop in profit, it has endured since 2008), has stepped down its most heated rhetoric about appropriated content and the like. So we’re seeing some kind of renewal today; we’ll be interested to learn whether it’s of a marriage of convenience or something more truly companionate.

August 26 2010

16:00

The Newsonomics of news orgs surrounded by non-news

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Image by John Cooper used under a Creative Commons license.

August 18 2010

19:00

The kids are alright: How news organizations can tap the vast potential of younger consumers

[Christopher Sopher is a senior at the University of North Carolina, where he is a Morehead-Cain Scholar and a Truman Scholar. He has been a multimedia editor of the Daily Tar Heel and has worked for the Knight Foundation. His studies have focused on young people's consumption of news and participation in civic lifewhich have resulted in both a formal report and an ongoing blog, Younger Thinking.

We asked Chris to adapt some of his most relevant findings for the Lab, which he kindly agreed to do. Below is Part 1; we'll post Part 2 tomorrow. Ed.]

There are three “truths” the journalism world seems to acknowledge about the current generation of young people: They like cell phones, they use Facebook, and they never read newspapers. This is frequently interpreted to mean the end of the storied twentieth century tradition of reading the newspaper at the breakfast table, and, therefore, the end of democracy.

Perhaps it’s youthful naivete, but I’m fairly certain there are a few steps between reading the news on a mobile phone and the inability of a people to govern themselves. And this isn’t the first time a generation of young people has been accused of marching the world toward languid doom. The question that matters is this: What will replace the morning newspaper as the news habit of the first generation of Americans to grow up immersed in a digital culture? I recently finished a year of research and review in an attempt to find some answers to this question.

What I found was this:

With a few exceptions, the journalism world hasn’t been particularly effective at connecting its concern about young audiences to better understanding or better action. Which is an unfortunate failure, because young people have a lot to teach — both about themselves as current and future news consumers, and about the social and technological trends that shape the news ecosystem.

The broad summary is that most of today’s young people (the “millennials”) are interested in local, national, and international issues — and a strong majority are at least somewhat engaged with news media, predominantly online, through social networks and on television. Yet there is also great untapped potential resulting from the troublesome fact that most news outlets simply aren’t very good at reaching or serving young audiences.

Without significant changes and experimentation, news organizations are likely to miss the democratic, journalistic, and financial opportunities that are latent in the largest generation since the Baby Boomers. It is a common-sense but regrettably neglected point: If you care about the future of news, you need to care about (and understand) young people.

At the conclusion of my research, I compiled a list of the ten ideas I believe hold the most promise for getting more young people engaged with the news media. The general theme is that news organizations need to create a more usable, relevant, and explanatory experience and combine it with serious support for news literacy and news-in-schools programs that communicate to young people why they ought to use and support journalism. These aren’t complex or novel ideas individually, but if they’re to be effective, they’ll need collective attention.

I’ll explore a few of the most pertinent ideas in more detail in the next post, but I’ll conclude here with three points I think are vital to understanding young people’s relationship with the news.

1. The cliche that becomes the assumption. Too many stereotypes about young people get worked into news experiments aimed at them. One example: while it’s true that most young people feel more comfortable with technology and the Internet than their elders do, we don’t possess some sherpa-like, innate ability to navigate poorly designed, poorly organized information (as the Media Management Center’s excellent research demonstrates). Recreating an old experience in a new format is an ineffective way to reach young audiences.

2. Boring or fluffy. Most sectors of journalism thought have rejected the bimodal theory of news: either it’s inherently boring but deeply important (town council minutes) or entertaining but inane (Lindsey Lohan updates). Yet for some reason the assumption of bifurcation continues to pervade news outlets’ discussion of young people: Journalist types implore young people to eat more broccoli, while most news organizations’ efforts to reach young people assume they’re only interested in candy. (See Chicago’s RedEye or Denver’s failed 2005 experiment, Bias Magazine.) The potential is in the elusive middle ground — which I suppose, to follow my own analogy, would be “tasty vegetables.”

3. Why young people get the news. It’s an obvious, but often overlooked, point that the news needs to be designed with an awareness of how and why the audience experiences it. As for the latter, there are many theories about why young people read the news (and some excellent research, such as this ethnographic study [pdf] by the AP): the social capital theory (also known as “I want to seem smart by being able to talk about the oil spill’s effects on the brown pelican”); the democracy theory; the habit theory. The truth is probably a combination of these three, but they all point to the idea that news is both social and functional. Most news organizations do a poor job of providing an experience that, for young audiences who have a different level of knowledge and experience than older consumers is either of those things.

The point: Journalism needs to focus on young audiences and experiment with new approaches to engaging them. The results of that would be beneficial for everyone involved. Here, again, is my list of ten ideas for making it happen. What would you add?

Image of a paper-reader by foreverphoto, used under a Creative Commons license.

August 12 2010

16:45

US group releases draft guidelines for online content syndication

A group of online content syndicators including the Associated Press, Reuters, Tribune Company and CBS has released a proposed set of guidelines for content syndication, according to a report from MediaWeek.

The Internet Content Syndication Council began considering the guidelines at the beginning of July.

The guidelines are aimed at countering the effect that the group sees as a growing and dangerous trend on the web – the rise of shoddy, poorly-sourced and edited content, often produced solely with gaming search engines in mind.

The proposed guidelines will now be open to review by its membership and the wider online media industry.

Full post at this link…Similar Posts:



August 02 2010

16:46

Music stops in the White House press room, Fox sits down first

The battle for a coveted front row seat in the White House press room is over, with Fox News claiming the chair.

Following the retirement of Helen Thomas in May, Associated Press moved to her centre-spot, freeing up its old space further along the front row.

National Public Radio, Bloomberg News and Fox all requested the special spot – but Fox was finally selected due to its “length of service and commitment to the White House television pool”, according to AFP.

NPR’s correspondent will now move up one row to Fox’s old second-row seat, next to Bloomberg News.Similar Posts:



July 08 2010

14:00

The newsonomics of replacing Larry King

[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.]

I know. You say, who could ever replace Larry King? But I remind you that Larry’s six ex-wives have already confronted that question.

Most of the speculation about a replacement has focused on a range of usual suspects, personalities from Katie Couric to Ryan Seacrest to Joy Behar to Piers Morgan — all around the question of who will be able to command a better audience than King, whose ratings have seen a steady decline. Indeed, his successor, who will take over the show in November, will probably come from that list, a month after the network plucked Eliot Spitzer and Kathleen Parker to fill Campbell Brown’s spot.

Yet the changing economics of CNN’s basic business model prompt lots of questions about ways CNN could go — as well as offering print- and broadcast-based news companies some pointers on their own business model development.

Let’s recall that CNN is a tale of two modern stories. Its flagship cable news station has been flagging badly, having fallen to a #4 position in cable news behind Fox, MSNBC, and its own Headline News Network (HLN), tabloid TV without tabloid wit. CNN is cool and confused in an age of hot and pointed.

Online, though, CNN has built a formidable business. It ranks at or near the top of the top news sites, excels at user-gen news content and offers one of the few paid news apps.

It’s a tale of two business units going opposite directions.

Look at the revenue pie for CNN, and you discover more nuance. One-half of CNN’s roughly $500 million in revenue comes from what it calls business subscription fees — what cable companies pay it for carriage. Ten percent of its revenue is now coming from prime-time advertising; the same percentage from its digital businesses. Advertising outside prime time, international, and some syndication round out the revenue picture.

We can certainly see that CNN’s revenue model is much more diverse than newspaper or broadcast companies. That payment from cable systems for carriage — averaging about 50 cents per subscriber per month, according to recent accounts — makes a huge difference in a time of great advertising change.

We can also see that CNN is becoming more and more of a content company. It gets paid that half dollar a month from cable companies because its inclusion helps drive subscribers. Recently dropping the Associated Press, it’s moving increasingly into syndication, both video and text, and there the quality and breadth of content counts. As one of the first news companies to embrace multi-platform publishing (cable + desktop + mobile, long before others got that notion), it moved quickly to price its product for the iPhone, charging $1.99 and now ranking as the #2 news app in the iTunes store.

So content creation — and content creation that rebounds in digital waves, even if it starts from a cablecast — is more important to CNN every day. If it could come up with more programming that provided digital multipliers — smartphone and tablet users willing to pay for access, and advertisers joining them — then the Larry King replacement might be not just good TV, but good strategy.

What might that mean?

For instance, how could could CNN better leverage its substantial iReport operation, a user-generated innovation that is the gold standard for TV news. Viral user-gen video is a mainstay of the digital world. Or maybe it could create an America’s Best News Videos (is Bob Saget available?), riffing on the montages that Jon Stewart has made almost mainstream. Maybe it could go The View-like, aggregating characters whose comments and rants might generate great two-three minute digital products. Or, most likely, it could find a bolt-out-of-the-blue digital age personality, like Rachel Maddow, who may well front MSNBC’s first iPad app. As MSNBC’s Mark Marvel told AllThingsD’s Peter Kafka about its coming app, it will allow users to “engage with the host of that show.” Engagement with Rachel, yes; with Larry, no. With Katie, maybe.

Can CNN find a digital upgrade to the analog King?

The goals here would be to produce great digital content, not just ratings. Sure, TV has seen some pick-up of memorable interviews — think CBS’ Katie Couric and Sarah Palin, or more recently the half-million pageviews after-market that Maddow generated with her Rand Paul interview. That aftermarket, though, has been more of an afterthought. If revenue growth is in the digital content business, CNN, broadcasters, and all news producers must increasingly think at least digital rebound, if not digital first. As Stephen Covey legendarily said, “Begin with the end in mind.” A good habit for highly effective media companies to adopt.

What else might print news companies learn from the CNN model?

First, syndication. While the Chicago News Cooperative and Bay Citizen pioneer innovative content syndication models, both with the New York Times, and Financial Times’ direct licensing model breaks new ground, most newspaper companies have failed to find other new, lucrative markets for their content. Yes, they’ve made some money from enterprise and education licensing, but if their content is really that valuable, they should be able to find other companies (Comcast, NYT, regional businesses, and more) to pay them for it.

Second, the pay-per-subscriber model that has insulated CNN from the ravages of ad change is one news companies should ponder. CNN made itself an indispensable part of the cable mix. Is local/regional news content indispensable to any aggregators — AT&T, Verizon, Apple, Nokia, for instance — as they bundle technology and content? What would it take — in the kind and breadth of content (video?) produced — to get a monthly payment, especially in the mobile digital world to come?

July 06 2010

14:00

The ASCAP example: How news organizations could liberate content, skip negotiations, and still get paid

Jason Fry suggested in a post here last week that current paywall thinking might be just a temporary stop along the way to adoption of “paytags — bits of code that accompany individual articles or features, and that allow them to be paid for.” But how? As Fry recognizes, “between wallet friction and the penny gap, the mechanics of paytags make paywalls and single-site meters look like comparatively simple problems to solve.”

I suggested a possible framework for a solution during a couple of sessions at the conference “From Blueprint to Building: Making the Market for Digital Information,” which took place at the University of Missouri’s Reynolds Journalism Institute June 23-25. Basically, my “what-if” consisted of two questions:

  1. What if news content owners and creators adopted a variation on the long-established ASCAP-BMI performance rights organization system as a model by which they could collect payment for some of their content when it is distributed outside the boundaries of their own publications and websites?
  2. And, taking it a step further, what if they used a variant of Google’s simple, clever, and incredibly successful text advertising auction system to establish sales-optimizing pricing for such content?

News publishers have been tying themselves in knots for the last few years deciding whether or not to charge readers for content, and if so, how much and in what fashion — micropayments, subscriptions, metered, freemium and other ideas have all been proposed and are being tested or developed for testing.

As well, publishers have complained about the perceived misuse of their content by aggregators of all stripes and sizes, from Google News down to neighborhood bloggers. They’ve expressed frustration (“We’re mad as hell and we are not going to take it anymore,” Associated Press chair Dean Singleton said last year), and vowed to go after the bandits.

But at the same time, many publishers recognize that it’s to their advantage to have their content distributed beyond the bounds of their own sites, especially if they can get paid for it. When radio was developed in the 1920s, musicians and music publishers recognized they would benefit from wider distribution of their music through the new medium, but they needed a way to collect royalties without each artist having to negotiate individually with each broadcaster.

A model from music

That problem was solved by using a non-profit clearinghouse, ASCAP (American Society of Composers, Authors and Publishers), which had been formed in 1914 to protect rights and collect royalties on live performances. Today the performance-rights market in the U.S. is shared between ASCAP, BMI (Broadcast Music Incorporated, founded by broadcasters rather than artists) and the much smaller SESAC (formerly the Society of European Stage Authors & Composers). Using digital fingerprinting techniques, these organizations collect royalties on behalf of artists whose works are performed in public venues such as restaurants and shopping centers as well as on radio and television stations and streaming services such as Pandora.

Publishers have put a lot of effort into trying to confine news content to tightly-controlled channels such as their own destination websites, designated syndication channels, apps, and APIs in order to control monetization via advertising and direct user payments. But when content moves outside those bounds, as it can very easily, publishers have no way to regulate it or collect fees — so they cry foul and look for ways to stop the piracy or extract payments from the miscreants.

Among the content-protection schemes, AP is rolling out News Registry, which it touts as a way of at least tracking the distribution of content across the web, whether authorized or not, and Attributor offers “anti-piracy” services by “enforcement experts” to track down unauthorized use of content. But for now, content misuse identified by these systems will require individual action to remove it or force payment. In the long run, that’s not a viable way to collect royalties.

Suppose, instead, that news publishers allowed their content to it be distributed anywhere online (just as music can be played by any radio station) as long as it were licensed by a clearinghouse, similar to ASCAP and BMI, that would track usage, set prices, and channel payments back to the content creator/owner?

To do this, perhaps the paytags Fry suggested are needed, or perhaps publishers can learn from the music industry and use the equivalent of the digital fingerprints that allow ASCAP’s MediaGuide to track radio play. (The basic technology for this is around: AP’s News Registry uses hNews microtags as well as embedded pixels (“clear GIFs”); Attributor’s methodology is closer to the digital fingerprinting technique.)

How it could work

The system for broadcast and performance music payments is a three-way exchange consisting of (a) artists and composers, (b) broadcasters and performance venues, and (c) performance rights organizations (ASCAP and BMI).

In the news ecosystem the equivalents would be (a) content creators and owners, (b) end users including both individual consumers and “remixers” (aggregators, other publishers, bloggers, etc.); and (c) one or more content clearinghouses providing services analogous to those of ASCAP and BMI.

The difference between a news payments clearinghouse and the music industry model would be in scale, speed and complexity. In the news ecosystem, just as in the music world, there are potentially many thousands of content creators — but there are millions of potential end users, compared to a manageable number of radio stations and public performance venues paying music licensing fees. And there are far more news stories than musical units; they’re distributed faster and are much shorter-lived than songs. In the radio and public performance sphere, music content still travels hierarchically; that was true in the news business 20 years ago, but today news travels in a networked fashion.

To handle the exchange of rights and content in this vastly more complex environment, a real-time variable pricing model could be developed, benefiting both the buyers and sellers of content. Sellers benefit because with variable pricing or price discrimination, sales and revenue are maximized, since content goods are sold across the price spectrum to various buyers at the price each is willing to pay — think of the way airline seats are sold. Buyers benefit because they can establish the maximum price they are willing to pay. They may not be able buy at that price, but they are not subject to the take-it-or-leave-it of fixed pricing.

When it comes to news content, a variable pricing strategy was suggested last year by Albert Sun, then a University of Pennsylvania student; now a graphics designer with The Wall Street Journal. (Sun also wrote a senior thesis on the idea called “A Mixed Bundling Pricing Model for News Websites.”) The graphs on his post do a good job showing how a price-discrimination strategy can maximize revenue; it was also the subject of one of my posts here at the Lab.

A well-known real-time variable pricing arrangement is the Google AdSense auction system, which establishes a price for every search ad sold by Google. Most of these ads are shown to users at no cost to the advertisers; they pay only when the user clicks on the ad. The price is determined individually for each click, via an algorithm that takes into account the maximum price the advertiser is willing to pay; the prices other advertisers on the same search page are willing to pay; and the relative “Quality Score” (a combination of clickthrough rate, relevancy and landing page quality) assigned to each advertiser by another Google. It works extraordinarily well, not only for advertisers but for Google, which reaps more than $20 billion in annual revenue from it.

Smart economist needed

What’s needed in the news ecosystem is something similar, though quite a bit more complex. Like the Google auction, the buyer’s side would be simple: buyers (whether individuals or remixers such as aggregators) establish a maximum price they are willing to pay for a particular content product — this could be an individual story, video, or audio report, or it could be a content package, like a subscription to a topical channel. This maximum price is determined by an array of factors that will be different for every buyer, but may include timeliness, authoritativeness, relevance to the buyer’s interests, etc., and may also be affected by social recommendations or the buyer’s news consumption habits. But for the purposes of the algorithm, all of these factors are distilled in the buyer’s mind into a maximum price point.

The seller is the content creator or owner who has agreed to share content through the system, including having remixers publish and resell it. Sellers retain ownership rights, and share revenue with the remixer when a transaction takes place. The price that may be acceptable to a content owner/seller will vary (a) by the owner’s reputation or authority (this is analogous to Google’s assignment of a reputation score to advertisers), and (b) by time — since generally, the value of news content will drop quickly within hours or days of its original publication.

The pricing algorithm, then, needs to take into account both the buyer’s maximum price point and the seller’s minimum acceptable price based on time and reputation; and at least two more things: (a) the uniqueness of the content — is it one of several content items on the same topic (multiple reports on an event from different sources), or is it a unique report not available elsewhere (a scoop, or an enterprise story) — and (b) the demand for the particular piece of content — is it popular, is it trending up, or has it run its course?

The outcome of this auction algorithm would be that different prices would be paid by different buyers of the same content — in other words, sales would occur at many points along the demand curve as illustrated in Sun’s post, maximizing revenue. But it’s also likely that the system would establish a price of zero in many cases, which is an outcome that participating publishers would have to accept. And of course, many remixers would choose to offer content free and step into the auction themselves as buyers of publication rights rather than as resellers.

In my mind, the actual pricing algorithm is still a black box, to be invented by a clever economist. For the moment, it’s enough to say that it would be an efficient, real-time, variable pricing mechanism, maintained by a clearinghouse analogous to ASCAP and BMI, allowing content to reach end users through a network, rather than only through the content creator’s own website and licensees. Like ASCAP and BMI, it bypasses the endless complexities of having every content creator negotiate rights and pricing with every remixer. The end result would be a system in which content flows freely to end users, the value of content is maximized, and revenue flows efficiently to content owners, with a share to remixers.

Clearly, such a system would need a lot of transparency, with all the parties (readers, publishers, remixers) able to see what’s going on. For example, if a multiple news sources have stories on the same event, they might be offered to a reader at a range of prices, including options priced above the reader’s maximum acceptable price.

Protecting existing streams

Just as ASCAP and BMI play no role when musicians sell content in uncomplicated market settings the musicians can control — for example, concert tickets, CD sales, posters, or other direct sales — this system would not affect pricing within the confines of the content owner’s own site or its direct licensees. But by enabling networked distribution and sales well beyond those confines, it has the potential to vastly increase the content owner’s revenue. And, the system need not start out with complex, full-blown real-time variable pricing machinery — it could begin with simpler pricing options (as Google did) and move gradually toward something more sophisticated.

Now, all of this depends, of course, on whether the various tentative and isolated experiments in content pricing bear fruit. I’m personally still a skeptic on whether they’ll work well outside of the most dominant and authoritative news sources. I think The New York Times will be successful, just as The Wall Street Journal and Financial Times have been. But I doubt whether paywalls at small regional newspapers motivated by a desire to “protect print” will even marginally slow down the inevitable transition of readers from print to digital consumption of news.

A better long-term strategy than “protect print” would be to move to a digital ecosystem in which any publisher’s content, traveling through a network of aggregators and remixers, can reach any reader, viewer or listener anywhere, with prices set efficiently and on the fly, and with the ensuing revenue shared back to the content owner. The system I’ve outlined would do that. By opening up new potential markets for content, it would encourage publishers to develop higher-value content, and more of it. The news audience would increase, along with ad revenue, because content would travel to where the readers, listeners or viewers are. Aggregators and other remixers would have be incentivized to join the clearinghouse network. Today, few aggregators would agree to compensate content owners for the use of snippets. But many of them would welcome an opportunity legitimately to use complete stories, graphics and videos, in exchange for royalties shared with the content creators and owners.

Granted, this system would not plug every leak. If you email the full text of a story to a friend, technically that might violate a copyright — just like sharing a music file does — but the clearinghouse would not have the means to collect a fee (although the paytag, if attached, might at least track that usage). There will be plenty of sketchy sites out there bypassing the system, just as there are sketchy bars that have entertainment but avoid buying an ASCAP license.

But a system based on a broadly-agreed pricing convention is more likely to gain acceptance than one based on piracy detection and rights enforcement. Like ASCAP’s, the system would require a neutral, probably nonprofit, clearinghouse.

How could such an entity be established, and how would it gain traction among publishers, remixers and consumers? Well, here’s how ASCAP got started: It was founded in 1914 by Victor Herbert, the composer, who was well-connected in the world of musicians, composers, music publishers and performance venues, and who had previously pushed for the adoption of the 1909 Copyright Act. Herbert enlisted influential friends like Irving Berlin and John Philip Sousa.

Today, just as a few outspoken voices like Rupert Murdoch are moving the industry toward paywalls, perhaps a few equally influential voices can champion this next step, a pricing method and payments clearinghouse to enable publishers to reap the value of content liberated to travel where the audience is.

Acknowledgments/disclosures: The organizer of the conference where I had the brainstorm leading to this idea, Bill Densmore, has spent many years thinking about the challenges and opportunities related to networked distribution, payment systems, and user management for authoritative news content. A company he founded, Clickshare, holds patents on related technology, and for the last two years he has worked at the University of Missouri on the Information Valet Project, a plan to create a shared-user network that would “allow online users to easily share, sell and buy content through multiple websites with one ID, password, account and bill.” Densmore is also one of my partners in a company called CircLabs, which grew out of the Information Valet Project. The ideas presented in this post incorporate some of Densmore’s ideas, but also differ in important ways including the nature of the pricing mechanism and whether there’s a need for a single ID.

Photo by Ian Hayhurst used under a Creative Commons license.

June 11 2010

08:10

June 10 2010

16:43

E&P: AP videojournalist in the thick of it in the Gulf of Mexico

Rich Matthews, a videojournalist with Associated Press, decided to report from the Gulf of Mexico’s oil-slicked waters. Not content with looking overboard, he went diving, intending first to go 60 feet but having to cut this back to 20 feet due to the lack of visibility.

I jump off the boat into the thickest, reddest patch of oil I’ve ever seen (…) I open my eyes and realise my mask is already smeared. I can’t see anything and we’re just five seconds into the dive.

Full story at this link…

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15:00

The Newsonomics of tablet ad readiness

[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.]

Are you ready to receive? That’s the question news company should be asking themselves this month, as the second half of the year — with its unexpected flow in mobile ad dollars — beckons.

The numbers are mostly anecdotal at this point, though as some of us forecast, tablets promise a new, significant source of revenue for the companies that are ready to play the tablet game, and play it well.

Among the early evidence, reported by AP’s Andrew Vanacore, are:

  • $50 CPMs ($50 per each one thousand views) for USA Today’s iPad ad, as compared to maybe $10 for its web ads.
  • Irrational exuberance! Brian Quinn, WSJ’s VP/general manager for digital ad sales, says overall ad spend is increasing because of the iPad version, not just switching dollars from one platform to another. “Out of the gate, there was an exuberance about this,” he says.
  • Chase Sapphire, which is a New York Times iPad sponsor,  says its ads are getting a remarkable 15 percent clickthrough rate. That’s 150 times the rate of an average web ad.

Add to that the July 1 launch of Apple’s iAds, which will introduce ads within iPhone and iPod Touch (but not yet iPad) apps, and which will begin with $60 million in sales, with such companies as Disney, AT&T, and Best Buy participating. You can bet that when the program launches on the iPad, a vastly superior ad medium given the screen size, it will do well. Even just on the “phone” side of the business, the iAds launch should give Apple — and, importantly, apps — almost half of the mobile ad spend in the U.S.

Want a little flavor to understand advertiser enthusiasm? Check out this Steve Henn Marketplace report featuring a VP for The Gap. She’s near-ecstatic in describing her enthusiasm for the iPad/tablet as a way of selling stuff and gaining customer knowledge.

So, yes, maybe the iPad ad euphoria should come with a few grains of salt. But, still, the “multi-touch” immersive future, painted by Steve Jobs and talked up by the big digital ad agencies (themselves looking for new reasons to be in the supply chain) is upon us.

So, are publishers ready?

I had a conversation recently with someone who runs a digital division for a major newspaper group — smart guy, a pioneer in the field. I asked: “So are you working on an iPad app?” Answer: “We’ve looked at our logs, and we’re seeing increasing traffic from the Kindle, but not much yet from the iPad, so we’ll wait awhile.”

I felt a rant coming up, but suppressed it then and will channel it now: If not now, then when?

We can look at each of the major revolutions in digital news and commerce, and see how news companies responded.

Search. Late.

Paid search. Way too late.

Video. Late.

Social. Too late.

Mobile. Largely too late.

News companies have used old yardsticks to measure new technologies, and the results have been, predictably and disastrously, too little, too late.

Now with the iPad, the advent of tablets generally, and the invention of the app metaphor as a way of navigating the digital life, news companies have another chance. The newsonomics of tablet ad revenue are uncertain — will iAds simply flood the ad market with more low-cost ads, as developers happy to get any ad revenue price their ads low? — but the tablet offers the biggest do-over potential for engaging readers anew and re-engaging advertisers, at rates somewhere between the laughably low of the web and the near-impossible-to-sustain-long-term highs of print.

The digital division head told me that the logs told him that there was insufficient customer demand to justify investment in an iPad app. This, I think, is like managing by rearview mirror.

The whole metaphor of the iPad is the app; ask anyone who uses it, and they’ll tell you they are surprised how little they use the browser and use search. So if you are counting browser views of your website coming through the iPad browser, you have no idea how a reader might use your product if it were built to take full advantage of the tablet’s abilities. In addition, consider that the sale of iAds require an app — not a browser-available site.

If this sentiment were uncommon, fine, but I fear it’s too commonly held. Wait and see. Wait — until it’s too late. That’s what I generally see happening among regional and local newspaper companies. They talk about early adopters and the high cost of a state-of-the-art iPad app, and most are waiting.

The big guys — what I’ve called the Digital Dozen — aren’t waiting. The Wall Street Journal, The New York Times, Thomson Reuters, The Guardian, BBC, and AP are in the game — some with better apps than others — and all planning the next generation of products. We’re seeing impressive sales in the thousands for the WSJ paid app and can wonder about the applicability of Wired’s impressive sales of 73,000 (which are on a trajectory to beat print newsstand sales) to news and newspaper companies.

We’ve already seen a great separation in product development, audience engagement, and ad revenues between the nation’s and world’s biggest news companies — each with struggles of its own — and the other guys. Yet as they struggle, they’ve gotten most of the ad revenue smartphones have so far generated, as local news media has failed to get any revenue of scale. At this point, the iPad era looks like it the opening of an even greater divide among the largest media — and the rest.

[Ken will be on vacation the next few weeks, but back in July. —Josh]

June 09 2010

16:00

Making connections: How major news organizations talk about links

Links can add a lot of value to stories, but the journalism profession as a whole has been surprisingly slow to take them seriously. That’s my conclusion from several months of talking to organizations and reporters about their linking practices, and from counting the number and type of links from hundreds of stories.

Wikipedia has a 5,000 word linking style guide. That might be excessive, but at least it’s thorough. I wondered what professional newsrooms thought of linking, so I contacted a number of them and asked how they were directing their reporters to use links. I got answers — but sometimes vague answers.

In this post I’ll report those answers, and in the next post I’ll discuss the results of my look into how links are actually being used in the published work of a dozen news outlets.

The BBC made its linking intentions public in a March 19 post by website editor Steve Herrmann.

Related links matter: They are part of the value you add to your story — take them seriously and do them well; always provide the link to the source of your story when you can; if you mention or quote other publications, newspapers, websites — link to them; you can, where appropriate, deep-link; that is, link to the specific, relevant page of a website.

I asked Herrmann for details and reported his responses previously. Then I sent this paragraph to other news organizations and asked about their linking policies. A spokesperson for The New York Times wrote:

Yes, the guidance we offer to our journalists is very similar to that of the BBC, in that we encourage them to provide links, where appropriate, to sources and other relevant information.

Washington Post managing editor Raju Narisetti made similar remarks, but emphasized that the Post encourages “deep linking.”

While we don’t have a formal policy yet on linking, we are actively encouraging our reporters, especially our bloggers, to link to relevant and reliable online sources outside washingtonpost.com and in doing so, to be contextual, as in to link to specific content [rather] than to a generic site so that our readers get where they need to get quickly.

Why would anyone not link to the exact page of interest? In the news publishing world, the issue of deep linking has a history of controversy, starting with the Shetland Times vs. Shetland News case in 1996.

The Wall Street Journal and Dow Jones Newswires wouldn’t discuss their linking policy, as a spokesperson wrote to me:

As you can see from the site, we do link to many outside news organizations and sources. But unfortunately, we don’t publicly discuss our policies, so we won’t have anyone to elaborate on this.

From observation, I did confirm that Dow Jones Newswires don’t reliably link to source documents even when publicly available online. I found a simple story about a corporate disclosure, tracked down the disclosure document on the stock exchange web site, then called the Dow Jones reporter and confirmed that this was the source of the story. But it’s unfair to single out Dow Jones, because wire services don’t do linking generally.

The Associated Press does not include inline links in stories, though they sometimes append links in an “On the Net” section at the bottom of stories. A spokesperson explained why there is no inline linking:

In short, a technical constraint. We experimented with inline linking a year or so ago but had difficulties given the huge variety of downstream systems, at AP and subscriber locations, that handle our copy. The AP serves 1,500 member U.S. papers, as well as thousands of commercial Web sites and ones operated by the papers, radio and TV stations, and so on.

Reuters links in various ways from stories viewed within its professional desktop products, including links to source documents and previous Reuters stories, though these links are not always standard URLs. Their newswire product does not include links. A spokesperson asked not to be quoted directly, but explained that, like the Associated Press, many of their customers could not handle inline links — and no copy editor wants to be forced to manually remove embedded HTML. She also said that Reuters sees itself as providing an authoritative news source that can be used without further verification. I get her point, but I don’t see it as a reason to not point to public sources.

The wire services are in a tricky position. Not only are many of their customers unable to handle HTML, but it’s often not possible for the wires to link to their previous stories — either because they aren’t posted online or they’re posted on many subscriber websites. This illuminates an unsolved problem with syndication and linking generally: if every user of syndicated material posts copy independently on their own site, there is no canonical URL that can be used by the content creator to refer to a particular story. (The AP’s been thinking about this.)

These sorts of technical issues are definitely a barrier, and staff from several newsrooms told me that their print-era content management systems don’t handle links well. There’s also no standard format for filing a story with hyperlinks — copy might be drafted in Microsoft Word, but links are unlikely to survive being repeatedly emailed, cut and pasted, and squeeze through any number of different systems.

But technical obstacles don’t much matter if reporters don’t value links enough to write them into their stories. In conversations with staff members from various newsrooms, I’ve frequently heard that cultural issues are a barrier. When paper is seen as the primary product, adding good links feels like extra work for the reporter, rather than an essential part of the storytelling form. Some publishers are also suspicious that links to other sites will “send readers away” — a view that would seem to contradict the suspicion of inbound links from aggregators.

Reading between the lines, it seems that most newsrooms have yet to make a strong commitment to linking. This would explain the mushiness of some of the answers I received, where news organizations “encourage” their reporters or offer “guidance” on linking. If, as I believe, links are an essential part of online journalism, then the profession has a way to go to exploit the digital medium. In my next post, I’ll break down some numbers on how different news organizations are using links today.

June 03 2010

07:53

AP updates Stylebook with social media guidelines

The Associated Press (AP) has updated its Stylebook to include 42 new entries under a special social media section. The new edition of the style guide, which is widely used in the US and internationally, has changed its recommendation for “web site” to “website” and now includes terms such as “app”,” blogs”, “click-throughs”, “friend” and “unfriend”, “metadata”, “RSS”, “search engine optimisation”, “smart phone”, trending, widget and wiki. (Not all necessarily in keeping with the Journalism.co.uk house style…)

The new Stylebook also includes advice for journalists using social media for their work, in particular tips on how to use Twitter and Facebook effectively.

Full release at this link…

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May 28 2010

20:00

Publish2’s Ryan Sholin: “We did not set out to kill the Associated Press”

This week, with much fanfare, Publish2 announced its new News Exchange service. Using the new platform, CEO Scott Karp wrote, “newspapers can replace the AP’s obsolete cooperative with direct content sharing and replace the AP’s commodity content with both free, high-quality content from the Web and content from any paid source.” With the result being “a new efficient supply and distribution chain for high quality content brands.”

The “obsolete cooperative.” (Also: “The Associated Press monopoly over content distribution to newspapers.” And also: “The New AP.”) Fighting words, to be sure — and, all in all, a remarkably effective approach for a new initiative coming from a nearly-three-year-old, ten-staffer startup that needs to fight above its weight class: The announcement drew tons of attention from media new and traditional, much of it framed in journo-irresistible terms of “Scrappy Startup Takes on the Associated Press.” And some of it framed in terms even more irresistable than that: “Scrappy Startup Wants to Kill the Associated Press.” Hooboy: David v. Goliath goes digital!

But now that we’re moving beyond the initial flurry of announcements and analysis of the News Exchange, it’s worth noting the nuances beyond Karp’s publicitytastic “New Associated Press for the 21st Century.” “Disrupt” doesn’t mean “destroy”; it simply means to “throw into disorder.” And, for all its fight-focused framing, Publish2 (at the moment, at least) seems much more intent on shaking things up than on shaking things down. As Karp himself noted as he introduced P2X, it’s “a platform aimed at disrupting the Associated Press monopoly over content distribution to newspapers.”

And there’s another word worth noting: distribution. The Associated Press, after all, has two core functions: There’s the AP, content producer; and then there’s the AP, content distributor. The “blazing guns” Publish2 has aimed at the cooperative, to borrow Mark Coddington’s phrase, seem to be directed much more toward the latter. To my mind, that’s a crucial distinction: I’m all about shaking up the structures of distribution, of broadening the marketplace when it comes to wire content available to news organizations; I’m much less enthused about the idea of killing off a valuable — and even, I’d say, valuably institutionalized — source of reporting and information.

And — whew! — as Publish 2’s Ryan Sholin explained to me today, “We did not set out to kill the Associated Press. That’s not the goal. I don’t think that’s a logical thing to even want to do.” What the News Exchange and its creators do want, Sholin said, is to broaden the ecosystem of access when it comes to the wire content available to newspapers.

And that content includes…the AP’s. “If the AP wants to sell content through our system and distribute it to their subscribers,” Sholin said, “that seems like a win for everybody. So we’d welcome that.”

Chutzpah! So, though the battle-of-the-news-co-ops won’t (necessarily) be a death match: game on.

During our conversation, Sholin also provided some background info on the structure and goals of the — indeed, quite fascinating — News Exchange. Here’s what he told me, in a lightly edited transcript:

The general mechanics:

There’s two big pieces to the News Exchange. The first piece is that it allows news organizations to share content with each other. And that’s something that they’re already doing — but they’re not doing it in a way that’s efficient or scalable. Most of those content-sharing networks that you see popping up are emailing stories and budgets back and forth. And that’s far from the most efficient way to do the job. And it’s also not scalable.

So what we’ve done is build an efficient, scalable system that ties directly into print publishing systems. So instead of sending copy editors off on email and copy/paste errands on deadline, they’re just going to be able to open a folder in their print publishing system, the place where they’re already getting all of their stories to flow into the papers, it’s going to be right there for them in the format they need it.

[Megan: How do the News Exchanges relationships with newspapers work right now? is there an existing network?]

Right now, we’ve got about two dozen newspapers that are beta-testing. For the most part right now they’re kind of jumping in and putting up their newswire. I don’t know exactly what’s going on behind the scenes. But if I were a newspaper and I were checking this out, and I liked it, I’d be turning around and going to the people that I share content with, and telling them, “Jump in.”

The financial mechanics:

Today, everything is free. If you want to come and share your free content, or your content for free, with your partners, you’re more than welcome to. If you want to take your online-only content and put it out there for print publication, you’re more than welcome to. At the same time, if you want to sell your content — for example, if you’re a nonprofit that wants to sell your content to newspapers — you can use our system to manage subscription, distribution, and promotion of those newswires, and be off on your own selling it and dealing with your own contracts and purchase orders off in your own systems right now.

We are going to add on a marketplace layer. And what that’s going to do is allow, number one, the newspapers to set a price for their newswires. I’ve talked to editors who say, “Hey, we want to sell our college football coverage. The team in our town is a popular team across the state and across the region, we want to sell this newswire to other newspapers.” And then we also have paid content providers. Even people who are looking to put photos and other content in the system who are interested in selling it. And we’re going to make it easy either to pay for either a subscription to a newswire — or, if the content provider allows it, à la carte pricing, as well. The pricing structure is definitely going to be up to the individual content providers.

[Megan: So, essentially, you provide a space for the market interactions, and charge organizations for the convenience cost of the facilitation.]

Yes. When we build on the marketplace layer, we’ll charge a transaction fee, but it’s going to be based on the volume of use. So if you’re a nonprofit organization trying to sell your stories to six papers, we’re not terribly interested in taking your money. But if you’re a major, international news provider who is using our system to sell and deliver subscriptions on a large scale to American newspapers, that’s a case where I’m sure we’ll be taking a transaction fee — based on volume of use, circulation of the papers you’re selling to. Forty-five minutes into every call with each editor, when they ask me, “What’s the business model?” that’s one half of it — that’s one side of it.

[Megan: So the fee will be determined on a case-by-case basis?]

I don’t know if I’d say case-by-case, exactly. But it’s definitely going to be based on volume of use and circulation. It’s not just going to be a blanket fee. We’re exploring all our options and it’s something that we’re going to talk in great depth with newspaper editors and content providers about. The goal here, in the long term, is to save newspapers money. So we’re not looking to add on anything to what they’re already paying for newswire content.

So the other side of the question of how are we going to make money is definitely that we’re looking to help newspapers reduce their dependence on other newswire sources like the AP. So if we make it possible for a newspaper to drop from an “AP complete” to “AP limited” — or to cancel the AP altogether (and obviously there’s a longer timeline involved with that) — we’ll be looking to assess something like a license fee for the software. And it’ll be a fraction of the difference.

The goal here is that if we can cut newspapers’ newswire bill in half, that would be a big win for them. For the major metros, we’re talking about hundreds of thousands of dollars. We talk to editors about this all the time, and they do the math in their head, and say, “Oh, that’s four FTEs.” So I personally like the sound of that: newspaper editors saying, “Oh, if you saved me that much money, I could hire this many reporters.” That seems like a good thing.

Providing content vs. facilitating its exchange:

[Megan: What about the criticisms that the News Exchange won't provide original content, as the AP does?]

The original content is out there. There are freelancers on the streets of Bangkok right now who are tweeting and filing photos and providing reports to people like The Economist and the BBC and the Financial Times. Over the past three years, Publish2’s been building up a user base of about 10,000 journalists, and we’ve done that by approving them all by hand, in large part. If someone has an @newspaper.com email address, they’re automatically shepherded into the system. But for all of our other users, we’ve spent a lot of time and resources and energy in making sure that we’ve got a user base that is journalists-only. And the end result is that there’s a ton of top-shelf freelancers already in the system.

So connecting the kind of top-shelf freelancers — content providers that we don’t normally think of as somebody that we can easily connect with to write a story — that are out there with editors in the U.S. is one big step. That’s a big piece of this. And the other big thing is just to say, “Let’s take all the international news providers that are out there and put them in one bucket.” The newspapers that are out there, picking their stories for the day: Let them decide who’s got the highest-quality content. Let them vote by slotting the stories on the pages.

One thing that we’re going to try and do in the coming days is try and get the word out a little bit and probably put up some blog posts about what the system — how the system can help a freelancer, a newspaper, a blogger, a media company — just to give an idea of the different value propositions that we’re offering to everybody in the ecosystem. Because there’s a lot of moving parts, and only so much that Scott could say onstage for six minutes. It was very much about getting the big idea out.

And I can tell you, as the guy who’s been here all week fielding calls and emails and tweets and registrations, that we got the word out. The big idea is out there. So it’s been a very exciting week here.

12:30

This Week in Review: Facebook’s privacy tweak, old and new media’s links, and the AP’s new challenger

[Every Friday, Mark Coddington sums up the week’s top stories about the future of news and the debates that grew up around them. —Josh]

Facebook simplifies privacy control: After about a month of loud, sustained criticism, Facebook bowed to public pressure and instituted some changes Wednesday to users’ privacy settings. The default status of most of the data on Facebook — that is, public — hasn’t changed, but the social networking site did make it easier for users to determine and control their various privacy settings. For some social media critics, the tweaks were enough to close the book on this whole privacy brouhaha, but others weren’t so satisfied with Facebook. Here at the Lab, Megan Garber seized on the theme of “control” in Facebook’s announcement, arguing that the company is acknowledging that online sharing is as much individual and self-interested as it is communal and selfless.

Before rolling out those changes, Facebook’s Mark Zuckerberg penned a Washington Post op-ed that served as a defense of Facebook’s privacy policy masquerading as an apology. “If we give people control over what they share, they will want to share more. If people share more, the world will become more open and connected,” he wrote. The reaction was swift and negative: It was called “long on propaganda and short on news,” “disingenuous” and “missing the point” by several media and tech critics.

Their comments were part of continued attacks on Facebook’s privacy stance that began to shift from “Facebook is evil” to “So what do we do now?” Facebook’s new, more private rivals escalated their efforts to provide an alternative, while social media researcher danah boyd argued that leaving Facebook would be futile and instead urged users to “challenge Facebook to live up to a higher standard.” Several legal and web thinkers also discussed whether the government should regulate Facebook’s privacy policies, and the Harvard Business Review’s Bruce Nussbaum made the case that Facebook has alienated the generational principles of its primary user base of millennials. (Mathew Ingram of GigaOm disagreed.)

But amid all that, Facebook — or at least the sharing of personal information — got another defender: The prominent tech thinker Steven Johnson. In a thoughtful essay for Time, he used the example of media critic Jeff Jarvis’ public bout with prostate cancer to argue that living in public has its virtues, too. “We have to learn how to break with that most elemental of parental commandments: Don’t talk to strangers,” Johnson wrote. “It turns out that strangers have a lot to give us that’s worthwhile, and we to them.” Of course, Johnson argues, being public or private is for the first time a decision, and it requires a new kind of literacy to go with it.

Paywalls and the links between old and new media: The Pew Research Center’s Project for Excellence in Journalism released a study examining the way several big news topics were discussed across several online news platforms, and as usual, it’s a whole lot of discoveries to sift through. Among the headlines that Pew pointed out in its summary: Twitter users share more technology news than other platforms, the traditional press may be underemphasizing international news, blogs and the press have different news agendas, and Twitter is less tied to traditional media than blogs. (Mashable has another good roundup, focusing on the differences between the traditional media and the blogosphere.)

The study did take some heat online: TBD’s Steve Buttry took issue with the assertion that most original reporting comes from traditional journalists, and the Knight Digital Media Center’s Amy Gahran dug into the study’s methodology and argued that Pew selected from a list of blogs predisposed to discuss what the traditional media is reporting, and that Pew’s definition of news is shaped by circular reasoning.

Gahran was looking at what turned out to be the most attention-grabbing statistic from the study: That 99 percent of the stories blogs link to are produced by the mainstream media, and more than 80 percent come from just four news outlets — the BBC, CNN, The New York Times and the Washington Post. DailyFinance media columnist Jeff Bercovici used that statistic to caution that the Times may be giving up a valuable place as one of the top drivers of online news discussion by implementing its paywall next year, while The Big Money’s Marion Maneker countered that bloggers’ links don’t equal influence, and the Times is more interested in revenue anyway. Reuters’ Felix Salmon echoed that warning, adding that if the Times is truly keeping the doors to its site open to bloggers, it should be trumpeting that as loudly as possible. And wouldn’t you know it — the next day the Times did just that, reiterating that links to their site from blogs won’t count against the limit of free visits.

Meanwhile, Rupert Murdoch’s British newspaper the Times and Sunday Times unveiled plans for its soon-to-be-erected paywall, including the fact that all of the sites’ articles will be blocked from all search engines. The Times and New York Times’ paywalls were almost tailor-made for being contrasted, and that’s exactly what the Lab’s Jason Fry did, using them as examples of an open vs. closed paradigm regarding paid content.

A challenger to the AP’s model: We found out about a fascinating news innovation this week at the TechCrunch Disrupt Conference, where the online news sharing company Publish2 revealed News Exchange, its new content-sharing service for publishers. Essentially, News Exchange is a way for media outlets, both online-only and traditional, to send and receive stories to each other for publication while retaining control of what they share and with whom.

If that sounds like a free, open version of The Associated Press, it’s because that’s exactly what Publish2 sees it as. At the conference, Publish2’s Scott Karp came out against The Associated Press with both guns blazing, calling it “a big enemy of newspapers” and “an obsolete, inefficient monopoly ripe for destruction.” Publish2’s goal, he said, is to “Craigslist the AP.” (In a blog post, Publish2’s Ryan Sholin went into some more detail about why and how; in a Mashable post, Vadim Lavrusik looked closer at how the service will work and what it’s missing right now.)

Publish2’s bold idea was met with mixed reactions among both the tech and media crowds: A few of TechCrunch’s panelists wondered whether print publications were worth building a business around, but they were impressed enough to advance it to the final round of the conference’s startup competition anyhow. NYU j-prof Jay Rosen called it “an extension into print of ‘do what you do best and link to the rest,’” and CUNY j-prof C.W. Anderson said he was thrilled to watch Publish2 take on an irrational system but concerned that the tangle of CMS’s could trip it up. But media consultant Mark Potts noted that much of what the AP transmits is news it reports and produces, something Publish2 isn’t going to try to do. It’s rare that we see such a bold, explicit attempt to take down such an established news organization, so this will doubtless be a project to keep a close eye on.

A disappointing iPad app and an open-web debate: A couple of iPad-related developments and debates this week: While publishers cautiously awaited the iPad’s international release this week, Wired magazine released its iPad app this week — an eagerly awaited app in tech circles. The app is $5 per month, significantly more than the $10 per year that the magazine charges subscribers. Gizmodo Australia’s John Herrman called it “unequivocally, the best magazine for the iPad,” but still wasn’t entirely impressed. It’s too expensive, takes up too much space, and doesn’t deliver the reinvention of the magazine that we were expecting, he said. Lost Remote’s Steve Safran was harsher — calling it a magazine dropped into an app. “Simply taking your existing magazine and sticking in some video does not make it a more attractive offering; it makes it a website from 2003,” he said.

The New York Times Magazine’s Virginia Heffernan ruffled a few feathers this week with a short essay on “The Death of the Open Web,” in which she compared the move into the carefully controlled environs of Apple’s products like the iPhone and iPad to white flight. Web writers Stowe Boyd and Tim Maly refuted Heffernan’s argument, pointing primarily to the iPhone and iPad’s browser and arguing that it keeps the door open to virtually everything the web has to offer. And blogging pioneer Dave Winer said the phrase “death of the open web” is rendered meaningless by the fact that it can’t be verified. In a final quick iPad note, the journalism and programming site Hacks/Hackers hosted a conference in which attendees built an impressive 12 iPad apps in 30 hours.

Reading roundup: This week, we’ve got two news items and a handful of other thoughtful or helpful pieces to take a look at.

— The Bay Citizen, a nonprofit local news site based in San Francisco, launched this week. The San Francisco Bay Guardian took a look at the challenges in front of the Bay Citizen, Poynter used it as a lens to view four trends among news startups, and the Chicago Reader examined the Chicago News Cooperative, another nonprofit news startup that also provides stories to The New York Times. The Lab’s Laura McGann also gave some tips for launching a news site the right way.

— Forbes bought the personal publishing site True/Slant, whose founder, Lewis Dvorkin, is a former Forbes staffer. Dvorkin explained his decision to sell, and Felix Salmon expressed his skepticism about True/Slant’s future.

— Longtime journalists Tom Foremski and Caitlin Kelly both wrote thoughtful posts on what happens when pageviews become a high priority within news organizations. They’re not optimistic.

— Two pieces to bookmark for future reference: Mashable has a thorough but digestible overview of five ways to make money off of news online, and TBD’s Steve Buttry gives some fantastic tips for landing a job in digital journalism.

— Finally, NewsCred’s Shafqat Islam has a wonderful guide to creating effective topic pages for news. This one should be a must-read for any news org looking seriously at context-driven news online.

May 25 2010

14:20

TechCrunch: Publish2 takes on Associated Press with new Online News Exchange

Online news aggregation service Publish2 announced yesterday that it intends to challenge the AP newswire with a new product that it claims will be more open and more efficient.

The start-up realises that the only way to disrupt the monster co-op is by offering a completely scalable substitute. Here’s basically what the company hopes the Publish2 News Exchange will do to the AP: ‘Craigslist it’.

As in, kill the AP’s main income stream by offering an open, efficient alternative.

And my educated guess is publishers are going to love this.

Full story at this link…

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May 04 2010

12:21

April 05 2010

14:15

Three iPad design choices that will influence how we read news online

So we don’t have to guess about what news apps on the iPad will look like any more. With Saturday’s debut of the device — which is, oh by the way, amazing — we now know how about a dozen major news organizations have chosen to present themselves on Apple’s new platform. I think it’s fair to say that we’ve seen no revolutionary apps to this point — solid, competent, but not revolutionary — but that doesn’t mean there aren’t already some important lessons to be learned from what’s already out there. After a weekend of playing around with all the news apps I could find, here are three design choices that I think are worth taking a closer look at.

Story-to-story navigation

Web-analytics types push time-on-site and pageviews-per-visit as measurements of a reader’s engagement. It’s fine to have someone following an occasional link in Twitter, but the real money, some argue, is in dedicated readers who spend lots of time with your content. And to that end, a number of sites have been working on their internal website navigation to push users from story to story, rather than asking them to head back to a list of headlines first.

On news iPad apps, that story-to-story navigation has become the norm. The Wall Street Journal, BBC, Associated Press, USA Today, NPR, Reuters — their apps all allow (and in some cases emphasize) swiping or tapping from story to story rather than Back and Forward, web browser-style. (The New York Times’ app is an interesting exception.) I suspect that’ll lead to more stories consumed per session — and I wouldn’t be surprised if you didn’t see more news companies taking that lesson back to their websites.

Diving right in

Similarly, just about every news website created in the past 15 years has pushed users down a similar path: show them a whole bunch of headlines, arrayed into a variety of design styles, then expect the user to choose one of them and begin what the site hopes will be a lengthy run of clicking on stories. It’s a decision tree: Here are your options, now make a choice.

The very attractive BBC app takes a key step away from that pattern. When you launch the app, you’re not confronted just with a bunch of headlines — you’re also thrown immediately into the text of the app’s top story, without so much as a click. And once you’re reading one story, the act of flicking to another one seems closer to a default act than when you’ve just selected from a menu of options.

It’s a model that makes perfect sense from a broadcasting background; a BBC radio or TV show doesn’t wait to ask which story the listener wants first. It just dives right in. Considering how many news website users never get past that list of initial headlines, dumping the reader directly into a story might be a way to push browsers into readers. The BBC may not rely on in-app advertising to pay the bills, but for sites that do, it’s a model worth watching.

The Times’ cyberclaustrophobia

There’s been a hearty debate among a certain breed of techie over whether the iPad’s existence as a closed ecosystem of apps makes it somehow evil. I think that argument’s more than a little overblown, but using The New York Times’ Editors’ Choice app, I was surprised at my own reaction to the closed universe of Times news it presents.

The free Editors’ Choice app includes a limited sampling of Times stories; presumably, that’s because the full New York Times experience is being held back for a subscription-only app to come later. But the experience of using the app is markedly different from going to nytimes.com, because it has an endpoint. Give yourself two minutes and you can easily read every headline, with five swipes and four taps. Not too much longer and you can read all the stories you’re interested in reading.

On one hand, I’ve heard print-centric people complain that one reason they prefer newspapers over their websites is that, with a newspaper, you know when you’re finished. Turn that last page and you know your news-collection job is complete. With a news website of any size, there’s always one more place to click, always one more link to follow, always one bit of breaking news that dribbled in since you started reading. Maybe an approach like the Editors’ Choice app’s can give a jolt of emotional satisfaction to those users.

But for me, the Editors’ Choice app just gave me a weird case of cyberclaustrophobia. It’s like swimming in the river of news only to find it ends not at a lake but in a parking lot. It’s like reaching the end of the Internet.

I can’t knock the Times, or pretend my reaction is logical. They are giving away around 50 stories at any given time, nytimes.com is still a click away in the iPad’s web browser, and I’m glad to see them (and others) experimenting with paid-content strategies. But at a gut level, reaching the end of a Times digital project still feels wrong after more than a decade of training.

March 26 2010

12:30

AP’s ethnographic studies look for solutions to news and ad “fatigue”

A new study by the Associated Press has come to the conclusion that consumers are “tired, even annoyed, by the current experience of advertising,” and that, as a result, they don’t trust very much of it. But at the same time, AP found, consumers do want information relevant to their needs, as well as ways to socialize that information.

Although it tends to move cautiously and deliberately, AP has been subtly and quietly introducing tools aimed at improving relevance and socialization, and may have plans for an ad-supported aggregation business that applies what it has been learning.

I spoke about the study with Jim Kennedy, AP’s vice-president for strategic planning, about how the study’s findings will impact AP’s strategic thinking. “The future of information delivery needs to be quite different from current practices and quite different from the old packaged practices that we’ve had offline and online so far,” Kennedy said. “That’s the big deal for us now. You can’t figure all that out in a minute or even a year.”

The findings are part of a study called “A new model for communication,” released two weeks ago with little fanfare and no press coverage, even by AP’s own reporters (PDF link to report). The research was done in conjunction with Context-Based Research Group of Baltimore, and was a followup to a 2008 study called “A new model for news” (PDF link to report). Both studies used ethnographic research techniques to do a “deep dive” into consumer behavior and motivations.

Turning news into social currency

In the earlier study, AP and Context found that consumers were experiencing “news fatigue” as a result of getting an “imbalanced news diet” — heavy on updates and disconnected facts, but short on depth and breadth in the form of contextual backstories or updates and spinoffs. To address this, AP recommended that news producers take steps to “improve the discoverability of deep and relevant content,” and improve ways for consumers to derive “social currency” from the news.

“People want to have a relationship with their information sources like the whole relationships they have with their friends and colleagues,” Kennedy said, “and getting all that into your mindset as you go about building new experiences in the next couple of years — as this wonderful opportunity opens up now beyond the web into new devices — it’s just going to be really important.”

Among other things, AP used these findings to adjust and expand the elements in its news stream relating to any particular event. Traditionally, it focused first, and mainly, on distributing a newspaper story. But based on the understandings from “A new model for news,” it switched to “1-2-3 filing” — first a Tweetable headline; then a brief synopsis; then the complete story, along with deeper analysis and forward-looking stories about the day’s top news. In addition, the research accelerated AP’s move into mobile delivery with the AP Mobile News Network; prompted expansion of its offerings in entertainment, sports and financial areas; and increased its production of interactive graphics and alternative story forms.

For the 2008 study, all of this was based on insights gleaned from the anthropologists’ in-depth work with just 18 individuals, all aged 18 to 34, spread between the U.S., United Kingdom and India. And in the current study, there were 24 participants, all in the U.S., aged 18 to 55 but heavy on 18 to 34-year-olds. Kennedy says that the ethnographic methodology yielded insights that can’t be gleaned from survey results: “When it comes down to understanding how people really live their lives, these ethnographics have been really important to us.” While AP is clearly looking ahead by focusing on the “digital native” cohort, Kennedy believes also that the rest of the population “is catching up to the vanguard.”

Steps into social media

As reported in the current study, in 2009 AP also applied the earlier findings to two major efforts to “socialize” the news: its reporting of the Sotomayor confirmation hearings and of the Copenhagen conference on global warming. In the Sotomayor hearings, it used a live-blog plus Tweets, and for the climate talks, it moved the blog into Facebook. Since then, AP has maintained its presence on Facebook and activated its Twitter account, under the direction of a social networking team based at its New York headquarters and headed up by Lauren McCullough.

Significantly, AP is not using its Facebook and Twitter streams to “spool out headlines as a lot of news agencies are,” in Kennedy’s words. “People don’t want to be bombarded by that stuff in the first place, so now delivering that same material into a social environment would be a terrible mistake,” he said.

Instead, AP is using its social streams “judiciously,” both to ask questions and to point people to something they might not know, or have noticed behind the headlines they’re bombarded with.

For example, on Facebook Monday, AP mentioned the passage of health care legislation and asked “How much of an effect do you think it would have you your family?” And in a post late Sunday night: “The House has passed a historic health care bill with a 219-212 vote. Do you think it will help or hurt Democrats in upcoming elections?” Both queries have elicited a few dozen comments from the press agencies 12,000-strong “fan” base.

Over on Twitter, AP asks its 40,000 followers: ‘Watch Tiger Woods talk with ESPN in 1st interview since November crash. Did he answer your q’s? http://bit.ly/cOnxx5 -FWU” and mentions: “You asked, we answered: Solving some mysteries about the health care overhaul: http://bit.ly/b5l0zQ -EC.” The latter links to a Q & A on Facebook.

“It seems kind of funny maybe to be asking individuals for feedback and answering them but that’s the beauty of it,” Kennedy said. “That’s the breakthrough here — that we’re connecting directly with individuals and in doing so we’re actually making a much broader audience connection. So we’re getting individuals to articulate questions on behalf of the whole audience, and we’re answering those individuals on behalf of the whole audience, and it’s having positive effects. It’s certainly engaging the community.”

Removing the middleman (or middle-newspaper)

AP journalists have typically lacked a direct connection to their audience, so they are warming up to the idea of having “a direct pipeline to the consuming public to get their feedback,” according to Kennedy. While McCullough is creating training programs and guidelines, the social networking accounts will continue to be controlled at the New York office.

As for the advertising focus of the second study, Kennedy explained that “we wanted to understand how people come to advertising; how is advertising affecting them in the digital space, what are their thoughts about it in the news context, and then pair that up with what we’ve learned from the news study and be able to talk about the whole experience of news and information and advertising in the same context. That was our motivation, not that it was going to lead to a specific product development by AP.”

However, AP does have advertising associated with both its mobile presence on smartphones and with its online video network (in a model that shares revenue with members who drive traffic to it). And based on what AP has learned about consumer preferences for aggregated content, Kennedy sees the need for another ad-supported AP venture that would supply aggregated content and be operated jointly by AP and its members. “We know that the consumer wants the convenience of aggregated display…and as we think about those things we think about the revenue streams attached to that, and certainly advertising would a predominant one, so that’s why AP is concerned about the future of advertising,” he added.

To combat “ad annoyance,” the study recommends restoring trust, noting that social vetting of information is now often “filling a role historically played by trusted packagers of information, such as local newspapers, which connected readers with advertisers in a trusted environment.” This led the study team at Context to suggest a what they call Communitas, consisting of collaboration, social contract (understood rules), kinship, honesty, reciprocity and relevance. Another partner to the study, Baltimore ad agency Carton Donofrio Partners, has built these concepts into StopTheAdness, a site pledging the agency’s commitment to the new social contract, inviting conversation about it, and asking others to “take the pledge” as well.

March 25 2010

15:00

The Barclays case: Will “hot news” limit the right to aggregate news?

[Sam Bayard, one of our friends down the street at the Citizen Media Law Project, has written the most detailed analysis I've seen of the Barclays v. TheFlyOnTheWall.com case. While focused on the work of financial analysts, the case could have serious impact on the ability of websites to aggregate and curate content. It also invokes the "hot news" doctrine that some news organizations have argued limits the kinds of linking other sites can do to their content. We're reprinting Sam's piece below; it's worth a read for anyone interested in how the new news ecosystem is evolving. —Josh]

In 2003, prolific legal scholar and 7th Circuit Judge Richard Posner published a law review article entitled "Misappropriation: A Dirge," which discussed — among other things — the continued viability of "hot news" misappropriation, a theory of unfair competition that dates back to the Supreme Court’s 1918 case, International News Service v. Associated Press, 248 U.S. 215 (1918), which involved unauthorized re-publication of wire service reports. Contrary to what Posner’s title might suggest, the article didn’t outright announce the death of the hot news doctrine, but it did paint a picture of a legal doctrine on the ropes — disdained by noted jurists, unwise as a matter of policy, and limited in practical significance. For better or worse, a decision issued last Thursday shows the doctrine to be very much alive and relevant. In fact, the case raises some disturbing prospects for news aggregation and sharing of information on the Internet more generally.

In Barclays Capital Inc. v. TheFlyOnTheWall.com, 06 Civ. 4908 (S.D.N.Y. Mar. 18, 2010), Judge Denise Cote of the United States District Court for the Southern District of New York issued a permanent injunction requiring the Internet-based financial news site FlyOnTheWall.com ("Fly") to delay its reporting of the stock recommendations of research analysts from three prominent Wall Street firms, Barclays Capital Inc., Merrill Lynch, and Morgan Stanley. The injunction requires Fly to wait until 10 a.m. E.S.T. before publishing the facts associated with analyst research released before the market opens, and to postpone publication for at least two hours for research issued after the opening bell.

The injunction is based on Judge Cote’s finding, after a bench trial, that Fly engaged in hot news misappropriation, "free-riding activity that is directly competitive with the Firms’ production of time-sensitive information, thereby substantially threatening their incentive to continue in the business." Barclays, slip op., at 87. Morgan Stanley and Barclays also succeeded on copyright infringement claims relating to Fly’s unauthorized copying and distribution of excerpts from their research reports for a few weeks in 2005, but the court awarded relatively minor damages on these claims and this doesn’t impact Fly’s current business practices, which no longer involve verbatim reproductions or close paraphrases of analyst research.

Background

Like other Wall Street firms, Barclays, Merrill Lynch, and Morgan Stanley produce analyst research reports on stocks. The firms distribute these reports for a fee to their clients, usually large institutional investors. The firms often release these reports before the NYSE opens for the day, and the reports contain recommendations (buy/sell/hold) that, according to the firms, often spur investors into making trades, usually through the firm that issued the report. As a result, the release of a report often has a significant impact on the market price for the stock in question.

The firms’ paying clients gain access to the reports through several means, including the firms’ password-protected websites, licensed third-party distributors like Bloomberg and Thomson Reuters (presumably also using some sort of password protection), and email messages. In addition, the firms host private conference calls or webcasts in which their analysts discuss their research reports and recommendations with clients. Access to these calls and webcasts is restricted to those with the required passcode or login.

The firms take various precautions to ensure that the reports go only to paying clients. For example, they forbid employees from sharing the reports, their licensing agreements purport to forbid the clients from redistributing the research content, and licensed distributors like Bloomberg and Reuters contractually agree to maintain a "firewall" so that their media arms can’t obtain information from their research arms.

Inevitably, though, the research reports and the recommendations contained in them leak out, and Fly pioneered the business model of publishing this information for its own clients on a newsfeed over the Internet. The model has caught on, and, according to the court, presently "there is a crowded marketplace with small internet companies and major news organizations reporting the Firms’ Recommendations before and after the market opens." Barclays, slip op. at 35.

According to Judge Cote’s opinion, it looks like Fly’s operations have changed significantly over the last few years, largely in response to the firms’ lawsuit. Before 2005, Fly relied primarily on employees at the firms who emailed research reports to Fly after they were released to clients (this was pretty clearly a violation of the employees’ duties of loyalty and confidentiality to the firms). At that time, Fly staff would type the recommendation as a headline, sometimes accompanied by a verbatim reproduction or close paraphrase of a passage from the report explaining the basis for the recommendation. Id. at 32. Hence the copyright claims for Fly’s conduct in 2005.

As a result of the lawsuit, however, Fly apparently changed its information-gathering process. According to testimony from Ron Etergino, Fly’s president and majority owner, he "no longer feels free to look at the research reports, even if someone should send them to him," id. at 33, and he now gathers information about the firms’ reports from other sources:

According to Etergino, he checks first to see what Recommendations have been reported on Bloomberg Market News. Then he checks Dow Jones, Thomson Reuters, and Fly’s competitors such as TTN, StreetAcount.com, and Briefing.com. Next, he visits chat rooms to which he has been invited to participate by the moderator. . . . Etergino also receives "blast IMs" through the Bloomberg, Thomson Reuters, or IMTrader messaging services that may go to dozens or hundreds of individuals. Finally, Etergino exchanges IMs, emails, and more rarely telephone calls with individual traders at hedge funds, money managers, and other contacts on Wall Street.

Id. at 34. In other words, Fly acquires information about the reports through a process that looks a whole lot like good-old fashioned journalism. And it largely relies on information that is publicly available through mainstream and Internet media reports, IM blasts, and what appear to be open chat rooms. The result is a headline like this: "EQIX: Equinox initiated with a Buy at FofA/Merrill. Target $110." Id. at 27.

Hot News and Copyright Law

As noted, the main dispute in the Barclays case was not about verbatim copying, but about Fly publishing time-sensitive facts from the firms’ research reports — essentially, the buy/sell recommendations. Facts are not protected by copyright law. Feist Publ’ns, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340, 345 (1991). While the firms’ recommendations aren’t exactly facts in the same way as "hard news," the firms appeared to concede that they couldn’t stop Fly’s current reporting practices through resort to copyright law. Enter the hot news misappropriation doctrine, which is controversial precisely because it provides IP-like protection to facts despite copyright law’s bedrock policy that facts are in the public domain.

In International News Service v. Associated Press, 248 U.S. 215 (1918), the Supreme Court created the hot news misappropriation doctrine as a matter of federal common law, and some state courts, like those in New York, adopted it as part of state unfair competition law. The INS case arose after British and French censors barred INS from sending war dispatches to the United States because Hearst had offended the British and French by siding with Germany at the outset of WWI. See Posner, at 627. INS employees got around this problem by paraphrasing AP dispatches published in east coast newspapers and sending them by telegraph to the west coast for publication in Hearst newspapers. See INS, 248 U.S. at 231-32 (at issue was INS’ practice of "copying news from bulletin boards and from early editions of complainant’s newspapers and selling this, either bodily or after rewriting it, to defendant’s customers"); id. at 259-60 (Brandeis, J., dissenting) ("The means by which the International News Service obtains news gathered by the Associated Press is also clearly unobjectionable. It is taken from papers bought in the open market or from bulletins publicly posted.").

The INS Court acknowledged that AP had no copyright claim because it had failed to register and/or place notice on its news reports (no longer a requirement under U.S. copyright law), and because copyright law did not extend to the facts in the reports. But, the Court nonetheless enjoined INS from using AP’s news reports in direct competition with the news service, finding that the INS’s free riding "speaks for itself and a court of equity ought not to hesitate long in characterizing it as unfair competition in business." Id. at 240. Justices Holmes and Brandeis wrote powerful dissents, decrying the majority’s opinion as unprecedented, unnecessary, and unwise.

The main policy justification advanced by the majority, which remains the motivating principle behind hot news doctrine today, is that protecting hot-news-type information is necessary to preserve the incentives that drive economic actors to make the substantial investment required to produce a socially valuable product or service in the first place. Posner characterizes this policy impulse as protecting against the danger of "killing the goose that laid the golden eggs." Posner, at 628.

In the Barclays case, the idea is that Wall Street research reports are a social good — they help disseminate information important to the proper functioning of the securities markets that otherwise would not be produced. This may be a disputable proposition, but it’s one the court accepted. And, the theory goes, Wall Street firms like Barclays and Merrill Lynch won’t go to the expense of producing these socially valuable reports if companies like Fly can free ride off of them and undermine the money-making potential of the practice. Again, it’s disputable whether Fly’s conduct rather than other economic factors (like international economic meltdown) has hurt demand for the firms’ reports, but Judge Cote found as a matter of fact that Fly’s activities did create a substantial disincentive.

I’ll leave to the economists the question of whether or not all this is wise economic policy. But from a legal perspective, the hot news doctrine creates an obvious tension with copyright law because, as noted above, it creates a pseudo property right in facts that copyright law says are in the public domain. This raises the specter of preemption: that is, a situation where federal law displaces inconsistent state law under the Supremacy Clause. Judge Cote’s opinion in Barclays does a very thorough job on this issue and determines — rightly, in my view — that federal copyright law does not preempt hot news misappropriation, or at least a narrow version of it. This result was a foregone conclusion for Judge Cote because the Second Circuit Court of Appeals had already said as much in National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997), which is controlling precedent in the Southern District of New York.

Under NBA, the narrow version of hot news misappropriation that survives copyright preemption has the following elements:

(i) a plaintiff generates or gathers information at a cost; (ii) the information is time-sensitive; (iii) a defendant’s use of the information constitutes free riding on the plaintiff’s efforts; (iv) the defendant is in direct competition with a product or service offered by the plaintiffs; and (v) the ability of other parties to free-ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.

Barclays, slip op. at 55 (quoting NBA, 105 F.3d at 845). Posner says that the "meat" of the test is in element (v), with (i) through (iv) describing a situation where (v) is likely to be satisfied. Posner, at 632. Therefore, "[t]he criterion appears to mean that states can protect fact gathering without running afoul of the preemption provision in the federal copyright statute only when unauthorized copying of the facts is likely to deter the plaintiff or others similarly situated from gathering and disseminating the facts that the defendant has copied." Id. The test is "alarmingly fuzzy once the extreme position of creating a legal right against all free riding is rejected, as it must be." Id. at 638.

In other words, hot news doctrine presents an inherently subjective and necessarily fact-specific standard, and one would expect courts to be cautious in finding it met, if for no other reason than to avoid the potential conflict with copyright law and to promote the public’s access to information. In Barclays, the firms convinced Judge Cote at trial that each element was satisfied, showing that, while it may take a unique set of facts, it’s not an impossible task.

What About the First Amendment?

Notably lacking from Judge Cote’s very thorough opinion is any discussion of how hot news misappropriation interacts with the First Amendment. This could be because Fly didn’t argue the point, at least not directly. While this post suggests that Fly’s lawyers "played the free speech card," it is hard for me to believe that Judge Cote would fail to address such an important argument if it were raised directly in the briefs. We have a student looking through the documents on PACER, which are pretty extensive, but so far we haven’t turned up any direct invocation of the First Amendment, except for an affirmative defense in the answer. As we’ll see below, though, Fly undoubtedly raised factual arguments that bear on the question.

The First Amendment issue is an important one because the Supreme Court didn’t address it in INS. Justice Brandeis’s dissent gives us a First Amendment tingle in his famous statement, "[t]he general rule of law is, that the noblest of human productions — knowledge, truths ascertained, conceptions, and ideas — become, after voluntary communication to others, free as the air to common use," 248 U.S. at 250 (Brandeis, J., dissenting), but even he didn’t seem to appreciate the constitutional implications of the case. It’s also an important question because First Amendment doctrine has developed considerably since 1918, and free speech concerns of which the Justices had only a vague inkling now have become an accepted part of the constitutional landscape.

The First Amendment issue raised by the case is one I’ve addressed before. A long line of Supreme Court cases hold that the First Amendment protects truthful speech on matters of public concern. See, e.g., Bartnicki v. Vopper, 532 U.S. 514, 527-28, 533-35 (2001) (First Amendment barred imposition of civil damages under wiretapping law for publishing contents of conversation relevant to matter of public concern); Florida Star v. B.J.F., 491 U.S. 524, 534 (1989) (First Amendment barred imposition of civil damages on newspaper for publishing rape victim’s name); Smith v. Daily Mail Publ’g Co., 443 U.S. 97, 103-06 (1979) (First Amendment barred prosecution under state statute for publishing names of juvenile offenders without permission of court); Landmark Communications, Inc. v. Virginia, 435 U.S. 829, 841-42 (1978) (First Amendment barred criminal prosecution for disclosing information from a confidential judicial discipline proceeding). Therefore, “if a newspaper lawfully obtains truthful information about a matter of public significance then state officials may not constitutionally punish publication of the information, absent a need to further a state interest of the highest order.” Smith, 443 U.S. at 103; accord Bartnicki, 532 U.S. at 527-28.

In Bartnicki v. Vopper, members of a teachers union sued a radio announcer under state and federal wiretapping laws after he played an unlawfully recorded telephone conversation on the air. The radio show host had received the recording from a third party who himself had received the tape in the mail from an anonymous source. The Supreme Court held that the First Amendment prohibited the recovery of damages against the radio show host for publishing the tape, explaining that “a stranger’s illegal conduct does not suffice to remove the First Amendment shield from speech about a matter of public concern.” Id. at 535. The constitutional principle in Bartnicki and other Supreme Court cases is not limited to traditional forms of media like newspapers and radio broadcasters. See Mary T. Jean v. Massachusetts State Police, 492 F.3d 24 (1st Cir. 2007) (First Amendment barred criminal prosecution for posting illegally recorded video online when recording made by third party, even if knowing receipt of the recording constituted a crime under Massachusetts law).

In Barclays, Judge Cote considered it unimportant that Fly obtained the information it published from other news services that were publishing the firms’ recommendations on the Internet in advance of Fly’s own publication. The court said that "the conduct of third parties is simply of no moment in finding Fly liable for hot-news misappropriation," and "it is not a defense to misappropriation that a Recommendation is already in the public domain by the time Fly reports it." Barclay, slip op. at 61. This may be a faithful application of the INS case itself — recall that INS involved taking facts from publicly available bulletin boards and published newspaper accounts — but INS never considered the First Amendment, so it can’t resolve the issue.

Under Bartnicki and the cases mentioned above, if Fly obtained the information in question through lawful means, then the First Amendment protects its right to publish that information. There is nothing inherently unlawful about Fly reading about a stock recommendation on a newsfeed provided by another news service or participating in a public chat room where Wall Street "rumors" are discussed (accessing a passcode-protected conference call would be another matter). The court says that Fly has engaged in "illegal conduct" by publishing the information it did, Barclays, slip op. at 61, but this label begs the question — that is, whether the state may constitutionally penalize publication of truthful information relating to a matter of public concern that was not obtained in violation of any other applicable laws.

To be sure, the person who originally leaks a firm research report to a news service or chat room participant may violate a legal duty owed to one of the firms, but "a stranger’s illegal conduct" is not sufficient to remove First Amendment protection under Bartnicki. The question is closer for Fly’s pre-lawsuit-era publication of reports received directly from firm employees who violated a duty of loyalty and confidentiality. It might be independently "unlawful" in the constitutional sense to knowingly induce a breach of these duties, but even in the trade secrets sphere this question has not been resolved with any clarity. Furthermore, I’m not aware on anything that would make it "unlawful" for Fly to communicate by email or telephone with firm clients who are willing to convey the substance of the recommendations, though this probably violates the client’s license agreement. Regrettably, the court did not differentiate between Fly’s different information-gathering tactics, and it enjoined publication of information obtained through at least some practices that clearly aren’t "unlawful" in any meaningful sense.

The court might well respond to all this by arguing that the firms’ reports are not facts related to a matter of public concern like ordinary news, but rather "subjective judgments based on complex and imperfect evidence." Id. at 78. There may well be a constitutionally significant distinction between reporting the subjective recommendations generated by these Wall Street firms and objective, external facts that are discovered "out there" in the world. On the other hand, these subjective judgments have objective, real-world consequences, and the announcement of a recommendation is itself a newsworthy event because it may cause a change in a stock’s price. It strikes me as difficult, and potentially hazardous, to try to distinguish between reporting the "subjective" recommendations versus reporting the "objective" fact that they were made, especially when the publication in question looks like this: "EQIX: Equinox initiated with a Buy at FofA/Merrill. Target $110."

The court may have ameliorated some of the First Amendment concerns by clarifying that the scope of its injunction, like the scope of hot news misappropriation, is narrow:

[T]o the extent Fly alters its business and begins to engage in actual analysis of market movements, and refers on occasion after the market opens in New York to one of the Firms’ Recommendations in the context of independent analytical reporting on a significant market movement that has already occurred that same day, such conduct will not run afoul of the injunction.

Id. at 87-88. But, this description of speech activity (the court doesn’t frame it in terms of speech) that won’t be enjoined displays an obvious preference for original/sweat of the brow/"analytical" content-creation over the free transmission of facts and information, which is a lot of what happens on the Internet. This is a preference that hot news doctrine’s anti-free-riding purpose surely calls for, but I don’t believe the First Amendment shares this ideal. (Copyright sure doesn’t. See Feist, 499 U.S. at 359-60.) As I’ll touch on more below, the court’s logic here also has foreboding connotations for news aggregators and others who supposedly "free ride" by transmitting information to others over the Internet without engaging in "independent analytical reporting."

News Aggregators, Bloggers, and the Like

The $75,000 question is what the Barclays case means for other online news aggregators, as well as social media more generally. Will the major newspapers be able to use this case to revive a robust hot news misappropriation doctrine that will kill the news aggregators and lock down facts on the Internet? I have no doubt that AP lawyers are smiling to themselves this week, but I don’t think this decision spells doom for the Internet as we know it.

The bad news for aggregators, bloggers, and those who like to share news is that this is a detailed, thoroughly reasoned (with the First Amendment exception noted above) decision from a respected judge in one of the most prestigious federal district courts in the nation. And, the decision is the product of a full-blown trial, giving it a concreteness and specificity that other, Internet-related hot news decisions, like Associated Press v. All Headline News, 608 F. Supp. 2d 454, 458-61 (S.D.N.Y. 2009), lack. This will give the decision credibility and make it useful in the hands of future judges looking for direction.

Worse, there are moments when reading the opinion where one feels like Judge Cote might as well be talking about news aggregators or bloggers free riding on "original reporting" instead of equity research. The court’s concept of free riding (element iii of the NBA test) certainly sounds like it would apply to news aggregation or acts of curation more generally:

To the extent that Fly adds value through its collection and aggregation of information, however, the value reflected in that act of aggregation does not controvert the fact that Fly expends no effort to produce the Recommendations and does not contribute to the underlying research and analysis process.

Barclays, slip op. at 60. It’s not a huge logical jump to say that all news aggregators are "free-riding" because they "expend no effort" to produce original reporting, and therefore "do not contribute to the underlying [journalistic] process." But this logic vastly understates the social benefit contributed by news aggregators, as well as bloggers who curate and comment on the news without expending effort to create it, and it automatically tilts the scales in favor of content producers at the expense of informational services and commentary, without any real justification.

Also potentially troubling is the court’s willingness to attribute the firms’ disincentive to produce equity research to Fly’s online activities as opposed to global financial meltdown, a willingness we can only hope won’t be reproduced when it comes to evaluating the alleged contribution of news aggregators and social media to newspapers’ current financial plight. Courts need to take a very close look at what is causing newspapers to suffer hard times; increased competition and loss of monopoly advertising rents explain a lot more than headlines and ledes with a link back, but that’s a topic for another day.

In any event, on the all-important fifth element (killing the golden goose), the Barclays case is easily distinguishable because the firms made a good (if not bullet-proof) case that production of high-quality equity research implicates a special need for time-sensitive exclusivity so that firm clients can feel they uniquely benefit from the recommendations and so that these clients can place trades with the firms based on them. Most regular news doesn’t share this rivalrous character, and it may be extremely difficult for newspapers to show that news aggregation or blog commentary ultimately hurts their bottom lines.

As for blogs, Twitter, and other types of social media, Barclays is further distinguishable because of the direct and obvious competition between Fly and the firms, which will be lacking in all but the most unusual cases. When it comes to Google News, which may be a real competitor, the ability of news organizations to opt out using robots.txt makes it extremely difficult to argue that Google is free riding, much less that it is destroying all incentive to engage in original reporting.

Finally, I suspect that the move from the financial sector to the general news sector will brighten and clarify the First Amendment issue discussed above, making it harder for courts to ignore that hot news doctrine plainly contemplates restricting the publication of truthful information on matters of public concern, regardless of how that information is required.

March 22 2010

14:00
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