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December 16 2010

15:00

The Newsonomics of all-access — and Apple

[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.]

Don’t wait for the white smoke to waft over America’s tech consumer Vatican, the Cupertino headquarters of Apple. The electronic elves are too busy shipping Christmas iPads, and figuring stock-option payouts based on 2011-12 sales projections. Those projections, newly minted by eMarketer, call for another 50 million iPads to be sold in the U.S. alone over the next two years, atop the eight million they think will sell by year’s end. (Other manufacturers would only sell another 20 million tablets in the U.S. over the same period.)

The white smoke? That would be the signal to news and magazine publishers of how Apple is going to allow access to the tablet kingdom. We’ve seen lots of debate, quasi-information, and mixed signals out of Apple about how digital subscriptions will work, including who will keep which revenue and who will partake of user data, the new digital gold. Apple execs talk regularly to publishers, under threat of severe NDA. Those discussions and the back and forth of dealing with Apple on how apps must be configured to get approved are described as an exercise in Kremlinology — trying to divine how things are really working and will work, without actually being told.

After talking with numerous people in and around the tablet/apps industry, I think we can divine the 2011 policy and clear away the smoke and mirrors. Simply put, this is what the de facto Apple policy on digital news subscriptions appears to be:

  • Publishers can charge their digital readers for tablet — and smartphone — subscriptions, and keep the generated revenue stream.
  • Publishers can offer “free” apps in the Apple store — iTunes for now, iNewsstand maybe not too far away.
  • Publishers must — and here’s the rub — restrict browser access is some form. In other words, you can’t simply charge for digital content on the tablet and the smartphone and let it run freely wild through a browser. The pay models may not have to be the same, tablet to smartphone to browser (that’s unclear), but publishers can’t two use two opposite approaches and use the iTunes stores an initial access point to gain customers and keep all the resulting revenue.
  • Publishers must do their own authentication of users and their own e-commerce outside the Apple interface, to make the program work.

Importantly, numerous news players are acting on the belief that the above will be the policy, given their conversations with Apple. If that seemingly de facto policy becomes formal — with the announcement of the iPad 2? — it will have far-reaching implications. In fact, it gives a rocket boost to the “paid content” (meaning new streams of digital reader revenue) revolution now in front of us. Why? It marks the convergence — maybe the ratification — of three big things happening as we enter 2011. Put them together, and you have the Newsonomics of all-access.

Number one: The tablet. It’s a reader’s product, and therefore a news publishers’ dream. Longer session times. Longer reading forms embraced. A greater willingness among consumers to pay. Print-like advertising experiences — and rates. All of those results, reported privately by the big news companies that are first to market with tablet products and also in a user survey just released by the University of Missouri’s Reynolds Journalism Institute here, are preliminary. (More on the recent Roger Fidler-led Digital Publishing Alliance conference, at which I spoke, here.)

As the iPad moves from Apple lovers to mass market, those numbers should moderate. Yet the very nature of the tablet is telling us that digital news reading isn’t what we thought it was — only a Kibbles ‘n Bits, check-in-on-the-briefs-and-scoot reading experience. It looks like a lot of what we thought were huge changes in news reading behavior may have had as much to do with what the nature of a computer (desktop, laptop) reading experience, and not with a change in the nature of humans themselves. We’ll see, but meanwhile, it looks like a good fifth of the country will have a tablet by 2014.

Number two: That paid content push. 2010 has been prologue, as The New York Times took the year to lay extensive plans, connecting pivotal technology, and Journalism Online traversed the country (and lately other continents) preaching from the pulpit of the Holy Church of Freemium and the practice of metering. Don’t erect a paywall, like News Corp. did in London with the Times; start the meter, track it, and charge accordingly. That’s the Financial Times model, and the one The New York Times and Journalism Online cite as a bible, along with learnings from The Wall Street Journal’s freemium experience, a pivotal education for JO principal Gordon Crovitz, who served as WSJ publisher. The digital reader revenue payment was born out of abject frustration, as publishers concluded that digital advertising itself would never support the large news enterprises they wanted to maintain. They were tired of unicycling into the future; digital reader revenue restores the “circulation” leg of the business, providing (in the abstract) two strong legs to stand out going forward.

Number three: The arrival — finally, o Lord — of the news-anywhere, multi-platform, multi-device world that we’ve been envisioning for more than a decade. For more than a decade, it was a print/online world, in the minds of publishers. Now it’s a print/online (desktop, laptop), smartphone, tablet — and soon Apple TV for news — world. That changes everything in how product is thought out, created, presented and sold.

Put these three phenomena together — a multi-platform world in which the tablet becomes a prime part of daily news reading, reading that will be partly charged for — and you have the shiny new business model of 2011: all-access. I’ve written about all-access and exhorted those publishers with high-quality, differentiated news products to embrace it (see The Newsonomics of the fading 80/20 rule, on Time Warner moves). Now, the forces of the times seem to have conspired to bring it forward and make it dominant.

No, there has been no announcement of a warm all-access embrace, but consider:

  • It’s the model used by the paid-content champ FT (“The Newsonomics of FT as an Internet Retailer“) and The Economist.
  • It’s the model just embraced, without fanfare, by The Wall Street Journal, which had throughout the year priced each new digital platform separately. In its recent announcement of an Android tablet product, it said: “A full digital subscription is available for $3.99 per week, which provides access to WSJ Tablet Edition for Android and iPad, WSJ.com, and WSJ Mobile Reader for BlackBerry and iPhone. Current Journal subscribers receive full access to the WSJ Tablet Edition for free for a limited time.”
  • The New York Times model will follow the same across-platform approach when it launches metered pricing early next year.
  • And, it’s not just the big guys. Take Morris’ Augusta Chronicle, a new Journalism Online customer, which just went metered– and all-access, including its upcoming tablet product in the subscription bundle. Expect to see other Journalism Online customers — a few dozen to start — follow this model next year, along with a number of other dailies that tell me they are planning a similar approach.

The big idea? Cement the relationship with those readers who really want your news, delivered by your brand, global, national or local. Say simply: We’ll make it easy for you to read the news however, wherever, on whatever you want and offer it at a single bundled price. Expect three basic offers: Everything (Print + all digital forms), Print Only and the Digital Bundle (probably including the odd cousin of the digital group, the e-edition), plus some by-the-device (iPhone, iPad, Blackberry, etc.) pricing. It’s certainly not a news-only idea, as Netflix, HBO, and Comcast build out the same model.

It’s a tablet-fed, Apple-polished tablet do-over, and for many news publishers, really a do-or-die effort to reassert brand and product value, reassembling a new business model and building what will sooner-than-later be a digital-mainly business. Will they succeed? Some — those with substantial product offerings that are not commoditized — who move the meter dials smartly, picking off the top five percent or so of their mostly digital visitors for payment will. In a twist on the now-legendary Jarvisism: Charge the best. Market ads to the rest. (And don’t scare them off with a paywall.) Other legacy publishers have cut too much to make the new math work, and still other newer publishers will find all-access works for them as well.

There are many more twists, turns, issues — many of them requiring technology lacking among many publishers — and obstacles yet to work through, but we’ll get to those into the new year. Apple’s own role certainly won’t be to remove itself from the new equation, but to find numerous ways — iAds anyone? — to harvest value.

For now, consider all-access the model to be tested in 2011.

October 25 2010

15:30

National Journal relaunch tests free/pay content strategy

When your site goes hybrid, with a combination of paid and free content, the question becomes: What goes in front of the paywall?

That question will be front and center at National Journal, a Washington, D.C. publication until today published behind a paywall (over $1,000 per year) for political insiders, like Hill staffers, lobbyists, and so on. It relaunched today with a new, dual online strategy, aiming to attract a second, more general-interest audience. National Journal will still charge subscribers for the in-depth, nitty-gritty Washington coverage they’re known for, but will post their national and breaking news — about a quarter of its stories — for free. Until today, only a handful of National Journal stories were available without a subscription. With many Washington publications going niche, it’ll be interesting to watch whether the site can make a go of it in the opposite direction.

“If our goal is building subscriber base, we’ll have to measure that with the natural, ego-driven interest to put everything on a free site,” David Beard, National Journal Group’s online editor and deputy editor-in-chief told me.

Beard expects to post stories which appeal to a broad, national audience, particularly breaking news, on the free version of the site. The plan is very much in line with advice Alan Murray, executive editor of WSJ.com, gave Nieman Lab alum Zach Seward last year on monetizing content. “The key is not to take your most popular stuff and put it behind a pay wall,” Murray said. “The broad, popular stuff is the stuff you want out in the free world because that drives traffic, that builds up your traffic, and you can, of course, serve advertising to that audience.”

Beard gave me this hypothetical to describe his plan: “If Christine O’Donell won [the Senate race in Delware], or showed some increase in the polls, that would go [up for free]. If she become chair of an agriculture subcommittee, that would go to the subscribers. That would go to the people who really care about the nuts and bolts of government operations.”

Beard also said that National Journal has plans for about 40 email newsletter products. About ten of them will be free. The morning newsletter world is already crowded in Washington, particular by their chief competition, Politico, which puts out Mike Allen’s morning read, as well as a number of free policy-oriented daily emails, like Morning Money and Morning Tech. “The idea is that some of that might be cheeky aggregation,” Beard told me. “I think the goal is that people paying for this [newsletter], it’s x percent more important and better.”

August 09 2010

14:30

GameChanger sees a business model in baseball scores

One of the truisms of the paid-content conversation is that sports information — game scores, analysis, team-specific details — is one of the few types of content that, online as everywhere else, people will happily pay for. And sports sites (ESPN, Scout, Rivals) are putting that truism to work. Which is to say, financial gain.

There’s another platform that wants to be part of that league. GameChanger is trying to monetize not just sports-related content, but sports scoring in general. Via, in particular, a mobile app that coaches and other scorekeepers can use to tabulate the scores of their games. And which they can also use — here’s where we get interested — to automatically distribute those scores to local media.

If you’ve been waiting for the day that the Nieman Journalism Lab discusses the future of news as it relates to Little League…here it is.

GameChanger was designed to solve two problems, the company’s CEO, Ted Sullivan, told me: first, the “archaic” nature of baseball and softball scorekeeping; and second, the challenge fans face in following games remotely, in real time. (Sullivan played baseball in college, and went on to play in the minor leagues — before changing course and getting a degree from the Harvard Business School.) The first problem is an old one, and other apps are attacking it too. To solve the second problem, the platform facilitates targeted — highly targeted — crowdsourcing: via the GameChanger app, baseball and softball scorekeepers use their iPhones or iPads to file the detailed scores of their games, in real time. Those data then get beamed to GameChanger’s central servers, which tally up box scores.

While that means that parents and other interested parties will be able to follow games in real time, online and via text updates, it also means that local news sites have an easy, real-time-accurate piece of sports content that they can embed, via GameChanger’s widget, on their sites. (It works similarly to the Outside.in model of hyperlocal content-sharing.) GameChanger makes money — or, hopes to — though revenue-sharing arrangements with its media partners.

The idea, Sullivan told me, is “to monetize the output side, not the input side.”

GameChanger also markets itself to individuals using a classic freemium model: for free, a fan or follower of a particular team can set up an email alert containing simply the score of the game. If they want SMS updates, though — or updates (hello, parents) having to do with a particular player — they have to pay. The model leverages the classic benefits of sports content: Little League scores, being hyperlocal, are exclusive; they’re also time-sensitive. And there’s also the ostensibly large and committed consumer base: the millions of kids who play Little League every year, their friends, and, of course, their parents. It’s a bit of the old sell-the-Thin-Mints-to-Mom strategy, applied to niche news content.

Sullivan is all too aware of the myriad challenges that come with monetizing information — even, yes, niche information — online. But “we know people will pay for this content,” he says. “I think it’s a rare type of news content that people will pay for.”

Image by Ed Yourdon used under a Creative Commons license.

March 30 2010

09:07

March 09 2010

20:18
15:00

How Ars Technica’s “experiment” with ad-blocking readers built on its community’s affection for the site

Even on the web, sometimes actions really do speak louder than words.

The technology site Ars Technica has a tech-savvy group of readers, of which about 40 percent have installed ad-blocking software in their web browsers. That’s a plugin that allows you to avoid seeing most ads on a site. The financial consequence for Ars is “devastating”, editor-in-chief Ken Fisher explained in a post. Ars sells ads based on impressions, not clickthroughs — which means it takes a big financial hit because of browsing habits of its users.

On Friday evening, Ars tried an experiment: Readers running ad blockers got a blank page instead of the story they intended to read. The move was a technical success, but caused an uproar (and confusion) among users. In hindsight, Fisher told me, the site’s experiment in retribution was the “wrong approach,” causing confusion among many readers.

“What we weren’t expecting is so many people were blocking ads and didn’t even know it,” he said. “It left a lot of people very confused. They started digging around, wasting an hour trying to fix their broken computer.” There was nothing on the site to explain to readers why content had been blocked.

But the experiment still generated positive returns for the site’s bottom line. Fisher wrote a lengthy post on Ars (similar to many the site has run before) about its goals and why ad blocking was a big problem for the site:

My argument is simple: blocking ads can be devastating to the sites you love. I am not making an argument that blocking ads is a form of stealing, or is immoral, or unethical, or makes someone the son of the devil. It can result in people losing their jobs, it can result in less content on any given site, and it definitely can affect the quality of content. It can also put sites into a real advertising death spin.

And since Saturday, Fisher has received about 1,200 emails from users saying they had whitelisted the site — meaning they had told their ad-blocking software it was okay to show Ars’ ads. Based on Ars data from IP addresses, 25,000 users whitelisted the site in a 24-hour period — evidence that the goodwill the site has built up with its audience could be converted into user acts of generosity.

Another 200 users signed up for Ars’ premium accounts, which run $50 a year or $30 for six months. A subscription gets users access to an ad-free version of the site, full-text RSS feeds, printable PDFs of posts, and closed community sections of the site. (But Fisher notes that many subscribers just feel a sense of obligation, not a desire for premium features. “We get many people who subscribe just because they love us. They just want us to survive.”)

I asked if the $50-per-year subscription makes up, financially, for the loss of ad revenue on the ad-free version of the site. It depends on the user, Fisher said. For anyone who visits the site more than its user-average 89 visits per month, probably not. But he doesn’t think of the equation in those terms. Fisher views the subscription fees as covering the cost of specialized content that only the most dedicated user would want, like the online community sections. Ads alone wouldn’t generate the revenue to cover that. An advertising strategy that assumes a broad audience can cover the more general-interest content that audience wants. Having a multi-pronged revenue approach allows the site to provide different kinds of content for different audiences.

Fisher said he’s also had good experiences using a sponsorship model to support specialized content, including in-depth coverage that attracts a highly engaged, technical audience, but not huge pageviews. For instance, IBM sponsored a recent series on the future of collaboration. The writers didn’t know IBM was the backer, and IBM was told only the broad topic for the stories. Topic-specific sponsorship “delivers more value than display advertising, in my opinion,” he said. “It’s much more targeted. It takes the best of contextual advertising.”

But Ars’ bottom line still relies heavily on traditional display advertising. Its particular audience likely has a worse ad-block problem than other sites. But the benefits Fisher found from communicating directly with readers — making the ask along with a gentle but clear nudge — can apply to any site.

“It affects so many sites,” he told me. “And just getting the message out there makes a difference.”

February 22 2010

15:00

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

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

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

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

From covering acquisitions to being one

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

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

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

Trying a freemium model

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

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

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

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

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

February 02 2010

15:00

Media’s next top business model: survey suggests hybrids

It’s not just newspapers struggling to find their way in the digital era. Many content companies — broadcasting, film, music, publishing, and gaming — are grappling with the same business model uncertainty.

In a recent survey (pdf), the consulting firm Accenture asked 102 content-industry leaders to pick the biggest hurdle they face. Overwhelmingly, executives pointed to the hunt for a viable business model. And since they’ve asked the same question (sort of — see below) for three years, we can look at how execs’ thoughts have shifted over time.

First, the data shows a clear decline in what Accenture calls the “pay-for-play” concept — something like what we in the news context would term micropayments or “the iTunes model.” In 2007, 23 percent of respondents were banking on micropayments as the next top business model. In 2008, that number dropped to 11 percent. In 2009, it fell to just 8 percent.

But beyond that, the changing nature of the options Accenture gave respondents muddies the waters a bit. In 2009, the survey included two new options: “freemium” (some content remains free, users can pay for extra content) and “hybrid” (a combination of different models, like ads plus a subscription). One could easily argue that freemium is a type of hybrid, and for the chart above, Accenture chose to combine the hybrid responses with advertising ones. (The 60 percent you see above is actually 39 percent advertising, 21 percent hybrid.)

I spoke with David Wolf from Accenture’s media division about what we should take away from the findings. He said that the clear takeaway here is that “hybrid” models are the next big thing. “The only thing we can discern as we get through our research and look at it is there is no business model clearly emerging as ‘the one,’” Wolf explained.

Going hand-in-hand with a hybrid business model is an aggressive transition to a multi-platform delivery strategy. “What we conclude [from the survey] is that the platforms and the growth need to be viewed as integrated,” Wolf explained. “How do we create offerings that span the screens?” About 65 percent of respondents said new platforms or method of delivery is where they’ll find business growth next year, compared to 25 percent by creating new content, and 10 percent by expanding to new geographic areas. Those are all roughly similar to previous years.

Another trend to watch is the media industry moving toward a more personalized use of data. Rather than thinking about audience in broad terms, Wolf predicts media companies will get better at tailoring to individuals the way a hotel chain attracts customers with loyalty programs. Where companies once went after a demographic group like tweens, Wolf mentioned, “we’re changing that mindset” to something much more individualized.

January 23 2010

18:19
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