Steve Outing

Steve Outing

The leaked “innovation” report from The New York Times that made the rounds in May recommends that the company take more risks, move more quickly and consider radical steps to reinvent itself. Steve Outing wonders what would happen if the Times abandoned daily print editions, and he’s built an elaborate “what-if?” model to test the idea.

Outing’s model doesn’t answer the question, but it does provide a new tool with which to evaluate options. “Most news companies aren’t very good at grokking what’s coming at them or what likely futures could be ahead for them,” wrote Outing in an e-mail to us. “What I did was demonstrate one tool of strategic foresight that news companies should consider using.”

Outing would like to get more consulting gigs working for news organizations that need reinvention, and we hope he gets some. A self-described media futurist, he’s been challenging assumptions about the slow-moving newspaper industry for the past two decades. Read more here. We were fans of a blog called Reinventing Classifieds that he launched back in 2008 that recommended radical new ways to revive the highly profitable newspaper classified advertising business. To our knowledge, no on took him up on his ideas.

For this exercise, Outing applies a “Futures Wheel” to envision a Times that only publishes on Sunday. The exercise is meant to envision every impact on the paper’s business, including staffing costs, production savings, new sources  of revenue and circulation revenue. Outing has modeled his scenario out to two levels of detail. To fully understand the implications you need to go to  third level, and that involves surveys and pilots. Outing will do you that for any newspaper that wants to hire him.

Asked what value news organizations can gain from this exercise, he wrote, “Technological change is accelerating at a faster rate; indeed, exponentially, when it comes to computing power. This means that anyone’s business model can be disrupted, if not obliterated, faster than ever before. So now is a critical time to start seriously using strategic-foresight tools and techniques (futures wheels being just one) to better prepare for likely and plausible challenges and opportunities.”

He’s right. How many media executives have the vision to take him on the offer? Click here to see an enlarged view of the image.


 

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With BuzzFeed and Upworthy reporting eye-popping traffic growth and planning to hire teams of reporters, many people are wondering whether sharing is the new currency of media success.

The idea is that if you give readers enough top-ten lists and animated GIFs they’ll do all your marketing for you. You don’t even have to worry about search engine optimization because nothing ever went viral on search. This philosophy has even given birth to a new style of headline writing that’s intended to stimulate sharing (“Why’s This Kid Throwing Coins? The Reason May Or May Not Blow Your Mind, But Something Does Blow Up,” reads one recent Upworthy example).

Henry Blodget

But maybe sharing isn’t all it’s cracked up to be. In a recent case study on USA Today, Michael Wolff looks at Business Insider, the hyper-caffeinated new-media brainchild of exiled Wall Street bad boy Henry Blodget. Business Insider is notorious for its fixation on being first and for driving its reporters to exhaustion. It’s a content mill – albeit with higher quality than many of its peers – that churns out large volumes of information in the quest to earn shares on Facebook and Twitter.

And it’s generating traffic: 25.4 million unique visitors in January, says Wolff. The problem is that Business Insider has low reader loyalty:

Only a small percentage of Business Insider’s traffic actually seeks it out and regards it as a worthy destination and a source with particular brand authority. Most other readers land on a Business Insider article because of search-engine results, or because of an engaging — tabloid-style — headline in a Facebook feed and other social-media promotions, which generate 30% of Business Insider’s traffic.

Wolff asserts that this drive-by traffic has little value because readers don’t identify with the brand. Worse is that the drive for big numbers becomes a race to the bottom.  As advertising rates continue to drift lower, publishers must seek ever-higher traffic volumes to stay in the same place. This means resorting to gimmicks like contests, cheesecake photos and celebrity gossip. That attracts poor-quality traffic which has low brand affinity and little value to advertisers. It’s a vicious cycle.

Digital Dimes

Blodget disagrees. In a response on Business Insider he says that the very problems Wolff cites are actually opportunities. New media companies don’t have legacy businesses to protect and so are free to disrupt mainstream competitors and steal revenue, he says. “We are better at serving digital readers than many traditional news organizations, so we can thrive on these ‘digital dimes,’” writes Blodget. His post displays a photo of what are presumably a group of happy young reporters in the company’s New York offices (Wolff says Business insider has hired 70 full-time journalists at a cost of more than $15 million a year. Do the math).

We think Wolff is on to something. Take a look at the chart below from the Pew Research Journalism Project. It depicts traffic to the 26 most popular U.S. news sites over a three-month period. It shows conclusively that visitors who reach a site directly (via a bookmark or typing the address into a browser) stay much longer, read much more and visit more often.

This isn’t surprising when you think about it. Typing “nyt.com” into a browser is an act of brand affinity, whereas headline-clickers on Facebook don’t really care where the headline comes from. The BuzzFeeds and Upworthys of the world must compete headline by headline. Is that a problem?

Attracting readers with gimmicks is nothing new. One of the myths of the news business is that people read newspapers primarily for the news. The reality is that they read for all kinds of reasons. Any veteran of the pre-digital publishing days will tell you that an embarrassingly large number of traditional newspaper readers bought copies for the coupons, Ann Landers, comics, the Jumble and the daily horoscope.

But at least in those days readers knew what brand to buy. Today’s audience has more affinity to the content than to the publisher, and aggregators like Flipboard are constantly looking for ways to supersede publishers’ brands with their own. Brand still matters. A click is not the same as a reader.

 

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Marc Andreessen, internet pioneer and founder ...

Marc Andreessen, internet pioneer and founder of Netscape at Web 2.0 Expo in San Francisco, CA (Photo credit: TechShowNetwork)

Pretty much anything Marc Andreessen writes is worth reading, and his latest treatise on the future of the news business should be required reading for any publishing executive.

The man who arguably started all the trouble with the invention of the Mosaic browser in 1993 isn’t just an optimist on the future of the news business; he’s positively bullish about it. But the future he sees is much more like the newspaper market of the turn of the 20th century than the one that dominated the last 30 years of the 21st.

His 3,000-word prescription boils down to a few basic points, not all of which are new:

Run the news business like a business. Take advantage of the many new revenue sources that are emerging, in particular native advertising and subscriptions.

Take advantage of media democratization. Sure, anybody can be a publisher today, but that’s an opportunity as well as a problem. Universal media access creates noise, which presents opportunities for aggregators to simplify the cacophony. It also creates the possibility of much larger audiences than we have known the past. “The big opportunity for the news industry in the next five to 10 years is to increase its market size 100x AND drop prices 10X,” Andreessen writes. In other words, throw out the business model that relied upon scarcity and replace it with one that values abundance.

Stop playing defense. The good old days of news monopolies and oligopolies are gone forever, so get over it and focus on the future. The few organizations that have successfully crossed the chasm – he mentions The Guardian and The New York Times – began thinking digital-first years ago. What are the rest of you waiting for?

Find new revenue models. Bitcoin is going to make micro-payments feasible, so study up and start experimenting. And tear down that Chinese wall. It defeats too many new business ideas. Outlets like the Atlantic and the Times are finding ways to make blended advertising and editorial work and actually growing their influence in the process.

Andreessen provides numerous examples of new and traditional media enterprises that are succeeding and growing. They include several that we’ve talked about here previously as well as a few that we haven’t, including Anandtech, The Verge and Vice.

On the subject of investigative reporting, Andreessen is almost sanguine. “The total global expense budget of all investigative journalism is tiny —  in the neighborhood of tens of millions of dollars annually. That’s the good news; small money problems are easier to solve than big money nightmares.” He believes a combination of crowd funding and philanthropy can more than cover the costs of the necessary Baghdad bureaus and investigative teams.”

The future of news will see fewer large media empires and many more small, focused enterprises. These organizations will take advantage of improved economies that enable them to reach vastly larger audiences at much lower cost than in the past. The mainstream media survivors will be those that move the quickest to tear down old infrastructure and seize every opportunity to reinvent themselves.

Can Technology Save the News?

Pierre Omidyar

eBay founder and news investor Pierre Omidyar

A considerably less optimistic but more diverse perspective is contained in an article from the excellent Knowledge@Wharton service. Technology Can Save the News — If Readers Change How They Consume It consolidates the opinions of several Wharton faculty members about how mainstream media can be saved. They agree that standalone, for-profit news organizations are unsustainable but that that independent journalism is too valuable to sacrifice.

The professors see promise in the interest of billionaires like eBay founder Pierre Omidyar and Amazon.com founder Jeff Bezos in owning media companies. Omidyar recently committed $250 million to a startup media venture run by journalist Glenn Greenwald and Bezos ponied up the same amount to buy the Washington Post last summer.

No one believes these investors are buying traditional media properties for their growth potential. Rather, they think media companies are undervalued and they may see synergies with their other businesses. For example, targeted advertising delivered by Amazon’s impressive recommendation engine could yield immediate sales for advertisers and drive up Amazon revenues.

Many rich people also have an interest in advancing political agendas out of either self-interest or ideology, and media companies provide an ideal bully pulpit. The risk is that these media come to reflect the politics of their owners too closely and contribute to the “echo chamber” problem in which audiences choose to listen only to the outlets that reflect their beliefs.

On this question, Wharton marketing professor Pinar Yildirim is cautiously optimistic. She believes that the proliferation of slanted outlets like Fox News will create a backlash as consumers seek independent voices. “Technology can bring us perspectives other than our own, if the ones designing it build that into the architecture, and the ones consuming the news are open to it,” she says.

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We did a double-take when we saw this headline on Bloomberg last week: “BuzzFeed Said to Expect 2014 Sales of Up to $120 Million.” If you haven’t paid much attention to BuzzFeed, now is a good time to start, because this seven-year-old dark horse may have figured out the secret to making money in an environment of brutal competition and plummeting advertising prices.

The story relates some impressive statistics:

  • BuzzFeed expects to book $60 million in revenue this year, up from an initial budget of $40 million.
  • Year-over-year traffic is up fourfold.
  • The site attracted more than 130 million unique visitors in November.
  • BuzzFeed expects to field more than 600 ad campaigns this year.
  • It has raised $46 million.
  • It’s profitable.
Image representing Jonah Peretti as depicted i...

Image via CrunchBase

Casual visitors to BuzzFeed might be tempted to dismiss the site as just another collection of top-10 lists. That’s understandable, given that top stories bear names like, “The 28 Funniest Notes Written By Kids In 2013,” but there’s more to BuzzFeed than mouse candy.

The site was founded by Jonah Peretti (right), an MIT Media Lab alumnus who also co-founded Huffington Post. Peretti has made a career of figuring out how to make stuff that people want to share, and his latest venture appears to have cracked the code (For more on the new journalism discipline of writing for maximum share appeal, read this article).

Everything on BuzzFeed is optimized for sharing because that’s the secret to building traffic. BuzzFeed eschews traditional search engine optimization. “We don’t spend that much time thinking about search,” Peretti told Fortune in this interview. It focuses instead on the psychology of sharing: What content do people instinctively want to tell others about? In the long run, Peretti thanks sharing by humans will be a more important factor in online success than search results.

Unlike some other content farms, BuzzFeed has designs on serious journalism. Peretti has said he plans to hire 200 professional journalists, and the site’s news section is beginning to look more and more like what CNN used to. In essence, the cat videos and wet T-shirt slide shows bring in visitors s

o serious reporting can happen.

BuzzFeed is perhaps best known for its novel approach to native advertising. Sponsored content appears in line with staff material (it’s lightly labeled) and uses the same format as everything else on the site: lots of lists, photos and captions. Sponsors are encouraged to come up with creative ideas that will fit the look and feel of the site. Intel has 10 Pieces Of Vintage Technology We Couldn’t Wait To Have and Ruffles came up with 12 Reasons Dogs Really Are Man’s Best Friend. Peretti told Fortune:

We told brands, “You have to tell a story.” This is actually something the magazine industry has been great at over decades — making advertising that actually adds to the product. It’s something that websites have completely failed to do…If you take all of the ads out of a fashion magazine, you lose half the photography, you know? So we really took the approach of, “Well, why can’t the web be like that? Why can’t we make great branded content, advertising, that has its own page that people want to click on and engage in and share and interact with?”

This may sound like heresy to journalism traditionalists, but BuzzFeed is breaking a lot of molds in an attempt to find a model that works.

In fact, the site’s basic content model isn’t all that different from traditional newspapers’. The reason most newspapers carry horoscopes, crossword puzzles, comics and gossip columns is because large numbers of people read newspapers solely for those features. If BuzzFeed’s 21st-century version of Dear Abby can provide some serious journalists with gainful employment, then we all owe Jonah Peretti a debt of gratitude.

Media Boomlet

BuzzFeed isn’t the only new media entity that’s benefiting from the aggregation craze, but there are questions about how far this business can scale and whether there’s much money to be made.

Henry BlodgetUSA Today‘s Michael Wolff writes that Henry Blodget (left) is shopping Business Insider, reportedly asking a cool $100 million. Not bad for a site that’s less than five years old with just 62 editorial staff members listed on its masthead. Wolff runs the numbers, makes a couple of educated guesses and figures that Business Insider is probably getting a  CPM (cost per thousand) of between $1.50 and $3. That compares to $30-$40 CPMs that were common in the business magazine world just a few years ago.

Wolff sees the mass-market digital media landscape as being a race to the bottom, with publishers frantically searching for viewer eyeballs, regardless of their appeal to advertisers. “The digital traffic world, with techniques and sources and results that are ever-more dubious, is, as I’d guess the astute Henry Blodget has ascertained, not a sound long-term play,” he writes. Hence, it’s time to get out.

But the venture capital community, which is flush with stock market cash, apparently doesn’t agree – yet. CNN Money’s Dan Primack and Jessi Hempel say Flipboard is set to raise another $50 million, bringing to $160 million its total venture funding since 2010. Flipboard doesn’t even produce any original content. It’s a mobile platform that aggregates content produced by other media companies, and its licensing policies have raised some hackles.

The new high-volume aggregation model that’s attracting so much attention was outlined in The New York Times last year. It’s a caffeinated rush to get it first, and very little content comes from traditional journalistic shoe leather. Reporters are skilled at finding, assimilating and repackaging information in eye-catching packages. The assumption is that citizens are already doing a lot of the reporting on their Facebook timelines and Twitter feeds, and the media company that can be filter the noise adds significant value.

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Google has arguably been the worst enemy of working journalists for the last decade, but now the tide is turning and the search giant is trying to repair the damage it  has done. It deserves our patience and understanding as it continues on a course that hopefully will revitalize journalism as a career and rescue hundreds of thousands of freelancers who have seen their livelihoods damaged by the monster Google unwittingly created.

Early Lycos home pageA little historical background: Google changed human behavior, which is a pretty big deal when you think about it. Before it burst upon the scene in the latter days of the first dot-com bubble, people mostly browsed for information. Today we default to search because it’s a better way to find stuff. Thank Google for that.

But one of the weaknesses of all search engines going back to Lycos is their dependence upon keywords. Spammers have always used keyword tricks to game search engines, but Google’s enormous influence gave birth to large companies that do nothing but vomit forth keyword-laden text, the sole purpose of which was to drive traffic through Google search results. We’re looking at you, Demand Media.

The Ascendance of ‘Top 10′ Lists

The growing influence of keywords has diminished the importance of content quality. Why pay for professional writers when you can get the same or better results by employing interns or offshore body shops that write to formulas defined by keyword frequency? The reason you see so many “top 10″ lists and tip sheets online is because they perform well in search results, people click on the links a lot and they’re cheap to produce. We don’t think Google intended for this to happen; it just worked out that way.

Many capable writers have seen pay rates plummet by 75% or more over the last five years as publishers have pushed quantity over quality. The only way you can make a living at 25 cents a word is to churn out a lot of them. These journalism serfs are the real victims of the collapse of print media. They’re skilled professionals whose livelihoods have been stolen by publishers who make no distinction between writing and typing.

Serfs Up

google-hummingbird-algorithm-seo-tips1Now Google is throwing them a lifeline. With the release of its Panda search algorithm last year, Google made its first strong statements that it’s cracking down on keyword farms. Last month’s release of the Hummingbird algorithm continues a campaign to elevate the value of quality content in search results and penalize formulaic gamesmanship.

For example, officials sent the PR industry into tizzy by stating that press releases can no longer be used to juice search performance, calling them “link schemes” and “advertisements.” Executives have made it clear that their mission is to deliver search results that most closely match what the user is looking for, not just those that have the right  keyword combinations.

Writing on Forbes.com, Joshua Steimle summed up Hummingbird thusly:

If you’re the best at what you do, these updates Google has been rolling out are opportunities to separate yourself from your competition. [Your competitors] may have been engaging in spammy tactics to get good rankings, but if you’ve been focusing on creating content that provides real value to potential customers, their days are numbered.

People like Mike Moran, who really understand search engines, have said for years that the only true search optimization is quality content. Google is finally speaking the same language.

It’s Good

So what does this mean for journalists? We think it’s all good. Marketers, who are hiring increasing numbers of journalists to stoke their content marketing efforts, are going to have to step up their game. They’ll need better content, which means hiring better writers who charge higher rates. Publishers will also need to re-examine the merits of paying for quality content instead of publishing anything turned in by someone with a pulse.

Does Google’s strategy point to the rebirth of traditional news organizations? Sadly, that horse is already out of the barn. But it does indicate that the days of search engine gamesmanship are numbered and that quality is going to count for something again.

Google can’t change the way search has commoditized news and diminished the value of media brands, but that’s only partially its fault. In any case, it’s hard to feel sorry for the rich executives who have seen their bonuses cut amid falling profits.

The victims we feel sorry for are the career beat reporters who couldn’t anticipate the seismic shifts in their field and who were ill-equipped to adapt. Perhaps their fortunes are finally about to change.

 

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By Paul Gillin | August 19, 2013 - 9:50 am - Posted in Business News, BusinessModel, Local news, Newspapers, Paywalls, Solutions

The San Francisco Chronicle is removing its paywall after just four months and the Dallas Morning News plans to follow suit. Observers are speculating that this could be the end of the nearly two-year-old binge that has seen more than one-third of U.S. newspapers erect barriers to their online content.

Neither company is abandoning the idea of gated content entirely, but both are reportedly pursuing new models based on premium services. That’s basically a reversal of the paywall formula. The premium-service model is aimed at monetizing a small part of the audience while a paywall denies service to everyone except those willing to pay. We think this amounts to a concession from both papers that paywalls are ineffective in their geographies.

San Francisco is a particularly tough place to make a paywall work, with its abundance of media and its tech-savvy audience. Also, the Chron isn’t exactly The New York Times of the west coast. In our view, it was a mediocre newspaper before cutting more than half its staff over the last few years.

All the Chronicle content will now be available on SFGate.com. What content will remain paid? A vaguely worded message from the new publisher and president said the paid SFChronicle.com site “will continue to provide readers with an online version that replicates a newspaper experience and reflects the changes in the news throughout the day.”

Replicating the newspaper experience online is a non-starter. We assume they’re working on better ideas.

The premium content model that the Chron and Dallas Morning News reportedly hope to implement is difficult to pull off. It has worked for ESPN, Cooks Illustrated, Consumer Reports and a number of financial publishers, but we’re not aware of any successes in the general news market. The premium model works best with investor audiences or those who are passionate, affluent and have an insatiable thirst for knowledge about a topic. None of those characteristics applies to local news.

It could be that San Francisco and Dallas are just early indicators that paywalls are not a good strategy for most newspapers. If so, we’ll know soon. Many publishers are coming up on their first year of experience, and they’ll have both the data and the experience to make a decision.

Bezos-Watching

Jeff Bezos

If you need any further evidence that Jeff Bezos is the Lady Gaga of media-watching, look no further than this roundup on Nieman Journalism Lab. Everyone is speculating about what the Amazon.com founder plans to do, but Bezos himself is offering few clues. We didn’t read everything Nieman’s Mark Coddington found, but we did peruse a few analyses.

A profile in The New York Times highlights the paradox of Bezos’ interest in being a media magnate, given that Amazon is an extremely secretive company. “There are fewer leaks out of Amazon than the National Security Agency,” write David Streitfeld and Christine Haughney.

What little we know of Amazon comes from its famously vague quarterly analyst calls. Outsiders are rarely permitted to tour its buildings and even its own executives don’t know where all its data centers are located. Bezos himself makes few public appearances and keeps a low profile in his hometown of Seattle.

So why does he now want to carry the First Amendment flag in our nation’s capitol? Ken Doctor sees three reasons why he and other super-rich people are buying into newspapers: Low valuations, a call of duty and the hubris to believe they can turn around an industry everyone thinks is dying. Also, no one else is willing to do it. “The few remaining people with the stomach to run daily newspapers have bank accounts with at least nine zeros after a non-zero numeral of some kind,” he writes at Nieman.

Kudos to Doctor for reminding us of EPIC 2014, a vaguely creepy spoof video made in 2004 that forecast the emergence of a media Death Star created by the merger of Amazon and Google in 2014. Some of the parallels are striking (watch below).

Writer and futurist Tim Carmody says he’s studied Bezos for years and believes the Amazon founder is driven by a fascination with the future and the urge to leave something behind other than the company he runs. Carmody also has interesting details about the sale of the Post, which appears to have been more a coincidence than a plan. “By all accounts, Bezos did not go looking to buy a newspaper,” he writes. “When he was approached by his friend Donald Graham about buying the Post, he initially begged off considering it.” It was Graham who pushed the deal more than Bezos sought it.

A few consistent threads run through the accounts we read. One is that Bezos is intensely focused on customer experience. The Times relates the story of how Amazon stationed ambulances outside its Allentown, Pa. warehouse during a heat wave rather than turn up the air conditioning or reduce the workload for its employees. Meeting shipping deadlines was more important than the health of its notoriously overworked fulfillment staff.

A second is that Bezos is a long-term thinker who aims high. Whereas many entrepreneurs would have been satisfied to build the world’s largest online bookseller, Bezos has set his sights on becoming an infrastructure powerhouse that can deliver goods and services physically or virtually anywhere in the world. The newspaper industry could benefit from this kind of vision right now.

The third is that Bezos is an unpredictable experimenter who disdains the status quo. It’s a given that he will ruffle feathers among his conservative colleagues in the publishing ranks. Again, not a bad thing.

There are also conflicts of interest that will merit scrutiny. The biggest is Amazon Web Services, a contract data center operation that hosts thousands of large research and commercial entities, including more than 500 government institutions. It’s Amazon’s fastest-growing business, and the government market is a huge opportunity.

Will Bezos be able to balance his dual role as free press agitator and major government contractor? Most people seem to think so. As the Times’ headline summed up:  “Expect the Unexpected.”

 

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By Paul Gillin | August 6, 2013 - 11:51 am - Posted in Business News, BusinessModel, Journalism, Newspapers, Solutions
Image representing Jeff Bezos as depicted in C...

New media tycoon Jeff Bezos (Image via CrunchBase)

History may well mark the typically somnambulant first days of August as the week that forever changed the U.S. newspaper industry.

In a stunning sequence of events, two young billionaires with no media experience bought iconic East Coast newspapers and affirmed their commitment to helping to rejuvenate an industry that has been in freefall for the past seven years.

The Washington Post Co. announced yesterday that Amazon.com founder Jeff Bezos would buy the company’s namesake newspaper for $250 million, ending eight decades of stewardship by the Graham family. The news came just three days after billionaire commodities investor John Henry was announced as the new owner of the Boston Globe.
The news continues a trend toward deep-pocketed investors making substantial investments in news organizations, shoring up depleted reporting staffs and experimenting with new business models. Value-investing icon Warren Buffett has snapped up more than 60 dailies and says he plans to buy more. In Southern California, greeting card magnate Aaron Kushner and his partners at Freedom Communications are turning heads with an aggressive investment strategy at the Orange County Register that is showing early signs of bearing fruit.

This is the best news the newspaper industry has had in years, and we think the management styles of these investors symbolizes the kind of long-term view that the business badly needs.

Long-Term Vision

Why Billionaires Are Trying to Rescue the Newspaper Industry

Let’s look at the two newest arrivals on the media scene. We’ve watched both Henry and Bezos with interest for years, but for different reasons. Henry is the white knight who rescued our hometown Boston Red Sox from a tumultuous management struggle and brought the town its first World Series victory in 86 years. Bezos is an Internet pioneer who steered his company to greatness in a turbulent industry and forever changed retailing. The two men made their fortunes in very different industries but share a commitment to long-term vision and a belief in fundamental values.

Fenway Park, home of the Boston Red Sox, Bosto...

When Henry took over the Red Sox in 2002, the team was actively negotiating to abandon Fenway Park and build a new stadium in the suburbs. The new owner promptly scuttled the negotiations and redoubled his investments in the team’s home field, shoring up the infrastructure, adding seats and experimenting with new revenue sources that would keep the team competitive with other big-market players. The strategy has paid off. The 101-year-old stadium is a huge tourist draw, and high ticket prices combined with innovative promotions have enabled the team to support a payroll and farm system that consistently keeps it at the top of the American League East. Fans complain about ticket prices, but they can’t complain about the team’s performance on the field.

Bezos was one of hundreds of online booksellers that jumped on the early Internet. He successfully steered Amazon through the ravages of the dot-com crash and intense competition from brick-and-mortar retailers to make it a $61 billion powerhouse that has changed the way Americans shop. Bezos has kept his focus on core principles like personalizing the shopping experience and delighting customers. He has resisted the urge to chase short-term opportunities and focused instead on big picture problems like chipping away at the cost and frustration of shipping. See Michael Moritz’s profile for a financier’s account of Bezos’ brilliance.

Amazon made some early missteps, such as investments in busted Web 1.0 startups like Pets.com and Kozmo.com, but it has executed almost flawlessly since the end of the dot-com bubble. It has sacrificed profitability for growth, but that hasn’t stopped the stock from rising ninefold over the last five years. With Amazon still under-performing in international markets and just beginning to crack the business-to-business opportunity, there is reason to believe its best days are ahead of it.

Rule-Changers

Long-term thinking as exemplified by Henry and Bezos is exactly the tonic the newspaper industry needs. Its woes are rooted in a merger binge that started in the late 90s, fueled by an appetite for short-term profits. As online competition has eaten away the circulation and revenue base of the U.S. industry, most publishers have responded by cutting costs, raising prices and hoping for the best. But you don’t transform an industry by cutting costs. You do it by changing the rules. Bezos and Henry are rule-changers.

Editor & Publisher reported last week on newspapers that are successfully experimenting with new revenue sources. We have long maintained that growth opportunities exist  for publishers in local markets if they can break their advertising addiction and partner with businesses in new ways. Wouldn’t it be nice to see the Post and the Globe blazing these trails?

It’s tempting to dismiss these relatively small investments (the $250 million purchase price of the Post represents just one percent of Bezos’ net worth) as low-risk bets by people with money to burn, but we think there’s more to it than that. Wealthy entrepreneurs know that healthy, independent media are essential to democracy and to capitalism. Media watchdogs keep government and regulatory excesses in check and ensure that markets operate predictably. They also provide business intelligence that isn’t easily available elsewhere. Both Henry and Bezos are avid newspaper readers.

We have no reason to believe that either of these new media owners has any plans to try to wring cash out of a dying business. On the contrary, Henry was quick to issue a statement affirming his belief in the importance of a healthy Globe to the region. Bezos is leaving the current Post leadership in place and said no layoffs are planned. “The values of the Post do not need changing,” he said. “The duty of the paper is to the readers, not the owners.”

Some people have speculated in recent years that the salvation of the newspaper industry would be donations from foundations and wealthy investors. Perhaps there’s some truth in that, but donations are a backhanded way of saying that a cause can never support itself. Warren Buffett, John Henry and Jeff Bezos all have their own philanthropic interests, but we don’t believe they see these newspaper investments as charity. They see value, growth and ultimately something  that has eluded publishers for the last several years: profit.

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How are the experiments in reduced frequency that began in Detroit more than four years ago and have since spread to Cleveland, Syracuse, New Orleans and now Portland working out? Not so well, says author and J-school professor John K. Hartman.

Writing on Editor & Publisher‘s website, Hartman says the most from seven-day to three-day home delivery has caused massive subscriber flight and forced publishers to quietly backtrack. Newhouse, which is cutting frequencies across its line of dailies, has already had to introduce a new tabloid to produce on the days the Times-Picayune doesn’t publish.

Hartman blames greed. He accuses Newhouse of sabotaging journalism at the papers it own in the name of maximizing profits for the Newhouse family.

Newhouse is saving big money by eliminating news staff, eliminating office staff, eliminating delivery staff, and eliminating delivery expenses. In other words, Newhouse is getting out of the daily newspaper business and into the tri-weekly advertising shopper business.

We didn’t know this, but Hartman says the Detroit Free Press and News have re-introduced daily delivery to about 15,000 homes. The experiment, which was positioned as a “bold transformation” in December, 2008,

lost so many readers they had to beef up their non-delivery-day newspapers and restore limited seven-day home delivery. The Free Press now offers home delivery to 15,000 households through independent contractors the other four days a week. Nonetheless, hundreds of thousands of readers of the print products were lost in Detroit, and the projected switch of readers and advertisers to digital sites has not taken place.

The World Association of Newspapers and News Publishers (WAN-IFRA) released an upbeat report on the state of newspapers worldwide, pointing to growing readership levels in emerging economies but cautioning that engagement levels are still low.

The report includes data from 70 countries that account for more than 90% of the industry’s value. It shows:

  • More than half the world’s adult population reads a daily newspaper, with 2.5 billion reading in print and more than 600 million consuming in digital form.
  • The newspaper industry generates more than US$200 billion of revenue worldwide each year. However, that figure is down 2% from last year and 22% since 2008. The numbers are dragged down by plummeting ad sales in the U.S., which has seen print advertising revenues fall 42% since 2008. The good news is that ad revenues are up 9.1% in Latin America, 3.6% in Asia and 2.3% in the Middle East and North Africa.
  • Newspaper circulation remains high, through stagnant, globally. Circulation declined only .9% worldwide in 2012 from a year earlier, primarily due to  rising circulations in Asia. Circulation is down 2.2% globally since 2008, with the steepest declines in Europe.
  • While newspapers are a vital information source, they aren’t engaging online audiences very effectively. Newspapers accounted for only 7% of visits, only 1.3% of time spent online and only .9% of total pages visited.
  • U.S. newspaper publishers now generate 27% of their revenues from non-traditional sources, such as digital advertising, services and ancillary products.

While the report can be seen as a glass-half-full scenario, we think it’s encouraging to see publishers diversifying their revenue sources. The industry’s historic dependence on print advertising in general – and classified advertising in particular – is at the root of its problems. The rapid decline of those revenue sources is prompting some publishers to get creative about finding new revenues. Those that succeed will be stronger for it.

 

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Paywalls continue to spring up across the news landscape while new-media enthusiasts warn that gated news is a throwback to a bygone age.

Britain’s Telegraph and Sun announced plans to erect paywalls almost simultaneously after successful tests. The Telegraph, which claims to have the largest circulation of any U.K. daily, will give away 20 articles free every month and charge £1.99/mo. thereafter for unlimited access to the website and smartphone apps. The Sun‘s move is timed to make the most of parent company News International’s £20M deal to show near-live clips of Premiership football highlights on its websites beginning in August.

In Canada, Postmedia Network will roll out paywalls across all 10 of its properties, including the National Post. The move completes an experiment that began two years ago and has been deployed in stages. Digital-only subscribers will have to ante up $9.99/mo. for reading more than 10 articles in any title within a month.

Perhaps most indicative of the surging popularity of paywalls, though, is Politico’s decision to experiment with the idea. The Washington, D.C.-focused news service, which was once personified the new breed of digital-only publishers, has given in to the reality that advertising rates continue to fall and subscriber revenues must become part of the business. “We believe that every successful media company will ultimately charge for its content” said a memo signed by several of the Politico’s top executives.

Circling the Wagons

We continue to be more interested in experiments that break new ground in publishing economics than efforts to resurrect old models. There’s plenty to report there, as well.

Ken Doctor kicks us  off with a fine analysis of where NewsRight went wrong. NewsRight was a consortium of 20 publishers that sprung out of the Associated Press in early 2012 with the mission of tracking down copyright violators while also creating a subscription model that would permit digital publishers to license quality content for redistribution.

“Publishers have seethed with rage as they’ve seen their substantial investment in newsrooms harvested — for nothing — by many aggregators…” writes Doctor on the Nieman Journalism Lab, “…but rage — whether seething or public — isn’t a business model.”

Bingo. Consortia are good for only two things: setting standards and raising awareness. They’re a terrible way to create new products. The idea of pursuing copyright violators individually is ludicrous, anyway. It’s like trying to stamp out ants. There are always more where the first batch came from.

The only anti-piracy tactic that works is a public awareness campaign, and the newspaper industry has shown little interest in that. NewsRight died because the members inevitably had conflicting priorities, and it was impossible for everyone to find common ground when everyone had something to lose.

Does BuzzFeed Have it Right?

Sponsored Post on BuzzFeedDoctor points to the work being done at NewsCred, BuzzFeed and Forbes, among others, as examples of new ideas worth developing. “In 2013, we’re seeing more innovative use of news content than we have in a long time,” he writes. We’re particularly interested in BuzzFeed, the viral content engine started by Jonah Peretti and others in 2006. At first glance it looks like any other new-age news site, with a bottomless home page stuffed with a jumble of seemingly unrelated content ranging from the profound to the ridiculous.

As New York magazine points out in a lengthy profile, though, there’s a lot more going on there than cat photos. BuzzFeed is tuned to create content that people want to share, and it could care less who the authors are. The home page blithely mixes contributions from staffers and advertisers with minimal labeling. Every element within every story can be shared on every social network you can imagine. Every page is designed to maximize audience interaction with the content.

BuzzFeed makes little effort to segregate advertiser contributions from the work of its own staff. A photo essay on “12 Tips to Have An Amazing Barbecue” from Grill Mates sits next to “Just The London Skyline, Made Out Of Sugar Cubes” by staffer Luke Lewis. Some of the branded stuff is actually pretty good, like, JetBlue’s “The 50 Most Beautiful Shots Taken Out Of Airplane Windows.”

Is this serious journalism? Well, no. We don’t think corporate brands will ever produce that. But if they want to run their grilling tips next to similarly lightweight content from professional editors, why not let them? The genie that goes by such names as “brand journalism” and “content marketing” isn’t going back in the bottle. A recent survey concluded that corporate marketers and agencies consider branded content to be among their most effective branding tactics, and that 69% plan to spend more money on it in the coming year.

The bigger issue is whether sustainable publishing business models can be found that don’t rely entirely upon display advertising or subscription revenue. BuzzFeed and NewsCred are making some progress there. We don’t believe they produce serious journalism, if sex, gossip and voyeurism can attract a large enough audience to support real journalism, then we’re in favor of it. The idea isn’t new. It’s worked in the U.K. for decades.

Content Marketing Effectiveness

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