Tuesday, January 13, 2009

The elusive "business model"

It's all about the business model.

New York magazine has a don't miss-piece by Emily Nussbaum about the New York Times geeks—a team of 20-something experimental online coder/journalists who last year broke down a convoluted approval structure and are now collaboratively integrated into the paper's news operation, rolling out one innovation after another, dragging the rest of the news team along into the future, whether they like it or not. They've done great stuff and have great plans. Over drinks at the Algonquin, one of them gets around to the business model (italics added):
Over time, [Aron] Pilhofer adds, this is the role the Times can play: exciting online readers about the value of reportage, engaging them deeply in the Times’ specific brand of journalism—perhaps even so much that they might want to pay for it. If this comes true, it would mean this terrible year was not for nothing: that someday, this hard era would prove the turning point for the paper, the year when it didn’t go down, when it became something better. Pilhofer shrugs and puts his glass back down on the Algonquin table. “I just hope there’s a business model when we get there.”
In other words, "we don't really know if there is one, but that's not our job," and rightly so.

At the Times itself, media columnist David Carr, who is quoted in the New York story, has a column called "Let's Invent an iTunes for News," which has been much lambasted in the blogosphere (by Matthew Ingram, Jeff Jarvis and Jay Rosen, among others). Carr hopes against hope that readers can be induced to pay for news once again, but he doesn't really know what the model would be, either:
Is there a way to reverse the broad expectation that information, including content assembled and produced by professionals, should be free? If print wants to perform a cashectomy on users, it should probably look to what happened with music, an industry in which people once paid handsomely for records, then tapes, then CDs, that was overtaken by the expectation that the same product should be free.
He mentions expectations that we'll see, later this year, an iPod Touch with a 7-to-9 inch screen (we may, and we'll see upgraded Kindles and, before long the Plastic Logic reader, as well).
The device would allow scanning of pages with a flick of the finger. It sounds promising for newspapers and magazines. Now all we need is a business model to go with it.
And that business model would be? Carr doesn't tell us , the column ends there. But he's thinking that if you want to read the Times on that thing, you're going to have to pay. (Earlier in the column he expresses the hope that someone like Steve Jobs will somehow convince "the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up." A cashectomy.)

Wrong. Yes, we know that some publishers have some content that some people will pay for some of the time. (Carr mentions that he pays for the Wall Street Journal, Cook's Illustrated and Consumer Reports). But most people will never pay for any content at any time, whether or not micropayments become easier to handle. Besides that, when you put up any kind of paywall, you put a serious dent in your ability to sell advertising, because in contrast to the traditional printed newspaper (in which publishers owned the only available delivery pipeline), today's reader has free alternatives that are just a click away through whatever device they choose for browsing.

I've speculated, myself, that the news business could be enormously transformed by the advent of an "iPod for news" in the form of an e-reader that's particularly suitable for news reading, because the proliferation of such devices would broaden the consumption of digital news content away from computer screens, to anyplace where an iPod can be carried and used.

But while consumers might buy the gizmo, they won't pay for the content, so we still need a business model, no matter what. In mine, publishers dump print (except for a weekend edition), and deliver content digitally via all interfaces that come along, from desktop to Blackberry, from Kindle to iPodTouch. They layer in a robust social network for news (the Times geeks have only scratched the surface of that need with TimesPeople, but they must have more up their sleeves). They "monetize" by delivering all kinds of commercial content including much more video and new forms such as geotagged ads on mobile devices; and by moving beyond advertising into the sale of premium services (not premium content), by facilitating transactions, by leveraging their social network in ways not yet invented (but Facebook and others are trying).

In the end, it's still about capturing a slice of the advertising pie, which, as I've detailed before, is going to remain at around 2 percent of GDP as it has for 80 years or more, simply because our competitive economic model can't do without it. With the partial exception of non-profits such as public radio and TV, every major new content delivery method in 400 years (newspapers, magazines, radio, TV) has been financed by commercial content. (The subscription and single-copy revenue of newspapers and magazines is not relevant here, it's simply an offset for printing, distribution and circulation overhead expenses.) The online news organizations that newspapers morph into (or those that supplant them if they fail) need to find their share of that 2 percent pie. That's why it's important not only for newsrooms to become online-first, but for the advertising sales department to follow suit. Right now.

I do hope that Aron Pilhofer and his fellow Times Geeks (if they don't get to stodgy hanging around the Algonquin), let their thoughts wander away from news toward revenue generation now and then. It sounds like they could come up with some nifty ideas on the commercial content side of the equation, as well. Meanwhile, when the nation's press barons assemble for Round Two of their API Summit for an Industry in Crisis, perhaps the smartest thing they could do is to create a national newspaper geek squad focused on innovation in commercial content. It's the only way out of the swamp, fellows.

PM UPDATE: I can across this post at MediaBistro, quoting Aron Pilhofer, which sheds a tad more light on the Times's intentions with regard to real social networking: "The goal is to 'make the NYT programmable.'" Pilhofer is also on the team looking for a Knight News Challenge grant to create DocumentCloud.

8 comments:

Michael J said...

Re the ereader "And that business model would be? Carr doesn't tell us , the column ends there. But he's thinking that if you want to read the Times on that thing, you're going to have to pay."

But people pay for books 9.95 from Amazon. They will probably not pay for content. But I think they will willingly pay for convenience.

So. . .
Read for free on the web, read for $10 /month on your x device, read for $X the Friday Saturday, Sunday edition at your doorstep? or pick up the paper for $1.50 (if you live near a subway stop that justifies it.)

And buy the long analytic story in paperback form for $10 from Amazon.

Martin Langeveld said...

Michael, I agree that some readers will pay for editions formatted specifically for e-readers, but there's less likelihood of that if the device can simply access the free edition on the web, which is the case with iPhone and probably with the enlarged Touch, when it shows up. So it's convenience, but mainly when there's not a free alternative. In the case of books, you can't get them for free except at the library.

Joe Mescher said...

I read an interesting thought on Twitter this afternoon, speculating that the iPhone is Apple's version of the NetBook.

If Steve Jobs can convince people to pay for apps on the iPhone (more 'showing them the way' than convincing) I'm interested to learn/stoke the ideas for a paid service.

I wonder if any news people have approached a company like Apple about creating an app based service for the iPhone and cutting the Cupertino gang in on the ad revenue.

SactoMan01 said...

Joe,

I don't think the iPhone is Apple's version of the Netbook as it currently stands--the interface is still too clunky for real Internet access.

Now, if the device sported a larger screen and had the option of a small plug-in QWERTY keyboard, that would be completely different story altogether. That would allow for much easier Internet access, and could even make it into an e-book reader. With solid-state non-volatile RAM sizes increasing exponentially each year, we could have 256 GB or way more more of such memory in such a small device within two years, making such a device based on iPhone technology quite possible.

Anonymous said...

Michael:

If seen a lot of writers on a lot of blogs talking, rightly, about the need for the newspaper industry to have some courage to innovate, and to make some large transformative steps.

Yet you and all the others can't even bring yourself to step back from the most fundamental, doomed-to-fail aspect of our problem: The absolute reliance on advertising.

You note that ad revenues have remained constant at 2 percent of GDP as if that's some kind of reason for hope. But the media market has been hopelessly and irretrievably fragmented to the point that newspapers cannot and will not recapture the lion's share ever again. That's not conjecture, that's a simple conclusion if you track the evaporation of ad revenue over the last couple of months.

Quit trashing the idea that people will pay for content. That's a specious, lazy and even dogmatic assumption that's being spouted by the "information is free" crowd. That's their cause, but they're not the ones trying to keep journalistic enterprises alive in towns that need them.

When I signed my son up for cell phone service, I was basically given the phone for free in exchange for a two-year contract (content). Same with the discounted vehicle unit that Sirius gave me in exchange for satellite radio service.

People understand that you can't have something you want for nothing.

Google and Yahoo and other aggregators are leeches and should have been treated as such all along by newspapers.

Advertising is that good-looking but unreliable girlfriend who we know we need to leave but can't because of our own insecurities. But fear has had terrible consequences.

No one should have to go through the horrible and harrowing cuts in talent, in reporting, in our brands and in our service to the community, that we are going through right now without some incredible good on the other side as a worthwhile payoff.

If we keep giving content away and chasing advertising tail, we're just going to keep getting our hearts broken again and again and again.

Build the value on content. Sell the value. Let the advertisers back in in a very limited and cautious way.

Martin Langeveld said...

@Anonymous:
Good points, except I think it's a stretch to cite cell phone service and satellite radio as evidence that people will pay for news content. There are differences, clearly between communications and entertainment, which people will pay for, and news, which they've not show much inclination to pay for in any model other than the printed newspaper, and that model is broken—your son loves his cell phone, but I bet he doesn't buy or read a newspaper. If he does, he's the exception in his age group.

Anonymous said...

Martin:

I won't argue with your points about the difference between entertainment content and news content because i don't want to make the argument too nuanced.

My broad point is that people will pay for content. Whether it's by choice, because they want it (iTunes store, NetFlix) or because they're forced to if they want to participate in society (Internet access), they do it every day.

But no one will pay if they can easily get it for free. Take a week and shut down free access to all U.S. newspaper Web sites, and see how many would come back through a toll booth to get local news.

Only someone smoking hippie lettuce would suggest all those folks would go somewhere else. Where? Is Google going to hire folks from Calcutta to get births, deaths, weddings, school news, etc. from every town? (I know, I know -- don't tempt them).

It's a lot like Napster. We all knew it didn't feel right to take for free what generations before us paid for. We knew someone was putting some sweat and risk into that product. And when it went away, we all got on with paying for the content.

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