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.