AP’s “ASCAP for news” — new ecosystem, new revenue streams, new enterprise opportunities

In a speech on Monday, Associated Press CEO Tom Curley announced that the AP would soon set up  “an independent rights clearinghouse for news publishers to manage the distribution and use of their content beyond their own Web properties.” (Speech text in PDF link)

The entity, to be designed with input from multiple stakeholders including AP and the Newspaper Association of America, will be established sometime in 2011. It will be a business-to-business clearinghouse, not involving transactions with consumers. Through the clearinghouse, originators of news content (ranging from local bloggers on up; this is not limited to AP members) will be able to distribute their content for digital publication by others, and receive back royalties of revenue shares according to protocols yet to be determined. The clearinghouse will be facilitate a rapid, realtime means of negotiating rights for such content sharing, resulting in a large increase in the potential market for any particular piece of content.

As an illustration: a newspaper (or a broadcaster, or a local blogger) could release a piece of content (a story, a photo, a video) with tags indicating what it is about, who owns it, how and where it may be used, and how the content originator is to be paid. The content, distributed through any available channel, is picked up by another publisher, aggregator, or personalized news service and used in accordance with the attached rights and payments protocols. The clearinghouse monitors usage and payment obligations throughout the network of participating content originators and publishers, and settles transactions among them.

The plan Curley described is very similar to what I proposed in a post here in July, in which I asked, “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?”

Curley framed the opportunity in very similar language: “With the new rights clearinghouse initiative, we are hoping to give news publishers more tools to pursue an audience and capture value beyond the boundaries of their own digital publications.”

NAA switches webstat vendors — results look better but miss the shift to mobile

When last we checked on the Newspaper Association of America's webstats (and other data) back in April, the monthly website usage information that the nation's daily newspaper organization was publishing came from Nielsen Online, and it wasn't all that pretty.

The NAA tried to put the best spin on the data, but as we pointed out at the time, time spent at newspaper sites was in the doldrums and getting gradually worse, with three of the seven shortest attention spans measured by Nielsen occuring in the first quarter of 2010: 34:10 minutes in January, 31:39 minutes in February, and 32:21 minutes in March. For context, consider that at the time, also according to Nielsen, the average Facebook user was spending nearly seven hours on the social networking site.

It looks like NAA was not happy with those first quarter web stats. It published April data from Nielsen but offered no further updates for four months. At that point, I inquired whether NAA had decided to stop publishing the data, and was informed by Jeff Sigmund, Director of Communications, that "a new methodology" was in the works.

The new methodology turns out be be Comscore. Last Thursday, NAA posted Comscore data for September, and simultaneously wiped all the old Nielsen data off its site. The reason for the switch is clear: Comscore's results are more favorable to newspapers than Nielsen's in several categories, as trumpeted in an NAA press release.

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?

Read the rest at NiemanLab.

Ruminating with Rick: the second annual "Future of Newspapers" interview

My friend Rick Floyd has posted his second annual interview with me about the state of newspaperdom, at his blog Retired Pastor Ruminates. Here's a link to the first one, done in June 2009.

Moderating declines: Parsing the NAA's spin on newspaper circ data

Newspapers could borrow a line from a recent Dilbert comic strip: “We’ve been doing great since we redefined success as a slowing of failure.” Or perhaps it was the other way around, and Dilbert creator Scott Adams was inspired to write that line in a recent strip by the inventive terminology of newspaper executives describing “sequential improvement” and “moderating declines” in their revenue trends despite continuing losses in the double digit range.

Currently, the industry is reporting first-quarter earnings, and last week the Audit Bureau of Circulations released unaudited “publisher’s statements” reporting paid circulation for the six months ending March 31. The numbers are down, but the spin is up.

On the circulation front, the Audit Bureau of Circulations reported that circulation fell 8.7 percent on weekdays and 6.5 percent on Sundays, among newspapers filing publisher’s statements. This compares with drops of 10.6 percent weekdays and 7.6 percent Sundays for the prior six-month period, enough of an improvement for Newspaper Association of America CEO John Sturm to declare that “the data indicates the declines are moderating.”

Actually, it’s hard to discern real moderation in the rate of decline. The losses in the most recent period are indeed a bit less severe than those in the prior (Sept. 30) period, but they are worse than the drop in the period before that, or in any previous period. If we ignore the Sept. 30 data as an outlier, we actually have a trend that’s been worsening steadily for the last six years:

Nothing about that final uptick indicates that it’s a reversal of the trend — it would take two or three periods of “improvement” in the form of “moderating declines” to make that a valid conclusion.

Continue reading this post at Nieman Journalism Lab.

Groupon's 2010 revenue pace

One of the hottest companies around is Groupon, the social buying site that's offering daily deals in dozens of cities, and has dozens of clones trying to capitalize on the business model. It is, or should be, of interest to newspaper publishers because (as Michael Skoler has written about at NiemanLab) (a) it is probably eating their lunch, and (b) offers a model that they can adapt to facilitate, and profit from, direct connections between their readers and local retailers of goods and services.

Just how big is this opportunity? Pascal-Emmanuel Gobry was wondering at Business Insider which of the Groupon revenue and profitability guestimates are correct.  He wrote:

We're still very bullish on Groupon and think its valuation was justified at whatever end of the spectrum its financials are, given the market and the brand. But its financial picture is still very hazy. Who has the details? Let us know!

So I responded with a calculation based on Groupon's own data:

Why is the picture hazy? Groupon all but publishes its revenue in real time. Groupon's revenue is easy to estimate from the real-time stats they have on their site, plus estimates from sampling the deals to see what the average discount is. Here's my calculation based on the deal clock from Feb. 16 to April 4. Based on that period, revenue annualized to $150 million. However, it's growing rapidly, so $350 million is certainly possible.

3,001,657 "Total Groupons bought" as of 4/4
1,905,218 "Total Groupons bought" as of 2/16
1,096,439 Groupons bought in 47 days
23,328 Average number of Groupons sold per day, national total
543 Average number of sales per Groupon (per day total divided by 43 cities)
$141,593,040 "Total dollars saved" 4/4 (how much they saved customers)
$87,996,041 "Total dollars saved" 2/16
$53,596,999 Savings in 47 days
$92,408,619 Gross value (58% avg discount - based on a sampling of Groupons)
$38,811,620 Net revenue (42% actually paid by buyers)
$825,779 avg sales/day
$35.40 average individual sale/deal
$19,204 average total revenue per deal

$301,409,389 Current annualized sales pace (actual cash, not undiscounted value of deals)
$150,704,695 Groupon share of revenue at 50%

As to growth to a $350 million 2010 pace: the deals clock at this moment is at 4,007,360, the "dollars saved" clock is at $154,567,861. That's just 12 days after my prior benchmark on 4/4. So the deals pace is accelerating (83,808 daily deals sold per day in the past 12 days vs 23,328 in the prior 47 days). However, the value of the average deal is dropping, probably as Groupon moves into smaller markets. Based on the increase in dollars saved over the past 12 days, revenue has actually DROPPED to $782,963 per day, or a $142 million pace. Twelve days is not a good sample period, but this does suggest that the pace is leveling off. So I would say: they are heading for $150 to $200 million this year (assuming some additional growth and of course holiday spending uptick). I think expansion beyond this pace gets difficult, unless they find ways to (a) move into smaller markets, and (b) expand their demographic appeal beyond the young urban professional women who predominate right now.

I leave it to others to figure out what Groupon's costs are against this, but I suggest that a 50% operating margin is not out of the question - so, something in the $75-100 million range (EBITDA).

Clarification: my estimate of $150-200 million is after paying the merchant's 50 percent. So Groupon would actually report $300-$400 million in revenue on this basis.

Update: based on another comment at Business Insider (questioning whether Groupon is a great idea from a merchant's perspective), I added this comment:

There's an interesting discussion of Groupon from the merchant's perspective in this thread at Groupon's own forums (goes on for 8 pages, well worth perusing).

Merchants need to see Groupon as a marketing channel, not a sales channel. Yes, when they are the featured deal of the day, they'll sell hundreds of items or services at or below cost. But they don't do this every day, or even every month, because Groupon wants a lot of diversity in what it's offering. Again the math is worth considering:

Say you have a nail salon in Denver (nail jobs seem to be particularly popular on Groupon). You offer on Groupon a $75 service for $32 - close to the average discount. You sell 1000 of them, and Groupon pays you half the proceeds or $16,000. (You get that over 3 months, while the redemptions will probably spread over the next year, so you have a bit of cash flow advantage there.) Let's say your out-of-pocket cost for providing those services are $40 apiece or $40,000, so you're out $24,000. That's your marketing expense to get 1000 ladies (mostly) into your store, or $24 each. Do a good job and they come back. You have the opportunity to upsell each of them - do a $24 upsell and you've recouped your entire out-of-pocket expense. Plus you've had the marketing exposure of being on the Groupon site, being featured in Groupon's emails to thousands of members, etc. At the end of the day, you're certainly better off, if you do it right. And it's doubtful whether $24,000 in advertising on Denver radio, TV and print would bring 1000 people into your store.

Update 2, April 17: Paul Butler did a bit more sophisticated data scraping and came up with some pretty similar numbers.

Is print still king? Has online made a move? Updating a controversial post

A year ago, in a Nieman Journalism Lab post that garnered 88 comments and still has viral life out there, I maintained that just three percent of newspaper content consumption happens online; the rest of it happens the old fashioned way, by people reading ink on dead trees. Given the continuing attention being paid to that conclusion (it was cited just last month by Hal Varian, Google’s chief economist, in testimony to the Federal Trade Commission), let’s revisit the numbers and see whether anything has changed.

With updates or improved data on at least some of the numbers, the general conclusions still hold: U.S. newspapers have not pushed much of their audience to their websites, nor have they followed the migration of their readership to the web. Their combined print and online readership metrics, whether measured in pageviews or in time spent, show that there’s been significant attrition since last year in the total audience for newspaper content, and that the fraction of that audience consuming newspaper content online remains in the low-to-mid single digits.

Continue reading at Nieman Journalism Lab.

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.”

Continue reading this post at Nieman Journalism Lab.

"Velocity of ad decline is moderating," NAA chief says of Q4 losses

The Newspaper Association of America has quietly updated the "trends and numbers" section of its site with 4th quarter 2009 revenue, showing a 14th consecutive quarter of overall revenue loss and only a few indications of slowdown or reversal in the downtrend.

Counting online revenue, the industry's total revenue came in 23.73 percent below Q4 of 2008. In the first 3 quarters of 2009, the losses were 28.28 percent, 29.00 percent and 27.94 percent. While the lower loss rate in the Q4 results could be considered an improvement, the only category with a significant improvement was online advertising, which lost just 1.00 percent in Q4, compared to drops of 13.40 percent, 15.90 percent and 16.92 percent in the first three quarters. (For the full year, total revenue came in at $27.564 billion, which is a mere $64 million over my prediction made back on September 22.)

Putting the best possible spin on the situation, NAA President and CEO John F. Sturm said in a statement: "The velocity of the advertising decline for print classifieds continued to moderate, and adverse trends for national advertising and newspaper Web sites lessened considerably as last year came to a close." He added that he had been hearing "buzz" that this "ad trend improvement" was continuing in the first quarter of 2010.

Indications from a few of the firms for the first quarter of 2010 do point to a smaller loss, perhaps in the low teens. Since the downtrend began in 2006, the industry has lost more than 44 percent percent of its revenue, including nearly 48 percent of print revenue.

In most categories, Q4 provided no particular relief from the downtrend. Details:

Online revenue, as noted, was down just 1.00 percent, perhaps an indication of better days ahead. Part of the problem for online has been that for many, if not most publishers, a good fraction of online revenue is directly tied to printed advertising, with the online component sold as an "upsell" or added value proposition. This means online volume drops right along with print, even if there's growth in ads sold on an online-only basis. As I mentioned a few weeks ago, at E.W. Scripps, this linkage of online and print covers about half of all online advertising, and I'm finding similar levels at other firms.

Retail revenue (the largest category) was down 24.33 percent, continuing precisely the track it was on for the first three quarters (which were off 23.68 percent, 24.92 percent and 23.98 percent, consecutively). And keep in mind that while retail sales have not rebounded much, we've had GDP growth since mid-2009. Every retail category measured by NAA showed a decline, which has been the case all year. Not surprisingly, the worst drop was in the building materials category, which fell 36.58 percent, a tad better than losses in the 50 percent ballpark for the first three quarters.

Classifed revenue was down 31.72%, falling less than the first three quarters (42.34 percent, 40.42 percent and 37.90 percent), but that may be because there's just not much left to lose. In Q4, total classified revenue was $1.757 billion, compared with $5.243 billion in Q4 of 2005, the best quarter ever in classified volume. In other words, in four years, more than 66 percent of classified revenue has evaporated.

As in retail, every classified category (automotive, real estate, recruitment and other) was down in every quarter of 2009. The slight reduction in the rate of decline can be attributed to slowdowns in the loss rates in automotive (down just 37.0 percent in Q4 versus losses in the low 40s during the first three quarters), and "other," which was off just 8.0 percent (versus 16.1 percent, 11.7 percent and 8.8 percent earlier in the year), but that "improvement" is probably due to the growth in foreclosure notices, which are generally counted in this category.

National revenue fell 19.80 percent, compared with losses of 25.87 percent, 29.61 percent and 29.84 percent in the first three quarters. National saw small upticks in automotive (based on spending by manufacturers to support the cash for clunkers incentives), food, household furniture and furnishings (which almost doubled), and medical and toiletries. While most categories were down, at least there is evidence of a few actual trend reversals in spending by national brands.

Google’s Hal Varian to newspapers at FTC confab: “Experiment, experiment, experiment!"

Google’s economist-in-chief, Hal Varian, was the keynote speaker this morning at the Federal Trade Commission’s second round of hearings on the future of journalism. (The study is entitled “How will journalism survive the internet age?” Round 1 was held in December; transcripts and other material are linked here — scroll down. Not to be outdone, the Federal Communications Commission also has a project studying pretty much the same thing.

Here’s the slide deck from Varian’s presentation, entitled “Newspaper Economics, Online and Offline”:

Click through to slide deck and full post at Harvard's Nieman Journalism Lab.