Friday, February 27, 2009

The future of the news business

Neate has some interesting thoughts on the newspaper industry over at Out of Left Field, particularly with relation to an online subscription-based model either through cable companies or done as a standalone (as Newsday is trying [Steven Musil, CNET). I don't think this is the way to go, though. For one thing, subscriptions are untenable if free alternatives are offered, so you'd have to get all the papers on board (nigh to impossible) and others would certainly start free alternatives of their own to challenge this. Furthermore, bringing in subscriptions would generate some new revenue, but it would also lower your traffic numbers and thus either your online advertising rates or the number of ads you're able to sell. In my view, this would mean that going to subscriptions would either have a minimal effect or even a negative one on the bottom line.

For me, the solution is a traditional one with a couple of new elements. Make all the content free; this increases the reader base, both through your normal readers who navigate to the site on their own and through secondary readers (those who arrive there via links from other sites). Some normal readers will stick around in a subscription model, but most of your secondary readers will be gone: there's little to no point in linking to something behind a pay wall. Instead, if you maintain that high reader base and take it to your advertisers, perhaps in new and innovative ways (different kinds of ads, ads localized to individual stories, etc), you might be able to accomplish a lot more.

Internet advertising has the potential to be far more effective than any other form, and it's certainly more trackable; you can tell your advertisers exactly how many people saw their ad and how many clicked on it, something you can't do with print, radio or television ads. You can also tell what sites they're coming from and what stories they're reading; that gives a lot of valuable demographic information.

In my mind, advertisers will eventually realize the power of the web and will be willing to buy more ads there and pay higher prices for them, especially on sites that have high repeated traffic. It may take a while for this revolution to happen, but as young people familiar with the power of Internet marketing advance through the ranks, I see it as more and more likely.

You know what a good example of this is? Gawker Media. Forget for the moment the debate over if their content is journalistic or not (I'd argue that much of it is) and look at their business model. Nick Denton has proven that you can run a network of online-only sites with no pay locks and full access to archives, supported solely by high traffic numbers and advertising. That's something that could work very well for a lot of newspapers. The challenge is attracting that number of viewers, but that can be done by creating strong content and engaging with the Web population through such avenues as blogs and online discussions.

Also, newspapers need to get past their typical aversion to linking to outside sources. The Internet is a two-way street and a link-based economy. If you're willing to give out links to good content, that makes others more willing to link to your material and increases your secondary traffic numbers. It's more about collaboration than competition. Successful newspapers in the future will not only have websites; they'll think like natural web users and adjust their policies and content to take full advantage of the medium.

Thus, in my ideal endgame, we wind up with most papers surviving and drawing most of their revenue from web ads. They may or may not still run dead-tree editions, but if they do, those will likely be in very limited numbers and done as a loss-leader to give the online version credibility. The Internet is the present and the future, and it's where the business is going, but it's based around freedom and open access fueled by advertising; trying to bring a paid model to the web is a step backwards in my view.

[This post began life in a smaller form as a comment I left over at Out of Left Field]


  1. Cuban's point, I believe, was that marrying local news with the cable companies would give you a much broader platform. Seventy, 80 per cent of homes are cable subscribers; while 15, 20 per cent subscribe to a paper.

    I've put a lot of sweat equity into creating strong content and engaging the web population. Three years into starting Out of Left Field, what do I have to show for it? Absolute sweet FA.

  2. You're quite right that a news/cable deal could increase subscriptions, especially if offered at a discount. It might even work well if it uses a Wall Street Journal model; plenty of free content with premium content and features for subscribers. Even that would cause a partial decline in readership though, especially if there are other all-free sources out there. Making online news sites subscriber-only would be even worse in terms of readers (and thus potential ad revenue) lost. As to your point on blogs, at the moment it's easier to sell advertisers on traditional media outlets than blogs due to pre-existing client relationships and strong reputations. That may change over time, but newspaper websites will still likely have an advantage over other players in the Internet market due to name and reputation, and that's one of the reasons I think an Internet advertising-fueled business plan could work for newspapers down the road.

    (Plus, as Advertising Age pointed out, many newspapers currently are profitable on their own; it's the debt leveraging and attempts to corner media markets that are killing newspaper companies.)