I originally wrote the post below as an opinion piece that was published on paidcontent yesterday – although I’ve changed the title here to one I think is a little better. Ahhh, the joys of being one’s own editor.
News Corp (NYSE: NWS). and other traditional news businesses are hand-wringing over how they will make money on the internet. I think they are focusing on the wrong problem.
The web is more than just a new medium. Rather than thinking about how they can sell the same old news via a new channel, media bosses should be taking this opportunity to re-examine old assumptions, to rebuild their product for the 21st Century.
The interesting thing about the news industry is that, when we examine it from the ground up, we quickly realize that it lost touch with its customers a long time ago, and that the model for the future will most likely look very different to what we are used to.
The great tragedy of the newspaper industry in the late 20th Century was that, in the pursuit of profit, quality journalism became a dying art. Budgets were reduced, journalists were asked to write more stories per day and were given less time to check facts. At the same time, editors were instructed to avoid stories that might create controversy and the expense of lawsuits. The result was more and more bland articles recycled from paper to paper, more politically motivated editing and the collapse of public trust in the newspaper industry. This story is chronicled in Flat Earth News by Nick Davies.
We kept buying, though, because we didn’t have any choice. The newspaper industry operated as an effective oligopoly and the value of the news itself was impossible to pick out from the bundle of hard copy distribution, advertising and content that we all purchased.
Fast forward to 2009 and the situation looks very different – all of a sudden, there is choice and the bundle has been picked apart. And, to make matters worse, the industry is possibly more exposed than any other to the trend towards $0 pricing for online content.
As Chris Anderson argues in his seminal book on this topic Free, The Future Of A Radical Price, the answer to this conundrum is not to swim against the tide and find a way to start charging for news, but, rather, to understand what is becoming commoditized and abundant, and what new scarcities are created as a result. In the book, Chris points out that, when he was young, food was scarce and the main problem of poverty was hunger, but now food has become so cheap and abundant that the biggest problem of poverty is obesity. The new scarcity is health, spawning huge industries in diet food and health services.
In the news industry, it is the news itself that has become abundant. Making a trip to the corner shop and buying a paper to find out what is happening in the world has shifted from being the only option to being the least good of a thousand options. I prefer to check Techmeme and Twitter, but there is the choice of thousands of other sites, aggregators and services that can deliver to your desktop or mobile. Moreover, there is no exclusivity in news per se – getting the headline from one place is pretty much equivalent to getting it from another.
The good news is that every abundance creates new scarcities and this is where the news industry must go to make money in the 21st century. The scarcities created (and enabled) by abundant news are interesting stories, thought provoking analysis, conversation and community, and trust/verification.
Interesting stories go beyond simple reporting of what has occurred, bringing in relevant context and staying with a topic as it unfolds. Thought provoking analysis will dare to shock, and to be wrong. Conversation and community will both make the experience richer for the active participant and improve the quality of the content on the site for the more casual reader. Trust and verification will make you go back to one site rather than another as you know the stories there will be more accurate (note breaking news should be published first and verified second, with appropriate caveats).
The successful news company of the future will have to take all this on board and deliver it with a radically lower cost base than this industry is used to. In the digital world, the news industry, like many others, will be radically smaller. This contraction is partly a consequence of much reduced distribution costs, but is also a reflection of the fact that the monopoly rents Fleet Street enjoyed in the last century are a thing of the past. Witness how Craigslist has reduced the multi-billion dollar classifieds industry to nearer $100 million.
Companies that follow the blueprint above are emerging already, notably TechCrunch for technology news, Talking Points Memo, FiveThirtyEight and The Huffington Post for politics, PerezHilton for celebrity, and Pitchfork for music. These niche sites all write compelling content, spend time building up their sources, check their facts, encourage writers to find the real facts behind stories and are trusted by their readers. And, they all generate solid advertising revenues and benefit from relatively low cost bases.
Note that none of them charge for news. They do, however, have the option of leveraging their standing in the community to generate other revenues. TechCrunch runs the TC50 conference, Pitchfork organizes the Pitchfork Music Festival and Perez Hilton charges for personal appearances. This is, I think, the real business model for news companies in the future – build a community around news and stories and maybe make a little in advertising, but the real money will come from leveraging the position in the community to offer services no one else can.
I drew inspiration for this piece from a number of sources, and thanks to those who provided some pointers via Twitter. I’d like to point to two authors/articles in particular that may recognise some of their thinking in my words – Paul Carr’s The future of journalism and Umair Haque’s – The Nichepaper Manifesto.