Opinion: the news industry needs to look beyond news to find a business model for 21st century business

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.

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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.

  • RobWilmot

    It'll be interesting to hear if James Murdoch touches on this subject when he delivers MacTaggart lecture at the Edinburgh International Television Festival tonight. I have to say I broadly agree with you re: the fact that they shouldn't just put a pay wall in front of an online version of their popular titles (However well this has worked for their TV news service which is funded in the UK by ten million Sky subscribers). You have to admit though that they are displaying great guts in trying the paid for news model online. If it succeeds then it will answer the question of whether or not it would work (which has been on all our minds for years now). And if it doesn't work, we can all sit back and say 'told you so' with the question answered once and for all, then move on with new approaches.

  • Hi Rob – you could argue that they have little choice but to try out paid models now, although I agree that Murdoch's very public stance takes guts.

    The thing with paid TV is that we had little choice – if we wanted the football or movies we had to subscribe. News Int won't have that help this time round.

    Writing that opininion piece I found myself expressing my views with greater certainty than I normally do, and as you say the jury is still out on this issue. That said, it will probably take a decade to fully play out.

  • RobWilmot

    I agree things have to change, and it was disappointing that James Murdoch spent so much time lambasting to BBC and not so much on new business models in his MacTaggart Speech.

    You're right though, buisiness models will have to permutate to match the changing media landscape (mostly due to the maturing audience that now takes the Internet and its free content for granted).

    You say it's probably take a decade to fully play out. But hey it's going to be an awfully big adventure!

  • Great piece – would also love to see some examples of UK based companies who are pioneering business models. http://bit.ly/K46gE Surprisingly few really radical, big thinking approaches.

  • Thanks Mark

  • Great piece – would also love to see some examples of UK based companies who are pioneering business models. http://bit.ly/K46gE Surprisingly few really radical, big thinking approaches.

  • Thanks Mark

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