I think people are still in the mindset that the value produced by a journalist is in articles, period. I think there is more value to be created in the interaction between journalist and audience that the web makes simple to execute.
For example, right now articles have to be the same for all subscribers. But there will be some subscribers who care more about a particular article (or topic) then others. Why not enable those extra-interested subscribers to pay more for additional information about a particular article, or interaction with the journalist? Articles could have multiple tiers of access, journalists could have VIP hangout areas where your comments are guaranteed to be responded to, etc. Or an audience could put up reward money for journalists to investigate a particular topic (this has probably been done already, right? EDIT: spot.us).
Right now everyone is forced to subsidize the "general" interest categories, so we get a million articles about the same top-10 topics of the day, and this sucks. Enabling additional revenue will not come from a different way to treat those same topics but rather from better ways of engaging with increasingly niche audience groups.
I also think the future value of news is in the relationship to journalists and reporters. They need to become 'celebrities' to a certain degree. The Huffington Post is a good example.
However, I think the transaction costs of crowd-sourcing articles are too high. People have better things to do then finding topics to fund. It already didn't work for open source projects.
I would object against naming HuffPo as a good example.
1) They are not profitable.
2) Quite a few of their articles are just rewrites of other journalists work. They read article in other media, and then re-tell it in their own words. Which of course is much cheaper than to really report. So they are dependent on other media in their operation, and also the point 1) applies.
p.s: I don't have anything personal against HP, I just think they didn't prove anything yet.
Interesting analysis, but with 80% of the profit going direct to the journalist, I have a hard time imagining how they give their sales staff a decent commission AND cover their overhead. In such sales-driven industries, the commission alone regularly hits 15% and upward.
That means at best, without a dedicated sales staff, there's going to be a lot of that remainder traffic that doesn't require sales staff and pulls in even lower margins.
Edit: The blog post goes into all these issues quite well, including factoring in a commission in his calculations. So, yay original poster
Moreover, in the so-called "real" journalism, in many cases the reporter actually has to physically go somewhere to witness what is happening, and then the total cost of producing an article is even higher, in other words journalism work is not only writing.
But still, in certain sectors like Tech or some other niches, the best outlets actually are profitable online; those are typically something between media and blog, like Techcrunch, gadgets blogs etc., where about 10 reporters are pumping out articles 24h/day, and maybe about 25% of articles can be called journalism (they called someone or went to some event).
But where this model doesn't work are general news, since they are quite expensive to produce and yet not perceived as very valuable. There it doesn't work.
What it really means is that online ads simply don't pull in enough money to support journalism, except in weird edge cases-- another business model is needed.
Exactly what that business model might look like is left as an exercise for the reader.
Great point. I would add the caveat that "online ads as they currently exist simply don't ...".
Jeff Jarvis (http://www.buzzmachine.com/) has been pushing papers to jump into marketing packages that go beyond the ad/CPM model. It requires better sales/marketing/ad staff and innovation, and isn't as simple as "We have your target market hostage," but then again, the pay is a lot better.
One wonders why the major news/media corporations haven't simply cartelized their ad space. If NYTimes, News Corp, Knight-Ridder, and Conde Nast got together and decided the ad space in their properties would cost $X, where X is enough to sustain good journalism, people would probably pay X in order to advertise in those websites, because they have large prestigious markets.
The problem with web-based advertising is that it is so damned measurable-- it's trivial to see if your ad is working or not (where "working" is defined as leading to a conversion appropriate to the task at hand.)
In the old days, a company might pay $X to run a print ad, and suspect that it was helping business, and then run it again, etc.
Now, it's trivial to know for sure, one way or the other. Which means that ad prices get tied to actual effectiveness, not to some amorphous notion of "prestige".
In other words: a lot of print advertising was horribly overpriced. I don't think a cartel is going to be able to put that toothpaste back into the tube....
Only slightly related, but a number of media outlets are currently talking about cartelizing their web subscriptions.
I think that Michael_Dorman's largely correct on this issue, however: If they do find they can even legally follow on your suggestions, there is still the next question of whether it's the most cost-effective buy. For some branding purposes (the prestige buy you mention), it might be. But while that is a substantial spend, it's not the majority spend and at the end of the day, cartel or not, the revenues simply won't reach where they need to be to support their businesses.
As far as I can tell, those corporations have been using third party ad networks to serve ads on their web properties. I think that limits the amount of control the NYTimes or WSJ might have over the pricing of ads, since the same ad might be run on a high-status newspaper like Washington Post and also on middling web-only pages alike.
I'm sure there are anti-trust implications if done improperly. But "The Deck" advertising network works on the same principle: limit ads to a certain network of blogs with a certain type of content, charging a different rate, having control over the type of ads, and delivering a certain known target market to advertisers. My idea for the big news/media corps is essentially the same.
Right on. The problem is the advertisements. Someone needs to figure out how to charge print CPMs for online content. It means thinking beyond banner ads--maybe even the whole CPM model.
Meanwhile, the calculations in this post are very conservative. Lots of journalists make more than $300 for a 1000 word article. The financial situation for working online journalists is even more difficult than suggested by the post.
Here is the standard framing of the print-to-online journalism problem: newspapers can no longer make enough money because (1) users won't pay for online subscriptions and (2) online advertising cannot make up for the lost print-subscription revenue. Thus, giving away content for free is not sustainable. (This argument is repeated everywhere.)
But haven't newspapers always subsisted on advertising? My understanding is that, historically, the print subscription price didn't even cover the cost of printing. So isn't true that the problem has nothing to do with giving away content and everything to do with the value of online ads vs. print ads?
I have never gotten a good answer to this question. Could someone help?
Historically a lot of newspapers made their money through specialist ads (classifieds, jobs, housing) - but both in print and online they just can't compete against niche sites that cover those areas.
Many major print newspapers aren't profitable any more either.
Just thinking out loud here but I wonder if the longevity of online content has been factored into these analyses? It might take a longer ramp-up but theoretically at least an article published online exists longer than an article in print. So the time revenue is earned on an article is also longer than revenue earned on an article in print. It's not entirely unreasonable to think that there might continual revenue per article earned for online content so as more content is created it snowballs.
Newslab is going to see a big pivot down the road. They want to build several complex structures simultaneously: an advertising network, a syndication network, and a content network. Technical innovation in any one of these areas will determine the path of the company and whether yahoo news buys them or not. It is highly unlikely they will succeed in all areas, especially content, but since they are smart they may be able to build a tool the big media sites want.
Still think people will continue to be willing to pay for editors, artists, photographers, page designers, researchers and all the other jobs news orgs have besides journo and ad sales.
I think people are still in the mindset that the value produced by a journalist is in articles, period. I think there is more value to be created in the interaction between journalist and audience that the web makes simple to execute.
For example, right now articles have to be the same for all subscribers. But there will be some subscribers who care more about a particular article (or topic) then others. Why not enable those extra-interested subscribers to pay more for additional information about a particular article, or interaction with the journalist? Articles could have multiple tiers of access, journalists could have VIP hangout areas where your comments are guaranteed to be responded to, etc. Or an audience could put up reward money for journalists to investigate a particular topic (this has probably been done already, right? EDIT: spot.us).
Right now everyone is forced to subsidize the "general" interest categories, so we get a million articles about the same top-10 topics of the day, and this sucks. Enabling additional revenue will not come from a different way to treat those same topics but rather from better ways of engaging with increasingly niche audience groups.