Live Blogging — The Quest for Pay Models

by David Robinson | November 13, 2009 | Uncategorized | 1 Comment

Hi, this is David Robinson, live blogging the panel on The Quest for Pay Models. Our participants:

• Penelope Abernathy, University of North Carolina, Chapel Hill
• Steven Brill, Journalism Online Inc.
• James Kennedy, Associated Press, VP for Strategy
• Tom Glocer, CEO of Thomson-Reuters
• Robert Pickard, Jonkoping University, Sweden

Here’s some background on Penelope Abernathy (bio). She asks, why have investors abandoned news conglomerates? Because in their judgment, barriers to entry, which used to be substantial in the news business, are now minimal. On the revenue side, meanwhile, classifieds are gone, and pricing leverage for display ads has declined because Google et. al. create new (competing) ad inventory.

James Kennedy of the Associated Press says he’ll talk about harnessing forces of nature. When the AP did an enterprise (exclusive) story about a computer virus that could fill up your computer with child pornography, a Google search shortly afterward showed 32,000 hits–far more than the number of authorized outlets from which the AP collected syndication fees. [But your rapporteur wonders: doesn't this count also include any secondary comment on the story, and any fair use excerpting, that may have occurred online?]

The old model, Kennedy says, has been upended: There are too many facts, too many updates, being presented, and not enough context or forward-looking prediction. The five story front page and the 6:30 newscast are gone, so people are moving through the news with no rhyme or reason. “It’s not a good experience.” The old business model, that was built on packages, no longer works. Rather than “pushing” packages of news, we have to let users “pull” what they want. Media is atomized, rather than packaged.

Right now, you can have packaged or atomized news for free, and some packages are profitable. Can atomized news be profitable on its own? New initiative called the News Registry is “an effort to standardize the metadata and formatting” of news. Coverage in PaidContent, Poynter. Kennedy calls this “monetizing along a trail [of users' browsing], not trying to monetize the old packages.” [But, technical observers say the press coverage misunderstands the underlying technology.]

Next up is Steve Brill. Here’s some background on him. Short version: He created Court TV and The American Lawyer. His take? “About ten years ago, a bunch of news organizations committed suicide” by making their valuable content available for free. The New York Times’ plan is to charge young people for the newspaper they don’t want, and to give them for free the web site access which they highly value. He says the goal is not to create a new model, but to bring back an old model: readers and advertisers share the costs.

Brill’s vehicle to do this is Journalism Online, LLC. (Here’s a PaidContent writeup.) He says it’s not a paywall, but a “process where you gradually wean people off of the idea that everything is free.” It will allow market segmentation by user geography. [Note this is analogous to ESPN360 and could be considered part of the net neutrality debate.]

Next is Prof. Robert Pickard. (Bio) He says media organizations are focused on the revenue they can extract, rather than focusing on the publisher. “There are about a dozen elements to a good business model, and the last one is price or revenue.” It’s about giving people reason to pay you. He challenges the idea that news media is like other media that people buy online, such as music and video. And the idea that payment systems for news are efficient. People have a much greater willingness to pay for entertainment media than for news, and this is reflected in the prices each get in the market. Further, the offline product is not only news, and is not the same online as off. Print news consumers are buying selection, organization, bundling, delivery, and a tactile experience, none of which remain unchanged online.

Online content is relatively unorganized and much harder to navigate. Less pleasant experience than paper, and the promise of personalization or interactivity is largely unrealized. The worst problem is, you don’t know beforehand whether a story is worth buying (since you haven’t read it yet). [But isn't this also true of other media?].

You need 50-100 online readers to replace a print reader, 15-20 online ads to replace a print ad. Meanwhile, paywalls ask a community who largely are not paying for the offline product to begin to pay for an online product.

Next is Tom Glocer (bio, blog), CEO of Thomson-Reuters. Says what Steve is doing is brilliant, since it will make it easy for content providers to “dial up or dial down” how much of their content is paid for. Creative destruction is supposed to be painful–no surprise there. As a practical person running Thomson-Reuters, it boils down to revenues and costs. The current generation of newspapers “have lost track of that balance.” There has been a cross-subsidy by advertisers, the cover price for newspapers was ridiculously low. Now that advertisers know which half of their ad spend is wasted, total ad spend will go down (even without a recession). The cross-subsidy came in large part from the inefficiency of advertising, which has been eliminated. There is a very bright future for journalism. Thomson-Reuters billions of dollars a year from professionals, 90 percent of it for electronic media. That’s “niche.”

In Q&A, James Kennedy says that once it became clear that online was a substitute for print, they should have begun to rethink revenue. Steve Brill says that he refused to give away the American Lawyer on the Delta Shuttle, even though that would have increased circulation, because the incremental revenue would have been outweighed by the loss of subscription revenue (they were charging about $500 a year for subscription). Brill says the goal is to ask the ten or fifteen percent of readers who are most engaged to pay a small monthly subscription.

Robert Pickard says that in packaged news, there is cross-subsidy for content only a few people care about. Micropayment systems would end this cross-subsidy. Steve Brill points out that his venture aims to sell monthly subscriptions, not micropayments.

Tom Glocer, of Thomson-Reuters, gives an example of news segmentation: A news flash about new Fed monetary policy goes out for free, but specialized traders with special equipment get it a second quicker, or can use it in an integrated computer trading system. Later, the full story goes out to professionals. Later, the story goes out to a public website that, based on advertising, covers its own costs and serves as a storefront for high value products. But ad sales are just two percent of revenues. In the last seven years, Thomson-Reuters has hired hundreds of journalists.

Robert Pickard points out that 90 percent of the online ad revenue goes to the top ten grossing web sites. There’s not a lot of ad revenue online.

James Kennedy is asked, is it plausible to expect that AP will guide people through the news? You said that the user experience on Google is muddled and doesn’t work–but doesn’t Google’s huge success belie this? Kennedy says his point of view is that search “produces results — it doesn’t produce discovery, in a lot of ways.” In some cases, Google shows a tremendous amount of duplication, or things from the wrong geography. What we’re trying to do is to make it possible for machines and humans to connect the dots and understand the news. Steve Brill says, “God forbid that when you hear Michael Jackson died, you go to Google and get a story from a newspaper outside your local geography. I don’t think that matters much to customers” (near-quote). But: community news, whether local geographic community or the community of people who share a certain interest, can indeed be valuable for people. Targeted publications are really giving up a lot when they don’t ask people in that community to chip in something for it.

Tom Glocer acknowledges, in response to a question, that paywalls reduce audience size and make it harder for reporters to get access to their sources. Steve Brill says that targeting the most engaged users won’t raise this problem as a paywall might.

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