Required reading: The birth of Red Eye

From the inestimable Owen Youngman, the sort who always says his mood has never been better in spite of whatever crisis is breaking.

Here he outlines the birth of Red Eye, the youth-focused commuter paper of The Chicago Tribune, and a classic example of disruptive and lean product innovation at work.

You got laid off – now what?

I can tell there was another round of layoffs at one of my old newsrooms: I’ve had a flurry of LinkedIn invites from former colleagues.

There’s been the usual grumbling about the heartless bastards at corporate, at how these cuts will only further diminish our Noble Religious Calling, etc. – but the reality is these cuts are only going to continue in traditional media.

The financial numbers are awful: Print ad revenue at publicly reporting companies keeps going down, down, down.  Revenue is off by half since the 2006 peak, and has dropped for 20 straight quarters.

And it’s not the economy, stupid (sorry, Carville). Digital ad revenues at most shops continue to grow and the overall interactive ad economy grew by an astounding 23 percent in Q1 vs. the same period in 2010. Does anyone need more proof that the long-predicted seismic shift in ad-spending patterns has happened? Does anyone really think the financial picture will automagically improve? Buehler?

So: what should my newly unemployed friends do?

My erstwhile colleague Mark Potts offered sage advice in this neatly packaged 2009 blog post: 10 Tips for Suddenly Unemployed Journalists.  Some of my former colleagues must have already read it: The LinkedIn tip is No. 5.

I would add only a couple additional thoughts:

1) Start on all of Mark’s tips now – before the Reaper comes.

2) Keep backup files of everything – beat notes, your story ideas and especially your Rolodex. I know too many people whose employers locked their access to their email accounts the moment the layoffs took effect, and who suddenly lost years of carefully organized contact information. (My bosses were kind enough to extract it from Outlook for me. As a printout. Um, thanks.)

3) Get digital. Now. To paraphrase a delicious job-interview story,* there are two kinds of journalists these days: digital ones, and unemployed ones. Start a Tumblr blog, follow Andy Carvin to see  how Twitter can be used as a reporting tool, join ONA – just get in the damn pool.

The future of new is being invented right now, and plenty of traditional journalists are part of it.

But most of them aren’t at their traditional organizations anymore.

 

*OK, so that’s far from the most-elegant line I’ve ever written. But it gives me an excuse to tell a great story.

Years ago, just before the Great Collapse, a hot-shot job candidate was interviewing with the interactive corporate staff at the place I worked. She was an articulate, high energy MBA from a seriously good business school, and she totally nailed every interview. The team wanted to hire her quite desperately.

So in one of the final meetings in the process, our uber-boss makes an effort to impress her. He looks across the table, and intones in his most sophisticated and leaderly air: “You know, we’re in the process of turning this place into a digital media company.”

The candidate, who by that time had clearly and correctly decided that we were doomed, snapped back: “That’s good – because in about five years, there are going to be only two kinds of media companies: Digital ones, and dead ones.”

ONA parachute training in Birmingham

My friends at the Online News Association put together a terrific program at the University of Alabama-Birmingham for entrepreneurial journalists and others interested in starting news and information sites. (Thanks to the Gannett Foundation for the necessary financial support.) 

I spoke a bit about emerging business models to support these kinds of sites (and – plug warning – the work of my partners at GrowthSpur).

You should search on Twitter for the #ONAUAB hash for some of the fascinating discussions that grew out of the sessions. Less fascinating, perhaps, was my presentation – but for those who asked for it, it’s here.

(Why, yes – I used Prezi. My friend Tim Windsor snarks that Prezi screams 2009 the same way a Yamaha DX7 synthesizer screams 1983. But, hey, I liked a-ha.)

Also: Here’s Robert Hernandez‘s excellent presentation on how journalists can use social media tools (both to build audience, and to be better reporters).

And @DannySanchez’s informative riff on free tools doesn’t have a perfect online analog – but he writes about nearly all of those tools (and even more) on his blog, Journalistopia.com.

No magic bullets – so try a hail of them

I’ve been preparing a presentation to the terrific News Entrepreneur Boot Camp at the Knight Digital Media Center next week. I’m part of a panel of folks who have transitioned from the newsroom to business-side roles.

As part of the prep work, I’ve re-read a hefty stack of posts about emerging revenue models for news – advertising-supported for-profits, L3Cs, non-profit structures, even the wishful-thinking paid-content model.

Running through many of the pieces was an irksome thread: A focus on single solutions. Most framed the discussion in terms of “what’s the source of revenue,” as if there were a magic bullet that can solve every operation’s money woes.

There isn’t, of course. What’s more important, though, is there never has been. In times like these, naiveté isn’t charming – and for entrepreneurial journalists, it can be downright dangerous.

No successful news media organization has ever relied solely on a single source of revenue. In fact, the most successful industry segments – newspapers, magazines and broadcast stations – have long had many revenue sources, almost too many to list.

There’s more elaboration – and a rough list of the different sources — in this deck.

Key takeaways:

-  Don’t think too broadly. Even something as seemingly straightforward as “advertising” isn’t a single source of revenue. There are myriad advertising products – each with distinct strengths and weaknesses, sets of customers and sales models.

- As you plan the revenue models for your own proto-business (that’s what start-up journalism sites are, folks), copy the best of traditional organizations. Find multiple streams of revenue.

(Lest this come off as too scolding: I think it’s fantastic to see journalists actually interested in this sort of question. For decades, most of us acted as if the money that powered our organizations was created by magic. Worse, some assumed that it was the result of their brilliant journalism. For a welcome example of incisive, if tardy, analysis, see James Fallows’ terrific Atlantic piece on Google and the news industry.)

Defense loses this ballgame

Most of what I hate about the newspaper industry was encapsulated in a single session at the American Society of News (not Newspapers! Really!) Editors meeting in D.C. a few days ago. An otherwise smart agenda took the inevitable detour down the rabbit hole with yet another discussion of pay walls.

Walter Hussman, publisher of the Arkansas Democrat-Gazette in Little Rock, flogged his usual paywall-as-a-defense argument: In a world where online users are worth less than print readers, he seems to say don’t bother with the former. “Why would I want to be platform agnostic when I can get (ad rates of) $40 (per thousand print readers) instead of $4?”

 I was reminded of two recent, similar quotes:

  •  An analysis ascribed to Washington Post president Steven Hills in a devastating New Republic piece on the paper’s woes: Post print readers are worth $500 a year in revenue; online readers are worth only $6.
  • Rupert Murdoch’s assertion that users will cough up for online content: “When they’ve got nowhere else to go they’ll start paying.”  

Hussman and Hills are both falling for the same “defense first!” mentality that has crippled innovation at newspapers. They’re implicitly assume print readership will stay the same forever (it isn’t ), and that print ad revenues will maintain, too (they aren’t).

Rupert is making an even bigger mistake. He assumes “nowhere else to go,” conveniently forgetting that his media empire was built on expensive printing plants and government broadcast licenses, each of which makes competition economically unfeasible.

Clearly, Rupe hasn’t noticed that those monopolies are gone (or maybe he’s blustering). Local television stations are emerging as real competitors  to newspaper sites in many markets. Some, like Allbritton Communications in Washington, are building separate sites to target niches and general news. And there are plenty of independent  local  sites, with new ones springing up all the time. On their own, they may not seem formidable. But enough of them in a community could ruin a local newspaper publisher’s day. No wonder potential entrepreneurs are licking their chops.

 (The ease of publishing via free services like WordPress  and Blogger are a key reason that “information wants to be free.” More on that, including some semi-geeky economic theory, another day.)

 If competition makes paywalls nothing more than defense (and the numbers sure seem to make that case), then what’s a better answer? What gets at Hussman and Hills’ arguments that print readers are worth more?

Let’s take this out of the emotional world of change for a second, and into the dispassionate world of math. Everyone remember the commutative and associative properties from third grade?

If your print readers are worth 10 times your online users, then work to get 10 times the number of online users. You’ll make the same amount of money. (Actually, you’ll end up with more – production costs are lower on digital platforms. No paper, no trucks.)

Daunting? Sure. Simply regurgitating your print product in digital formats won’t grow your audience ten times. No single product will, either.

But a network of niche products is part of the answer.

So is good app for the iPad (and don’t forget the waves of similar devices that are sure to follow).

It also means forcing the business side of the house to think clearly and execute.  And it means engaging in biz-side thinking ourselves.

If our goal is to grow our audiences again – not merely milk the ones we have – we have to engage consumers. We have to give them what they want, when, where and how they want it.

Yes, it’s not easy. Innovation never is.

But doing nothing – or hiding behind a paywall – merely guarantees a slow, lingering death for newspapers. That’s unfair to shareholders, to employees – and ultimately to the communities we serve.

If Moore’s Law befuddles, watch the tourney

OK, I know that I rant about Moore’s Law continually. It’s the key driver of the digital age. It’s why things that seem incomprehensible get invented, and it’s why things that flopped spectacularly just a few years ago are common and successful today.

But many people – traditional journalists especially – struggle to get Moore’s Law. “Half as expensive per unit of computing power every 24 months … wha?!?”

This analogy struck me today (and, thanks, Florida, for blowing my bracket on the very first afternoon): The NCAA tournament is an example of a Moore’s Law function in action. How do you get from 64 teams to the Sweet Sixteen in just four days? Simple: The number of teams drops by half every round.

The tournament grinds down 64 teams to the final four in just eight game days.

Moore’s Law grinds down a $500,000 server to under $10,000 in a decade.

Don’t let the math equations freak you. Just know that whatever kind of entrepreneurial journalism you want to try, the hardware is cheap. And it will only get cheaper. (The software, too.)

Fear the Turtle.

Why the Newsday paywall is irrelevant

Much kerfuffle – and more derision than warranted – erupted earlier this week when the New York Observer reported that Newsday has sold only 35 online-access subscriptions since it walled off the site last October.

There was astonishment at the low numbers:

“Michael Amon, a social services reporter, asked for clarification. “I heard you say 35 people,” he said, from Newsday‘s auditorium in Melville. “Is that number correct?” [Publisher Terry] Jimenez nodded.

There was hand-wringing: The Observer’s John Koblin archly observed that Newsday.com’s relaunch and redesign last year cost $4 million … to gross $9,000 in revenue.

That analysis is technically correct, and utterly wrong. Ultimately, that’s why neither side in the Great Paywall Religious War should waste any time thinking about it.

Newsday’s pay wall isn’t about making online-subscription revenue. It’s only partially an attempt to protect print circulation. It’s all about protecting one of the most lucrative businesses around – high-speed Internet access.

The paywall rules first: The only people who get unfettered access to newsday.com are Newsday print subscribers (there’s the modest defense for print circ) and/or subscribers to the Optimum Online high-speed Internet service provided by Cablevision, Newsday’s owner.

Let’s do the math that the Observer, the grumblers in the Newsday newsroom, and just about every blogger out there didn’t bother to do. (I was hoping Alan Mutter would do it for me – lord knows he’s great at it – but he was writing about the iPad today.)

First, understand the economics of the cable-television business: Most of the costs are in stringing the wire past your house. (Lump in the copper or fiber itself, the equipment back at the cable headend and the labor to keep it all running.)

Depending on how tightly houses are packed, it all can run from a few hundred to as much as $1,500 “per household passed” in cable slang.

Oh – Cablevision pays that whether you subscribe or not. Every neighborhood they try to serve is a massive sunk cost.

Now let’s look at the revenue side of the cable business: A subscriber in my wife’s ancestral homeland of Massapequa might pay $50 a month for basic cable. But Cablevision has to share that revenue with the programmers – a few pennies per month per subscriber for niche channels like National Geographic, but more than $3 a month for behemoths like ESPN. Basic cable is a nice business, but not an obscene one.

The obscene ones are those the cable companies entered in the last decade: digital telephone service, and high-speed Internet. They had to upgrade their wiring – and for a company like Cablevision, that meant shelling out billions. But once they did, they could offer bundles of service with essentially zero added cost.

Think about that for a second: They already paid for the wires past your house. If they can get you to sign up, they collect $30 to $40 a month for high-speed Internet. Their cost? A few pennies in FCC fees (oh, wait – they add those onto your bill!), a few more pennies to print the bill (oh, wait – they’re bribing you to “go green!”), maybe 40 bucks once for the cable modem (that’s why they give it to you!).

Let’s round it down and say that every Cablevision high-speed customer is worth $400 a year in profit.

That’s a fabulous business. Until, say, Verizon FiOS comes to town with a competitive product.

So the math gets really simple: If FiOs can convince a mere 100,000 people on Long Island to switch, Cablevision loses $40 million a year in profits.

If you’re Cablevision, you use every tool at your disposal to stop that. Even the blunt cudgel of a pay wall at Newsday.

I have no particular love for the spinmeisters at Cablevision, but the math backs up their words: the paywall strategy at Newsday is designed “to provide Cablevision’s high-speed Internet customers with reasons to remain with Cablevision, reasons to return to Cablevision, or reasons to choose Cablevision.”

The essential digital-economics library

My older brother used to joke that when I wanted to learn to play baseball, I read a book. Mike’s style: Pick up the ball and throw it harder than seemed humanly possible.

Hey, we all learn differently, right? So when friends – especially newsroom lifers – ask how they can catch up with the digital revolution, I default to books. These are some of the titles that formed my thinking about information economics and the digital revolution.

Read these and you’ll understand that “information wants to be free” isn’t religious sloganeering – it’s the logical outcome of perfect, free copies. You’ll also understand how that same force Continue reading →

A tale of two movies

Like an awful lot of Americans, I spent the week between Christmas and New Year’s Day gorging on filmed entertainment. In between fistfuls of unhealthy popcorn, I started to think about the lessons two of the movies can teach entrepreneurial journalists.

Avatar sceneThe first: Avatar, in all its 3D glory at the local cineplex. James Cameron spent at least $230 million – and maybe as much as half a billion dollars.

The second: Dr. Horrible’s Singalong Blog, a DVD gift from a hip brother to my 15-year-old. Dr. Horrible cost around $200,000 in up-front cash, maybe double that when you factor in all the donated services. 

Yes, less than one-1,000th the cost of Avatar. (Put another way: Dr. Horrible cost less than six minutes of a mediocre hour-long scripted TV drama like Numb3rs.)

No, the point isn’t whether Avatar is 1,000 times more entertaining than Dr. Horrible. The point is that these two works are terrific in their own way; have vastly different economics; and are producing nice profits for their creators. Continue reading →

Yes, the business side matters

 

Economist Robert Picard has always been one of the sharpest thinkers about the nexus of economics and media. Today, he nails a topic that has long vexed me (and others): the willingness of journalists to stay in their newsroom cocoons, woefully ignorant of the business workings that for so long provided bountiful resources for newsgathering.

The full post is worth a read. (And, for that matter, Picard belongs in your RSS reader alongside the usual suspects like Romenesko, Mutter and Jarvis.) But if you’re skimming:

Journalists need to be equally responsible in ensuring they produce news and information that has value. They need to be responsible for ensuring their new organizations create the revenues and organizational strength needed to carry out high quality journalism. They need to ensure that organizational decisions make the organizations and the journalism offered viable.

If journalists continue to deny responsibility for the operation and survival of their news enterprises, it will be impossible to create sustainable news organizations for the future.

That, by the way, is what we aspire to at this humble little blog: Help create the future of news. It will be done by generating revenue, trying a multitude of new ideas, and thinking about the business as much as fretting about the perfect lede. (Believe me – the reporters I was privileged to work with suffered enough of that from me already.)