The NAA’s secret meeting

Newspaper execs gathered in Chicago this week in a not-so-secret meeting to discuss their mutual problem — a collective southbound bottom line. Staci Kramer has an excellent summary including information from Steve Brill of Journalism Online, the group of former media executives trying to solve the “problem” of how to monetize online content. Brill’s group has a model that they’re trying to sell, and the newspaper people at the meeting were eager to hear all about it. According to The AP, the meeting was called “Models to lawfully monetize content.”

The problem, from my perspective is enormous, because the disruption that’s killing legacy media isn’t about content, it’s about advertising. The assumptions of any content play are that its value is so great that expensive, adjacent advertising will support it and that the mass attractive to advertisers can be created through scarcity. Neither of these assumptions is viable online, and the real problem is that both must be present for significant revenue to be realized.

Advertisers don’t need mass anymore, because the Web efficiently allows them to directly target potential customers in a variety of ways. Gordon Borrell has a great post today (Are We NUTS?) on why legacy media companies don’t believe the size of his revenue projections at the market level.

With the Internet, however, you can’t fathom the universe of companies and individuals selling things like email advertising or search advertising or banners. In a lot of cases, they aren’t even companies, but individuals who don’t have business licenses and thus cannot be tracked at all for their “ad revenue” receipts.

The amount advertisers are spending is truly stunning, and much larger than most people imagine. Those who understand the true breadth of opportunity are more likely (in my humble opinion) to get a larger share than those who underestimate it.

News content online is a ubiquitous and increasingly commodified community, and attempts to restrict access so as to create scarcity will only result in the isolation of those who need most to be a part of the discussion, professional journalists. If you think newspapers will be able to restrict ANY reference to articles they publish, I’ve got some oceanfront property in Arizona that I’d like to sell. And even if they could accomplish such a monumental task, the disruptions in advertising will continue make the model of ad-supported content increasingly problematic.

The newspaper industry is obsessed with an old model, and rather than trying to fit its square peg into the round hole of Media 2.0, it makes much more sense to focus our attention elsewhere. We should nurture our legacy products as best we can, but we simply must separate our ability to make money from our dependence on the content we create.

The key to that is in defining, understanding and developing the Local Web.

Comments

  1. There will always be demand for content. Imagine a world tomorrow, where newspapers die and all news is obtained online. Who is going to provide that news? Bloggers? I don’t think so. Whether or not people want to admit it, blogging is primarily about commentary which references other news sources or other blogs. Yes, there are exceptions to the rule; however, I would argue that any exceptions are few and far between. Who is going to provide the local stories, which affect our individual communities? You know, the news about city corruption, crime, spending and tax proposals, ballot initiatives, zoning changes, etc? Bloggers aren’t going to hit the bricks, ferreting out stories like real reporters. They sit comfortably in their dens, typing away about the work done by actual reporters. I’m not saying that blogging doesn’t have value. It does. But there is a role for traditional news-gathering, and anybody who says differently is a charlatan.

    The real question is this … how do the traditional news-gatherers monetize this content? The short answer is that most won’t make it. I think that what we’re going to see is a reduction in the number of news-gatherers to a notable few: AP, Reuters, etc. They will license this content to others — like Google or whoever — who will aggregate content. This has already happened, to some degree, but the structure of the industry is going to change, since so many newspapers are folding. Companies like AP and Reuters and others are not getting the same revenue that they got 10 or 20 years ago.

    Bottom line, newspapers are dying primarily because people don’t need or want paper anymore. Not because they don’t find value in the content that’s provided. Let’s face it: Getting your news online is more environmentally-friendly, you can get it 24x7, it’s mostly free, and you have many, many choices about where to get your news from. The decline in newspapers will cause many of these media companies to shutter their online websites which have been subsidized until now with print revenues. Many of these newspapers are merely aggregating content from AP and Reuters. If other websites have access to the same content, there’s really no way for them to differentiate themselves from one another. So, they’ll perish.

    The only winners that will be left standing (and by winners, I mean ones actually making serious money) are the guys providing the fundamental news streams (AP, Reuters, etc) and the guys who can leverage traffic to drive advertising at their websites (eg. Google, Yahoo, MSN, etc). There are no in-betweens. People aren’t going to pay for the content. WashPost and NYTimes have a miniscule subscriber base compared to the size of the news-reading population. So, I would agree that the only revenue will be advertising-driven revenue.

  2. Tom,
    With all due respect I think you’ve got it backwards. You say “newspapers are dying primarily because people don’t need or want paper anymore. Not because they don’t find value in the content that’s provided.” Actually newspapers are dying because advertising is changing. It has nothing to do with paper.

    As for news, the mass market for newspapers never had much to do with news as content. It had to do with the crossword puzzle, comic strips, now sudoko, the sports stories and gossip. The defensible advantage of paper is that it is very convenient, able to be easily shared, and disposable.

    Imagine a local newspaper that had 6 pages of comics, 1 page of world summaries, with links to the web 1 page of local summaries with links to the web, 2 pages of hometeam pro and high school sports + 20 pages of local ads with coupons and stories about the local stores. My bet is that it would sell just fine at 25 to 50 cents an issue.

    Until the journalist part of the industry squarely faces what anyone on the business side of the paper knows — the fact that most people, most of the time do not buy paper for news — they are not going to get this right.

Trackbacks

  1. […] Terry Heaton is also concerned about newspapers willingly shutting themselves off from the world, in an ill-conceived effort to make money the old way — through scarcity. News content online is a ubiquitous and increasingly commodified community, and attempts to restrict access so as to create scarcity will only result in the isolation of those who need most to be a part of the discussion, professional journalists. … […]

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