Thursday, August 12, 2010

“News organizations will rely upon a greater variety of revenue streams… and their proportions will vary”

Sustainable business models have emerged as a Holy Grail of America’s news industry. Frustratingly elusive, such models have caused much mind-wringing by a variety of media scholars, one of whom is Robert G. Picard.

A leading light of the media business, Picard holds the Hamrin Professorship in media economics at the Jönköping International Business School, Sweden, and is a fellow at the Reuters Institute for the Study of Journalism at University of Oxford. In this instant-messenger conversation with Nikhil Moro of UNT’s Mayborn School of Journalism, Picard expands on views he articulated a few days earlier at the AEJMC conference in Denver.

Professor Picard, you have said, “The real problem we have today is too much news.” What do you mean by that?

We have too much news in the sense that we are bombarded with news from print, broadcast, Internet, mobile, and outdoor sources. It has made certain types of news ubiquitous and commoditized it. Flow of events news is particularly widely available. Consequently one cannot create much value with it.

When news turns into a commodity, does its quality tend to suffer?

It can. However, one can have quality information and news that is commoditized, which primarily strips it of economic value, but it may still have some social value.

You have said that the news industrys problem is not revenue as much as a poor quality of its product. Elaborate?

The product problem today is that most news outlets are filling themselves up with inexpensive flow of events news from news agencies and features from feature agencies and syndicates that serve all types of media. The end result is that there is very little unique provided by different news organizations. Because some provide it free or nearly free, it makes it difficult to get the public to pay for news. News organizations have to pay attention to their products and ensure that they are higher quality and unique compared to competitors that did not previously exist.

Can you name five attributes of great journalism that also help the business side of news operations?

Uniqueness, credibility, specialization, knowledgeable analysis, and application to readers and listeners' lives.

How would you define credibility in news?

Credibility results from audience faith that the news source is primarily concerned with the public's interest, that it is making efforts to be fair and accurate, and that it is an honest broker of information. It is not just something news organizations do, but something the public BELIEVES they do.

Can a business model define the products social value?

Social value comes from news and information that helps us understand the world about us, gives us knowledge needed to participate in society, and helps us interact effectively with those around out. That kind of material is relative expensive to produce and only small percentage of news outlets engage in that kind of news production. A business model—the parts that define what the product is and how it will be produced—can incorporate activities most likely to produce social value.

The news industrys movement from mass medium to “niche medium”may be alienating mass advertisers. But can any good come of it?

Perhaps. It will begin to move news organizations away from being primarily providers of non-news content (75% or more of content in newspapers, for example, isn't news) toward a focus on news and providing in ways other distributors do not, and in better ways than other providers.

Is the health of journalism related to the stability of news organizations?

No. News organizations are in poor health today, but journalism is in good health. I say that because not just journalists but public officials and the public are discussing the importance of journalism and journalism practice and seeking new ways to ensure society has the kind of journalism necessary for public life and democracy to take place. The focus on the functions of journalism and how to achieve them in the future indicates an esteem for and support of journalism that has not been evident for many years.

You have said that the “mass media model won’t go away completely, but it will not be the primary model of newspapers in the future.”

The mass media business model is dependent upon creating an audience of such size that advertisers will be willing to pay a disproportionate part of the costs of operations so audiences can access content at a low price or free (as in television). Some advertisers will still be interested in reaching the smaller audiences that news produces, but additional revenue will be needed from other sources. In the future, the business model will include revenue generation from more sources.

What might be the other sources?

Raising the price to audiences is one. Engaging in commercial activities that can subsidize news operations is another option. Obtaining grants and donations may work for some providers.

Does Rupert Murdochs payment model have a chance when competitors such as BBC Online, which is funded by a license fee, are offering similar content for free?

That depends on how one defines success. Although BBC Online provides news and features, there is some unique content in papers such as The Times of London and there are people in Britain and elsewhere who will wish to access it for a fee. Those numbers will be far lower than those who want it free, however. There is no reader income when it is free and at least some when it is paid. From that standpoint it will be a success. However, a second question is whether advertising revenue lost from the reducing readers with the pay wall will decline to the point it outweighs the new income.

So is free a model?

It is a model, but only if someone other than readers, viewers, or listeners is willing to pay the price. Although many think of it as free, the BBC and its online operations are not and are paid for by the licence fees of nearly every British household. In general, free is not a good price from the producer’s standpoint, but consumers may like.

Professor Dan Gillmor said last week, “I am not clear which business model is going to emerge.” What is your assessment? Regardless, would you like to share a list of five emerging business models that are most likely to prevail?

It would be nice to say there is a single model that will emerge but there will be many, depending upon the unique characteristics and situations of each news organizations. I don't think it is possible to say there will be clearly separate models. What I foresee is that all news organizations will rely upon a greater variety of revenue streams than in the past and that the proportions from each will vary. Even not-for-profit media such as the BBC, NPR, and The Guardian now have multiple income streams, including commercial income.

If American newspapers have been losing 1-2% of their audience every year for 40 years, what is different now?

The current situation did not happen suddenly and the Internet is not to blame, but is compounding the long-term challenge. What has happened it that circulation has now reached a critical tipping point. Combined with new developments in digital media, both the public and advertisers are changing their consumption patterns and reconsidering all their media use.

Please name a couple of your favorite news outlets, perhaps newspapers that you read every day.

I regularly read The Boston Globe, The New York Times, and The Guardian in hard copy when they are available and otherwise online. CBS News and BBC are my main broadcast sources.

Any favorite Swedish newspaper?

When I am in Sweden I favor Dagens Nyheter.

Do you see a consolidation in the news industry in America? If so, at what levels?

Consolidation is already occurring at the local level through joint ownership and joint ventures between local newspapers, television stations, and cable channels. At the national and global level we are seeing major media operating several outlets and news services and we are seeing use of bureaus and reporters from other news organizations in gathering international news. When organizations encounter financial problems, consolidation is a normal business response.

Are you elated or bothered by consolidation at the national/global levels?

Both. It is a two-edged sword that has to be viewed with caution. From one view it is improving news provisions in some outlets, reducing costs, and making news more readily available. From another view, however, it reduces the number of news and information sources and creates fewer independent sources. That said, we are better off today in terms of the number of news providers at the national and international levels than in the past and the number is growing. Even at the local level we are now seeing a variety of new startups If the entrants balance the consolidation we will not have a problem; if they don’t, we will need to be worried about the effects.

Would you share some wisdom? -- your top five tips for entrepreneurs that are about to start a media startup such as a hyper-local or community news portal.

1) Do something different from newspapers and television stations in your cities.

2) Focus on what your readers need and are not getting elsewhere.

3) Make the public part of your effort; draw on their knowledge and expertise; allow them to participate in many different ways.

4) Pay attention to the management of the enterprise and ensure you carry out tasks that will make it sustainable.

5) Do not assume that merely because you are doing something good, it will be perceived as valuable and useful by the public.

Thanks for the stimulating interview!

You are welcome. I have enjoyed it.