Last week, Apple announced that iTunes will eliminate copying restrictions (“digital rights management”) and adopt multiple price points. That news got New York Times media columnist David Carr thinking about a new future for news organizations. On Jan. 12, in “Let’s Invent an iTunes for News,” Carr essentially contended that getting people to pay for journalism is the best hope for preserving news organizations and enterprise reporting.
Carr wrote that Steve Jobs revolutionized music distribution by recognizing that music could be “an ancillary software business to generate sales of the iPods and iPhones.” He noted that he pays for an online subscription to The Wall Street Journal and uses Cook’s Illustrated and Consumer Reports as examples of publications that charge for access for some of their online content.
All of this is true. But then Carr went further, quoting a Bernstein Research report as saying it’s “idiotic on its face” to assume that the cost of news-gathering can be supported by online advertising. “Free is not a business model,” said Bernstein analyst Craig Moffett (as quoted by Carr).
I beg to differ. Here’s why:
- An “iTunes for News” already exists. It’s the Amazon Kindle store. Quite a few publishers sell their content — for a fee — to Kindle users. Just last week, USA Today stated selling paid subscriptions to Kindle users.
- News stories don’t get replayed. Even if you imagine a future in which the Kindle (or some superior electronic reading device) is as ubiquitous and easy to use as the iPod/iTunes package, there’s one critical reason to think people won’t pay for news content like they do for music: When people discover a song they like, they want to hear it over and over again. This was the principle that drove AM radio decades ago, and it drives iTunes today. As much as I love great journalism, it’s awfully rare that I want to read any article more than once.
- Newspapers aren’t folding because people don’t pay for news. The constant drumbeat of bad news about the financial situation for newspapers conceals the fact that most papers remain nicely profitable on a cash-flow basis. It’s just that some of the largest newspaper companies borrowed heavily to finance their expansion plans and now can’t pay back their debts. For evidence, check out Alan Mutter’s analysis of the financial plight of Lee Enterprises.
- Online advertising can — and already is — paying for some professionally produced content. Consider CNET.com, Marketwatch.com, and ESPN.com. These sites make money online by attracting large, target audiences that are attractive to advertisers.
I’m not blind to the challenges facing journalism in the digital age. I am indeed quite worried about the consequences for our society if there isn’t enough money to support original reporting — especially outside large cities where the ad revenue associated with any specific story may not be sufficient to pay a journalist to produce it. But amid the current journalistic gloom and doom, I can see the outlines of a successful business model emerging, if news organizations would consider these options:
- Challenge cherished traditions that news organizations can no longer afford. The Detroit newspapers, for instance, have decided not to home-deliver print editions if there’s not enough ad revenue to pay for distribution. Is that a crazy idea? It certainly seems less crazy than cutting the investment in original reporting.
- Adopt new technologies and workflows to make news production more efficient. Many traditional news organizations have redundant production processes for their traditional (print or broadcast) product and the Web. These must be consolidated.
- Distribute professionally created content through as many channels as possible. Stories must go out in print, on the air, online, via mobile technology — and yes, on the Kindle or another “iTunes for news.” When appropriate, news organizations could share the cost of content creation with other news organizations. The Miami Herald and Poynter’s St. Petersburg (Fla.) Times, for instance, already collaborate to pay for coverage of the Florida state capital.
- Adopt practices to increase the loyalty of online audience. Despite their financial challenges, traditional news organizations have been very slow to adopt blogging, permalinking, article commenting, social networking and other approaches that are proven to bring repeat usage. The average user of a news site spends less than two minutes per day there; it’s no wonder there’s not enough revenue!
- Improve online ad sales and targeting. Borrell Associates reports that top-performing local media Web sites generate two or more times the revenue of the average site. The Interactive Advertising Bureau reported last year [PDF] that publishers can earn 10 to 16 times as much money by directly selling an online ad themselves as by turning the ad over to a national ad network. And highly targeted online ads — now becoming possible through advanced behavioral targeting — can yield even greater revenue. (For more on this point, stand by for an upcoming report on online ad networks, which I’m editing right now for Northwestern University’s Media Management Center.)
(Thanks to Bill Densmore for the pointer to Carr’s column.)
