Sunday, March 09, 2008

The land of free

Brian B.'s comment on an earlier post I thought deserved a post of its own:
Doug: Following up on our discussion some time back on free vs. pay models for news Web sites, I wonder if you've seen this article in Wired magazine. It's Chris "long tail" Anderson on how and why some things become available for free. Apparently he's working on a book about the phenomenon.
First, go read the article. Make sure everyone in your newsroom reads it -- especially the publisher.

Now, consider again the reality of the modern news business:
  • The "news" as we do it has little intrinsic value.
  • The value came from the "wrapper" -- the newspaper. It is this part of the equation the Internet is destroying.
  • We are not going to solely "write" our way out of this, nor will we do it simply by increasing the number of photos of people with their pets or receiving the latest charity check (although it's probably a good start if, for no other reason, to get back to the roots of why we exist anyhow).
  • This is a two-part problem, and unless we think about and attack both parts ...
OK, let's again tackle these in order:

The news has little intrinsic value
If you don't understand why after reading Chris Anderson's article, go read it again. Yes, the news has value, but it is so fleeting and close to zero that it is economically impractical to extract it. I know it's hard telling a generation of journalists that what you're doing has no (or little) value, but until they have that catharsis, it's going to be tough to move on.

This, of course, is a blanket statement that will have variances. For instance, in a smaller area with less media, the "news" is likely to have more intrinsic value. Even these areas, however, are unlikely to be bypassed by the digital revolution, which means, eventually, there will be more sources for that local news. Whether they will suffer the same dilution that metro areas have or whether dilution will not get to the point where an economic model -- think small community newspaper, etc. -- can be maintained remains to be seen. This, of course, is the backbone of the faith in "hyperlocal" -- that somehow if we carve it up enough the resulting news product builds intrinsic value because there are likely to be fewer competitors in each sliver ( in other words we keep grasping for the monopoly or oligopoly straw that allowed 30 percent profit without any real innovation for 50 years or more). This, however, may be offset by the resources needed to produce enough material for each of these hyperlocal markets, plus the reality that it also takes fewer competitors to make a smaller segment unprofitable.

The value is in the wrapper
Until now, we have wrapped the various parts, each with minimal value, in the newspaper (or into channels on the airwaves). The very aggregation provided some value, as it made it convenient for readers to get most of what they wanted in one place. However, that "place" had limited space, and as their interests broadened and diverged, this wrapper became less relevant, long before online. It was prolonged by its monopoly position. Online destroyed that, and the economic model is rapidly collapsing (whether it will find equilibrium at a much-contracted level remains to be seen).

However, Google and Yahoo and Digg and Reddit, etc., are all just wrappers, too. They bring a new kind of convenience in the digital age. More on that in a moment ...

We are not going to "write" our way out of it
Go back to point one -- the inherent value of the "news." Again, not all stories nor pieces of information will have the same value. Thus we have "refrigerator journalism" in which those items, hung on the refrigerator door, have greater value to one or more people, as does the picture of someone's son or daughter, etc. And maybe a "big picture" article occasionally falls into this category.

But the reality is:
  • Such items, the things people probably are willing to pay for, generally have a micro audience. If you amortized the cost of production across the willing payers, it would be a serious mismatch. Advertising helps fill the gap, but we have not developed systems to match advertisers with buyers at this granular level, and even were we to, it's still not clear it would be cost-effective.
  • The cost of producing "must-read" pieces with a wider base of potential readership climbs rather quickly to the point where there is no marginal benefit. This becomes especially acute if you try to increase the frequency. (Think of one grabber investigative or other type of piece once a month versus one every day or two.) Plus, frankly, there's no guarantee that any local area has that many compelling stories. (This is another conundrum for local media -- a New York Times can amortize not only its expenses but its newsgathering over a much broader area, making it more likely it will find a steady stream of compelling reads.)

We have to attack both parts
If you have that catharsis I talked about, you realize this is a problem that has to be dealt with on two levels.
  1. Yes, we have to try to improve the "news" so that we increase its intrinsic value. How do we do that? Is it possible to do with economic effectiveness? (An honest assessment tells you that you absolutely have to get your audience involved to help with the production.) What are the elements of photos, stories, headlines that work for audiences? (When you begin to get into this you find lots of shibboleths and assumptions, but really very little reproducible research.) We can't write our way out of it in the sense that we are unlikely to produce a journalism in which every part has measurable, recoverable value. But we are likely to be able to increase the value of some parts.
  2. Develop new "wrappers." The industry track record on this is shameful at best. R&D has best been referred to in this industry as "rounding error," and now it is coming home. Cooperation has been hard to come by, too (anyone remember New Century Network). But if journalists expect to be more than just bit players, they are going to have to coalesce and crack this nut, as well as get a better idea of how readers/users interact with the material they are putting out. Read Anderson's article again closely. What he describes is a universe in which the digital product is largely free, but it's the wrapper that costs (if you elect to choose the more expensive wrapper).
The challenge for journalists is to figure out what new digital wrappers provide the convenience, credibility, portability, etc., that can add value to their product. So far, this industry has abdicated that to the Googles of the world -- and then it likes to whine that Google et al. are "stealing" its product.

So we, as journalists, have a choice: Do we want to be just "content" providers? If so, then admit you are going to rely on someone else to distribute your product and you are going to be one - small - dot on the map with relatively low value. Like any artist, you 'll be able to do what you are doing for its intrinsic beauty. A few will become superstars. Most will need a second job to eat.

If not, then somehow this industry is going to have to discover a way to break more than a century of independence, cantankerousness and anti-intellectualism. Whether it backs such efforts at universities, think-tanks, corporate R&D centers or all three, there is a small window developing. It starts next February when TV goes digital, freeing up tremendous bandwidth and starting a push that I predict within a decade will pretty much bring an end to the desktop computer. New devices, programs and ways of interacting with online media will all result.

News organizations -- and most journalists and j-schools -- missed the first window after the dot-com bubble burst. Now that they know this "Internet thingy" is real, maybe they won't miss the second.

But I'm not putting any money on it.

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At 3/11/08, 1:15 AM, Blogger Brian B said...

Thanks for this post, Doug.

I'm working on a chapter in a book on news in the future, and I suspect that this aspect of media economics will dominate it.

It's an information economy, and it's not clear which information will be worth something 10 years from now. Depending on your outlook (and your skills and flexibility), it's an exciting time or a scary one.


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