IV: Greater urgency on relevance, research and revenues

IV. Greater urgency must be placed on relevance, research and revenues to support local journalism

Many traditional for-profit news organizations are one disaster away from extinction. They have cut costs so drastically in the past decade that more significant cutting could put them into a death spiral. Many do not have the financial strength to survive another 9/11 terrorist attack or economic shock. They must better understand how people interact with information online, then turn that knowledge into new services, products and revenue streams. They urgently need to focus on relevance, research and revenues.

The 3Rs of relevance, research and revenues are also vital for public media and non-profit media. They must understand and utilize market incentives to build engagement, loyalty and financial support. They need to be smart about how their journalism can be relevant to the communities they serve, especially when news consumption habits are shifting dramatically.

Relevance is about understanding the value propositions for consumers, advertisers and donors. What benefit do they derive from the time, attention or money spent?

Research is needed to identify unmet needs in the changing news and information ecosystem and to drive revenue. Whether the dollars come from advertising, pay-for-content, donations or transactions, revenues are a function of the value that is provided.

Value is not about merely giving people what they want; it is about knowing what matters to them and establishing a relationship of trust and enrichment. It is about respecting their values in the news judgments one makes. Interactive technology enables more meaningful connections between news producers and consumers than ever before.

An example of the importance of relevance and research can be seen in the Pew Research Center’s work on understanding the participatory news consumer. “In the digital era, news has become omnipresent. Americans access it in multiple formats on multiple platforms on myriad devices. The days of loyalty to a particular news organization on a particular piece of technology in a particular form are gone.” News is becoming portable, personalized and participatory.80

Advertisers, too, are changing. They are increasingly able to bypass media as a go-between with potential customers. Digital technology promises to give them unprecedented knowledge of whether and how their ad dollars are effective. The effect is ravaging the business model that sustained journalism for the past century. Even new, low-cost competitors are struggling to get financial viability in a world where content is presumed to be free.

The 2010 “State of the News Media” report from the Pew Project for Excellence in Journalism said the situation is urgent:81

• Newspaper ad revenue, including online, fell 26 percent during 2009, which brings the total loss over the last three years to 41 percent.

• Local television ad revenue fell 24 percent; triple the decline of the year before.

• Radio ads dropped 18 percent.

• Magazine ad pages fell 19 percent.

• Network TV ads fell 7 percent (and news alone probably more).

• Online ad revenue overall fell about 5 percent, and “revenue to news sites most likely also fared much worse.”

The report quotes one estimate that in 2013, after the economic recovery, “three elements of old media—newspapers, radio and magazines—will take in 41 percent less in ad revenues than they did in 2006.”

Despite all of the activity in journalism startups, the report’s conclusion is dire.

Unless some system of financing the production of content is developed, it is difficult to see how reportorial journalism will not continue to shrink, regardless of the potential tools offered by technology. And as we enter 2010 there is little evidence that journalism online has found a sustaining revenue model. A new survey on online economics…finds that 79 percent of online news consumers say they rarely if ever have clicked on an online ad.

This is a daunting challenge, made even more so because journalistic organizations historically have not adequately invested in nor valued research and development. Despite their current economic plight, their future may depend on carving out dollars to better understand relevance, research and revenues.
A. Develop shared principles and mechanisms to rationalize the online content economy

Content creators and technology service providers must collaborate to develop shared principles and mechanisms to protect content from misuse and to appropriately compensate creators for the value of their work. This will stimulate new forms of journalism from traditional and emerging media, and it will encourage the growth of new technology and services.

Two observations by the Pew Project for Excellence in Journalism drive this call for action:

• The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem—the decoupling, as we have described it before, of advertising from news.82

• Unless some system of financing the production of content is developed, it is difficult to see how reportorial journalism will not continue to shrink, regardless of the potential tools offered by technology.83

Many content providers are testing ways to have consumers pay for the online content they access from the content provider. But those payment mechanisms do not address the issue of content that is accessed through search engines and other third parties.

The Fair Syndication Consortium, a group of some 1,500 publishers, measured the extent to which newspaper content is reused and monetized by unlicensed websites. It found that 75,000 unlicensed sites reused newspaper content during a 30-day period ending November 15, 2009. “On these sites, 112,000 nearly exact unlicensed copies of articles were detected.”

The consortium asserted that, “Google and Yahoo’s ad networks dominate the unlicensed monetization of U.S. newspaper content. Google represents 53 percent of the total monetization with Yahoo accounting for 19 percent.” Blog sites made up less than 10 percent.84

This issue has been getting a lot of attention, but it is unlikely to be addressed effectively by legislation, legal action or even revenue-sharing deals among key players. Legislative consensus is highly unlikely with so many complex and contentious issues involved. Legal action is likely too slow to be helpful in such a fast-paced marketplace. And deals among interested parties may or may not serve the need for broad, collaborative understandings that serve the public good.

Chris Ahearn, president of media at Thomson Reuters, voiced what might be possible when he wrote:

Let’s stop whining and start having real conversations across party lines. Let’s get online publishers, search engines, aggregators, ad networks, and self-publishers (bloggers) in a virtual room and determine how we can all get along. I do not believe any one of us should be the self-appointed Internet police; agreeing on a code of conduct and ethics is in everyone’s best interests.

Our news ecosystem is evolving and learning how it can be open, diverse, inclusive and effective. With all the new tools and capabilities we should be entering a new golden age of journalism—call it journalism 3.0. Let’s identify how we can birth it and agree what is ‘fair use’ or ‘fair compensation’ and have a conversation about how we can work together to fuel a vibrant, productive and trusted digital news industry. Let’s identify business models that are inclusive and that create a win-win relationship for all parties.85

In proposing guidelines to speak to the issue, the Fair Syndication Consortium said:

To date, there is no uniform manner in which the undesired reuse of content is handled by publishers of media content. A rare and unique opportunity exists to define the set of rules which are reasonable and benefit everyone. Other industries like music, movie, television, and software have handled this in a variety of ways, with varied results. We feel that the publishing industry can learn from and leverage past experiences to provide a contemporary approach….86

Two examples of what might be possible in support of journalism can be found in the area of principles for user-generated video online.

“Principles for User Generated Content Services” were announced October 18, 2007. These principles say, “In coming together around these Principles, Copyright Owners and UGC Services recognize that they share several important objectives: (1) the elimination of infringing content on UGC Services, (2) the encouragement of uploads of wholly original and authorized user-generated audio and video content, (3) the accommodation of fair use of copyrighted content on UGC Services, and (4) the protection of legitimate interests of user privacy.”87 The companies supporting these principles included CBS Corp., Dailymotion, Fox Entertainment Group, Microsoft Corp., MySpace, NBC Universal, Veoh Networks Inc., Viacom Inc. and the Walt Disney Company. Their announcement of the principles said:

Widespread adoption of these principles will encourage innovation, enable new creative expression and further the goal of eliminating infringing content from UGC services. It will allow innovative business models to develop. Most importantly, it will benefit consumers by encouraging further cooperation between the creators of content—from the largest entertainment company to the individual artist—and the companies that distribute their works.88

On October 31, 2007, the Electronic Frontier Foundation (EFF) and several other public interest groups issued a document called “Fair Use Principles for User Generated Video Content.” The principles were intended to offer guidance to media companies and video hosting providers who were negotiating “new mechanisms to address copyright infringement while protecting fair use.”89

Fred von Lohmann, EFF senior staff attorney, wrote at the time that a critical component of the principles was a detailed description of the threshold to be met before materials are automatically blocked from posting. “In addition, the document includes a ‘humans trump machines’ rule, which is to say that users must be afforded the opportunity to dispute and override the conclusions of automated identification or filtering mechanisms.”90

Others who endorsed the EFF principles were the Center for Social Media and the Program on Information Justice and Intellectual Property at American University, Public Knowledge, the Berkman Center for Internet and Society at Harvard Law School and the ACLU of Northern California.

The UGC principles explicitly recognized that respecting and accommodating fair use was a critical goal. The Fair Use Principals then expanded on that point from the perspective of its public interest signatories.

Negotiations and deals among media and Internet companies to share revenues are frequently announced and are to be encouraged. But they are not a substitute for shared principles and mechanisms intended to serve the interests of all stakeholders in the news and information ecosystem.

What is needed is an open, voluntary and collaborative process to help rationalize the online journalism content economy. This process could be convened by neutral entities. The design of the process would include emphasis on the experience of alternative dispute resolution mechanisms.

This convening would be in line with the Knight Commission’s recommendation for policies that support innovation, competition and business models that provide marketplace incentives for quality journalism by traditional and nontraditional entities.

Protecting content from misuse and appropriately compensating creators for the value of their work is not a total solution to the question of how to pay for and sustain local journalism. But it could help provide foundational principles and some economic relief to legacy and emerging media as they work toward new revenue sources and sustainable business models.

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Finding symbiosis in the news ecosystem

Tom Rubin, chief counsel for intellectual property strategy at Microsoft, received an award from the Dispute Resolution Services of the Los Angeles County Bar Association for his role in leading and successfully completing the “Principles for User Generated Content Services.” His comments in accepting the award1 provide insight into what might help in developing a similar understanding about journalism content.

Rubin said the keys to success were:

• A shared commitment to the process—“a strong belief that launching principles would break a decades-long cycle of acrimony and disputes, and would best facilitate the adoption and growth of new technology and services.”

• A “shared respect for each other that let us break through typical posturing that often arises during negotiations…. We were willing to move off of many firmly held positions to achieve our goal, and all of us had to do that at one time or another during the process.”

In other remarks, Rubin addressed the need for a healthy symbiosis in the news and information ecosystem. “And symbiosis it must be, for journalism and digital consumption are forevermore inextricably linked.… Media companies are dependent upon technology firms for two things, readership and monetization online. And conversely, technology firms are dependent upon media companies to produce quality content that fuels their own business models online.”

Rubin said the central elements are copyright, competition and collaboration:

First, publishers and editors must be able to maintain appropriate control of their own branded content and the experience of their readers, and not cede those to search engines or aggregators. Second, the online publishing business must remain free and competitive, with plenty of room for new creators to emerge, and with no single entity—be it a publisher or a technology company—able to gain a chokehold over revenue streams or reader experiences. And third, publishers and technology companies must collaborate to ensure that the great promise of our digital age is realized in ways that preserve and enhance the quality journalism that free societies depend upon.”2

1. Rubin, T. C. (2010, May 5). Remarks to Los Angeles County Bar Association. Los Angeles, CA. Retrieved from http://www.lacba.org/Files/Main%20Folder/DRS/Files/Microsoft_Rubin_Speech_May10_2010.pdf
2. Rubin, T. C. (2008, November 20). The change we need. UK Association of Online Publishers. London, England. Retrieved from http://www.microsoft.com/presspass/exec/trubin/11-20-08copyright.mspx

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B. Improve audience metrics

A significant and urgent need is to develop better metrics for print and online audiences. Speaking at the 2010 Aspen Institute Forum on Communications and Society, Mark Contreras, E.W. Scripps Company senior vice president/newspapers, said simply, “Audience metrics are a mess.” There is no lingua franca for print and online audiences together, he said.

Contreras pointed out that during the first 15 years of broadcast television, audience metrics were chaos. That changed in the early 1960s after Congress threatened to intervene. “As soon as trust was put into that ecosystem, revenue followed.”91

In September 2010, Nielsen unveiled what it calls “Nielsen Online Campaign Ratings,” which will provide online audience data comparable to its television ratings. This will provide a common language across media for the television industry.92

In an interview for this paper, Contreras said print and online publishers need a comparable unified metric. The key players to make this happen, he said, are the Audit Bureau of Circulations (ABC), the Interactive Advertising Bureau (IAB) and the Newspaper Association of America (NAA).

Contreras, who served as chairman of the NAA board of directors for 2010– 2011, commented, “If it were easy, it would be done,” but he said that it can be done. He added that more trusted online metrics would benefit emerging news sites as well as legacy media.

Unfortunately, the 2011 Pew State of the News Media report says that, if anything, the metrics of online news have become more confused, not less. It said:

Many believe that the economics of the web, and particularly online news, cannot really progress until the industry settles on how to measure audience. There is no consensus on what is the most useful measure of online traffic….

More audience research data exist about each user than ever before. Yet in addition to confusion about what it means, it is almost impossible get a full sense of consumer behavior—across sites, platforms, and devices. That leaves potential advertisers at a loss about how to connect the dots. In March 2011, three advertising trade groups, supported by other media associations, announced an initiative to improve and standardize confusing digital media metrics called Making Measurement Make Sense, but the task will not be easy.93

The three trade groups are the Interactive Advertising Bureau, the Association of National Advertisers and the American Association of Advertising Agencies.

C. Use research to optimize strategic investments

The value of research to traditional and emerging media can be seen in a resource optimization model that publishers can use to assess their investment allocation among news, advertising and distribution departments for maximum revenue and profits. Researchers concluded that many newspapers lack a clear picture based on quantitative data. As a result, newspaper managers assume they are over-investing in their operations when in fact they are under-investing.94

The model can be developed for any individual newspaper and has been estimated and validated using annual compilations of hundreds of newspapers’ financial and operations data collected by the Inland Press Association. The findings demonstrate that there is considerable opportunity for newspaper profit enhancement using quantitative models.

This “econometric model” was one of several strategies laid out at a conference titled “How Newspapers Could Have Saved Themselves and How Some Still Can,” in May 2009 at the Reynolds Journalism Institute. Other strategies included:

• Guidelines based on dozens of newspapers’ experiences in deciding optimal distribution of layoffs and buyouts among departments

• A new page-view pricing strategy for both online and print ads that offers a more accurate picture of consumer online behavior for use by advertisers

• Online pricing strategies that can help publishers decide whether and how to repurpose, hold back, or charge for online content that also appears in print

• Surprising data about monetizing out-of-area users of newspaper websites

Esther Thorson, director of research for the institute, said, “Newspapers hold rich sources of information and data, all of which can be mined for additional revenue generation. Academic researchers have the expertise to mine this data to the benefit of newspapers and their customers.”95
D. Re-invent revenue streams

In addition to re-imagining journalism for a networked world, news organizations need to re-invent the revenue streams that sustain journalism. This is true whether the news organizations are for-profit or non-profit. To date, experimentation in new revenue models has lagged behind innovation in content creation and collaboration.

The survival of traditional media and the sustainability of emerging media require experimenting with new revenue models that go beyond traditional notions of money from paid circulation and advertising. Among the notions being explored are the following:

• An emerging strategy called “Local Online 2.0” positions local media sales forces as experts in the digital space for small businesses96

• Ad sales networks in which legacy and emerging media work with local ad agencies to help local advertisers collect, analyze and present data on performance and return on investment97

• Media companies redefining their potential revenue streams in relation to their journalistic functions98

• Media companies becoming active leaders in developing trustworthy behaviorally targeted advertising99

• Experimenting with revenue models outside the traditional role of intermediary for advertisers, including the possibility of direct involvement with commerce100

• Brokering web marketing services101

• Integrating web marketing services with social media and personalization102

• Providing consulting services to local businesses in the use of social media103

• Running sponsored messages on non-profit news sites such as ProPublica through a public media ad sales network104

Researchers have studied textual online advertising with some encouraging findings. Research done on behalf of the Associated Press Managing Editors and in conjunction with the Seattle Times addressed questions such as the following: Would contextual advertising damage the credibility of online news sites? Would it harm the credibility of advertisers? Would readers even notice it? And if they do, what would they think of it? The conclusion was contextual advertising is valuable if it is relevant and appropriately placed.105

To date, efforts to monetize online content have been disappointing.106 As of this writing, for-profit media companies seem committed to experimenting with some form of pay model for content; or maybe not. Predictions from industry observers, even for the short-term, vary widely.107 The long-awaited and closely watched New York Times digital subscription effort generated more than 100,000 orders in its first 3 weeks. The company said the results were better than expected, but the experiment was too new to judge.

The rapid adoption of smartphones and the emergence of the iPad and other tablet devices further complicate the picture. The year 2011 has seen the emergence of “social magazine” apps and news personalization services, such as Zite, NewsMix, News.Me, Ongo, the Washington Post’s Trove, Yahoo!’s LiveStand. While these offerings complicate issues about content control and revenue, they do not provide a clearly sustainable business model.

A survey in the 2011 Pew State of the News Media report says that nearly half of all American adults (47 percent) report that they get at least some local news and information on their cellphone or tablet computer. But, the report adds, “Currently, only 10 percent of adults who use mobile apps to connect to local news and information pay for those apps. This amounts to just 1 percent of all adults.”

The survey indicated “roughly three-quarters of adults say they would not be willing to pay for online access to their local newspaper, even if it was the only way to access the newspaper’s content.”108

Perhaps for the moment, the best bet for news organizations is to focus on the quality, while emphasizing the uniqueness, the multi-platform availability and the perceived value of their content among consumers.

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