Dorian Benkoil senior consultant at Teeming Media. An award-winning journalist and editor, he was a foreign correspondent for AP and Newsweek, and international and managing editor for ABCNews.com. At ABC News he moved to the business side, handling sales integration and business development, before joining Fairchild Publications as General Manager for their Internet division, becoming editorial director for mediabistro.com, then a consultant for Teeming Media in New York. He graduates this year with an MBA from Baruch's Zicklin school of business. Learn more about him at Benkoil.com or his blog - MediaFlect.com.
Robert Cauthorn is a journalist, former vice president of digital
media at the San Francisco Chronicle, and was the third recipient of
the Newspaper Association of America's prestigious Digital Pioneer
Award. He launched one of the first five newspapers web sites in the
world and is generally considered to have delivered the first
profitable newspaper web site in 1995. Cauthorn has been in the middle
of the transition from old media to new and is recognized as
frank-talking critic when he believes newspapers stray for their
mission. In mid-2004 he became the president of CityTools, LLC a new
media startup based in San Francisco.
Ben Compaine has divided his career between the academic world and private business. He was a journalist when manual typewriters were considered state of the art, but also led the conversion of his college newspaper to cold type. He has started and managed weekly newspapers. His dissertation at Temple University in 1977 was about the changing technologies that were going to unsettle the landscape of the staid and low profit newspaper industry. Since then he has focused his research and consulting on examining the forces and trends at work in the information industries. Among his most well-known works (and the name of his blog) is "Who Owns the Media?".
Vin Crosbie has been called "the Practical Futurist" by Folio, the trade journal of the American magazine industry. Editor & Publisher magazine, the trade journal of the American newspaper industry, devoted the Overview chapter of executive research report Digital Delivery of News: A How-to Guide for Publishers to his work. His speech to the National Association of Broadcasters annual conference was one of 24 orations selected by a team of speech professors for publication in the reference book Representative American Speeches 2004-2005. He has keynoted the Seybold Publishing Strategies conference in 2000; co-chaired and co-moderated last year's annual Beyond the Printed Word the digital publishing conference in Vienna; and regularly speaks at most major online news media conferences. He is currently in residence as adjunct professor of visual and interactive communications and senior consultant on executive education in new media at Syracuse University's S.I. Newhouse School of Public Communications, and meanwhile is managing partner of the media consulting firm of Digital Deliverance LLC in Greenwich, Connecticut.
About this blog
Two forces have shattered the news media. Technology is the first. Although media technology is undergoing its greatest change since the day in 1440 when Johannes Gutenberg first inked type, for more than ten years now the news industry has mistaken new technologies merely as electronic ways to distribute otherwise printed or analog products. Estrangement is the second. The news media has lost touch with people's needs and interests during the past 30 years, as demonstrated by rapidly declining readerships of newspapers and audiences of broadcast news. How we rebuild news media appropriate to the 21st Century from the growing rubble of this industry is the subject of this group weblog.
While my colleague Dorian Benkoil has been writing about entrepreneurial journalism, I’ve been studying a slightly different universe, media entrepreneurs. In collaboration with Anne Hoag at Penn State, we have been seeking to learn whether media entrepreneurs are different than entrepreneurs in general. That is, does one go into the media business motivated by a different set of goals than other sorts of entrepreneurs, say, in restaurants or pharmaceuticals? And, more broadly, what is the state of media entrepreneurship today?
I first discussed this line of research in an entry a few years ago at my Who Owns the Media? Blog. More recently Anne and I have pursued this notions of media entrepreneurship and have made some encouraging findings about the vibrancy of bottom up media. This is, indeed, a phenomenon that was recognized in America's earlest days. In our most recent paper we note that
It was Frenchman Alexis de Toqueville who first observed in the 1830s the role of media entrepreneurship in the United States. In his second volume of Democracy in America, Toqueville identified the media entrepreneur (though not employing that term) as peculiar to American democracy in a passage titled, “On the Literature Industry.” He may well have been the first to recognize the inherent interdependencies among media, capitalism and democracy, noting that democracy creates a mass market for “literature” (Newspapers, books and a few magazines were then the only mass media) because citizens seek to be informed in order to participate in their democracy.
We characterize media entrepreneurship as “the creation and ownership of a small enterprise or organization whose activity adds at least one voice or innovation to the media marketplace. In her initial work, Anne found that in measuring the incidence of media entrepreneurship in comparison to other U.S. industries, media on the whole were at least as entrepreneurial, and often enjoyed greater rates of entrepreneurship.
In the most recent line of our research we undertook extensive interviews with 14 entrepreneurs who started media businesses. Though not any sort of statistical sample, we did strive to locate a diverse group of subjects. About half were involved in traditional media—newspapers, book publishing, cable and film—while the others were in some type of online media venture.
Although the entrepreneurs we interviewed have come to their media ventures by many different routes and are at different stages in life, there are some striking similarities in their motivations and attitudes toward entrepreneurship as well as their process for discovery and exploitation. In brief, they are hard pressed to recognize any particular barriers, regulatory, technological, structural or otherwise. And while they are working to make their ventures profitable, their first thought about being “successful” is often a reference to having an “impact” or having influence in some sphere.
From my point of view the most noteworthy insight was that this impact appears in two distinct forms. Some view running a media enterprise as more than just an entrepreneurial venture. The media’s power to influence, for this group, is a prime motivator for becoming an entrepreneur. Others exploited their media ideas for reasons similar to those of entrepreneurs in general. We refer to the former group as “missionaries” and the latter the “merchants” -- a potentially significant organizing concept for media entrepreneurship.
For example, typical of the of the missionaries are the comments of one interviewee who said that merely running a business, “holds absolutely no appeal to me…When you say that, I think of payroll taxes, balancing a cash register. When you say media, I think creative, influence, reach.” She added that a media business was appealing because “you can help people in the masses. There are very few other ways to do that."
A minority of those we spoke to we determined were “merchants.” In general, they responded that running a business, not necessarily a media business, was the motivating factor. Merchants talked about success and rewards in terms that could apply generically to any enterprise:
“It’s rewarding from a self fulfillment stand point that, hey, here’s a concept that I took….We brought it to the marketplace and made it successful. That’s, you know, part of it. There’s a real sense of fulfillment now the fact that we have people working for us. People depend on us for their livings. We're supporting other families, paying taxes and being good citizens. … There’s a satisfaction that comes from that."
The research supports the notion that prospects for new media players—and hence voices—is strong. Or at least there are many entrepreneurs who perceive great opportunity. Combined with our data that shows rapid growth in the number of media businesses overall, it bodes well for diversity of formats and sources of media-supplied content. Perhaps most encouraging is that these entrepreneurs barely recognize the existence of barriers to entry to the media business.
Mark Glaser calls the entrepreneurial acumen of journalists into question, but most start-ups fail, in any industry. He and others in comments give examples of those who’ve succeeded. This on the heels of Jeff Jarvis’ entrepreneurial journalism contest, which, if it works, will help seed a new generation of journalists not encumbered by the need to have a “job”. I’ve taken a fairly traditional route, myself, getting an MBA before becoming truly entrepreneurial. But then, I’m 1 or 2 generations away from most of the folks proposing projects to Jarvis’ contest.
There are a few advantages they have over some of the older folks like Dan Gilmor or Bill Scoble that Glaser sites as having failed, chiefly that they may not be as wedded to older ideas of what a journalist is or can be. They probably don’t think of “entrepreneurial journalism” as an oxymoron. Some may say that true journalism can’t be entrepreneurial, because a journalist should not have commercial concerns. (If you worry about whether to put an ad on your site, or where, that will affect how you display the content, for example.) And the anxiety of being laid off can be debilitating, while the sense of charting one’s own destiny and earning money from folks who are actually consuming the product, rather than an in-between entity, can be liberating.
There is something else that can be a challenge for many journalists: I’ve found successful entrepreneurs to be relentless optimists, skilled socially (at least when necessary), willing to make hard choices even when it’s not fair, and not being stopped by unfairness directed at them. Journalists, but contrast, are often a bit negatively oriented, and gripe about things that haven’t gone well -- newsrooms are full of, if not malcontents, certainly half-contents. Then, again, so are many workplaces. There is a such thing as a postive-minded journalist, and I hope entrepreneurial journalism isn’t an oxymoron.
That newspapers continue to lose advertising market share to the Internet is not a revelation. That newspapers are losing share of local advertising is a reason for concern. According to the latest tally, newspapers accounted for 43.7% of the local online advertising pie of $8.5 billion for the first 10 months of this year. This was down from a 44.1% share of a smaller total in 2004. The online revenue of local TV stations, on the other hand, did not decline so precipitously.
Local advertising traditionally has accounted for about 85% of total revenue for newspapers in larger market, even higher for small market newspapers. Local TV stations receive a far higher proportion of their revenue from spot national advertising, while radio stations have tended to be in between, though in most case closer to newspapers than TV. The primary local competitor for newspapers has historically been directories (e.g., Yellow Pages) and direct mail. Increasingly, cable has been able to siphon off local dollars with the capability to insert advertisements down to the neighborhood level.
What must be most unnerving to newspaper publishers and, to a lesser extent other local media players, is that pure play Web sites now have the largest share of local on-line advertising revenue—43.7% by the reckoning of Borrell Associates.
How can this be? Didn’t the publishers take solace in the fact that their local papers had a built in advantage over the upstarts thanks to their identification with the local market? And that all-critical brand equity?
It is becoming evident that the value of ad placement based on search terms, Zip code or Internet address proves more effective for the local advertiser even if the page viewed does not directly contain information that is congruent with the location of the user. That is, the value of the local newspaper or radio station has been that the advertiser had a high degree of confidence that anyone listening to that station or reading that paper was in their local trading area. But online the advertiser may not only be assured that the ad is placed in view of an individual within their target trading area, but may also have specific demographic or other characteristics desirable for that advertiser. Not to mention the added delight of knowing when an ad may have been seen and responded to in the form of a click or more.
Of course, this is true for the online site of any local medium. Too often, however, it seems that while the publisher’s sales force was working on convincing the paper’s current advertisers to try the online version, the new players had no such blinders. They were marketing to anyone, which often meant new service providers and merchants who had not been print advertisers: smaller in size but far greater in number. A version of the long tail effect. And that is where much of the growth is coming from. It’s not just old advertisers in new bottles.
Just now, minutes after the WSJ sent out an alert about the George Mitchell baseball drug report, someone put up a list of the players names on Wikipedia. I saw it on public Twitter while randomly visiting the public page there.
Wow. How can a newspaper hope to compete with that? And why wouldn't a newspaper, to save effort, simply -- assuming the list is accurate -- link to it? Journalistically, I can see the rationale of wanting to control the accuracy and therefore keep it on the newspaper's site. There will be tons of lists in tons of publications (hats off to any that add value). ... But, the speed of the list by what seemed to be a private individual, and on Wikipedia to allow other fervent folks to correct it - that's something that proves the power of community and individuals. (And one more caveat: I'll bet you that some Web editors -- you know who you are! -- will copy and paste that list without saying they did so.)
When I first saw on Jeff Jarvis’ Facebook page that he was assembling the jury for his “entrepreneurial journalism” contest, I quipped that what used to be an oxymoron is now worthy of a prize. Wonderful, isn’t it, that students in J-school now can ask for a few thousand bucks to start their own publishing businesses. Jarvis points to a post by NYTimes’ Saul Hansell, one of the judges, who says that no one starting out in journalism should ask advice of anyone who’s been in the business more than five years.
Fair enough. The ideas Hansell mentions -- a hyper-local site for Brooklyn's perennially troubled Bed-Sty neighborhood, a magazine for Muslim women, etc. -- are great niche ideas. I do find myself wondering where the business model for supporting deep, investigative journalism comes from. Perhaps, from the same place it comes from now: Other "verticals" like business, tech -- and perhaps a bunch of ad-supported hyper-local blogs and community apps -- that make enough profit to pay the expensive journalistic productions.
Is a large circulation newspaper likely to generate more revenue by charging for its online edition or making it free to maximize advertising revenue? Is the online version of a newspaper a complement to the print version—or a substitute? The stakes are high and the answers have been elusive. With few exceptions, since the dawn of the Internet Age, newspapers have been wrestling with whether this new conduit would be its friend or its death.
Of course, we will know in the long run, when some media historian looks back on this time from 20 years hence. But that doesn’t help today’s decision makers. That is why the research of University of Chicago economist Matthew Gentzkow published earlier this year in The American Economic Review is so helpful.
In this highly data driven paper with the typically academic title, “Valuing New Goods in a Model with Complementarity: Online Newspapers,”, Gentzkow blends consumer data from the Washington, DC market with newspaper operating results to address three questions: What is the relationship between print and online versions on 1) the demand for either diversion, 2) on the welfare of consumers, and, crucially, 3) on the impact of charging consumers for the online product?
With 30 pages of assumptions, explanation and calculations, Gentzkow makes a well substantiated finding that, The Washington Post would have been better off charging a modest sum for its online version (on the order of $6.00/month) until about 2004. After that, however, the growth in online advertising expenditures crossed over to affirm that it is significantly more profitable to set a zero price for the online edition when one factors in even a small transaction cost for online payments. He suggests that his findings are robust enough that they would likely apply to other big city newspapers.
Along the way, Gentzkow upends the early assumption that the print and online versions of a newspaper were complements. Applying a more sophisticated demographic model than had been used in the past, which simply looked at newspaper readers and online readers, Gentzkow concludes that the substitution effect is “nonnegligible." He does add that ”it is “small, however, relative to some earlier predictions.” In other words, real but not likely “to threaten the survival of print media,” at least right now.
Gentzkow further quantifies the “consumer welfare benefit” created by having a zero consumer price for online newspapers, which he put at $45 million annually for The Washington Post’s market. For the 2000-2003 period that came at the expense of Washington Post Co. stockholders, as he calculated it lost money by giving away the online edition when it could have made a profit by charging for it. (Among the factors here is that, as substitute products, by charging for online, some print subscribers would have continued with their subscriptions instead of switching to the online offering). Starting in 2004, however, the Post was more profitable with the free online version that it would have been with an online use charge
Having seen considerable discussion about whether The Wall Street Journal would be better off making its online version free, as the The New York Times has done Gentzkow’s approach is another data point (a rather large one at that) to reinforce the advertising supported model, for mass market newspapers, at least. There are numerous instances, however, where a consumer-paid model will still be needed. In the magazine business, for example, advertising revenue for many of the mass audience magazines, such as People or TV Guide, can be 50% or more of total revenue. But there are many niche publications, such as The Nation or Weekly Standard, that are highly dependent on subscriptions for the bulk their revenue. It is likely to be the same for niche online sites.
(Finally) Getting around to posting some info I compiled on tough times for business magazines. Late October, for a panel on magazines at the Future of Business Media conference, I prepared some figures and charts about business magazines, based on the Publishers Information Bureau (PIB) data for the first three quarters of this year compared to the same period in '06. Looking at the visuals, they show some trends. (Click on the pictures to see them more clearly.)
For one thing, in dollar terms, most of the "majors" are down in ad dollars, save Forbes, which went up in ad dollars. (See below for a note on PIB's methodology that casts some doubt on these figures.) Forbes, interestingly, has for years had the "free Web" philosophy, and now puts material dating back years up for free, and makes the (disputed) claim that it's the number one destination for business news.
It's also worth noting for business mags that while dollars in aggregate are down 2.7 percent, ad pages were down 6.8 percent, which means page rates were increased. For how long can ad rates continue to go up in the category as competition for ad dollars increases. Also, while Inc. and Fast Company are up, that's against years of previous losses. So it's a relative thing.
Conde Nast Portfolio isn't on the chart I prepared because it's new, and therefore the $13 million-plus it's gotten this year is compared to zero for last. Nevertheless, that’s quite a feat that, if annualized, would put Portfolio in the top four. But while those dollars would seem to be coming from the other business magazines – taking a significant slice of a shrinking pie – executives at the mag point out that it has also gotten a lot of its revenue from luxury brands very familiar to the Conde sales force but not so used to many of the other business magazines. So, they're reaching into a different pie for a significant chunk of their wealth.
Finally, I came across some figures that showed that business magazines, until a few years ago the unparalleled leaders in ad pages and for a while in ad dollars, too, have declined heavily next to celebrity mags.
Business magazines faced similar issues before. In the 1980s, when certain kinds of business-to-business advertising declined, business mags rejuvenated themselves by pitching to new classes of advertising, such as cars and liquor. This time, they may want to do the same thing, but it's harder to think of a major ad category that’s both underserved and appropriate. Pharmaceuticals? Everyone's going after those dollars; and would they be the right fit? Tech? That territory's well-trodden and going aggressively to the Web. Speaking of the Web, that didn't exist in the '80s, nor were there cable business channels competing for the dollars. Not to mention financial portals like Yahoo and Google finance and CNNMoney, which is relaunching with more video this winter.
A few caveats: PIB figures are based on rate cards, which are notoriously inaccurate and always subject to discounts of 20 percent or more, especially for the best clients. Over here is a spreadsheet with business magazines sifted from the PIB figures, on which the above two charts were based, along with an aggregated chart of all the biz mags.