Cap­i­tal­iz­ing on dis­rup­tion

The Insider - - CONTENT -

The rea­son why it is so dif­fi­cult for ex­ist­ing firms to cap­i­tal­ize on dis­rup­tive in­no­va­tions is that their pro­cesses and their busi­ness model that make them good at the ex­ist­ing busi­ness ac­tu­ally make them bad at com­pet­ing for the dis­rup­tion.”

Clay­ton Chris­tensen The In­no­va­tor’s Dilemma

Driven by dig­i­tal dis­rup­tion, news con­sump­tion has be­come more so­cial, more pro­mis­cu­ous, more topic-driven and less mast­head­driven, as read­ers dis­cover and en­gage with con­tent in mul­ti­ple forms through a myr­iad of dis­tri­bu­tion chan­nels.

Com­pe­ti­tion for eye­balls is fierce for both news and ad­ver­tis­ing. Which begs the ques­tion: how can US pub­lish­ers grow global au­di­ences and rev­enues in such a com­plex and com­pet­i­tive world?

Dig­i­tal News Con­sump­tion Trends in the US

Ac­cord­ing to Reuters, read­ers in the UK and some other Euro­pean coun­tries still tend to dis­cover con­tent through trusted brands, but it is a dif­fer­ent story in the United States where Search is the main gate­way to news.

How­ever, in July 2015, Face­book pulled ahead of Google in the US as the top re­fer­ral source in Parse.ly’s news traf­fic pat­tern study.

In­ter­est in dig­i­tal news is grow­ing in the US with the num­ber of peo­ple en­gag­ing with dig­i­tal news­pa­per con­tent hav­ing grown by 10% in one year since Au­gust 2014 to 179 mil­lion.

So, the US mar­ket is gain­ing in­ter­est in qual­ity con­tent which is great, but how can Amer­i­can pub­lish­ers cap­i­tal­ize on this trend to max­i­mize en­gage­ment and rev­enues?

Look­ing a lit­tle deeper into US news reader be­hav­ior… Cross-plat­form con­tent con­sump­tion and shar­ing is a way of life for US read­ers.

- 35% get news on at least 2 de­vices

- 35% share news story via email or so­cial me­dia each week

- 17% ac­cess news mainly through mo­bile

- 10% say tablets are their main way of ac­cess­ing news on­line

How­ever, the data also in­di­cates that only peo­ple’s will­ing­ness to pay for dig­i­tal news is trend­ing in the wrong di­rec­tion.

This presents a real dilemma to US pub­lish­ers. They have an au­di­ence that wants to read their news, but the ma­jor­ity don’t want to pay for it to­day. What about the fu­ture? When look­ing at where pub­lish­ers could po­ten­tially re­ceive pay­ment one might in­stinc­tively think that older, more tra­di­tional read­ers would value the con­tent enough to pay for it since they’ve been pay­ing for printed me­dia for years. But in fact, it is the mil­len­ni­als (i.e. who are ex­pected to spend $10 tril­lion glob­ally in their life­time) seem to be more open to pay­ing for news mov­ing for­ward.

Research shows that GenYs spend 18 hours a day con­sum­ing me­dia with 37% of that time vis­it­ing news sites that they reached through mostly so­cial re­fer­rals and search. Th­ese read­ers ex­pect in­stant, seam­less ac­cess to con­tent. So the mo­ment a pub­lisher raises a re­quire­ment to reg­is­ter or worse, a pay­wall, in front of that con­tent, is the mo­ment the pub­lisher loses profit po­ten­tial.

This less con­ven­tional news con­sump­tion be­hav­ior presents yet an­other chal­lenge for US pub­lish­ers. How can they serve both tra­di­tional read­ers, who fa­vor the printed replica for­mat to­day but are un­likely to pay for news in the fu­ture, and the “likely will­ing to pay in the fu­ture” dig­i­tal na­tives who pre­fer a more con­tem­po­rary pre­sen­ta­tion that of­fers “fric­tion­less dis­cov­ery of con­tent cu­rated by the crowd”? It’s re­ally quite simple; give read­ers what they want – qual­ity con­tent they can read, en­gage with and share with oth­ers

- Wher­ever they are

- In what­ever for­mat they choose (on­line, via apps or in print)

- In the pre­sen­ta­tion style they pre­fer (en­hanced replica and non-replica)

- On what­ever de­vice they carry - On­line or off - For the right price

Many es­tab­lished and new en­tries into the dig­i­tal pub­lish­ing world are at­tempt­ing to sat­isfy th­ese read­ers through var­i­ous pre­sen­ta­tion for­mats, dis­tri­bu­tion so­lu­tions and pric­ing mod­els.

Their goals may be the same, but their ser­vice of­fer­ings and abil­i­ties to sat­isfy the needs of both con­sumers and pub­lish­ers couldn’t be more di­verse.

Mak­ing Sense of the Con­fus­ing Dig­i­tal Pub­lish­ing Land­scape

At last count there were over 80 com­pa­nies in the dig­i­tal news­pa­per and mag­a­zine dis­tri­bu­tion and pub­lish­ing in­dus­try. It’s be­come a very crowded and con­fus­ing land­scape be­cause it’s so easy for star­tups to adopt dig­i­tal pub­lish­ing tech­nol­ogy and start pro­mot­ing them­selves as

the new Net­flix/Spotify/iTunes for news. But are they re­ally giv­ing pub­lish­ers what they need, which is to

- Grow au­di­ence

- Grow rev­enues

- Grow au­dited circulation

- Pro­tect their con­tent

- Know their read­ers

- En­gage with read­ers

- At­tract ad­ver­tis­ers

- Re­duce costs

Of­fer­ing pub­lish­ers mul­ti­ple dis­tri­bu­tion op­tions to reach more read­ers is great, but pub­lish­ers must be care­ful to weigh the pros and cons of each of­fer­ing against what they truly need and con­sider the com­bined ef­fect of all th­ese fac­tors on their cur­rent busi­ness and their fu­ture.

Busi­ness Vi­a­bil­ity

There is some big money be­ing in­vested in lit­tle star­tups in dig­i­tal pub­lish­ing th­ese days, but the fu­ture sus­tain­abil­ity of many of th­ese small busi­nesses is still in ques­tion. It isn’t the first time pub­lish­ers have in­vested in “al­ter­na­tive” pub­lish­ing so­lu­tions one year, only to dis­band them the next. A pub­lisher’s con­tent is its most valu­able as­set. Risk­ing it on un­proven so­lu­tions can be dan­ger­ous. Es­tab­lished, proven and trusted part­ners are a much safer bet when the stakes are high. And in to­day’s highly com­pet­i­tive pub­lish­ing land­scape, the stakes have never been higher.

Con­tent Pre­sen­ta­tion & En­gage­ment

Pre­sen­ta­tion of con­tent may not be a deal breaker when it comes to on­line clas­si­fieds, but when it comes to at­tract­ing and re­tain­ing news­pa­per and mag­a­zine read­ing au­di­ences, it is crit­i­cal. Pub­lish­ers need to pay close at­ten­tion to how ser­vice providers are pre­sent­ing their con­tent to en­sure that it...

- Serves the needs of both tra­di­tional replica read­ers and to­day’s new gen­er­a­tion of news con­sumers

- Of­fers fric­tion­less dis­cov­ery of con­tent cu­rated by the crowd

- Sup­ports dig­i­tal fea­tures de­signed to en­gage read­ers’ in­ter­est longer (e.g. search, shar­ing, trans­la­tion, text to speech, per­son­al­iza­tion, com­ment­ing, book­mark­ing, etc.)

- Al­lows for the in­te­gra­tion of mul­ti­me­dia and in­ter­ac­tiv­ity into ed­i­to­rial and ad­ver­tis­ing

Con­tent Pro­cess­ing

It’s fairly easy to man­u­ally process a monthly mag­a­zine which is an­other rea­son so many new play­ers have en­tered the mar­ket. They can pay pen­nies for off­shore con­trac­tors to process th­ese pub­li­ca­tions. But for full­con­tent news­pa­pers and sup­ple­ments, the bar­ri­ers to en­try are just too high.

So be­fore jump­ing into a re­la­tion­ship with a new chan­nel, pub­lish­ers need to eval­u­ate the scal­a­bil­ity, re­li­a­bil­ity and qual­ity of the con­tent pro­cess­ing sys­tems in place. Can the so­lu­tion han­dle the com­plex­i­ties of pro­cess­ing their daily is­sues 7/24/365?

Au­di­ence Reach

Ev­ery dig­i­tal newsstand prom­ises pub­lish­ers a global dis­tri­bu­tion so­lu­tion sim­ply be­cause the ser­vice is on­line. But the in­ter­net is a highly com­pet­i­tive uni­verse where con­tent is like a nee­dle in a haystack – dif­fi­cult to dis­cover (es­pe­cially if it’s a flat PDF-like replica) un­less the searcher is specif­i­cally “brand hunt­ing”. Pub­lish­ers al­ready own brand loy­al­ists in their lo­cal mar­kets. What they need is a distrib­u­tor that brings their con­tent to a mas­sive pay­ing au­di­ence they can’t eas­ily reach on their own. The ques­tions pub­lish­ers need to ask are...

How many peo­ple will my con­tent ac­tu­ally reach on a daily ba­sis?

What spe­cific con­sumer­centric chan­nels does the distrib­u­tor own that have cap­tive au­di­ences will­ing to pay for my con­tent (or have oth­ers pay on their be­half)?

Au­di­ence An­a­lyt­ics

There is a lot of buzz in the in­dus­try th­ese days about the im­por­tance of big data and how news­pa­per and mag­a­zine pub­lish­ers should use it to max­i­mize au­di­ence and rev­enue growth.

When choos­ing a dis­tri­bu­tion and pub­lish­ing part­ner, make sure their data and au­di­ence

an­a­lyt­ics and re­port­ing give you ev­ery­thing you need to truly “know” your au­di­ence, so you can give them what they want to max­i­mize their en­gage­ment with your con­tent.

Rev­enue Mod­els

In the 1990s there were ba­si­cally three ways to make money with news – sub­scrip­tions, sin­gle copy pur­chases and ad­ver­tis­ing. To­day, new rev­enue mod­els are pop­ping all over the pub­lish­ing land­scape. Here are a few that are mak­ing head­lines th­ese days that re­quire fur­ther scru­tiny.

Pay per Is­sue

The mo­ment the iPad hit the mar­ket in 2010 and fu­eled the mo­bile app rev­o­lu­tion, dig­i­tal news­stands started pop­ping up ev­ery­where with ev­ery pub­lisher in the world scram­bling to get their ti­tles up front and cen­ter on read­ers’ tablets and smart­phones.

They pro­vide a one-stop-shop for read­ers will­ing to pay for news and of­fer some op­por­tu­ni­ties for pub­lish­ers to count is­sues as au­dited circulation. But news­stands are los­ing fa­vor with many pub­lish­ers be­cause they don’t of­fer the level of dis­cov­er­abil­ity, sub­scriber growth and reader con­ve­nience pub­lish­ers and con­sumers need, which is why Ap­ple Newsstand was dis­man­tled in Au­gust of 2015.

Pay by Time Spent

There is a rel­a­tively new model be­ing hyped that pays pub­lish­ers based on read­ing habits of sub­scribers. The more time spent with a pub­lisher’s con­tent, the more money that pub­lisher gets out of the “pot” col­lected from read­ers.

The rev­enue pool so far is small with rel­a­tively few users, re­quir­ing the provider to pay pub­lish­ers min­i­mums to en­tice their par­tic­i­pa­tion. It will be in­ter­est­ing to see how long the “pay by time” model keeps ven­dors afloat be­fore their time runs out.

Mi­cro­pay­ments

Re­cently, some new play­ers and even some es­tab­lished pub­lish­ers have em­barked on a mis­sion to cure what ails the in­dus­try through an “iTunes for news” paid con­tent model.

This model breaks the typ­i­cal mon­e­ti­za­tion par­a­digms by un­bundling pub­li­ca­tions and sell­ing ar­ti­cles by the slice to sub­scribers. Price per piece, de­ter­mined by the pub­lisher, ranges be­tween 20 cents to just over $1.

On the sur­face the model sounds “in­ter­est­ing”, but isn’t it lead­ing pub­lish­ers down the same path to pen­nies the mu­sic in­dus­try slid down nearly a decade ago? It didn’t work for record la­bels, it didn’t work for video and it es­pe­cially won’t work for news where the shelf life of an ar­ti­cle has much less value to con­sumers than the ev­er­green me­dia (i.e. songs and movies) they tend to con­sume mul­ti­ple times.

Peo­ple are be­com­ing less and less in­ter­ested in own­ing a song off iTunes or a DVD; they are more in­ter­ested in pay­ing for a li­cense to lis­ten to any song or watch any movie on any de­vice. The same is true for me­dia, which bring us to…

Net­flix for News

To­day, the most user-friendly con­sump­tion model for mu­sic, video and news is the all-ac­cess/one-sub­scrip­tion model.

A num­ber of new dig­i­tal pub­lish­ing houses now of­fer some form of “Net­flix for news” to their mag­a­zine read­ers for a monthly fee. News­pa­pers aren’t in­cluded as they re­quire com­plex pro­cess­ing th­ese com­pa­nies do not pos­sess.

Many of­fer just flat PDF-like repli­cas cre­ated us­ing off-the-shelf dig­i­tal pub­lish­ing so­lu­tions and do not sup­port fric­tion­less dis­cov­ery of con­tent; they do lit­tle more than present images of a pub­lisher’s con­tent which can’t be searched, shared or en­hanced with dig­i­tal fea­tures. The value to users, pub­lish­ers and ad­ver­tis­ers is lim­ited at best.

Au­dited Circulation

The suc­cess of a pub­lisher’s ad­ver­tis­ing rev­enues lies in its abil­ity to rec­og­nize its con­tent as au­dited circulation. Au­dit bu­reaus world­wide pro­vide very strict guide­lines to en­sure pub­lish­ers’ con­tent is be­ing “counted” prop­erly.

The Al­liance for Au­dited Me­dia (AAM) pays close at­ten­tion to how pub­lish­ers are ac­count­ing for dig­i­tal dis­tri­bu­tion. So when choos­ing a part­ner to dis­trib­ute paid con­tent to read­ers, US pub­lish­ers need to make sure that the value of their con­tent is rec­og­nized and prop­erly counted, both from the com­mer­cial/pub­lisher side and from that of the con­sumer.

Ser­vices that pay pub­lish­ers “per is­sue read” count and are a pub­lisher’s best choice when look­ing to max­i­mize au­dited circulation. The more amor­phous rev­enue shar­ing mod­els (e.g. time spent or ar­ti­cles read) that do not “count” are good for brand ex­po­sure, but ques­tion­able in terms of their long term value to a pub­lisher and its ad­ver­tis­ers.

Pub­lish­ing is no dif­fer­ent. It’s been liv­ing in “in­ter­est­ing times” since craigslist hit the in­ter­net in the late 90s. And while some pub­lish­ers at­tempt to weather the storm with flashy apps, di­ver­si­fi­ca­tion of prod­uct lines and du­bi­ous dis­tri­bu­tion choices, oth­ers are tak­ing a more prag­matic ap­proach, part­ner­ing with proven in­no­va­tors that are work­ing with ev­ery part of the pub­lish­ing ecosys­tem and trans­form­ing it in a way that read­ers and pub­lish­ers don’t feel that they are los­ing out in terms of qual­ity con­tent, value for money, au­dited circulation, au­di­ence growth and rev­enues.

Un­like the video and mu­sic in­dus­tries that al­ways sold prod­ucts through third par­ties, the pub­lish­ing in­dus­try has tra­di­tion­ally sold di­rectly to con­sumers.

How­ever, with to­day’s mul­ti­plat­form and multi-chan­nel de­mands of news con­sumers it’s not re­ally fea­si­ble for most pub­lish­ers to reach read­ers wher­ever they are on what­ever de­vices they carry. The pres­sure to part­ner with third par­ties to de­velop new tech­nol­ogy and man­age dis­tri­bu­tion chal­lenges has never been greater.

The mu­sic and video in­dus­tries have suf­fered se­ri­ous rev­enue set­backs af­ter adopt­ing busi­ness mod­els that were not pub­lish­er­friendly. So what does that mean for main­stream me­dia look­ing to cap­i­tal­ize on dis­rup­tion with the right dis­tri­bu­tion and pub­lish­ing part­ner?

Two words…”Part­ner wisely!”

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