The free news co­nun­drum

In­no­va­tive so­lu­tions emerge for mak­ing the news prof­itable

Mizzima Business Weekly - - IN DEPTH - Marc Ja­cob

Com­pare the lunchtime scenes in a typ­i­cal Yan­gon tea shop and a Star­bucks in New York. Chances are that there will be news­pa­pers at the for­mer and smartphone­s and iPads in the lat­ter. What this com­mu­ni­cates, at least anec­do­tally, is that print re­mains popular in Myan­mar and dig­i­tal is all the rage in the United States. No sur­prises here.

While Myan­mar read­ers still have a love for a printed news­pa­per – as also seen in neigh­bour­ing mar­kets such as In­dia – the world­wide trend is to­wards on­line news de­liv­ery, 24/7, typ­i­cally through a range of mo­bile de­vices, where much of the news is free.

Yan­gon and New York may be worlds apart, but long-term, the trend is one of con­ver­gence.

This grow­ing dig­i­tal con­sumer pref­er­ence poses a chal­lenge for me­dia com­pa­nies and for the re­porters and ed­i­tors who earn a living de­liv­er­ing news and in­sight, whether in New York, Lon­don, Paris or Yan­gon. Earn­ing in­come from on­line plat­forms is prov­ing a tougher call when com­pared with the ad­ver­tis­ing-driven model on which the print and broad­cast me­dia print could rely to gen­er­ate rev­enue un­til about a decade ago.

The trend the world over to­wards dig­i­tal is un­der­way and although print still re­tains popular in many mar­kets, it is im­pos­si­ble to ig­nore the dig­i­tal chal­lenge.

The crux is how to make news pay. It’s stump­ing many me­dia com­pa­nies, of­ten strug­gling with the need to im­ple­ment cut­backs and lay­offs as they try to stem the flow of red ink. But out of the murk are ris­ing some in­no­va­tive mod­els re­mak­ing the busi­ness of news. Look­ing to news con­sumers For news me­dia or­gan­i­sa­tions strug­gling to keep up the world over, me­dia re­search in­di­cates there is good news and bad news for me­dia own­ers wor­ried about their bot­tom line.

News is still in de­mand and pay­ing for it is still an op­tion for many con­sumers and the age de­mo­graphic re­mains broad. Re­cent stud­ies in­di­cate that those will­ing to pay for news are in a broad de­mo­graphic from age 25 to 65, with a ten­dency for youth to err to­wards free con­tent. Re­search in­di­cates that de­spite an im­pres­sion of apathy amongst mod­ern-day youth, many are in­ter­ested in lo­cal and in­ter­na­tional news. Re­search­ing their in­ter­ests and ex­am­in­ing their spend­ing habits is a cru­cial el­e­ment of plan­ning news me­dia in­come op­tions short and long-term.

A new US-based study of “mil­len­ni­als” – those aged be­tween 18 and 34 – has found them “any­thing but ‘news­less,’ pas­sive or civi­cally un­in­ter­ested”. The Me­dia In­sight Project’s sur­vey of the younger gen­er­a­tion in the US, re­leased in early March, found that con­trary to wor­ries that that they were not in­ter­ested in news, news­pa­pers and the world around them, young Amer­i­cans have an ap­petite for news and in­sight but are se­lec­tive in how they chose free and paid news.

The study found that young adults don’t get news in the same way as their par­ents and grand­par­ents. This gen­er­a­tion tends not to con­sume news in dis­crete ses­sions or by go­ing di­rectly to news providers. In­stead, news and in­for­ma­tion are wo­ven into an of­ten con­tin­u­ous but mind­ful way that mil­len­ni­als connect to the world gen­er­ally, which mixes news with so­cial con­nec­tions, prob­lem solv­ing, so­cial ac­tion and en­ter­tain­ment.

Much of the news young adults read is from so­cial net­works such as Face­book, even though they of­ten go to th­ese plat­forms for other rea­sons. Just 39 per­cent said they went on­line to seek news or in­for­ma­tion and 60 per­cent said they “mostly bump into news” dur­ing unre-

lated on­line ac­tiv­ity, the re­port says. As a re­sult, Face­book has be­come a key source of news for the 18-to-34 gen­er­a­tion, with some 88 per­cent say­ing they get news reg­u­larly from the so­cial net­work.

Although a sim­i­lar sur­vey is yet to be con­ducted in Myan­mar, the pop­u­lar­ity of Face­book is grow­ing by the month. Anec­do­tal ev­i­dence sug­gests many Myan­mar cit­i­zens rely on Face­book for news and for shar­ing popular – or con­tro­ver­sial – news re­ports.

Myan­mar’s com­mu­ni­ca­tions in­fra­struc­ture is be­ing im­proved. Although mo­bile pen­e­tra­tion stands at about 14 per­cent, it is fore­cast to rise to more than 80 per­cent in the next five years as for­eign play­ers Oore­doo and Te­lenor build in­fra­struc­ture and ex­pand their reach and state-owned MPT, backed by Ja­panese mo­bile car­rier KDDI and big trad­ing com­pany Su­mit­omo, im­proves its ser­vice to at­tract more cus­tomers. As time goes by, smart­phone and in­ter­net con­nec­tiv­ity will grow, of­fer­ing me­dia com­pa­nies both more out­reach po­ten­tial and chal­lenges for those de­pen­dant on old me­dia mod­els for cre­at­ing in­come. Al­ter­na­tive in­come op­tions Given the world­wide shift by con­sumers to on­line news, me­dia com­pa­nies have been com­ing to terms in re­cent years with the need to con­sider al­ter­na­tive in­come op­tions and prod­ucts. News­pa­pers from the New York Times to ob­scure jour­nals have been ex­per­i­ment­ing with in­come and mon­e­ti­za­tion ideas. Not sur­pris­ingly, no sil­ver bul­let has been found, no 11th hour an­swer to pro­vide a solid in­come stream, but not every­body is throw­ing up their hands in dis­may.

Although the Myan­mar me­dia is still heav­ily print-based and is likely to re­main so medium-term, a dig­i­tal fu­ture beck­ons and with it the chal­lenges that are con­fronting many West­ern me­dia com­pa­nies. It would be ad­vis­able for me­dia com­pa­nies in Myan­mar to con­sider the op­por­tu­ni­ties and pit­falls in an evolv­ing me­dia land­scape be­ing played out on the in­ter­na­tional stage.

As Freep­ress.net suc­cinctly put it in 2012, the cri­sis in jour­nal­ism has its roots in a com­mer­cial me­dia model that pri­ori­tises profit im­per­a­tives over other con­cerns. For decades in the past, many news­pa­pers gen­er­ated un­matched prof­its — well be­yond most For­tune 500 com­pa­nies. But as cor­po­rate share­hold­ers de­manded higher re­turns and con­sis­tent growth, many news­pa­per com­pa­nies took on mas­sive amounts of debt to buy other me­dia prop­er­ties. This fix­a­tion on the bot­tom line has ad­versely af­fected the qual­ity of Amer­i­can news. In place of ex­pen­sive in­ves­tiga­tive jour­nal­ism and time-in­ten­sive beat re­port­ing, news­pa­per ex­ec­u­tives have too of­ten opted for cheap celebrity gos­sip or generic wire sto­ries.

The New York Times is a prime ex­am­ple of a hal­lowed me­dia in­sti­tu­tion – with big of­fices, costs and over­heads – wak­ing up to fall­ing print sales and plum­met­ing ad­ver­tis­ing. The Grey Lady, as it is known, launched dig­i­tal sub­scrip­tions in 2011 and – sur­pris­ing the naysay­ers – has been re­port­ing some suc­cess mainly be­cause of loyal read­ers will­ing to pay the rel­a­tively low cost of ac­cess­ing their favourite news­pa­per on their smart­phone. As the US-based Pew Re­search Cen­ter said in its an­nual State of the Me­dia re­port in 2013, the drive to de­rive in­come from on­line sub­scrip­tions re­ally picked up in 2012, not just for the New York Times but also for many of the 450 daily news­pa­pers – of the 1,380 in the US – that chose this strat­egy.

A March 2014 as­sess­ment of US me­dia com­pany in­comes by the Pew Re­search Cen­ter re­vealed no big sur­prises.

Ad­ver­tis­ing still ac­counted for most known news rev­enue—a lit­tle over twothirds; au­di­ence rev­enue was the next big­gest source of in­come, ac­count­ing for about a quar­ter of the to­tal news in­come pie. The re­port said per­sonal wealth, cap­i­tal in­vest­ment and phi­lan­thropy are all still grow­ing, but are still a small slice of that pie; and other earned rev­enue streams – such as event man­age­ment, mar­ket­ing ser­vices and web con­sult­ing – could be­come a crit­i­cal com­po­nent to the broader, long-term pic­ture. The prom­ise and per­ils of pay­walls Au­di­ence rev­enue is an op­tion for on­line prod­ucts but one that is hard to lever­age if con­sumers are used to ob­tain­ing their news for free or have a his­tory with the news site of open ac­cess.

Me­dia baron Ru­pert Mur­doch is prob­a­bly still gloat­ing over his ac­qui­si­tion in 1981 of The Times be­cause the ven­er­a­ble Lon­don daily – like its New York coun­ter­part – ap­pears to have a ded­i­cated read­er­ship still will­ing to pay for the on­line ver­sion and still pay­ing for the printed ver­sion, in­clud­ing the heavy Sun­day edi­tion. Pres­ti­gious and re­li­able me­dia prod­ucts may have a loyal read­er­ship base in a largely mid­dle-to-up­per in­come de­mo­graphic that is will­ing to pay for their news – dig­i­tal or print, say me­dia an­a­lysts.

The same holds true for pub­li­ca­tions that fo­cus heav­ily on busi­ness news, such as the Wall Street Jour­nal and its Asian edi­tion, the Fi­nan­cial Times and the Econ­o­mist. Few self-re­spect­ing West­ern busi­ness peo­ple would deign to ad­mit that they don’t sub­scribe to this “es­sen­tial read­ing.”

Me­dia stud­ies show that such read­er­ship loy­alty oc­ca­sion­ally holds true for lo­cal pa­pers, many of which re­tain rev­enue-earn­ing clas­si­fied ad­ver­tise­ment sec­tions in their dig­i­tal and print ver­sions. But for many other news me­dia pub­li­ca­tions that have an on­line pres­ence, in­stalling a pay­wall for news that was pre­vi­ously pro­vided free has proved tough if not dis­as­trous for those who have tried.

Typ­i­cally, th­ese pay­wall news sites of­fer some free news or en­tice­ment, with pre­mium sto­ries and ma­te­rial be­hind the pay­wall.

For many me­dia pub­li­ca­tions, this is tough to im­ple­ment. On­line news con­sumers are del­uged with free news and try­ing to charge for ac­cess to news can be

counter pro­duc­tive. Niche of­fer­ings That is un­less you have some­thing spe­cial to of­fer. Two ex­am­ples, one French and one Ger­man, il­lus­trate coun­try-spe­cific ways for me­dia com­pa­nies to en­cour­age peo­ple to pay.

For­mer Le Monde edi­tor-in-chief Edwy Plenel and a strong team of in­ves­tiga­tive re­porters got off to good start in 2008 with Me­di­a­part, an in­ves­tiga­tive French and English lan­guage on­line news ser­vice. It made its first profit, of €500,000 in 2011, with the help of 60,000 sub­scribers who pay the equiv­a­lent of about US$100 for their an­nual fee. Although Me­di­a­part re­ceived €5 mil­lion in in­vestor fund­ing to launch, it now re­lies solely on sub­scribers for in­come. The web­site does not carry ad­ver­tis­ing.

Mr Plenel’s gam­ble was that a largely French au­di­ence was not get­ting enough good in­sight into po­lit­i­cal and so­cial af­fairs in France and fur­ther afield. The web­site, www.me­di­a­part.fr pro­vides free news but the qual­ity in­ves­tiga­tive pieces and a col­lab­o­ra­tive fo­rum are be­hind the pay­wall. In 2011, it set up a French ver­sion of Wik­ileaks, called FrenchLeak­s. Me­di­a­part has ex­posed sev­eral ma­jor French po­lit­i­cal scan­dals.

A Ger­man foray into the paid on­line mar­ket has been re­cently made by Krautre­porter, a hu­mourously-named yet se­ri­ous at­tempt to mar­shal a group of in­ves­tiga­tive re­porters to pro­vide the news on Ger­many and the world that mat­ters for a largely young, busy, pro­fes­sional cli- en­tele. The site www.krautre­porter.de was launched through crowd­fund­ing in 2014 and ap­pears to be get­ting on to its feet. The site charges €5 a month for mem­bers, or about $70 a year.

The key to th­ese sites ap­pears to be a care­ful anal­y­sis of the mar­ket to as­sess the miss­ing in­sight or ser­vice that is not be­ing ef­fec­tively cov­ered by main­stream me­dia. It also helps that both coun­tries have a large pool of con­sumers seem­ingly more in­ter­ested in qual­ity news cov­er­age than, say, the Amer­i­can mar­ket, as in­di­cated by stud­ies and anec­do­tal in­for­ma­tion.

Non-profit op­tions

Crit­ics claim part of the prob­lem lies in the tra­di­tional profit model for news. The non­profit model has at­tracted sig­nif­i­cant at­ten­tion for its po­ten­tial to de-em­pha­sise profit-mak­ing and to pro­duce qual­ity news, says Freep­ress.net. Ad­vo­cates for non­profit news sug­gest that 501(c)(3) news­rooms [named for the sec­tion of the US tax code that ex­empts th­ese or­gan­i­sa­tions from some fed­eral taxes] could re­ori­ent around the idea of jour­nal­ism as a public ser­vice. By tak­ing the pres­sure off the bot­tom line, th­ese non­profit or­gan­i­sa­tions may be able to in­vest more fully in news gath­er­ing.

While this idea has en­joyed re­newed at­ten­tion in the de­bate about the fu­ture of news, non­profit news out­lets have ex­isted for quite some time, says Freep­ress.net. One of the most cel­e­brated mod­els is the Tampa Bay Times (for­merly the St. Peters­burg Times), which is for-profit news­pa­per owned and op­er­ated by the non­profit Poyn­ter In­sti­tute for Me­dia Stud­ies in St Peters­burg, Florida. The Poyn­ter In­sti­tute owns the Times Pub­lish­ing Com­pany, which in turn owns the Tampa Bay Times, Con­gres­sional Quar­terly and sev­eral smaller pub­lish­ing ven­tures. The Tampa Bay Times cov­ers all of its own op­er­at­ing ex­penses, pays taxes on its prof­its, and even re­turns a div­i­dend to the Poyn­ter In­sti­tute.

An­other prom­i­nent ex­am­ple is The Guardian in Bri­tain, which is owned by the Scott Trust. Sim­i­lar non­profit mod­els — or for-profit ven­tures owned by non­prof­its — ex­ist in var­i­ous forms else­where, in­clud­ing the Chris­tian Science Mon­i­tor. Other long­stand­ing ex­am­ples of non­profit news or­gan­i­sa­tions in­clude Harper’s Mag­a­zine, The Wash­ing­ton Monthly, Ms. mag­a­zine and Mother Jones. New mon­eti­sa­tion mod­els We must not for­get Politico. When the pol­i­tics-fo­cussed on­line news site was founded in 2007 by jour­nal­ism vet­eran Jim Van­deHei, the con­cept was dis­missed by many in the me­dia in­dus­try with the flip­pant claim that “po­lit­i­cal news doesn’t sell.” Con­ven­tional wis­dom had it that health, sport, life­style and celebri­ties was where the money was.

Ken Doc­tor, writ­ing in Jan­uary for the NeimanLab, named af­ter the Nie­man Jour­nal­ism Lab at Har­vard Uni­ver­sity, was up­beat on Politico’s in­no­va­tive ap­proach to the new dig­i­tal me­dia world. Hav­ing built a busi­ness model tar­get­ing in­flu­en­tial po­lit­i­cal play­ers in the US, the com­pany is in the process of testing how many times it can repli­cate with var­i­ous me­dia prod­ucts. Mr Doc­tor says Politico has taken the tar­geted newsletter metaphor – gained from Mr Van­deHei’s time on a newsletter fresh out of col­lege – and blown it up into the most suc­cess­ful dig­i­tal news star­tups in the US. Of its 431 em­ploy­ees, 244 are jour­nal­ists.

Politico is go­ing global and lo­cal, wrote Mr Doc­tor, ex­tend­ing its in­flu­ence and model to other pub­li­ca­tions in the US and as far away as Ber­lin and War­saw and es­tab­lish­ing a part­ner­ship with Ger­many me­dia pow­er­house, the Axel Springer com­pany. “Politico has even named an ex­ec­u­tive vice pres­i­dent

for ex­pan­sion – a ti­tle I haven’t seen any­where else­where in the news busi­ness,” Mr Doc­tor said.

“There’s a big block of in­flu­en­tial high-end read­ers who want to read high-end, non­par­ti­san po­lit­i­cal and pol­icy con­tent, and there’s a good chunk who will pay a sig­nif­i­cant amount. If you de­liver the goods, there’s a mar­ket there, for ads and for sub­scrip­tions, and we’re now plung­ing into events,” Mr Van­deHei told the NeimanLab.

Mr Doc­tor said Politico is run­ning a three-headed rev­enue model, with the im­por­tant part be­ing Politico Pro, a sub­scrip­tion and membership ser­vice that pro­vides qual­ity sto­ries and in­sight. An in­come break­down shows that Politico Pro earns 50 per­cent of its in­come from ad­ver­tis­ing, 40 per­cent from sub­scrip­tions and eight per­cent from events.

In 2011, Politico rolled out three Pro prod­ucts, in health, tech­nol­ogy and en­ergy, and they have even­tu­ally been ex­panded to 14. The Pro prod­ucts are aimed at in­sid­ers: peo­ple in the top­i­cal fields who want to know the more im­por­tant de­tails im­me­di­ately, with as much con­text for po­ten­tial de­ci­sion-mak­ing as pos­si­ble. Sub­scrip­tion pric­ing was based on a trusted model used in B2B mar­ket­place in­for­ma­tion and in­tel­li­gence. Politico sees a 95-per­cent re­newal rate for its Pro sub­scrip­tion prod­ucts that could bring in 50 per­cent of rev­enue.

Politico is rolling out its model through­out the United States and is spread­ing to Europe. Politico Europe is poised to launch in the sec­ond quar­ter of 2015 with bureaux in Brussels, Paris and Ber­lin. As Van­deHei says, the Politico Doc­trine uses “over­whelm­ing force,” namely bet­ter and larger num­bers of re­porters to “dom­i­nate an area.”

NeimanLab recog­nises that there is crit­i­cism of Politco, in­clud­ing that it de­votes too much at­ten­tion to the minu­tiae of Wash­ing­ton pol­i­tics. “Oth­ers dis­par­age it for cov­er­ing the horse race of pol­i­tics bet­ter than the sub­stance of gov­ern­ing. Some peg it to the left; oth­ers to the right. What­ever the truths of th­ese ob­ser­va­tions, in its sheer breadth, the new Politico now emerges to do more of more kinds of things.”

Mr Doc­tor said Politico’s rise has been one of in­no­va­tion, from the newsletter model to its Pro Model, but noth­ing is ac­tu­ally new.

What does ap­pear to be new, how- ever, is the foray of Nether­lands-based Blen­dle. Medium.com re­ports that the on­line por­tal is a small start-up that is re­defin­ing how peo­ple pay for jour­nal­ism. The site en­ables users to ac­cess all their news­pa­pers and mag­a­zines but pay only for what they read. Blen­dle has more than 220,000 users who pay be­tween €0.15 and €0.30 to read a story, with a money-back guar­an­tee if they don’t like the story. De­posit money in an on­line wal­let and a sin­gle click will de­liver the story and debit your wal­let.

A Blen­dle pro­mo­tion says the ser­vice is “great for dis­cov­er­ing fan­tas­tic jour­nal­ism. Users can see what ar­ti­cles their friends or in­ter­est­ing cu­ra­tors (celebri­ties, jour­nal­ists, politi­cians, ra­dio DJ’s) have shared from the paid sec­tions of to­day’s news­pa­pers and mag­a­zines, and which ar­ti­cles are trend­ing on the site.”

As an en­cour­age­ment for jour­nal­ists long lament­ing the drop in in­ves­tiga­tive and long-form jour­nal­ism, “ar­ti­cles that seem to sell very well on the plat­form are the kinds of in depth jour­nal­ism you of­ten see in news­pa­pers and mag­a­zines: long­form, anal­y­sis and com­men­tary.”

Blen­dle’s users are young , very young for a site that fo­cusses on qual­ity

jour­nal­ism, with 60 per­cent of users aged be­tween 20 and 35. The 20 to 25 age group is the big­gest group on the site. Blen­dle is only avail­able in the Nether­lands but is plan­ning to ex­pand to other coun­tries, partly be­cause of link-ups with the New York Times and Ger­many’s Axel Springer.

New in­vest­ment trends

Men­tion of in­vestors points to new de­vel­op­ments on the global me­dia stage. Amid a slug­gish world econ­omy, the news busi­ness has seen cut­backs and lay­offs. Yet new ven­tures and in­vestors con­tinue to sur­prise.

As the Pew Re­search Cen­ter re­ports, US tech com­pa­nies started to in­vest in the me­dia in­dus­try in 2013. New in­vest­ment play­ers have been look­ing to the me­dia sec­tor for in­ter­est­ing op­por­tu­ni­ties.

Much like the cre­ative fi­nanc­ing deals in post-re­ces­sion com­mer­cial real es­tate, the fi­nan­cial sup­port for jour­nal­ism has be­come more com­plex and more var­ied. In 2013, the in­dus­try saw the vi­ral con­tent web­site Buz­zFeed’s in­vest­ment in orig­i­nal in­ves­tiga­tive and for­eign re­port­ing, Ama­zon founder Jeff Be­zos’ pur­chase of The Wash­ing­ton Post with the prom­ise of “run­way” money to al­low the news­pa­per to grow, Vox Me­dia’s cap­i­tal in­vest­ment in Ezra Klein’s ex­plana­tory jour­nal­ism project, and eBay founder Pierre Omid­yar’s pro­jected $250 mil­lion in­vest­ment in the cre­ation of First Look Me­dia, the cen­ter re­ported. [The First Look Me­dia deal has gone ahead since the Pew Re­search Cen­ter re­port was writ­ten].

It’s im­por­tant to note that much of this new in­vest­ment is from peo­ple and or­gan­i­sa­tions with dig­i­tal ex­per­tise. They un­der­stand tech­nol­ogy in­nately and suc­ceeded there first, be­fore mov­ing into news. Much of it also comes from deep pock­ets that can po­ten­tially al­low for some fail­ure and loss dur­ing ex­per­i­men­ta­tion, the cen­ter said.

Hav­ing dig­i­tal-savvy own­ers and in­vestors may help to pro­vide a vi­able busi­ness or sup­port model for prod­ucts that live and breathe on the in­ter­net. At least that is the idea in the­ory. Squint­ing at the crys­tal ball Th­ese are early days for the news me­dia try­ing to find its way in an ex­cit­ing, rapidly-evolv­ing dig­i­tal era. In the “world of the free” – news, in­for­ma­tion, mu­sic, videos, movies, soft­ware and more – valu­able prod­ucts or ser­vices will be needed that en­cour­age con­sumers to put their hand in their pocket - or more pre­cisely, click an on­line pay­ment op­tion.

Given the high cost of qual­ity jour­nal­ism and the ten­dency of the gen­eral public to un­der­value it, the tran­si­tion to a vi­able, healthy news me­dia model will in­volve many chal­lenges. But as the ex­am­ples of Politico, the New York Times and Blen­dle demon­strate, in­no­va­tive so­lu­tions are be­ing rolled out.

For the jour­nal­ists and other me­dia in­dus­try work­ers wor­ried about their fu­ture, that’s good news.

Blen­dle charges users for read­ing sto­ries, of­fer­ing a new mon­e­ti­za­tion method for the news me­dia. Photo: Blen­dle

Re­porters at work in Politico's of­fices. Photo: Politico

Jim Van­deHei, founder of Politico

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