“News has to be subsidized because society’s truth-tellers can’t be supported by what their work would fetch on the open market. However much the Jour- nalism as Philanthropy crowd gives off that ‘Eat your peas’ vibe, one thing they have exactly right is that markets supply less reporting than democracies de- mand. Most people don’t care about the news, and most of the people who do don’t care enough to pay for it, but we need the ones who care to have it, even if they care only a little bit, only some of the time. To create more of something than people will pay for requires subsidy.” – Clay Shirky, 2011
A landscape view can be a daunting and sobering experience for journalists. As we have already discussed, if you scratch the surface of serious journalism, you quickly find that market-based pricing has never covered its full cost.
There has been some debate over exactly how much money has been invested in non-profit news; it’s been difficult to track. In June, J-Lab updated its database of philanthropic activity in nonprofit news. It found that over the past five years, nonprofit news sites attracted $187 million in grants from 274 foundations. The money was doled out in 775 grants to 146 projects in 23 states.
Though this may seem like good news, those grants are short-term. Long-term sustainability for these organizations will require a diversified funding model for the development of a product (website, publication, YouTube channel) and/or a strategy that is weighted to content distribution and impact (getting the right message on the right channel at the right time). (Source.)
New Market Dynamics
Technological changes have shifted the media landscape and undercut the tidy economics built on the bundling of content into a limited number of distribution channels. Today journalism has become unbundled from traditional packages, through blogging, portals, and the endless-chan- nel universe of the Internet. This has fragmented audiences, and created fierce competition for the most precious commodity in the information economy: attention.
A fragmented media market with dwindling audience attention requires product-marketing dis- cipline. You need to listen to the market not only for the stories that can make a difference, but also to identify opportunities for packaging and distributing those stories in the most productive way. In the product-marketing world, good products that are well marketed (delivering the right message, at the right time, in the right channel) to a clear customer often find success.
The forces that destroyed the profits that underwrote great commercial journalism have not gone away. In order to avoid a similar fate, INN members need to confront these market realities and keep their eye on the bottom line.
The other, more hopeful side of the coin is the emergence of a new media ecosystem that allows content creators to publish cost-effectively and find audiences with a degree of efficiency and scale unimaginable in the past.
These conditions have ushered in a new era and have begun to redefine the role and scope of journalism that dominated the last century. Abernathy and Foster, in their paper “The News Landscape in 2014: Transformed or Diminished?” describe the effects of “creative destruction” on industries under assault: “Economists often invoke the image of a shoreline, battered by turbulent seas. As the waters begin to recede, what is most visible initially is the damage to the landscape. But, they stress, “the retreating waters also leave behind the seeds of eventual economic revitalization.”
Today more Americans are getting their news online than from newspapers. While it is true that traditional media such as print, television, and broadcast are still important ways of reaching news consumers, now you can also reach them online, on their phones, through social media, and directly at their electronic inboxes.
Digital First, Separation of Content from Distribution
Digital content is like liquid; it can be poured into any news product, but at a cost to design, de- velop, deploy, and promote. Media companies (with the exception of news services, syndicates, production companies, and freelancers) have long acted as both content creators and distribu- tors. Profits from distribution activities subsidized the cost of content creation. In the new mar- ketplace, production of content has been cost-effectively unbundled from distribution, opening up a huge number of choices about how and where to find an audience. Just because you can write once and publish across many platforms doesn’t mean you should. Decisions about how to distribute, bundle and productize your journalism require disciplined prioritization and measure- ment. You need to ask yourself: “Does the value of this channel justify the complexity and cost of delivering it?”
Mass Media is in Decline, Channel Management is on the Rise
The exponential increase in information channels ushered by new technologies has diminished the reach of newsprint and broadcast news. Aided by tools like Google, Twitter, and Facebook, consumers can now find the content they are interested in across thousands of information publishers online. To maintain mass reach, media companies are increasingly forced to package their content and distribute it across a variety of channels, from online to mobile to apps. Revenue and production management across a growing array of channels will continue to be a challenge for the foreseeable future. Tried and true time-based broadcast style promotion (using email, social media, events, and partner promotions) is essential to bringing your audience back. Being organized is only the beginning; classic project management skills and frameworks that remind us of the challenges of maintaining quality in the face of increased scope, and limited resources and time can come in handy but are generally applied in a far more agile way. In the example here, the challenge is to maintain an equilateral triangle, so changing one dependent variable (scope, schedule, or resource) requires a change in the others.
Cost Cuts Can Create Opportunity
Failing business models, bankruptcies, consolidation and reorganizations have pressured commercial news organizations to reduce fixed costs across the board. Coverage of public policy issues has been disproportionately affected, due in part to layoffs of older, experienced (and more expensive) journalists who have traditionally covered these complex topics (Penny Abernathy, interview, August 24, 2011).
As news executives look to continue reducing fixed costs, they are more likely to entertain variable cost solutions like outsourcing and collaborations. There are countless examples, with varying degrees of success. Examples of outsourcing include the Pasadena, California news site outsourcing its city council coverage to India (via video stream); to Demand Media, the well-known “content farm,” producing the travel section for USA Today (phone interview with Ken Doctor, Aug. 19, 2011); to the Journal Register Company outsourcing all printing, distribution, pre-press ad make up and page make up.
The Journalism Marketplace: A Colorful Market for Valuing Content
The marketplace for INN member sites and content still resembles a colorful bazaar where, as this picture shows, it’s often difficult to discern:
• Who is doing the selling and who is doing the buying?
• What are they selling?
• How are they packing and promoting (a beautiful sign, a pretty bag, or a baker’s dozen)?
• Why buy from one vendor and not another (quality of goods, uniqueness, credibility of the vendor, pre-existing relationship, or the recommendation of a trusted friend)?
Issues of pricing are still immature, and there is not enough combined scale in the market or clear editorial budgets for pricing to become more standardized.
The Risks Are Real
The explosion of nonprofit news sites bodes well for innovation in the industry. But it’s unlikely that all of these organizations will find a path to sustainability. For some perspective, approxi- mately 75% of nonprofits registered in the United States fail in the first year. Although many reasons are cited, some of the most common include:
• Lack of planning
• Poor management
• Insufficient capital
• Poor diversification of funding
These factors are similar to new small businesses, 50% of which fail in the first five years, according to the U.S. Small Business Association.
The National Venture Capital Association estimated that 40% of venture-backed companies fail, 40% return moderate amounts of capital, and 20% or less produce high returns. In his blog post titled “Why Early Stage Venture Investments Fail,” Fred Wilson, founder of Union Square Ventures in New York writes, “Most venture backed investments fail because the venture capi- tal is used to scale the business before the correct business plan is discovered. That scale/ burn rate becomes the cancer that kills the business… capital efficiency and bootstrapping are critical values. You must keep your burn rate low until you can show without a shadow of a doubt that you have a business model that works, can be operated profitably, and is ready to be scaled. Then and only then should you step on the gas.” (Source.)
Values for Today’s Journalism Marketplace
Market Driven Products Require Ongoing Conversations with Customers
Despite all the talk about entrepreneurship and innovations, the journalism business still seems largely trapped in a 19th century factory production model. Just as good journalism requires a variety of sources and rigorous fact checking, the organizations working to bring a journalism product to market must have an ongoing conversation with that market about its needs (not for the journalism itself but for how it is packaged) and align their products with those opportunities. What we learn from startups and product companies is that flexibility in how products are packaged, deals are made, and customers are acquired are the ingredients of successful organiza- tions. That knowledge and feedback comes from ongoing customer conversations.
In a Sea of Commodity Content, Craft Matters
One of the most encouraging things we heard repeatedly is that the fundamentals of the craft still matter greatly. It’s not only the quality of the investigations that matters, but also the quality of the writing and copy-editing, the production value of related materials, the documentation, and the fact checking and sourcing. A well-written, well-researched, well-executed (balanced, accurate and fair) piece still matters to partners and consumers as described by Shirky, “who care to have it, even if they care only a little bit, only some of the time.” To that same end, craft and experience matter in all of your hiring including the related functions of business, technology, marketing, and social media.
Credibility is King, Relationships Matter
It matters by whom and where investigative journalism is done. Credibility is built over time and founded in trust. Opportunities to deliver impact continue to be bolstered by standing relation- ships with trusted sources, and influencers, and career-long relationships with decision makers at potential partner sites. In building a new news brand, success comes from building relation- ships with not only your audience but also all of the stakeholders your news product will serve.
Story Selection is Fundamental
Story selection is perhaps the most obvious, but largely overlooked key attribute of nonprofit investigative news. The stories these organizations choose to pursue and how closely those stories align with their stated mission is core to INN members defining and achieving success. Selecting the right story and managing the correct resources to deliver it remain key. If a story is unique, finds an audience, goes viral, and activates public or key figure influence, it is successful.
The Wisdom and the Work of the Crowd: Collaboration is the New Norm
Cost cutting, distributed workforces, networked resources, and the rise of citizen journalism are some of the ingredients of a fresh approach to journalism. Where once hard lines were drawn between journalists, media companies, sources, and citizens, today’s collaborative opportunities represent a new frontier still to be fully explored. This is an area rich in debate and conversation, with collaborations between media and the public being championed by Jay Rosen and entre- preneurial training groups like J-Lab. A recent paper titled “Partners of Necessity: The Case for Collaboration in Local Investigative Reporting” by long time Oregonian Editor Sandy Rowe is useful for further exploration of this powerful and promising trend.
Market Trends for Revenue Generation
It takes time for definitive trends to emerge from a disrupted market. Our research revealed dozens of angles, nuances and “trendlets.” What follows is a short list of those that seem most relevant to INN members. We are sure this list will continue to grow.
Unlocking the Value of Data
Data journalism may have started as the domain of highly specialized “computer-assisted reporting” specialists, but decades later, it has become a vital tool in many journalists’ toolboxes. Collecting, accessing, and analyzing large datasets has become easier, and thus cheaper than ever. Some of the most innovative news organizations, including many nonprofit newsrooms, are building expertise in handling ever more complicated data and using them to tell important journalistic stories.
Expertise Is a Premium Product, and Could Call for a Premium Price
Expert networks, which supply marketers with domain experts for product development, have grown into over a $300-million business17 over the past decade, reflecting the potential value of subject expertise. When the assignment calls for it, there’s clearly an appetite for experience, and in the broader market the subject matter expertise of INN member organizations may represent opportunity. The Public Insight Network project of American Public Media is one example.
Packaging and Bundling
The next phase of report once, publish everywhere is optimizing your content for the right dis- tribution channel. Whether that means localizing a national story to a region or creating a video presentation of a 3,000-word investigative piece, journalists need to become more willing to take charge of the packaging and bundling of their content for different channels. The value-add that member organizations bring is being able to customize the “package” and its related graphics, photos, data sets, etc., for individual partners. That flexibility may in many cases greatly enhance opportunities for distribution, allowing a story to achieve an audience of scale and resulting impact.
Narrowcasting and the Freemium Model
The proliferation of media sources has made it difficult for consumers looking for consistently reliable information on topics important to them. These consumers have shown a willingness to pay for information that matters deeply to them. In a “freemium” model, a product or service is given away for free to the majority of users. A small minority sustains the business by paying for enhanced services that are of value to them. Because the Internet has reduced distribution costs to practically zero, the freemium business model has begun to show success. Publishers ranging from Consumer Reports to McGraw Hill to the Financial Times have realized that they only need to monetize a narrow spectrum of very interested consumers to achieve financial sustainability and profitability.