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April 28, 2011, 11 a.m.

The newsonomics of story cost accounting

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

What’s a story worth?

Last week, I looked at a single investigative story (California Watch’s “On Shaky Ground“), and we saw the tab of half a million dollars for a 20-month-long tale of sleuthing. What about that ordinary daily story, quotidian journalism as we know it — the grinding out of less eventful articles, the kinds of things that keep us informed but don’t offer epiphanies? How much does it cost, and how much does that matter to the future of the news business?

It’s not an academic question. This week, McClatchy added to the long line of down financial reports, telling us that it was down 11 percent, year over year, in ad revenues and 9 percent in overall revenues, for the first quarter. That announcement follows on from similar reports from The New York Times Co., especially its regional properties, and Gannett. The U.S. news industry is extending its unwanted record: 21 straight quarters of revenue down quarter to quarter. That’s a lost half-decade.

Add up those down revenues and the need to maintain profitability — for public or private owners — and there’s but a single answer: cut costs. Certainly, the industry has cut out major costs in the last three years, but cost-cutting is slowing, if you look at the company reports. The New York Times’ costs were flat in the first quarter, Gannett’s down 0.9 percent and McClatchy’s down 6.5 percent. That’s in large part due to rising newsprint prices, making it harder to get costs more appreciably down. With those continuing revenue declines, though, expect more cost-cutting. It’s a given.

So, let’s ask about that daily story. What’s it cost?

Of course, we’ve never looked at it that way. We’ve hired people, told them to write, at times monitoring their production, but rarely taking a look at the cost of what they’re producing. Given the pressures of the day, given the Demand Media model and given the predilection to start counting whatever can be counted (“The newsonomics of WaPo’s reader dashboard 1.0“), story cost accounting is inevitable.

In fact, it’s already started. Let’s take a brief look at what is bound to become a bigger topic in the months ahead, the newsonomics of a single story.

Clark Gilbert, Salt Lake’s dean of disruption, is getting into the nitty-gritty of retooling editorial content production, top to bottom, and that includes getting a handle on differing costs of content. Gilbert is a key part of the team that is transforming the media properties of the daily Deseret News and leading local TV and radio stations KSL, all owned by the Church of Jesus Christ of Latter-day Saints, better known as the Mormon Church. Last August, Gilbert announced one of the most major restructurings in journalism, making major staff cuts — a prelude to the re-architecting now being done. That restructuring includes the launching of Deseret Connect, an initiative to round up pro-am user-generated content from around Utah, and around the globe.

The new CEO of Deseret Media will soon be able to tell you exactly how much articles cost him. He’ll specify the differing price points of local, proprietary content, of AP content, of a blog post written halfway around the world, and lots more.

For now, he draws upon his experience as a Harvard Business School prof and strategic consultant. From that career work, he estimates the following, general cost metrics for the content offered by news companies in print and online:

  • $250-$300 per staff-written story;
  • $100 per stringer story;
  • $25 per Associated Press story;
  • $5-12 for “remote” stories, largely written by the emerging class of bloggers

“You better know your cost per story,” he says. “That’s the kind of rigor you need.”

As focused as he is on building digital ad revenues, he makes the point directly: “You have to work both sides [revenue building, cost reduction] of this.”

“It doesn’t mean I’m not willing to pay for content,” says Gilbert. “I’m paying a boatload for stories that are a commitment to my audience.” It’s a straightforward strategy: If you are going to pay a boatload for some stuff, you better pay a lot less for other stuff.

Still, those numbers are bound to chill many a journalist. You think posting reader metrics in newsrooms is still a point of contention — wait ’til story cost accounting becomes mainstream. And it will. It’s just simple manufacturing, and like it or not, that’s what the news business has long been. Manufacturing, with lots (New York Times, Wall Street Journal) of quality added or with (insert your favorite rag here) just enough to draw ads. News creation used to be a sunk cost, with headcount a small and usually polite battle between editors and publishers. That was in stable times. In these times, knowing business drivers, down to the dollar, is going to be part of the new world.

The metrics-driven thinking may have been first demonstrated by Demand Media, with its $10, $25, and $50 stories (“The newsonomics of content arbitrage“), but once opened, that Pandora’s Box won’t be closed.

Clark Gilbert is early in the game, but others are taking a parallel cost-conscious approach.

John Paton, CEO of the new, continuous-revolution Journal Register Company, breaks it down differently, but is highly cost-aware.

“We’re not looking to save money on local, professional content,” Paton told me this week. Notice the emphasis on “local” and “professional.” Like many others, Journal Register is beginning to round up hundreds of local bloggers (as Patch joins that club), who will be largely unpaid.

What Paton emphasizes, though, in his cost-of-content analysis, is the 60 percent of JRC’s content — across print and digital — that is national. He’s done a careful counting of what’s in his products, and says that while 40 percent is local (above average for dailies, he says), 60 percent is national. So Project Thunderdome, newly headed by D.C. veteran Jim Brady, has put a bullseye on that content. The notion: Lower the cost, and where possible, raise the quality of national content. That thinking is behind JRC’s recent deal with TheStreet.com, which is now providing its national business news. It’s a revenue share, with JRC gaining national revenues. In addition, says Paton, it has increased its local business content-related revenue, given both the new inventory of ad impressions made possible and the quality of TheStreet.com content. That’s a model Paton intends to extend to other non-local content.

Further, he’s taken dead aim at the cost of getting content through the mechanics of a newsroom. Saying that about half of U.S. editorial staffs are engaged in producing content for publication — not creating it — he’s focused on changing that ratio. Instead of five of ten journalists engaged in production, he’s aiming for two of ten, to be accomplished through centralization and templating of the production functions. “Then, two or three more of the ten can create content,” he says.

Both plans will, in effect, reduce the cost of content overall. And, as with Clark Gilbert’s philosophy, the intent is to invest in unique, local, proprietary content, even though it’s far more expensive.

Let’s consider one more take on story cost accounting. As CEO of Huffington Post, Betsy Morgan pioneered the unique brand of higher-end, often personality-driven aggregation that distinguished the site’s offerings. Out of that experience, and in her new role as CEO of Glenn Beck’s The Blaze site, she’s evolved her own metrics. They divide nicely into thirds.

  • One-third original, professional content, largely reported journalism.
  • One-third voice and opinion.
  • One-third aggregation, or to use the updated term, “curation,” as editors aggregate, honing off-site story selection given their understanding of their unique audiences.

Morgan tells me that “the thirds” form both an audience strategy and a cost strategy. Clearly, as the venture-backed HuffPo began its life, it watched its dollars very carefully. That meant that curation wasn’t just an audience-pleasing idea, of course, but a cost-saving one, as bloggers (at least then!) willingly forked over content in exchange for play and recognition, not money.

Going forward, the “thirds strategy” offers another twist on Clark Gilbert’s and John Paton’s (and Arianna Huffington’s) strategies. Obviously, you don’t pay for the curation part, other than for the technologies or smaller staff to handle it. You can pay for some of the voice and opinion, but there’s a hell of a lot of it you can get for free or cheap. And, once again, you concentrate your costs of content on the high end — original, professional, largely reported journalism.

The new AOL/HuffPo’s been doing that with pro hire after pro hire. Morgan herself is doing it, as recently as this week with the hiring of former Denver Post columnist David Harsanyi.

Add it all up, and it’s a new cost structure for the craft of journalism. As with all metrics, the good or bad they inspire depends on who is using them. What’s clear is that those news outfits — local, national or global — which only concentrate on paying staff, like in the old days, will find themselves out-strategized by those who take the blended approach.

Is it all about thirds? No, but it’s a good place to start.

I think of it as a pyramid. Original content — content that distinguishes news brands — is at the top, and, yes, is the most costly. At the bottom is clearly aggregation, because as Morgan points out, “[readers] can’t easily find and read what’s of interest to them.” Then, there’s the middle third or so. For regional news companies, that includes hyperlocal bloggers and subject-specific (transportation, public health, sports) experts; for national sites, it’s non-staff “contributors” of differing skills and costs. That third is quite open to innovation.

It’s a great whiteboard exercise, at least, for anyone in the news business. Pass the marker, please, and work the pyramid.

POSTED     April 28, 2011, 11 a.m.
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