You’d think the new digital printing presses were minting money.
Just within the last month, all kinds of details have emerged about the construction of new, digital, high-quality-aiming national news organizations. What may seem like a gold rush is really something else, but the reasons underlying the great movement — and it’s only January! — are worth examining.
New. We love the word, with its shiny imaginative possibilities. New news companies — now that’s really exciting to many of us. Let’s first count the five most noteworthy recent plays:
Omidyar’s potential investment stretch into the stratosphere, from $50 million to $250 million. Showing an understanding of what any modern news company now requires in addition to journalists, Omidyar makes a point of hiring technologists, data analysts, and visual designers.
AJA put 900 journalists to work in the middle of last year.
Count it out, and that’s over a thousand journalists: well-paid jobs for many veteran reporters and editors, paid to do the kind of journalism they mostly want to do. Sure, we’ll continue to see lots of of tech-led “news” startups, like Jason Calcanis’ reborn Inside.com, which promises to seize the opportunity of mobile curation, while promising “to build the world’s best news product…but we want to do that without any journalists…We want to be the starting point, not the destination. We don’t do any original journalism and we’re never going to.” There’s room for such companies (though as Peter Kafka asks, how many of them do we need?) — but I hope news-producing companies can finally master the curation art on their own. That way, curatorial business success will help pay more journalists.
Let’s be clear: The biggest bets here are funded by funny money. I don’t mean that it’s laughable — just that it’s money that’s not intended, as most investments are, to make more money.
Pierre Omidyar is spending a small part of his eBay fortune to double down on the kind of revelatory journalism that Greenwald and Co. have generated out of the Snowden files, though early indications are that he intends First Look to be a general news site. The government of Qatar refills the budgets of the wider Al Jazeera Network with its inexhaustible pipeline of oil revenues. Yet even if the motivation of those two funders differ from those of NBC, ESPN, and Vox, they’re all seizing a moment in digital news history.
Even those funded by the for-profits don’t stand much of a chance to be big moneymakers. At the national level, the digital ad competition is intense. While there will be $40 billion in national digital advertising, programmatic buying and downward pricing pressures are accruing to the favor of the big guys, especially Google and Facebook. While companies that pay $75,000 to $125,000 salaries to journalists can offset much of that cost, there’s no hockey stick of revenue growth and precious little profit. Consider that The Huffington Post, the now-grandmother of news startups, is still operating at less than $100 million in annual ad revenues and flirting with profitability, as the stay-or-split saga of Tim and Arianna rolls on. It is considered the most successful non-legacy news company of the last half-decade.
As Jason Calcanis knows so well, paying journalists will weigh down the financials of any news business, and when the main support for that business is advertising, break-even becomes the three- to five-year goal.
So what’s the motivation here for NBC Universal, ESPN, and Vox? They vary, of course. NBC, after new rounds of digital-exec shuffles and purchases that didn’t pan out, seeks to up its digital content game, after having done a deal with GlobalPost last year. FiveThirtyEight may be housed at ESPN — a brilliant pioneer (great WSJ piece on its innovation) in next-stage moneymaking — but sister ABC News can also be a big beneficiary of the content edge Silver may bring. Vox’s sports/food/tech optimize-the-digital business smarts are among the best in the business, though the kind of wonkier work Klein and colleagues do likely won’t take off the way Vox’s other sites have. (For those wanting to go deeper on the Klein/Silver sweepstakes, Politico’s Dylan Byers faces the two off well.)
The price of entry is what’s key in this new business. No printing presses or broadcast pipes. At this moment, the world has conspired to make relatively cheap entry — at $25 million or less — quite possible. It’s also possible to project a new credibility for such new products: Digital audiences have become accustomed to taking new brands seriously, seemingly overnight.
The newsonomics here are fairly straightforward. It’s not simple, but it’s still far easier to launch new stuff than it was even five years ago. Here’s why:
In the old days, superior regional talent, like that of The Miami Herald’s legendary Sunday magazine, would migrate to The Washington Post and stay there. Now, people come, people go. The movement that we’ve seen growing over the past several years will only increase as legacy and startup news companies compete and journalists balance the massive traffic, brand support, and stability the old brands offer against to the allure of the new and of building their own brand and products. Companies like The Washington Post and the Times now must weigh how much to invest in retention versus development — what I’ve called “the Pujols effect” when the Times saw Pogue move on to Yahoo.
Photo by Anne used under a Creative Commons license.