HOME
          
LATEST STORY
A mixed bag on apps: What The New York Times learned with NYT Opinion and NYT Now
ABOUT                    SUBSCRIBE
Jan. 29, 2014, 3:23 p.m.
start-finish-cc

The newsonomics of why everyone seems to be starting a news site

Even though much of the digital advertising market is dire for news operations, a confluence of factors are making it easier than ever to build something new online.

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:

  • Project X, the Ezra Klein/Melissa Bell/Matt Yglesias/Dylan Matthews site building on Wonkblog (“Digital Native Ezra Klein Finds Post-Post Voice”), got Vox Media’s Jim Bankoff’s nod — a nod worth, we believe, close to $10 million in order to “build on” a new news company to the Vox portfolio. [Added clarification: Bankoff's investment will be lower than the investment Project X asked of the Post; Vox's already-developed Chorus technology will support the new site, lowering the need for upfront capital.]
  • Nate Silver’s new FiveThirtyEight has already added 15 journalists, with more to be hired as he blows fuller life into the analytical data work he pioneered at The New York Times.
  • Still in something close to stealth mode, Pierre Omidyar has named his Glenn Greenwald/Eric Bates/Bill Gannon/Jay Rosen new news company First Look Media, and begun laying out the game plan in a short video.

    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.

  • On New Year’s Day, Recode launched. Kara Swisher and Walt Mossberg transplanted their AllThingsD staff of 15 smoothly, finding a new home with support from NBC Universal, a company willing to fund the re-startup. Meanwhile, The Wall Street Journal, AllThingsD’s former home, reinvested to fund a replacement tech-coverage staff, launching its own new WSJ.D.
  • As 2013 wound to a close, Time Warner Cable added Al Jazeera America to its lineup in New York City; watch anchor John Seigenthaler gamely defend its uneasy-to-swallow branding (and logo) against the wiles of Stephen Colbert.

    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:

  • Free-agent talent. Journalists are more mobile than ever. People now bring along their own audiences. Just look at the Twitter followings and some of those in the news. Nate Silver: 653,000. Ezra Klein: 422,000. Glenn Greenwald: 326,000. Matt Yglesias: 100,000. Digital access and social sharing mean that both twentysomethings and veteran voices can develop big followings in a short time. A case has been made that The New York Times has been bleeding talent, losing people like Silver, David Pogue and Matt Bai — but a case can also be made that it is replenishing just as quickly. The Journal’s new personal tech columnist Joanna Stern provides a smart, updated and humorous take on LG’s G Flex phone here), beginning to identify an answer to the post-Mossberg question. Slate, which has developed lots of real talents, will find new talent as well. (Farhad Manjoo may be this year’s poster child for mobility — from Slate to The Wall Street Journal to The New York Times, all since September.)

    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.

  • Foundational technology only gets better and cheaper. Digital-only content management systems get the content out on all platforms with far fewer people and keystrokes. Ad automation and optimization maximizes revenue with fewer staff. Social sharing tools magnify voice for virtual pennies. NBC Universal, ESPN, and Vox can all extend their content and sales systems to serve their new properties, leveraging the digital technology investments they’ve already made.
  • Business models are maturing. New publishers are finding enough niches to largely pay smaller-but-expanding staffs of journalists — if they can create large enough audiences. They are also seeing that native advertising, well done by BuzzFeed and Atlantic Media, for instance, offers a way to compete with programmatic advertising. Premium (Politico Pro) and events (Business Insider) strategies are giving the new publishers the sense they don’t have to wholly rely on advertising.
  • Time. The financial pressures on the legacy companies, newspaper and magazine, are unrelenting: Short-term profit expectations, ongoing debt service, the need to maintain burdensome legacy costs even as legacy revenues tumble. The new funders provide not just money, but time. Jeff Bezos gave a one-word answer to what he offers the Post when asked on his first newsroom visit: “Runway.” No new news digital company is break-even or profitable early on; with luck, at the three- to five-year mark, it may get there. Time is as important as money — though it’s money, of course, that creates the time.

Photo by Anne used under a Creative Commons license.

POSTED     Jan. 29, 2014, 3:23 p.m.
SHARE THIS STORY
   
Show comments  
Show tags
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
A mixed bag on apps: What The New York Times learned with NYT Opinion and NYT Now
The two apps were part of the paper’s plan to increase digital subscribers through smaller, targeted offerings. Now, with staff cutbacks on the way, one app is being shuttered and the other is being adjusted.
The newsonomics of new cutbacks at The New York Times
The Times found success with its first round of paywalls, disappointment with its second. Is it hitting a paid-content ceiling?
With limited time to revamp WNYC’s Schoolbook, John Keefe decided to take his team on the road
The new Schoolbook will have targeted emails, major content partnerships, three languages, and more — and building it took just seven days.
What to read next
751
tweets
Wearables could make the “glance” a new subatomic unit of news
“The audience wants to go faster. This can’t be solved with responsive design; it demands an original approach, certainly at the start.”
677Designer or journalist: Who shapes the news you read in your favorite apps?
A new study looks at how engineers and designers from companies like Storify, Zite, and Google News see their work as similar — and different — from traditional journalism.
596Ken Doctor: Guardian Space & Guardian Membership, playing the physical/digital continuum
The Guardian is making its biggest bet on memberships and events by renovating a 30,000 square foot space to host live activities in the heart of London.
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
Medium
Zonie Report
Poynter Institute
The Washington Post
NBCNews.com
Connecticut Mirror
Backfence
Hearst
Charlottesville Tomorrow
Tribune Publishing
Placeblogger
West Seattle Blog