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July 12, 2012, 1:05 p.m.
Business Models

The newsonomics of good news about news

It’s easy to focus on all the bad news about the news business. But there are some reasons for optimism poking through the clouds.

Admit it: Good news is boring. All of us in and around the news business know that. Bad news gets read and gets our juices flowing. So when that news DNA is challenged by reality, the news can be easy to miss.

As we head into the second half of 2012, amid much despair given downward ad trends in print and stalling ones in digital, let’s pause to consider some good news about the trade. The good news is too well balanced by the bad, but it’s still important not to lose sight of it. It’s not a matter of being Pollyannish, but of being realistic: Within that good news are seeds of what will sustain whatever forms the next stage of the news business.

Let’s call it the newsonomics of good news.

I’ll make it a top 10 list, as is appropriate with a good news feature. As we move down the list, we see some of the elements that are among those encouraging some outside the industry — Warren Buffett, San Diego’s Doug Manchester, Halifax’s Michael Redding, Chicago’s Michael Ferro, Jr. and John Canning, Jr. — to buy into the flagging news industry.

1. Digital circulation can work.

Digital circulation (a.k.a. a paywall strategy) is working and fast becoming the default among daily newspapers — from Tokyo, Singapore, and Sydney to Minneapolis, Boston, and Augusta to London, Madrid, and Helsinki. At the top end, right now, we can call it a 10 percent solution: That’s the kind of circulation revenue bump top publishers are seeing. This is a big piece of new puzzle. (Caveat: See #11 below.)

2. Digital circulation vastly improves circulation revenue margins.

Last week, faced with a Wall Street Journal renewal notice, I opted for digital-only for the first time, knowing that WSJ’s tablet format and easy right-hand navigation makes it far quicker to read than the paper version. That choice is also greener, both for the environment and for the Journal. The pricing of digital access — $260 — is only a dollar cheaper a week than the print — with far lower costs for the Journal. As readers tip into digital, these margins will make a big difference in bottom-line performance.

3. Third-party content sales take off.

As the Journal explained about its Pulse deal, it’s just a toe in the water. Expect whole feet and legs to plunge in over the next several years. Once digital circulation strategies are put into place, extending them makes perfect sense for news companies. This movement is not only about new revenue sources — it’s about cheaply and easily leveraging the best design and presentation on tablets, smartphones, and other devices, as they come along, without news companies having to develop them themselves. So The New York Times doesn’t need to build its own Flipboard model — it can piggyback on Flipboard’s substantial investment and harvest new revenues. Multiply this strategy by more distribution outlets, and it goes way beyond experimentation.

Big caveat: How and how fast can this strategy be adapted for the regional and local press?

4. Readers love tablets.

From Pew’s several studies to Roger Fidler’s Reynolds Journalism Institute surveys, the news is almost unreservedly good. People like to read news on the tablet. They read more of it, from known sources, for longer periods. If the news industry were just stable, euphoria would be in order, but since it’s not, this astounding turnaround from splintered, bit-sized, aggregator-driven desktop news reading has been under-appreciated.

5. Ad sales are growing beyond selling impressions.

Selling pageviews is so 2005. The most innovative companies are moving as fast as they can beyond cost-per-thousand-based advertising sales. Two big trends here: First, selling share-of-voice — sponsorships of sorts, borrowing strongly from broadcast models. These are working to boost effective rates for publishers from the FT to the innovative, newer products, like the Orange County Register’s The Peel tablet app. Second, becoming a digital regional agency, offering local merchants of all sizes ways to leverage the digital world, well beyond simply placing an ad. Marketing services (“The newsonomics of small things”) is a tough, tough business, with lots of competitors (note that One on One Ads All-Star game commercial), but it’s an area of growth for many news companies.

6. The Googlejuice thins.

For half a decade at least, news publishers have found themselves hugely dependent on Google. The search giant sends a third to half or more of the web referrals that news sites get. That’s created a great reliance on Google. Now, though, referrals are diversifying. Several publishers tell me that the percentage of Google referrals has dropped a good ten points in the last year. The reason: the rising importance of the social web and social referrals. Facebook is the fastest growing source of referrals, and Pinterest, Twitter, and Linkedin are all growing as well. The key to finding new value here: mining the referring data to see how different kinds of samplers may be turned into regular customers.

7. Community-generated blogs mature.

This movement is now several years old, and in its most worthwhile forms, is beginning to form both new identities and new revenue streams for newspapers. Take The Seattle Times, which has expanded an experiment that started with five regional blogs, produced by non-staffers, and built it into a 50-blog News Partner Network. The Times pays the bloggers with recognition and traffic, currently sending about 115,000 clicks a month to partners, says Times executive editor David Boardman. The benefits to the Times are both tangible and intangible.

“Recently, we created an ‘Around the Sound’ page in our Sunday newspaper that features neighborhood content provided by the blog partners. That’s low-cost, quality content we would not have otherwise,” says Boardman. “We have made consistent use of the network partners for both news tips and for reporting stories. And it works both ways, with us providing tips and reporting and photography to them.”

Then there’s the community warmth factor, as J-Lab’s survey has found a surprising 80 percent of the local population showing appreciation of the notion.

8. Computer-generated journalism’s tough birth.

A new surprise entry. The reaction to Journatic’s byline faux pas has been predictable, right at its core — and totally overblown. Journatic and Narrative Science are far from the only companies plying this territory. The fact is the computer-generated editorial content is here to stay, and it must be mastered by editors. One such editor is David Arkin, GateHouse’s vice president for content and audience, quoted in David Folkenflik’s NPR story on the contretemps. Says Arkin, “As we look at what our content goals are in our organization, we need and want more enterprise storytelling.” Exactly. Hold on to as many of those real enterprise-plus reporting jobs, and then use comp-gen technology to do the heavy lifting, to which reporters add minimal value.

9. Journalism gets more mobile.

No, not as in smartphones and tablets, but as in mobile journalists. Digital First Media is testing the next generation of its community reachout strategies, outfitting mobile vans in the Bay Area, Twin Cities, Connecticut and York, Pa., well documented at Steve Buttry’s blog. Some of what DFM is trying to do will work; some won’t, but there’s no doubt that real engagement with news readers — online and offline — is a major key to the future, especially as reader revenue becomes the dominant revenue source (“The newsonomics of majority reader revenue”) feeding journalists.

10. Publishers are getting to know their readers far better.

Still another consequence of digital circulation: Some publishers are learning much more about their readers. From The New York Times to New London, Conn.’s The Day, publishers have seen the necessity of creating a single unified customer view. That means connecting up print readers and their digital reading, shopping, and buying habits. As I wrote last fall, the goal here — someday — is close to a 100 percent connection (“The newsonomics of 100% reach“). The Day is almost halfway, ace audience tracker Daniel Williams told me this week. It has now linked 45 percent of its print subscribers. That sets up 2013 as a year to better serve those readers — and harvest more revenue accordingly.

Let me add a bonus eleventh, one both sobering and elevating:

11. Quality sells.

In this age of digital circulation and readers opening their wallets to all-access models, we’re seeing that big national/global providers of news are convincing readers to pay up in substantial numbers. For the regional press, it’s a mixed record so far. We can attribute that mix to a half-dozen questions about the papers’ execution of digital circulation. In addition, though, it’s becoming increasingly important to point out that readers are more likely to pay up when they believe they are getting something sufficiently filling. Those that have concentrated on saving as much of their newsroom capacity as possible are generally faring better. As Press+’s Steve Brill just put it, as his company released a report this week on the relationship between content and digital circ revenue: “If you want to sell journalism, you have to do journalism.”

Publishers best heed that truism of the new, and old, business.

POSTED     July 12, 2012, 1:05 p.m.
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