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“Silly Season” Summer Roundup: Squeezing the Value From Online Content

Posted by chanders on August 12, 2009

ACAP, hNews, CircLabs, the Information Valet, Attributor … this summer, a number of initiatives designed to squeeze one last  drop of value from the well-juiced orange of news have been breathlessly announced. If you’re like me, most of these plans eventually start to blur together into one big “they want to charge for content” miasma. But, they’re actually different enough that I think it would be valuable to break them all down into a few general categories. It seems clear that, by the winter of 2010, many if not most online news products will have launched a variety of payment initiatives, so it might not be a bad idea to get an idea of what could be coming down the road.

I want to be clear: this is a limited overview of some of the ways people are talking about funding journalism in the online era. I don’t get into some of the more forward-looking projects, like Spot.us or Kaiser Health News. I’m not even getting into what I think is the only real question about journalism worth asking: what are news organizations going to add to what they already do in order to generate new revenue? The title of this post sums up, I think, the gist plans outlined here: squeezing value from traditional online content.

Finally, you’ll notice that I don’t discuss the Steven Brill venture “Journalism Online.” To be honest, while Journalism Online was first out of the “create value by charging” box, I have had trouble figuring out exactly what it is they’re planning to do. At best, they want to do a little but of everything I outline here, but it seems like, at least for now, they are primarily a consortium empowered by struggling newspapers to “figure it out,” rather than an entity possessing any actual plan.

I divide the numerous “value from content” plans into four general categories: (a) the paywall, (b) tracking users for ads (c) tracking content for extraction (d) reinstate online scarcity via legal doctrine.

The Paywall

In some ways, this is the classic: if information “doesn’t want to be free,” or if it wants to be free and freedom is unsustainable, than the obvious answer is: information should cost money. And the way to get money from information is to make it unavailable except for those who pay.

The patron saint of the paywall is Walter Hussman, the editor-in-chief of the Arkansas Democrat-Gazette, who has argued consistantly that news should not be given away “for free” online. Many newspapers and news media owners, including both Rupert Murdoch and the New York Times, appear to be considering variations on this model.  In 2009, the Newspaper Association of American produced a study on industry paywalls [pdf]. The emerging argument from those advocating for paywalls is that the last decade of (mostly free) online delivery was a disastrous  multi-year experiment that is now coming to a close.

My own quantitative research has demonstrated that there is a meaningful  correlation between paywalls and the stabilization of print circulation  in the few cities where walls have been opperative long enough to conduct meaningful analysis. However, as research has also documented, the primary monetary effect of paywalls is to drive readers to print rather than make money online, which is a business strategy whose long-term viability is, at best, debateable.

The question confronting advocates of paywalls is not: was not charging for content the “original sin?” Nor is the problem one of whether or not media consumers can be “retrained” to pay for content. The problem is more deeply structural.  As research by W. Russell Neumann has shown [pdf], while the growth of media consumption from 1960 until 2005 increased on a linear scale, the growth of media supply increased exponentially, with the ratio of consumption to supply minutes moving from near zero to more than 20,000 to 1. In other words, if discussions about “what to charge for” are to make sense, they must be premised on this deeply structural change in the media environment.

This fundamental news oversupply, which can be said to have resulted in the deep “commoditization” of media content, has lead most pay advocates to embrace a modified form of charging, what might be called the” 80/20 Paywall” system. In effect, the logic here goes that while most readers will not plunk down money for general news, they will pay for unique, niche information that they cannot get anywhere else. The question then becomes– how to generate that unique content, and how to know for sure what people want? A more fundamental problem, perhaps, is that the task of providing niche content is one that newspapers– the current bastions of traditional “reporting”– have not done. In fact, their organizations have largely been premised on the opposite mission and business model.

Track User Behavior to Improve Ad Targeting

A second model largely bypasses the notion of putting news behind a paywall; instead, it embraces the current advertising support media system, but attempts to make that system better; and by better, I mean “more revenue generating.”  As Bill Grueskin notes, “We hear a lot about the death of journalism these days, but much of the crisis really amounts to the death of advertising, or at least advertising as we knew it.”

Both ViewPass and CircLabs would be built on a one-time registration system, and both “would support payments for individual articles, subscriptions and bundles of content. But as ViewPass co-creator Alan Mutter notes, the primary value of these registration systems would be “the data they assembled on each individual consumer, because the data would enable publishers to sell their advertising inventory at premium rates to advertisers seeking to target their messages to the most likely consumers … The data would enable superior ad targeting, thereby improving consumer response. Improved response would generate higher CPMs, boosting revenues as advertisers competed for access to the availabilities.”

Solutions like CircLabs and ViewPass would have the advantage of seeking to improve the existing advertising-supported model of news delivery rather than overturn it. The two primary difficulties with these model would probably come from the barriers they would present to users behavior (the need to register or to provide other forms of demographic information) and privacy concerns. A number of commentators discussing the ViewPass or CircLabs plan have agreed with the notion that the key to newspapers’ future lies in a better understanding of online advertising, but have doubted that “newspaper companies have the chops in mathematics to understand machine learning, natural language processing, semantics, association rule mining, etc.”

Track Content and Extract Value

A third general approach also largely abandons the notion of a paywall, and focuses instead on tracking online news content and, where possible, extracting value from that content. Various proposals floated by the AP, including ACAP and hNews fall roughly into this category.  These proposals make use of what is called “microformatting,” and would supposedly allow news organizations to track their content as it flows across the web; in a press release, the AP emphasized that this tracking would allow content originators to “crack down” on blogs and aggregators that were “misappropriating content” without permission.  But Yelvington noted on his blog: “from the perspective of building a better Internet, [hnews]‘is a good idea. From the perspective of stopping bad people from stealing, it’s utterly ineffective. We should understand what it really does, and adopt it for what it really is, and drop the silly posturing about how it’s going to make all our financial troubles vanish. Because it’s not that, not at all. What it is, is a good thing.”

Much of the confusion about what hNews will really do has been attributed to political and organizational battles inside the AP itself; namely, the organizations’ desire to keep its member newspapers from bolting by promising them the benefit of moth the microformat and advanced, RIAA-esque copyright protection. Other online confusion has stemmed from the AP’s consistant track record of overly aggresive and often absurd attempts to assert copyright protection over its material.

It should be noted, as an aside, that the Attributor plan, while bearing some passing similarities to  the ACAP and hNews enforcement model, differs from these plans insofar as it seems to put the emphasis on revenue sharing with organizations that “steal” online content rather than “cracking down” or suing those organizations. As Zachary Seward describes it:

“Organizations using Attributor don’t want to shut down splogs and their ilk, which would be a largely sisyphean task of enormous cost. Instead, the consortium is negotiating with the networks that serve ads against pirated content to negotiate a substantial share of that revenue.”

The difficulty here, of course, would be getting Google, Yahoo, and other owners of advertising networks to go along with the plan. A second difficulty may stem from the fact that there may be very little revenue to be extracted from the kind of “pirates” said to be operating on the back of the news industry.

Bring Back “Unjust Competition”: The Marburger Plan

Because, like hNews and ACAP, it would rely on “going after” online organizations that are supposedly “parasitical” on news content, the Marburger plan is easy to lump in with the AP plan. But it is actually quite different, and would not rely on copyright at all. Instead, it would basically make competing with newspapers illegal. While that is a somewhat extreme interpretation, in the Marbuger’s own words the plan would seek to restore the pre-digital balance between original news reporting outlets and advertisers by giving content originators a common law remedy to charge “unjust competition” with newspapers in a court of law. “The change the Marburgers are pushing for is more about adding some sort of economic hardship to these competitors such that they’re more likely to form an economic relationship with the newspapers that originate the news stories.” [techdirt].

With those clarifications, the heart of what the Marburger’s propose can be gleaned from this discussion between themselves and of Mike Masnick of Techdirt. In essence, the debate is about what newspapers and their online competitors do, and where value comes from online:

David Marburger: “There can be no doubt that summarizing a story that someone else wrote creates a close substitute for the original story. It is silly to pretend otherwise. Adding a link at the end is a nice touch, but can’t amount to fair compensation for taking and commercially exploiting the originator’s hefty journalistic services. That’s because the summary makes clicking on the link redundant. Why read the same story twice?” As a way to justly and not parasitically expand on newspapers work, Marburger argues that blogs can “expend your own resources to verify the original story and possibly add new information that your discover using your own efforts.”

Mike Masnic: “[The Marbugers'] examples of “parasitic aggregators” is also quite odd. It’s basically any competitor who has real staff that writes a story that competes with the original reporting. That’s not an aggregator. It’s competition. And if someone who was not on the scene can actually add so much value to the news that the original reporter doesn’t provide enough value, the problem is in the original publication for doing a poor job in providing enough scarce value beyond the basic facts.”

The debate, in short, is about externalities, value creation, and work.

***

After this summer of blowing-hard and rolling out big ideas, the Fall should be where the real fun begins. Here are some predictions:

1. News organizations with confidence in their own originality (the NYTimes, the Financial Times, others) and brand value will strike off on a version of the “paywall” plan on their own.

2. News organizations without such confidence (the Philadelphia Inquirer, anyone?) will join Journalism Online and place their fate in the hands of Steven Brill and Co. They too will probably institute some paywall format.

3. When looking at the “track the users” or “track the content” plans (CircLabs, ViewPass, Attributor, hNews) it will be interesting to see what Google does, if anything. Obviously some form of ad network accommodation with Attributor would mark a significant boon for them. Endorsing the hNews microformat would also be huge. Up til now, there seems to be little chance of Google doing either of those things, and I dont see how either of these plans can work without their buy-in. Expect to see heavy competition on the microformat angle from already existing tagging plans. It will also be interesting to see if the AP has learned from its disastrous roll out of hNews and comes back with a new description of what they’re doing.

4. The Marburger plan seems dead in the water. As something requiring Congressional action, I have a hard time seeing a law like that ever passing.

Fun months ahead.

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