The Quest for Pay Models

Friday, November 13, 2009

5:02 PM

Penelope Abernathy (University of North Carolina, Chapel Hill)

"The News Landscape in 2014: Transformed or Diminished? (Formulating a game plan for survival in the digital era)"
Not one model, at least not for forseeable future; has to be many models
When was the last time an industry died? When was the last time you saw a black and white or silent movie?
To create new pay models, you have to transform yourself in ways that make sense
Three viewpoints
Shareholder: The Curse of the Mogul
Journalist: Losing the News
Economist: Media Ownership and Concentration in America
10-year history
Media conglomerates underperforming market (S&P as proxy)
Niche information providers stay even
Traditional news overperformed and then fell off cliff in 2006
The internet's knockout punch
Destroyed barriers to entry (e.g., printing press)
Lost pricing leverage
Eliminated entire categories of advertising (e.g., classifieds)
"Creative destruction does not necessarily mean that the incumbents will lose out, it means they must transform themselves to keep pace with the ma rket"
Companies stay on S&P 500 for average of 16 years
The path to renewal
Shed legacy costs (biggest advantage of newcomer over incumbent; generally over 50% of traditional media companies)
Customer behavior is changing, so must switch out and transform
Reestablish community
Not about CPM, it's about selling community
Build new online advertising categories
Below-the-line advertising
Looking ahead: the landscape in 2104
"Creative leaders, once again, are needed to find ways to locate loyal audiences and to use technology to find (ways) to res earch these old and new audiences…"
"The likelihood that the structure of this medium will remain as before is nil." - Eli Noam

James Kennedy (VP for Strategy, Associated Press)

"A new Model for News"
Google is the new remote control for news
Pieces of the news:
Facts
Updates
Back story
Future story
Pieces are all disjointed, not a good user experience
People coming in through sidedoors and updates
Shift from Supply Push to Demand Pull
If we could standardize metadata formats and other steps, we could connect the pieces
Digital Platform
News Registry
Search Strategy
Social Media Model - move people from twitter into the news (Ed. Note: why not work with them on the home turf?)
Monetize long trail instead of old packages

Steven Brill (Journalism Online, Inc.)

10 years ago, major news organizations committed suicide by offering their content for free
Google is just helping AP give away for free what they want to give away for free (via their newspaper customers)
Not create a new model, create an old model
If you create journalistic content, the readers pay for a portion of it, and the advertisers pay a portion of it
Put power back in the hand of publishers to determine the balance/ratio
Not a paywall, but a gradual process to wean people off the idea that content is free

Robert Picard (Jonkoping University, Sweden)

Not dealing with dichotomous choices, but change over time
Newspapers are impacted about 4-5x as bad as any other industry during a recession
Push for paid content
Grounded in comfortable and seemingly logical arguments
Many newspaper companies are intrigued and studying how to charge
Some words of caution
Focus of discussion is about publishers' needs, not about customers' needs
Focus of discussion is about money not about the product
Focus is about the value of price for publishers
One cannot be successful without focusing on how to create value for the customer
Only then should you worry about price
Assumptions in the arguments
Paying for news is the same as paying for music, vide, and other content
NOT the same
There is more demand for entertainment than for news content
Willingness to pay is higher
Amount consumed is higher
Price for non-news content are much higher
5 times higher for tv/cable than newspaper

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 10x for CD
15x for DVD
Online content is the same product as print content
Is the product only news?
Print news consumers pay for many things
Content selection, organization, and bundling
Delivery to a convenient location
Customer service
Experience
Serendipitous discovery, normalcy of habitual use, consumption linked to relaxation, tactile simulation
Online news consumers get
Larger amount of relatively unorganized content
Convenient delivery
Difficult navigation compared to print
Little customer service
Unimaginative experience
Self selection of content, search, little personalization, limited interactivity
Online economic and market environment are similar
Except for printing and distribution
Fixed cost environment (first copy cost and almost no variable costs)
Average costs don't decline with increased more readers
No rivalry among consumers
Excludability of all news is not possible
Consumers don't know quality of content before purchase
Online consumers are the same type of consumers as print consumers
Less valuable than print readers
Print readers worth $500-750 for newspaper purchase and oduble that for advertising
Need 50 to 100 readers online to replace revenue lost from print
Conceptualized as monthly, not daily readers
Online payment systems are efficient

Tom Glocer (CEO, Thomson-Reuters)

Admires Brill for giving power back to publishers and taking advantage of medium
"Creative destruction" is painful by definition, shouldn't be surprising
Current generation of newspapers has lost sight of the revenue/cost balance
Technology doing what it always does: disrupt and unbundle bundled content
Both a generational shift and destruction of cross-subsidy
A lot easier to build than to shrink (as explanation for Politico vs WaPo)
Easier to ask a team to take out 25% of cost than to take out 2%
Because 2% often involves painful squeezes instead of large, radical swaths
Don't recreate the errors of old formats when creating new formats
Why does NYT have to do *everything* soup-to-nuts?
Niche-ification
News will matter more, history isn't dying

Q&A
Kenneddy: Need to create new news experience
Thinks that many people don't know how to find needle in haystack, need help finding information (Ed. Note: generational gap, clearly doesn't get it)
Picard: Newspapers know more about their advertisers than their readers, which will make it hard to monetize content by knowi ng what to sell

Business models =/= financial model. Pricing is only 12th thing on list of things on business plan

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