Shorenstein-newspay

A discussion: How to Make Money in News

Follow proceedings on Twitter at #newsmoney

These are Bill Densmore's raw notes from today's "executive seminar" in Cambridge, Mass., organized by the Joan Shorenstein Center on the Press, Politics and Public Policy at the Harvard Kennedy School. Entitled, "How to Make Money in News: New Business Models for the 21st Century," the event is organized as a roundtable discussion and breakouts. There are some 24 people in the circle, and some 30 or so observers sitting around the outside of a meeting room at the Charles Hotel, next door to the Kennedy School. Here are running notes of the day and discussion -- with no pretense that quotes are precisely correct or exhaustive -- but with every attempt to get sense and context correct.

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Alex Jones, who heads the Shorenstein Center, opens:

"We did not want to put a gloss on what we want to do."

"We are trying to find a way that the covering of ... news can be covered financially .... try to find away to solve the riddle of how to keep news alive."

"It is going to take a long time for people who don't have an interest in news, or are certainly unwilling to pay for news ... to realize that the cost of that is too dear."

He took consolation in the latest circulation reports, because the past six months were one of the worst economic times in the American economy since the depression.

In the case of the Boston Globe, 82% decided to keep subscribing at a time of great economic hardship and even though it cost more.

"There is demonstrated out there a core of people who still take news seriously . . . that is the base upon which we need to build."

Bob Giles talks about how the Nieman Journalism Lab got started. They decided to look at best practices in digital development that support journalism.

Now Josh Benton of the Nieman Labs is explaining the mission to share the successes and mistakes in journalism -- that wasn't happening very well before the Nieman Journalism Lab. They are at 150,000 page views a month and 75,000 unique visitors a month . . . and 17,000 followers on Twitter. "That's really been transformative for us ... we now get almost twice as much traffic from Twitter as we do from Google."

A Carnegie grant has allowed them to hire Max Slocum from O'Reilly's book operation.

Bill Mitchell from the Poynter Institute is on a fellowship at Shorenstein this year. He talks about three areas Poynter is working in with the Carnegie grant money, including research and conferences.

David Levy, Reuters Institute

Devid Levy from the Reuters Institute is also "in the circle." Carnegie is funding them to study what's being done about news in Africa. And they are doing some comparative project on how news organizations are responding to the Internet. "I think comparative rsearch is often quite useful" in dispelling myths.

Six oobservations:

• Avoid technological determinish. "The internet isn't killing news, what it is doing is it is increasing the reach of news." It is undermining one business model, but in Brazil, newspapers are growing and in Finland, high news readership is compatible with high internet penetration.

• Move away from an obsession on the supply side.

• Let's look at the demand side. We need more research on how people value the news. The move from pay to free doesn't have to be a one-way street. The bottled water business is now a $2B a year market. SMS messages are profitable. "People will pay for the oddest things ... if we can provide them in a useful and convenient way."

• If journalism matters to democracy, let's focus on that purpose for journalism rather than jobs for journalists." Focus on networked, public journalism.

• Focus on ubiquity and impact. There will always be news for enthusiasts. "What I care about is public-intrest news that is used by large numbers of individuals."

• Public support is rightly viewed by suspicion by many, rightly in some ways, and it may well be impossible in the U.S." Broad support and use can increase the independence of the news organization -- such as the BBC. If you combine that with automatic support mechanisms, that can increase the independence from the funder. In Sweden, a fund makes sure that 15 Swedish cities have competitive newspapers ... there is 75% turnout to elections there. Support for distribution is less contentious than support for content.

"There may well be new business models, but above all let's come up with solutions that are as routed in understanding demand as supply" .... and serve "a mass market, not just a minority interest."

Jeff Cowan, formerly USC

Interested in what the government's role could be. Key findings to date:

Government support of media has always been there. With postal subsidies -- always a core principle. Today the funding level for commercial media is in excess of a $1B a year -- but it is declining. There are three buckets of it:

• Postal subsidies. Takiing 1969 as a departure point -- as of 1970, 75% of the cost of postage for publications was being paid for by the federal government. Today that is down to 15%. "That decline ... if you take those numbers would actually take some magazines that are currently losing money profitable." The Reorganization Act of 1970 made most the difference.

• Public notices. At least one full page of the Wall Street Journal every day consists of legal notices. "We think that the federal government is in terms if lines of print, is if not the biggest one or the two or three biggest advertisers in the WSJ, maybe the single largest advertiser -- the federal government .... but it is certain to decline." it is inevitable that this will move online.

• Tax breaks. Ink subsidies and other things.

"It's more than a billion dollars, but it is hard to assemble this."

"We want to think about some criterias about ways in which the government should be involved."

Copyright is designed specifically for people to get paid for what they do. That's important.

"We think that funding for innovation is important."

"If there is going to be direct funding for publications, it should be on a formula basis rather than for specific programs. ... it should never be more than a small percent of a publication's budget, otherwise they become too beholden."

David Westphal, USC, Online Journalism Review

He writes about the non-profit media sector. He also wants to mention an emerging non-profit model. "There is striking growth going on here and it is probably going to continue." Support of local sites, topical sites and investigative-reporting sites, as well as funding of sites that reflect the interests of the foundation.

Also just getting going -- journalism by non-news organizations, particularly at unversities. The Goldwater Institute in Phoenix has hired an investigative reporter. There are labor unions which have funded two new sites in Orange County, Calif. "So here we are labor unions and the Goldwater Institute, comrades in journalism ... kind of back to the future .... so is this stuff journalism and are these people journalists? ... I suspect these questions are just beginning."

Labor unions, government think tanks, political parties, trade associations and unions will be among funders in the future.

Q&A/discussion

Alex Jones asks Josh Benton of Nieman Lab if any of the things he's looked at that appear promising.

Benton: He is encouraged by small local blogs, 1-3 person startups. "They are either profitable or at least paying their bills." He is also encouraged by the response seem from foundations. He is less encouraged about circulation numbers. "I tend to think the comet has just hit and the dinosaurs are not doing too well."

Jones: "These are people we ought to study very carefully because they have made a very counter-intuitive decision." We are trying to pursuade people to be intrested in the news instead of focusing on growing the base of people interested in the news. He thinks focusing on the demand side is really important.

Alex Jones: What about the situation with the Boston Foundation?

Bob Giles: The management of the Globe hasn't been very forward thinking about changing its content. The Boston Foundation holds money from many people who are particularly interested in journalism. "In this community there could be melding of pepole and funds in a place like the Boston Foundation, in building some specialty websites online that would take the paper beyond its normal coverage of city hall and public places."

Encouraged that:

• Hechinger Foundation (spelling) at Columbia University is starting a website on education coverage.

• Environmental reporting also.

"If you think about the Center for Public Integrity, that's been around since 1990." Chuck Lewis has been able to keep raising the money for it.

Alex Jones: There is also some discouraging news from the foundation world. "Foundation fatique is something I worry about a lot ... do you see this foundation support for journalism ... that would be more neutral in its journalistic support, do you see that as an enduringly sustainable source of support for journalism?"

Westphal: "Enduring for awhile." He says people are becomming more and more concerned about the news ecology. Most people think the legacy news ecology will continue to erode. He thinks foundation funding will continue to increase in terms of the number of players, but after the first three-year grant it becomes a more difficult proposition. We shouldn't assume that sustained foundation funding is out of the question, however.

Alex Jones: What about the idea of established news organizations becoming non-profit?

Westphal: The idea that there isn't a big IRS problem in front of that is important. There may still need to be changes. "Some of them will set out on this course, probably, or think about ways to split off pieces of their enterprise that could be supported by of foundations."

David Levy: Worries about an answer to a democratic problem.

Geoffrey Cowan: The New York Times audited circulation includes over 100,000 copies that go on college campuses, paid by universities. "That's sort of a hidden example something that's already being done." Says Cowan, himself an attorney: "As we have more and more fragmented and weak news organization, which is what we are talking about here, we lose something else ... we lose the ability to have strong lawyers protecting and fighting for these organizations."

Alex Jones now turns to Rick Edmonds at Poynter and asks about a blog report he wrote about how much news reporting has disappeared from newspapers.

Edmonds says it's gone from a $60B industry to something in the mid $30B this year. He estimated how much of that budget goes into news gathering. He figured it was about $1.6B annually that has gone by the boards. That is a lot in comparison to the scale of the new ventures. Granted maybe there is some waste, as Bill Densmore's discussion group said, "It is a little disturbing that we don't know what that $1.6B might have turned up. That's cumulative, it keeps on happening."

It's now 10:03 a.m. in Cambridge and Jones opens it up to general questions.

Scott Karp of Publish2 wants to ask questions about the non-profit model. "In the early days of the web, 1994-1995, there was a general view that search was not a business and it had to be subsidized by portals ... it was something you don't make money of off .... and then a little company called Google came along ... would you agree that there has been a little bit of a sense of capitulation about the possibility of a profit model?"

David Levy of Reuters responds: Newspapers are business with high fixed cost and relatively low variable cost. The logical business case is to try to make your content work harder. "I agree with you people are giving up too fast and people are not being very creative about how they might expand their business."

Alex Jones says the strategy at the NYT is increasing the cost of the paper enough to still keep the circulation at a million. The NYT has found that the demand for the print paper is fairly inelastic.

David Levy: The Guardian had no presence in the U.S. a decade ago. Now have of its 20 million page views on the web are from the U.S. "So there are opportunties." Levy says there is a tendency for complacency, to rely on the reader who will pay for the paper no matter the price. (Another commentator observes The Guardian is losing 20 million pounds a year).

Geoffrey Cowan: There may be ways to make the distribution model profitable. "I think there may be all kinds of revenue models and savings that will be created."

Alex Jones: Increasingly newspapers are separating the printing from the news organization. They are going to be contracting it out.

Scott Karp: Basically all advertising models explored so far are pasting onto the web.

Joan Walsh from Salon: Her college-age daughter won't read the paper. "It's sad to me, I don't think we are going to reach them with the news product."

Alex Jones: When people make a geographic living commitment, that's when they get interested in the news. "I have hope for your daughter."

Virginia Postrel, The Atlantic: When I was in college, I not only read the college daily and the times but I paid for them. She moved from Dallas back to LA. Until then she always had three newspapers -- the local daily and the WSJ. She still has the WSJ, after a year, they go they got the LA Times so her husband could read the puzzle. "I'm like everybody, I read it all online ... I get the LA Times headline servic eand read the headlines that interest me."

Alex Jones: If there were a news organization that needed you to subscribe, would you?

"We can talk about that later . . . That's a charitable decision. That's different from a commercial decision."

Discussion about whether that is commercial or charitable.

At 10:16 a.m., short break before second panel.

Second panel: Disruptive technologies

Lead by Nicco Mele, of the Harvard Business School. Mele says he was one of two people (with Zephyr Teachout, also present today) who ran the Internet outreach operations of the Howard Dean presidential campaign.

He talks about SimCity the computer game which allows you to build a virtual community in an architectural sense. He thinks journalism could be part of that.

Sherry Turke on how youth consume media

He starts with Sherry Turke, from MIT, who has a background studying youth, technology and society.

Sherry Turke: Has been excited about he talk about studying the user base. That's what she does and brings the data from the field. She studies the 13-25 adolescent years. "The bottom line when i talk to them about the news ... I would pay for my iPod on the NYTimes every day, now its free." They are used to paying for music after the first 10 seconds. "They are used to seeing the news for free, for those that read it, they thing it is just as valuable as paying 99 cents for a song." One girl says: "Its not my fault, I'm used to paying for news, I don't understand it."

All of this is paraphrased and with ellipses of Turke on her discussion/study of youth media/news use:

"I would love to get this and other stories on my I phone, I usually read news and stories on my iPhone. I usually get news on my iPhone and my Blackberry, but receiving news in podcasts is better. They want to be read the news."

Based in a seven year study, she is going to give five points of how technology disrupts this generation of readers and listeners:

"I believe that disruptive technologies afford us an opportunity to assert human purposes . . . to ask us again what are those uproses ... jouranlism, narrative jouralsim, may be among the human purposes that we need."

Five ways digital technology changes, disrupts education etc.

(Densmore note: I've only bulleted three -- will figure out where the other two were later)

• Technology changes how people read. Shirkey: We need to shift from saving newspapers to saving journalism. "But there is a big problem in this formulation. Something is left out." Newspapers create the reading space that journalism exists in. Teen-agers leave with the profound question: Will we be able to read journalism when we don't have newspapers to read it from. There is not one answer ot the question. One group of teen-agers is trained to read. They want to read it on their iPod or iPhones. Think of it as readers who are listening to books on tape. They want it on their iPhones, audible or the other way.

But there's another group of teens they interviewed, who grew up with news on the web, and they struggle to read the narrative forms. if you just read on the web, does not favor narrative, wrapped, complex lines of thought. "You cannot focus on saving journalism unless you make an active effort to train readers to read complex narrative." "This is a goal, a human purpose we need to actively encourage."

Educators need to catch up with their students in the ability to multicast. If you let students multitask during their class, they are at their laptops and not looking at you, underneath the table with their iPhone. "I love all this media, but basically we are learning now from very compelling studies you ability in every one of the tests goes down. That is happening to every one of our students ... multitasking degrades performance of everything you do .... those pilots who overshot the airport because they were on their computers."

Stay with narratives.

• Simulation technolgies create a crisis of authenticity. A complex dynamic is faced here as more and more people become bloggers. "They know that they don't know what they are talking about ... this is a piece of the user puzzle that is going to take a little time to unfold."

Her daughter reads the NYTimes in Dublin: "I just think that the New York Times and iTunes need to chat."

"Authenticity is to this generation what sex was to the Victorians." But among teens, they are beginning to admit what they don't know. They are looking for expertise. The have an expectation of peer support. They move from "I have a feeling, I want to make a call, to I want to have a feeling to I want to have an idea, I want to make a call." This is one of the things that leads people to continual use and to a rebirth of the interest in experts. There will be a thirst for expertise. Jon Stewart and Stephen Colbert fills that need. Students see that the program takes time to prepare. Somebody who looks to have put time into something -- that's craft.

• Young people have no expectation of privacy. We have become virtuosos of public expression. The challenge to privacy leads tomany questions, but the most important. "What is civil society without the ability to know and defend privacy." Her grandmother told her it was a federal offense to open other peoples' mail every morning when they went to the mailbox. "I learned the connection between privacy and democracy in our trips to that mailbox."

In the 1980s where you went in your are was a zone of necessary privacy. "Now you are holding up traffic if you don't have EasyPass for the MassPike. Many people don't think any longer you have an expectation of privacy.

The teen-agers she speaks do don't know how to think about this. Kids are used to think of their mailboxes on the web "as like jokes -- anybody can look at them."

"Mother made me a defendant of the First Amendment and privacy at a row of mailboxes in Brooklyn. I'm not sure where to take my 18-year-old daughter . . . I am haunted by the high-school seniors who tell me how hard it is to find a pay phone in Boston because that is where they have to go when they want to make a private phone call."

Nicco Mele: Observation from Sherry's talk: Studying the media habits of 13 year olds is how we are going to figure out how to make money.

Next panelist Tom Eisenmann, Harvard Business School

Eisenmann: The first panel had an anti-startup bias, or at least it was pro-big.

He mentions the Huffington Post. He's doing a business school case study on the Huffington Post. "They are doing something really powerful. It started as a little flower and it has bloomed and blossomed into a big plant." A total of 25 million monthly uniques. "What the HuffPost is doing is aggregation and bundling."

Eisenmann notes earlier discussion about a possible legal issue with news industry collaboration around bundling.

"There is nothing illegal about bundling. The newspaper is nothing but a bundle of multiple things. So all that's illegal is preserving or abusing a monopoly by virtue of tying products together." He doesn't think the cable industry has done that, at least legally. He's not defending the cable industry. But bundling and aggregation are themes.

One thing in common with the music industry: The book "Blown to Bits," was about unbundling in the music industry. As is the case with the newspaper industry, the wounds in the industry were self-inflicted. What can we learn from the response of the music industry? The players retrenched, litigated and lobbied around stopping file sharing.

There were a whole bunch of failed online ventures -- pressplay. "So what you got in response is an aggregator. And this one came from a big company -- Apple -- and it was called iTunes. ... People seem to want and need aggregators . . . keep an eye on the HuffingtonPost."

"So you get a lot of aggregators and the old elements of the industry learn to hate that and it makes them crazy."

In music, the four big labels got rid of the A&R (artist and repetoir) business (essentially the creative pipeline) and pushed it out to independents. The big majors now basically just do distribution.

He wonders, in news organizations, is that the role of the aggregator in the future? (Not sure if he means the A&R work or the distribution work). Musicians now make most of their money from selling objects and doing concerts.

So the question for news: "Who is the aggregator, and what is the role of the aggregator in nurthering a very diverse group of independents journalists?"

Mele: At HuffPost most people write for free, which raises questions about tipping and compensation. Let's look at how the changes in the music industry, and HufPost and writers and money.

Virginia Postrel, The Atlantic

What do we mean by make money? Do we mean a positive rate of return, or do we mean income-replacing business as in a small business. Some startups are designed to make a return for investors, and some that are designed to provide an income for the proprietor and a little more. How you think about that definition will change whether you think it is possible and what sources to fund it there might be.

She tells two stories:

• In college, she aspired to be manager of a general-interest magazine. She bought a book, how to start a magazine. She learned what she wanted to do was impossible. There was no business model for a general-interest magazine. Because television had taken away the advertising that supported general-interest magazines. It's not just on the advertising side. General-interest magazines used to publish the short story. Now you can buy them in anthologies. The short-story is now the television drama.

• About her "hero" -- Frederick Douglass -- in addition to his famous abolition speeches, he sent a lot of letters to people asking that they send him money so his newspaper wouldn't close. She felt a lot like Douglass. Most of the general-interest magazines went out of business, the rest were reborn as the pre-Samuel Johnson model -- amateurs and patrons. People who liked the cause, liked the newspaper -- people who give money. "I think in a market where the supply is going to infinity and you are competing with people who are primarily making a living doing something else that the future of making money in teh sense of making money doing news is amateurs and patrons, which is unfortunately, because I really wanted to get away from that in my career."

The other model is the music model, which is books and speeches and which she hopes will work.

Persephone Miel, Internews Network, and former Berkman Center researcher

At InternewsNetwork she helps very small outfits in other countries to do journalism. She came from the gospel that independent journalism would be support by advertising. What we are really interested is not about making money in news. If we were going to focus on doing that, we know how to do it -- We would become the WSJ or Bloomberg on the elite end, or produce 20:20 on the sensationalist end.

"I don't think that's really the question. The question is the same question our U.S. State Dept., and funders around the workd ask us in countries around the world and that is: "What's necessary for democracy? ... I think (we need to be) unbundling that from this mythology of are we saving newspapers, or the NYTimes or journalism jobs." "Supporting it blindly as the Boston Globe which does all of those things together when all of that bundling is no longer realistic is not where we should be looking."

We need to look at the non-wealthy, non-white folks who need the news, and how to make the news accessible to them.

She's a big fan of non-profit journalism. She thinks it will be hugely important, but need to broaden definition of what that is. It's not only about journalists finding jobs by creating non-profit newspapers. It should be about funding non-news organizations that are doing the watchingdog and reporting operations that are really important ... most of them are not going to be the traditional news organizations." It will be people working to make sure city council meetings are cablecast, and that they are transcribed so people can access them. She likes the idea of relating journalism of the future to SimCity. She says it's important to look at the supply side, but the demand site is separate. We don't have the answers. There will be plenty of people to figure out ways to make viable entitles to figure out how to get news to people. But will there be any firewall between news and advertising -- an historic firewall. "I still think there is a need for that, but I don't know where that is going to live." She doubts it will grow out out of the traditional news companies. How does that get pulled into the demand stream for entertainment news, fun, sports scores that people will continue to want.

We don't understand the demand very well. Wally Dean did a study a few years ago: Audiences didn't like what the TV news producers thought they liked. Coverage was driven by what consultants dictated, not what viewers wanted.

"I do think there is a lot of work to do on demand because I think there is a demand for serious news."

Goli Sheikholeslami: (rom WashingtonPost.com) talks about the mission of the WashPost to do journalism, not just an advertising and she worries about the fact that aggregators like HuffPost are reaping rewards but they aren't paying for journalism.

One commentator in the circle: "The Huffington Post makes my teeth crawl."

Doc Searls Berkman researcher on open source

Apple is an example of a wierd company. Trying to duplicate it is not possible because Steve Jobs is so obsessed with product. He wants to talk a long view. He is a senior editor at Linux Journal.

He's followed what geeks in the open source movement have been doing. He wants to talk about the Enlightenment and person rights and empowerment and a line from the First Amendment: "Congress shall make now law . . . . "

We used through our surnames by what we did in the marketplace. But nobody is called Joe Middlemanager anymore.

Peter Drucker in the 1950s saw the coming end of the organizations as we saw them then. Back then what Drucker saw coming, he could see the end of it because knowledge workers -- a term he coined -- were going to become more important.

What did we create with industrial systems? We got the Bell System. They wanted to build intelligence systems that produced things like call waiting. Then the Internet came along, and the Internet was made by geeks for geeks. He talks about the Internet Engineering Task Force vs the phone system's International Telegraphic Union. How long have we been talking about open source -- since 1998, when Netscape open sourced its software as Mozilla.

At that time, the free software community changed it to "open source." This was done by Eric Raymond. It is remaking the news world, and many other worlds. "And we are trying to cope with this and it is really, really hard."

The Internet is really only 15 years old. In the open source world, nobody every really wins, there are just leaders at time.