Posts about tow-knight

Hard economic lessons for news

I’m working on a talk that I hope will become the canonical link to my essential message about the business rules and realities of news. I continue to be astonished at the economic naiveté I hear in discussions of the business of news. (Look at this comment thread and and this one.) Here is my answer, the basis of a talk — to be delivered in tweets, in the model of John Paton — and a lesson for my classes. Work in progress. Thoughts so far; please join in….

RULES FOR BUSINESS MODELS

* Tradition is not a business model. The past is no longer a reliable guide to future success.

* “Should” is not a business model. You can say that people “should” pay for your product but they will only if they find value in it.

* “I want to” is not a business model. My entrepreneurial students often start with what they want to do. I tell them, no one — except possibly their mothers — gives a damn what they *want* to do.

* Virtue is not a business model. Just because you do good does not mean you deserve to be paid for it.

* Business models are not made of entitlements and emotions. They are made of hard economics. Money has no heart.

* Begging is not a business model. It’s lazy to think that foundations and contributions can solve news’ problems. There isn’t enough money there. (Foundation friend to provide figures here.)

* There is no free lunch. Government money comes with strings.

* No one cares what you spent. Arguing that news costs a lot is irrelevant to the market.

* The only thing that matters to the market is value. What is your service worth to the public?

* Value is determined by need. What problem do you solve?

* Disruption is the law of the jungle and the internet. If someone can do what you do cheaper, better, faster, they will.

* Disrupt thyself. So find your weak underbelly before someone else discovers it. Or find someone else’s.

* The bottom line matters more than the top line. Plan for profitability over revenue, sustainability over size.

REALITY CHECKS FOR NEWSPAPERS

* Circulation will continue to decline. There can be no doubt.

* Cutting costs will reduce product quality and value, which will further reduce circulation, which will further reduce ad revenue. A vicious, unstoppable cycle.

* Low-cost competitors and abundance will continue to reduce the price of advertising.

* Local retail will continue to consolidate, further reducing ad revenue. Blame Amazon.

* Classified categories—real estate, auto, jobs, merchandise—will continue to become more self-sufficient. They will need market mediators less and less.

* There’s a cliff coming: the end of a critical-mass of circulation needed to maintain inserts. That will have a big impact on newspapers’ P&Ls and will take away a primary justification for still printing and distributing paper.

* Some readers are not worth saving. One newspaper killed its stock tables, saved $1 million, and lost 12 subs. That means it had been paying $83k/year to maintain those readers. In creating business plans, the net future value of readers should be calculated and maximized.

* Once fixed costs are sliced to the bone, they will rise again. Cutting alone does not a business strategy make.

* “The newspaper model is broken and can’t be fixed.” Says John Paton.

DIGITAL RULES

* Scaling local sales is the key challenge. Google will pick low-hanging fruit from the 6 million businesses that have claimed their Places pages. Facebook’s fruit will be businesses that use its free Deals. Each will use distant sales. Groupon and Patch will attack the challenge with the brute force of local sales staff.

* There will always be new competitors. For content, attention, advertising, and advertising sales.

* You no longer control the market. You are a member of an ecosystem. Play well with others.

* Abundance will drive down prices in digital even more than in print. That’s the lesson Google tries to teach media (and government).

* The question about pay walls is whether they are the *best* way to make the *most* money. It’s not a religious matter. It’s a practical question of whether circulation revenue will net more than equivalent advertising, whether one can afford to give up audience and growth, what the costs are to support pay.

OPPORTUNITIES

* Scaling local sales is the key opportunity. I think the answer will lie in productizing services for local merchants (across all these platforms — not just selling them space in a media site but also helping them with Google Place pages and Foursquare and Facebook deals and Twitter specials) and establishing new, independent, entrepreneurial sales forces. The key challenge then will be holding down the cost of sale and production.

* There is huge growth potential in increasing engagement. Facebook gets roughly 30 times the engagement of newspaper sites, Huffington Post’s engagement is also a multiple of newspapers’. If we are truly community services, then we must rethink our relationship with the public, becoming more a platform for our communities, and that will multiply engagement and, with it, audience, traffic, and data. We have not begun to extend and exploit the full potential of the value news organizations can have in relationships with their communities: more people, more value, more engagement equals more value to extract.

* There are still efficiences to be found in infrastructure. If the presses and the distribution and sales arms of papers are not in and of themselves profit centers, they should be jettisoned and their tasks outsourced. If other tasks — including editorial tasks — can be consolidated, they should be.

* Journalists should do only that which adds maximum value. That’s not telling the public what it already knows. It’s not exercising ego. It’s not production. It is reporting, vetting, curating, explaining, organizing, teaching…. Do what you do best and link to the rest.

* There is growth to be found in networks. The more members there are in the ecosystem, the more content there is to link to (without having to go to the cost of creating it), the more opportunities there are for free promotion (links in), the more opportunities there are in aggregated and joint sales. See our work on new business models for news in the local ecosystem at CUNY.

* There are efficiencies to be found in collaboration. Working with the community and with other members of the ecosystem enables a news organization to specialize and increase value and to do more with less.

* There are other revenue streams worth exploring. Local bloggers are making considerable shares of their revenue in events. Newspapers are going into the real estate business and are also selling merchandise.

* We have not begun to explore new definitions of news.

: Note: I rearranged a few of the rules and combined two into one for better organization.

: Was mit Medien translates these rules into German. And translated again.

The NJ News Co-op

Please take a look at — and rate and comment on! — a proposal I helped draft for the Knight News Challenge proposing a co-op to support the emerging local news ecosystem in otherwise-deprived New Jersey.

The idea is that the scattered, independent members of that ecosystem need help to (1) curate and share the best of what they do across all media and get them more attention; (2) organize them to create collaborative works of journalism; to train them in skills from journalism to new media to business; and (3) begin to fill in the blanks that the ecosystem and the market leave with beat reporting and investigations. It’s not meant to be a news organization so much as it helps organize and support other news organizations of all sizes, media, and models in the state. The goal is not to grow a large enterprise but to help grow a large ecosystem.

I believe we are seeing the new ecosystem emerge (see our business modeling at CUNY’s Tow-Knight Center for Entrepreneurial Journalism here) but I also believe it needs help and support to grow and inspire more journalists and community members to join in. Thus the co-op.

The notion of a co-op was inspired by Deb Gallant, New Jersey’s own Queen of Hyperlocal at a meeting organized by my friend and neighbor, Chris Daggett, whom you last saw here when he ran as an independent for governor of New Jersey; now he heads the Geraldine R. Dodge Foundation. Chris brought together other foundations plus journalists, public broadcasting folks, and state officials in an all-day meeting to look at what can be done to help New Jersey’s media future. There are other efforts coming out of these players; this is just one.

New Jersey’s media scene is a unique mess. It has never been served by the media outlets at either end of the state, in New York and Philadelphia. The daily newspapers are shrinking rapidly. The governor has been looking to sell the public broadcasting licenses here at NJN and, truth be told, they’ve never been robust.

But all that bad news is good news, for it means that New Jersey is a blank slate, a unique opportunity to build a new media sphere. We want to nurture that development. This endeavor is a not-for-profit cooperative. These enterprises also need commercial help with revenue (advertising and events); others are simultaneously working on that.

(Because entries lose paragraph-spacing, it’s a bit hard to read on the Knight site. So you can read it here but please, please do comment there. We’re eager for suggestions and questions and help in fleshing this out.)

Entrepreneurial Journalism curriculum at CUNY

Here are the courses that make up the new Entrepreneurial Journalism curriculum at CUNY. We plan to offer these courses this spring–to our own students and to midcareer journalists. Once approved by the state, we’ll award a certificate and then an MA in entrepreneurial journalism.

This Monday evening the 29th at 6p, we’ll hold an information session at the school–219 W. 40th St. in NY–and we’ll stream it for folks who can’t be there. Details here. We’re accepting applications now–admissions addresses here.

We’ll teach a course in business basics in the media context and a course in new business models for news–which is really, I’ve discovered, a course about disruption (whether you cause it or have to cope with it). Students will create their own business plans and incubate them in a third course. We’ll give students an immersion in relevant technologies to inform their plans. And students will work on an apprenticeship in a New York startup to be exposed to startup and engineering culture. I’m delighted to be teaching these courses with my colleague, Jeremy Caplan, and others we’re recruiting in various specialties.

Students may leave starting their own businesses and making their own jobs. They may work for startups. They may bring entrepreneurship into legacy companies. And legacy companies may send them to the program. In my Entrepreneurial Journalism class at CUNY — an inspiration for this program — we have a few midcareer professionals in the class this term and I’m finding the mix with students to be good. So we plan to continue that mix in the larger program.

This educational program is one of the three legs of the stool that makes up the new Tow-Knight Center for Entrepreneurial Journalism. We will also continue research on new business models for news. We are also starting in incubator and investment fund. The research will inform the students businesses and those in the incubator and identify new opportunities we can help start. The courses we create for this program will also bring in resources to help teach and support businesses in the incubator. And having more services in the incubator will help the students with their businesses. That’s the idea.

At the end of the day, we hope to bring more innovation and innovators to journalism. That’s the hope.

Here are the syllabi (don’t ya love that word?) for the courses. If you would prefer, you can see them on Google Docs here.

CUNY Entrepreneurial Journalism curriculum

The Center for Entrepreneurial Journalism

Today we at the City University of New York Graduate School of Journalism are announcing the founding and funding of the Tow-Knight Center for Entrepreneurial Journalism.

The Center, which I’ll direct, received $3 million each from the Tow and Knight foundations, in addition to earlier funding from the McCormick, MacArthur, and Carnegie foundations and CUNY. We will:

* Establish the country’s first MA degree in entrepreneurial journalism for our students and also offer certificates in the field for mid-career professional journalists.

* Continue our research in new business models for news, following on our work last summer in the new ecosystem of local news.

* Help create new enterprises in news. More on that later.

See the entire release here.

This all flows from an essential optimism about the future of journalism. We just have to build it. That’s why I’ve been teaching entrepreneurial journalism — with seven students’ businesses in development now with a total of $100,000 in seed funding — and why we are expanding that into a degree and certificate program to prepare journalists to start and run businesses and make journalism sustainable. That’s why we will continue to bring concrete specifics to the discussion about new business models for news. And that’s why we will help create those businesses in and out of the school. We will also help lead the movement to teach journalists to be entrepreneurs at other schools. And we have other plans.

I’m grateful to the The Tow Foundation for giving us the challenge grant that led to today and to the Knight Foundation for pushing us to elevate our ambition. I’m grateful to the McCormick and MacArthur foundations the Carnegie Corporation for funding work that paved the way for the center. And I’m grateful to my CUNY colleagues — Dean Steve Shepard, Associate Dean Judy Watson — for having the vision to support this work.

Watch this space.