NewBizNews: Paid content models

In the New Business Models for News Project at CUNY, we will be fleshing out three kinds of business models to start:
* hyperlocal from the local perspective;
* a news ecosystem that comes after a metro paper;
* and paid content.
We will be joined by business analysts who’ll be making the models. But to make them work, we need much information and many perspectives.

Any business model is just a list of assumptions and ranges. There’s no truth to be had until a model is executed – and even then, of course, the quality of execution (and timing and luck and talent) matter. But we believe that the more specific we can get in the discussion about sustainable business models for news, the better. This not only informs the debate, it also demonstrates, we hope, that journalism is sustainable and has a future: a new and robust future.

We will be doing this in the open so we can get as much help as possible: again, as much data and as many perspectives as we can.

I’ll start the process by listing data points I think we’ll need in each set of models. I need your help to add to (and subtract from) these lists, to help define the variables, and to provide your experience and data whenever possible.

Let’s begin with the paid content model.

First, let me be clear that I have been skeptical about the prospects of charging for content online (here’s my reasoning). Here’s Clay Shirky’s more eloquent argument. Others believe that charging for content is not only possible but necessary; see the Brill/Crovitz/Hindery Journalism Online venture and see also Walter Isaacson’s manifesto for charging. Perhaps it would be helpful for the project to also aggregate such opinions (do you think so?).

My hope is that we can get very specific about numbers, fairly and completely presenting each view so you can judge. That is the point of the exercise. All opinions are welcome and the more directly they are expressed, the better (you know I’ll express mine bluntly). We want to hash out these models and address the tough arguments, questions, and objections; the better we do that, the more useful and credible the models will be. There will not be one final answer. That won’t come until the models are executed.

At the end of the day, what we’re trying to do is make hard, unemotional business judgments. The question is not whether content should be free or whether readers should pay; “should” is an irrelevant verb. The question, very simply, is how more money can be made. What will the market support?

The other question, then, is how much journalism the market will pay for? What kind of journalism will it support? This doesn’t necessarily start with the current spending on current newsrooms. Part of the equation, especially in the other models, will be new efficiencies (e.g., do what you do best, link to the rest) and new opportunities to work in collaboration and in networks.

Note other back-of-envelope calculations of paid content’s value by Martin Langeveld and Jeff Mignon and Nancy Wang. Anyone know of others? We’d also like to aggregate these.

So, to start on the paid-content framework, here is my list of data points we need to fill in so they can, in turn, fill in the models:

* Experience: It would be extremely helpful to get actual data from those who have charged for content online: The New York Times, The Wall Street Journal, The Financial Times, The Los Angeles Times (for Calendar), The Economist. Please, in the comments, add other efforts you know about (including charging for sports content). And if you have worked on any of these projects, we would kill to pick your brain – if not in detail about your own experience, then at least to give us perspective and reality checks in our process. For the good of journalism, I’d urge all these companies to open their books on paid content.

* Pricing models: There are various models for charging: subscriptions for access to all or some content on one or more sites over periods from an hour to a year and payments (or micropayments) for individual items. Some sites have made specific content premium; some have allowed limited access to any content (e.g., a few pages) before requiring payment. Is it useful to consider mobile models? What about the Salon roadblock ad (pay or watch this ad to get access)? Has anyone tried giving access to content as a premium for other business (a la frequent flier miles)?

* Price points: How much have the various players charged in each of these models? What do we know about experience with various price points and price sensitivity? What do you think would be credible price points? If you’re willing to pay, what would you pay?

* Bundles: When access to online content is sold with print subscriptions, what proportion of revenue is and should be attributed to each mediium?

* Subscriber/customer acquisition cost: That is, how much marketing is spent to acquire paying customers? Those of us who’ve worked in magazines and early proprietary online services (and, to a lesser extent, newspapers) have a healthy respect for subscriber acquisition cost. It will also be helpful to make assumptions about conversion rates across different customer types (e.g., marketing to an existing print subscriber, to someone who moved out of market, to someone who left the print customer base).

* Churn: It’s necessary to calculate churn – that is, customers who drop subscriptions – to calculate net marketing costs. For example, magazine relationships become more profitable after the first or second subscription renewal. How long subscriptions last has an impact on profitability and so we need to make assumptions about this, even though there will be limited data.

* Audience: We need to calculate total paying audience. This is probably best done in relation to a known existing audience – i.e., percentage of print audience or online audience that pays. That will best come from experience.

* Other operating costs: Credit-card clearance, customer service, bad debt, anything else?

* Total revenue collected: Obviously, this is the result of fees times customers. But as a reality check, it would be very helpful to know the scale of revenue in prior efforts to charge.

* Ad rate impact: The assumption is that advertising behind a pay wall is worth more because more is known about those customers and they are more engaged. What are credible deltas?

* Data collection: Is there further ancillary revenue and value from having subscription and payment relationships with readers? Are there opportunities to sell data?

* Audience and traffic impact: This is the pivot point in the argument for and against paid content. Simply put, will the advertising served to additional audience (at different rates) surpass the paid revenue (or will paid revenue surpass ad revenue lost)?

* Googlejuice: I believe that Google position is a factor in this decision as well. Google can search content behind pay walls, but with less audience and thus fewer links and clicks, what impact will that have on Google positioning? How does that affect specific content (e.g., topics) and the overall brand? This is difficult to calculate (we perhaps could consider trying to put a number to Google asset value) but it is relevant to the conversation.

* Qualitative questions: What kind of content would be best-suited to charging? Any experience here?

If anyone has any research on any of this, we’d be most grateful to see it. We do not need to attribute data to any company or person. What we want are credible numbers and the more information we have, the better. These models, all of them, are God’s work, remember.

That’s my list to start. What did I miss? What did I get wrong? What information and experience can you contribute?

Thank you.