Guardian column: Charity v. collaboration

My Guardian column this week expands on an idea I discussed here, about viewing charity to news organizations as collaboration in the news ecosystem. The kicker: “Charity is likely to be a contributor to the future of news. So will volunteer labour in the form of bloggers and crowdsourcing. But we still need a business model for news. News still needs to be profitable to survive. It’s not a church.”

The death of snail mail & Sunday papers

The Washington Post reports that “in the past year alone, the Postal Service has seen the single largest drop-off in mail volume in its 234-year history…. That downward trend is only accelerating. The Postal Service projects a decline of about 10 billion pieces of mail in each of the next two years, going from a high of 213 billion pieces of mail in 2006 to 170 billion projected for 2010.”

No, physical delivery won’t ever die. (Like a good newspaperman, I lie in headlines to get attention.) Indeed, we’ll get more ever deliveries of more stuff that used to be on store shelves but are now ordered online. That’s what UPS’ and FedEx’ businesses are built for. But, as the Post says, we’re sending fewer messages to each other; we have much better means to do that now. And companies are trying hard to reduce their cost of dealing with us – billing, bank statements – by taking that online.

There is still a business to be had in distributing coupons and circulars (aka junk mail); this is why newspapers are holding onto delivery a day or two a week. But that’s transitional; it won’t last forever.

As volume decreases, costs to users will increase as deliverers try to cover fixed costs that just can’t be cut anymore. Newspapers like to think they, too, have fixed costs and that’s why they keep whining that readers “should” pay their bills. But they don’t; for their core business – content and advertising – papers have new efficiencies online that the Postal Service doesn’t have. Except for those trucks and presses. They are fixed costs and that puts them in the same sinking ship as the mail.

At some point soon, the couponers will desert both the Postal Service and newspapers because they’ll be just too expensive. But consumers still want coupons; they have real value. (I often tell the story of coming back from a strike when I was Sunday editor of the New York Daily News. We didn’t have coupons because our new owner, Robert Maxwell, was feuding with Rupert Murdoch, who controls coupons – aka FSIs or free-standing inserts – in the U.S. When we got them back, circulation went up more than 100,000. Those readers weren’t buying news. They were buying ads.) Coupons are creeping online but it’s still a pain to deal with them digitally. Mobile devices may be the solution, but they’re not there yet.

So physical coupons and circulars are still great business – if you can get them into consumers’ hands. And it occurs to me that someone will craigslist – that is, undercut – both newspapers and the Postal Service in the delivery business. It’s in the interests of Murdoch’s coupon empire to do so and work with large retailers that produce circulars to come up with an alternative. Or an entrepreneur could establish a network to make it happen. I see the return of the paperboy (oops, the world has changed since then; pardon me: the paperyoungperson): networks of small agents who can deliver this material, which isn’t wildly timely (get it there this week) without the cost structure needed for individualized delivery – the Postal Service – or with a time wrapper of expensive content – the newspaper. Again, it’s transitional, but it’s a nice business for some years.

Here’s what happens then: The cost of mailing an old-fashioned letter will become prohibitive as the Postal Service covers its fixed costs for a system we won’t kill.

And the economic benefit of distributing a Sunday newspaper will all but disappear and news organizations – the ones still standing – will have no reason to hold onto the presses and trucks.

How (and why) to replace the AP

The Associated Press is becoming the enemy of the internet because it is fighting the link and the link is the basis of the internet. From Richard Perez Pena’s NY Times story today:

Tom Curley, The A.P.’s president and chief executive, said the company’s position was that even minimal use of a news article online required a licensing agreement with the news organization that produced it. In an interview, he specifically cited references that include a headline and a link to an article, a standard practice of search engines like Google, Bing and Yahoo, news aggregators and blogs.

Them’s fightin’ words: quoting an article’s headline while linking to it would require licensing? This means we would have to get permission from and negotiate with sites before linking to them. That would kill the internet. It also would kill the Associated Press and the news organizations it cons into joining its dangerous crusade – make that its cartel – for no one will link to them and they will not be heard.

There has been much stupidity lately about how news should operate in the ecosystem in the internet – threats to try to extend copyright, the ominously named and ambiguously written Hamburg Declaration, the ACAP “standard” that would be a boon to spammers – but the AP’s shot across our bow is the most destructive and ignorant of them all. The AP doggedly refuses to understand the link economy of the digital age and its imperatives.

The AP would rather destroy the link economy. Oh, it probably won’t succeed, just because what it suggests is so impractical and illegal and ultimately undemocratic and unconstitutional. But but like a bull in a knowledgeshop, it could do a lot of damage along the way, trying to rewrite the fair use that is the basis of the democratic conversation and rushing its members to even earlier graves by hiding their content from the readers it is meant to serve. Note well that most news organizations stand behind fair use every day when they quote somebody else’s story or comment on somebody else’s content. The AP is dangerous.

But that’s not the reason to replace it (it’s merely a bonus). No, the reason to replace the AP is because is that it is hopelessly, mortally outmoded for the digital age and its ownership structure – I blame its board more than I blame its management – won’t let it be transformed for our new reality. We need a replacement that will better serve journalism and the public, not to mention the democracy.

The AP’s primary job is to distribute content. In a content economy, that worked well. In the link economy, what the AP does is a disservice to content because it cuts the links to the source by rewriting news. The AP also translates content from one medium to another, rewriting newspaper stories so they can be read on radio or TV; that, too, cuts the link to the source (and note that rip-and-read has been the worse enemy of original reporting since the invention of broadcast, long before the internet). And the AP adds some original reporting to the ecosystem but it can’t monetize that value in the link economy because to do so would compete with its owner/clients.

What we need is an infrastructure for a content marketplace online that rewards the creators of original reporting – not the copiers or the commodifiers (that is, the AP) – by exploiting the essential nature of how the internet operates, that is, the link.

I’ve called one fundamental example of this structure reverse syndication – and Politico has started implementing it. Look at it this way: In the old days – in the AP’s ways – Politico would have syndicated its story to other papers, which would have sold ads to earn the money to pay Politico. Now, of course, Politico’s story is just a link and a click away. So now another paper – say, the Chicago Tribune – can just link to Politico’s story. That rewards Politico for creating the story. But what about also rewarding the Tribune for adding value through the link, sending audience to Politico? That is the missing piece.

Now imagine this Politico story sits out there on the internet with an ad on it and it is sharing that revenue with the Tribune proportional to the traffic the Tribune brings. Politico could sell that ad. But if the Tribune could get higher value, then it should sell the ad and share the revenue with Politico. Or a third party – oh, I dunno, Google – could sell the ad and share revenue with both. Whatever makes more money – that’s the question we should be asking; that’s what’s going to save the news business.

At the CUNY New Business Models for News Project, we are modeling the news ecosystem that we believe will emerge when a metro paper fades away. For our next project, I’d like to tackle this content marketplace infrastructure to look at what is needed: systems to track and pay and conventions to label content and draw audience to – and thus support – journalism at its source. When need more funding to do that. With or without an AP, we need to improve the means by which original reporting is found and supported.

Another project I’d like to tackle is The New York Times’ favorite subject: how to support a Baghdad bureau in this new ecosystem. I don’t know that I have the answer or that there is one. Global Post is one try. There may be a need for support from charitable sources (the subject of my Monday Guardian column, which I’ll link to later). The AP and large, ambitious news organizations like The Times report from places where others can’t afford to go; we need to look at how to continue to do this.

That leaves the AP’s other role: translating content among media. Well, there’s an entrepreneurial opportunity. On Twitter, Reuters’ Chris Ahearn volunteered to step in. And online, there’s really no need to do that anymore; it takes all media.

Could the AP remake itself? Doubtful. Its owners won’t let it be run as a rational business – redefining rational for the link economy. It also isn’t structured to help its members remake themselves. I told the AP a decade ago, when I was still working for a client, that I wished it would start a national ad network for news sites, to help them succeed. But that’s just not the way they think.

I’ve also speculated with folks with money about buying the AP and remaking it for the digital age, without the handcuffs of its ownership structure. But every time, we come back to the gigantic wind-down costs that would entail, getting rid of parts of the operation that aren’t needed anymore. And that’s the problem: much of it isn’t needed anymore. Just ask the many newspapers that are canceling the service along with their $1-million-a-year bills. (See the Star-Ledger that was produced with a single AP pixel.)

So I think there are entrepreneurial opportunities to replace the AP and bring far greater benefit to content creators online – all content creators, not just the old news oligopoly. It’s time to break out the hammers.

(Disclosures: I am a partner at Daylife, a news aggregator. I was an advisor to Publish2, which also traffics in links. I was on the board of Moreover, which aggregates and creates feeds of headlines and links. I did all that because I see the potential of the link economy, by the way. I also wrote a book about Google – have I told you about that? – and have discussed many of these ideas with people there.)

New York Times shows a slight profit

Times Company Turns a Profit

The New York Times Company on Thursday reported second-quarter net income of $39.1 million, up from $21.1 million in the period a year earlier, as another steep drop in advertising revenue was largely offset by aggressive cost-cutting.

A favorable tax adjustment inflated the earnings in the most recent quarter. But even discounting that factor, Thursday’s results marked a return to profitability — albeit slight — after a first-quarter loss of $74.5 million.

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When news people lose sense

Financial Times editor Lionel Barber predicted that “almost all” news organizations will be charging in a year just because they need to. Meanwhile, former McClatchy news exec Howard Weaver thinks that news orgs should get, oh, say, 10 percent of Google et al’s revenue because they, oh, should.

Amazing how news people lose their sense when they talk about news.

Let’s substitute GM for newspapers in this discussion.

Would Barber ever suggest that GM would charge more just because it needs to, with no consideration of the market forces and its competition? Would Weaver ever suggest that GM should get 10 percent of Toyota’s or Zipcar’s revenue just because, oh, it should?

I just spent two good days at Best Buy headquarters in Minneapolis talking about What Would Google So? and it was so refreshing to be in the company of a company facing the future bravely without whining like newspaper people do. One executive quizzed me, puzzled about why newspapers are so resistant to change. We talked about their sense of entitlement.

In what other industry do companies feel entitled to revenue just because they used to have it or they think they deserve it because of who they are?

But newspapers think that companies that served their customers better – Google or craigslist – owe them money because they lost those customers for serving them badly and ripping them off for years. They think that government owes them protection via copyright law (shall we look up how those papers editorialized about protectionist tariffs?).

It makes me look at the FT’s coverage of other industries in a different light. A dim one.

: SEE ALSO: John Temple tells newspaper people to stop blaming Google. Mark Potts tells Barber why he’s wrong.

“If we were doing our jobs right, Gawker wouldn’t have a reason to exist.”

So says the New York Observer publisher

The Legacy

At a meeting last month, Jared told his staff that the Observer needed to move on. “Kaplan is a classy guy, but he’s old-school,” Jared said. “If we were doing our jobs right, Gawker wouldn’t have a reason to exist. Curbed wouldn’t have a reason to exist.

“Every Observer writer wants to be a novelist,” he went on. “But we need to be deliberate about when we are short and when we are long.”

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It ain’t over

It wasn’t Craig’s fault. It was the internet’s. Almost $10 billion in annual newspaper classified revenue has disappeared (since it’s 2000 high, versus 2008) and it was essentially replaced by an estimated, unverified $100 million for craigslist with fewer than 30 employees.

But the bleeding ain’t over yet. The stone still has a few more corpuscles to squeeze out.

Look at the newly enhanced Google real-estate search. It’s awesome: useful, fast, informative, entertaining. Put in an address, browse all the homes for sale around. Who needs a newspaper? Who needs a real-estate agent? Speaking of whose death, see Michael Arrington reporting that disruptive, inexpensive real-estate service Redfin is turning profitable. Now see how classified aggregator Oodle is distributing classified ads on Twitter, which has also become the new distribution channel for news (challenging not just newspapers but also craigslist if you’re in the news biz and in the mood for a little schadenfreude).

Of course, this adds onto the the closing of thousands of advertising car dealers; the death of swaths of retail (e.g., Circuit City; and that is far from over, I think); the consolidation of more retail (and then the consolidator, Macy’s, cutting ad spending by half).

But that’s just advertising. I think that other arenas of newspapers’ competence could be targets for similarly disruptive attacks.

In content, I’m seeing that it’s possible for someone to come along with relatively little investment and a much smaller staff that operates more collaboratively to compete with the big, expensive traditional newsroom at low cost.

In distribution, it’s not hard to imagine someone – oh, say, News Corp., which already controls coupons in the U.S. – to take over distribution of other FSIs (free-standing inserts – that is, circulars) and undercut the hell out of newspapers and the postal service. Distributing those ads is the main reason papers want to keep printing at least a day a week, for now.

It’s bad in the industry now but it’s going to get worse as audience shrinks and advertising consolidates or migrates. There’s no quick fix: putting up pay or copyright laws or begging for favors from pols. The only solution is to rethink and rebuild the industry – and to do a better job of it than GM has.