Where's the innovation in news business models?

I've been following closely a theme that has developed here in recent days. It began last week with David Sasaki's post about the legacy of the Knight family, continued with Dan Gillmor's call for more entrepreneurial thinking in journalism, and was amplified by J.D. Lasica's call for newspapers to innovate or die.

All great thoughts, and worth reading to the word. But I have a particular interest here. As a business reporter at the San Jose Mercury News the past nine years, I've been living at the tragic center of the events being addressed to some degree by each of these posts. (Though I missed the era covered by Benjamin Melançon's post on Gary Webb).

Last Friday morning, I was one of many Mercury News employees who carefully watched their phone for two hours waiting to see if they got a call informing them their career was done. And make no mistake: In this day and age, getting fired from a newspaper for most people means your journalism career is finished.

My call never came. And that means I have now survived six rounds of buyouts and layoffs. Since it peaked in 2001, our newsroom has been cut by almost 60 percent.

The posts I referenced correctly identify the need to innovate. And indeed, there is tremendous innovation occurring in journalism these days (alas, most of it outside newspapers). I had been part of a group hoping to finally bring that inside the Mercury News, but our project, Rethinking the Mercury News, has been stopped for now.

But as I've watched these grand experiments in journalism, I've also felt some frustration. Don't get me wrong: The various projects (including many being chronicled in this blog) are inspiring, groundbreaking, and I believe have made great strides toward a new, and possibly better journalism.

My problem lies with an issue that David Sasaki identified near the end of his post:

"The Knight Foundation is single-handedly making citizen media both more serious and more respected by giving financial support to some of the field's most innovative thinkers. But is this a sustainable model for the transformation of media? What happens when the News Challenge's five-year funding period concludes? All of the News Challenge grantee projects are impressive, innovative, and important, but not a single one is turning a profit, nor do they seem poised to any time soon."

I see tremendous energy going in to breaking new ground in gathering news, telling stories, and creating community. What I don't see is an equivalent amount of innovation occurring around the business models that will support journalism going forward. What I tend to see, over and over, is people experimenting wildly on the content side, and then falling back on the same old business model: Selling ads.

This model is dying.

A couple weeks ago, I sat on a "Newsroom of the Future" panel at Berkeley's J-School. The moderator started the panel by asking whether newspapers have an "audience problem or a technology problem?" The answer is neither. More people read the content of the Mercury News than ever. And technology represents an opportunity to deepen our connection with those readers and enhance our impact on their lives.

What we have is a business model problem. Even as our audience has exploded, our revenues have cratered. It's hard enough for newspapers to experiment with their content. But playing with revenue models is the real third rail. Almost all the money still comes from print. Which means ads.

But all this fails to impress advertisers. For the dollar they pay us to advertise in print, they pay a dime to advertise online.

What truly surprises me is what I see (or don't see) happening outside of newspapers. Even the most innovative minds I know will describe their dazzling vision for new content, and then insist they will pay for it because this content will optimize things for advertisers. This is true for countless Web 2.0 companies. Even Facebook, for all its hype, can't seem to figure out any other business model than some twist on selling ads.

Is this it? Is this what we're stuck with? Why is there all this energy around reinventing the content and almost none being directed toward reinventing the business models? It represents a failure of imagination.

And it's not just a newspaper problem. It's a media problem. The New York Times this week looked at the growth in people watching television shows on their computers. Guess what? It's playing havoc with those TV business models:

"The four and a half billion we make on broadcast is never going to equate to four and a half billion online," said Quincy Smith, the president of CBS Interactive.

And according to Jeff Zucker, CEO of NBC Universal:

"Our challenge with all these ventures is to effectively monetize them so that we do not end up trading analog dollars for digital pennies."

Even Google's YouTube is stuck in a rut. According to a Bear Stern's analyst report issued last week, YouTube is bringing in $90 million in annual revenues. But while I was attending the TV of Tomorrow Show in San Francisco this week, I sat in on a panel where Jeff Richards, vice president of Digital Content Services for VeriSign, estimated that YouTube's bandwidth costs were nearly double that revenue. If true, it would dwarf the sinkhole faced by newspapers.

There is an enormous, untapped opportunity for innovation around the business model. This is where the conversation needs to go. There needs to be a new revenue model that will support some form of authoritative journalism, one that ideally exists in tandem with an expansive community journalism element and that is able to be optimized for any platform used by its audience (print, online, TV, mobile, etc.).

While there is far too little happening on this end, there are some efforts to identify a way toward a more sustainable journalism that are worth noting:

  • Newspaper Next: Sponsored by the American Press Institute, Newspaper Next just released the second version of their research called, Making the Leap Beyond Newspaper Companies. Newspaper Next has been instrumental in pushing newspapers to look beyond ads for revenue. And they map out how to get there by creating a framework for newspapers to begin identifying opportunities.
    At the same time, the latest report chastises newspapers for being too timid when it comes to innovation, especially on the revenue side: "On the business side, too, innovation must happen faster because core revenues are declining steadily. But even when launching new products for consumers, companies are mostly sticking to existing business models."
  • VillageSoup: Ask Richard Anderson, one of the founders, what kind of business he's in, and he'll tell you community hosting. Not journalism or media. Though he does publish two local newspapers. Richard is also a News Challenge winner. He sees businesses as members of the community who buy subscriptions to the site (which include the ability to run ads, but also many other services).
  • ProPublica: Paul Steiger's new public interest journalism project, funded by foundations and a few rich people.
  • The Public Press: An embryonic effort by Michael Stoll to build a non-commercial news organization in the Bay Area (disclosure: I'm one of many, many folks who have advised him on this project).
  • The Next Newsroom Prototype: This represents maybe some of the best, most comprehensive thinking I've seen on the business and content side. (Note: This is different than my Next Newsroom project). But this draft plan, formulated by Chris Peck and Bill Densmore (with contributions from many others) contains a number of intriguing concepts, such as a community ownership plan and new ways to think about delivery of the print product. And its overall goal is to de-emphasize the dependence on ad sales. Read and it and steal some of these ideas. Better yet, print out a copy, and give it to your friendly, neighborhood venture capitalist.
article originally published at http://www.pbs.org/idealab/2008/03/is-that-my-corpse-theyre-talki.html.

The media's job is to interest the public in the public interest. -John Dewey