ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Wednesday, April 08, 2009

New York Times Asks, How Can We Make Money at This?

Is this thing on? test... 1... 2... *ahem* Sorry for the lack of posting, although I suppose I could point fingers at my co-conspirators here as well. Things have been pretty hectic the past few weeks and, frankly... we are considering either launching a new blog (more in tune with current events), but for now please continue to check the site for updates.

I promise to post more regularly as we are certainly in a target-rich environment these days. On such target is this story from the New York Times which I found absolutely hilarious (I know, I'm a dork):

April 8, 2009
They Pay for Cable, Music and Extra Bags. How About News?

Just a year ago, most media companies believed the formula for Internet success was to offer free content, build an audience and rake in advertising dollars. Now, with the recession battering advertising online, in print and on television, media executives are contemplating a tougher trick: making the consumer pay.
Translation: What in the hell were we thinking?!? Let's put some crack reporters on the case and get some real, out-of-the-box thinking on how we can monetize it. I mean, let's go far & wide looking for a solution and float some of them as trial balloons in a news story.
Publishers like Hearst Newspapers, The New York Times and Time Inc.are drawing up plans for possible Internet fees. Jeffrey L. Bewkes, Time Warner’s chief executive, is promoting a plan called “TV Everywhere,” to offer consumers a vast array of television online, provided they are paying cable TV customers. And Rupert Murdoch, who once vowed to make The Wall Street Journal’s Web site free, is now an evangelist for charging readers.

“People reading news for free on the Web, that’s got to change,” Mr. Murdoch said last week at a cable industry conference in Washington.

The Associated Press said on Monday that it intended to police the use of news articles linked on countless Web sites, where many consumers read them free, to make sure the sites shared advertising revenue with those who created the material.
Yes... I'll share whatever advertising revenue I bring in with the Associated Press. After I deduct my time & efforts to improve their poorly constructed from the $0 in ad revenue that this blog generates, I should get a tidy sum from the AP!

Question; Does the AP go after The Today Show ad revenues after they feature a story that originated in the AP? Just curious...
But from networks selling downloads of TV shows, to music companies trying to curb file-sharing, to struggling newspapers and magazines, the make-or-break question is this: How do you get consumers to pay for something they have grown used to getting free?

Yes, that indeed is the million dollar question.

And in the case of newspapers, there are two more troubling questions:
  1. How do you get someone to pay for news in an online format when they are not willing to pay for it in print format, as evidenced by declining subscription rates across the board?
  2. When considering the younger demo (aka your future customers), how do you charge them for online news whey they don't even want your news in print format for free?
How about that conundrum?
Some industries have pulled it off. Coca-Cola took tap water, filtered it and called it Dasani, and makes millions of dollars a year. People who used to ask why anyone would pay for television now subscribe to cable and TiVo. Airlines charge for luggage, meals, even pillows. And some music fans who have downloaded pirated songs are also patrons of iTunes.

All of these success stories offered the consumer something extra, even if it was just convenience.
"just convenience"... perhaps this statement reveals one of the problems of the insulated view of the people in the news industry....
“With bottled water, it’s a kind of snobbery and the perception of healthiness that they have marketed,” said Priya Raghubir, professor of marketing at the Stern School of Business at New York University. “With downloads, the benefit is that the paying services allow you to sample many songs free, and you know it’s legal, and the TV shows have no commercials.

First, I see that the New York Times reporters did indeed travel far afield for this story. Assuming they didn't pick up the phone, they traveled 3.1 miles downtown to NYU!!!

Second, I should piont out that the analysis of the examples are incorrect:
  • Dasani vs. tap water is not pay vs. free (since people do indeed pay for tap water). At least, I have a water bill show up in my mail each month. And besides the perceived health benefits (vs. other beverage options), the other value-adds are the convenience of bottled water and the consistency of quality & taste.
  • With iTunes, the value isn't the sampling - it's the fact that pirating them from other sites is a pain in the patootey compared to getting the same content for a small fee, along with the assurance that the download is not malware and, again, has a consistency of quality. If you've ever downloaded a song for free, you know that the quality is always questionable.
What do the two examples the NYU professor highlighted have in common? The "pay" version have an increased level of convenience & quality. In the end, people judge that the cost to ensure this level of quality & convenience is appropriate - a quick and very typical cost / benefit analysis that consumers in capitalist systems make instantaneously on a daily basis.

Back to the Times...
“With newspapers and magazines, there have to be features you can’t get anywhere else, and maybe part of what you would pay for is the privilege of helping the business survive, but that is more of a difficult sell.”
ROTFL!!!! LMAO!!!!

Only a professor could make such a ridiculous statement. The surest way to go out of business is to use a marketing strategy & message that essentially boils down to "please buy my product so I can stay in business." No customer will buy a product for the "privilege" of helping the business survive - except for customers of your local PBS station, and that doesn't even count because that entire enterprise is heavily subsidized.
Major publishers say they have not yet decided how to proceed, but that some changes are coming soon.

“We’re looking, of course, at ways to extract payments from the consumers of our news — micro-payments, subscriptions, memberships, licensing, even voluntary donations,” Bill Keller, executive editor of The Times, said last week in a speech at Stanford University. “In the coming months, I fully expect that the N.Y.T. will begin laying down some bets based on our best forecasts of how the relationship between journalists and their audience will evolve.”
Yet again, our intrepid reporters have searched far & wide to cover this story - this time, they've asked their boss for his opinion.
Only a few publishers have tried such a transition, with mixed results. The Los Angeles Times and The New York Times each tried charging for access to some content online, then dropped the requirement because it cost them audience and advertising revenue.
Yes, that TimeSelect horse-hockey really didn't work out well. Turns out that people aren't willing to pay a monthly subscription to MoDo's stream of conciousness columns. So, if they've tried charging for their content and it failed, why are they writing this story?

They're trying too find a different mechanism to get the revenue without asking any serious questions about their product or what service they provide to their customer!
Most publications have moved in the other direction, trying to draw the biggest audience for advertisers by offering content free. The Associated Press’s new approach straddles the usual reliance on ads, and the new move to charge someone — though not the consumer — for the content.

By adding free features like e-mail alerts, blogs, discussion forums and video, news organizations are trying to persuade readers that they provide something more valuable than the aggregators and blogs that attract news readers online. In 2006, The Washington Post became the first newspaper to win an Emmy for its video.
And if I know anything, Emmy's and inside-the-industry recognition really drive consumers to your product.

Interesting that some sites are providing free features (value add services), but it's unfortunate that many of these services are provided for free on other sites. And what's the differentiator between using these services on my hometown paper's website ( vs. some other national newspaper (e.g. the New York Times)? Well, since the news is all the same crap on either site, it'll come down to how convenient either site is...
Eric J. Johnson, a professor at Columbia Business School, said he had been amazed by media companies repeatedly adding free online services, like on-demand video. “Before you add something to your site, you should say that if consumers really want it, that should be part of a package that you could charge for,” he said.

That is an alien concept to many media veterans, who grew up in a world where news and other content on television and radio were free, and newspapers made far more money from advertisers than from readers.
And the TV & Radio are still swimming in riches from that model - yes, yes? And, while newspapers do get most of their print revenues from advertisers, they do charge the reader something, right? How's that model working out? Aren't both print revenue streams seeing a decline?
Before the recession, media executives saw their future in online advertising, which was growing 25 to 35 percent annually. But last year, overall Internet ad spending rose 10.6 percent, and only 3.5 percent for television networks, according to a report by the Interactive Advertising Bureau and PricewaterhouseCoopers. The Newspaper Association of America says that for its industry, online ad revenue dropped 1.8 percent last year.
Hmmm.... so the online ad industry is still growing, but for some reason ads to online newspapers (what an oxymoron!) haven't seen their online ad revenues grow... it's almost like online advertisers are going elsewhere to place their ads.... places where the consumers are going. hmmmm.....
The free-versus-paid debate is a recurring one. At the birth of the Internet many sites charged for content, but by the late 1990s the prevailing view was that market forces favored free content. A consumer tollbooth raises money, but it also constricts the audience and ad sales. Media companies decided it was not worth the trade-off.

In 1995, Encyclopaedia Britannica began selling online subscriptions and attracted 70,000 paying customers. But in 1999 it opened its doors, hoping to take advantage of the Internet advertising boom. Two years later, it reversed course again, and now charges $70 a year for access to most of its site.

When it resumed charging in 2001, it got back to 70,000 subscribers within 10 months, and now has about 200,000.

If the site hadn’t begun charging, “we would have a product that would be used by many more people today,” said Jorge Cauz, president of Encyclopaedia Britannica, but it would probably generate less revenue.
I seem to recall some other version of an encyclopedia out on the interwebs recently.... hmmmm. I sure hope Encyclopaedia Britannica's budget doesn't exceed $14m per year.

Getting customers to pay is easier if the product is somehow better — or perceived as being better — than what they had received free.

In adding a new feature, “you don’t want the starting value you place on it to be zero,” Mr. Johnson said. “People are very loss-averse, and the worst penny to pay is the first.”
And, in the case of the quality of journalism in the US, that first penny is very expensive indeed.

I would say that the price point currently charged for online news (ie. $0.00) is about right. Or perhaps they should pay us to read their crap.
Mark Mulligan, vice president of Forrester Research in London, said that even sectors that had successfully charged fees online, like the music industry, have found that it was a game of chasing niches. But products like sitcoms or general-interest newspapers have always been built for the broadest possible appeal.

“The question now is whether that common denominator approach can work online,” Mr. Honack said. He says he thinks it will require treating the audience and the products as a series of niches, and tailoring the offering to the customer. “You have to find out what part of your product you can get them to come back for.”

Holy crap! Someone finally hit the nail on the head!!!

In order to charge a customer a sufficient amount of money to keep the business profitable enough to continue operations and invest in the future, the seller must tailor his product to the customers' needs!!!

Or, as Mr. Honack ultimately puts it, "you have to find out what part of your product you can get them to come back for."

People will not pay a dime to a news company so they can have an online blog at their site. They will not pay a dime to a news company so they can receive email alerts (are you kidding?!?) People will not pay a dime to a news company for content that they can get just as easily anywhere else on the internet (aka the world).

The entire model of print journalism is outdated for today's distribution network. Previously, the AP, Reuters, and the New York Times decided what was news and local affiliates reprinted the news.

This continues to this day as is evidenced by the similarity of reporting on each and every topic in each and every news source.

Focus on the consumer like a laser. Figure out what they need and provide it to them as efficiently and effectively as possible. Do anything else and you should be put out of business.

It's a wonder that these guys are even allowed to report on anything related to business. No wonder they think capitalism is evil - they're dying because they don't understand it.

Your Co-Conspirator,
ARC: St Wendeler

Comments (3)
Brian said...

Ahh nothing like a stupid business post to get an MBA riled up!

As an aside, I thought the EB had already gone out of business, guess not. How many of that 200k subscriber base is some sort of library system? Corporate libraries, public libraries, etc.

I thought they had stopped their print business too, but lo and behold when I went to the EB website sure enough its there:

EB Print version

It can be yours for only $1149!

And look at the featureset!

Print Set Features:

* Extensive Revisions: Updated in 2007, the Britannica Encyclopedia Set is packed with detailed articles on almost any subject imaginable. New and revised articles include Samuel Alito, bird flu, Celia Cruz, Ebonics, intelligent design, mathematics, open source, post-traumatic stress disorder, Rembrandt, John Roberts, Jerry Rice, Sikhism, virtual reality, Denzel Washington, and more.
* The Most Content Available: 32 volumes are packed with 44 million words covering the breadth of human knowledge. Over 4,000 expert contributors contributed to the 65,000 articles that make up this indispensable reference.
* Compelling Images: More than 24,000 carefully researched and selected photos, maps, and illustrations hold the interest of readers.
* Fascinating Biographies: Learn about historical people, celebrities, political leaders, and other important figures, ranging from Ansel Adams to Lance Armstrong to Pocahontas. Over 23,000 people are featured!
* Geography Articles: More than 15,000 geography articles cover all areas of the world. Revised entries include Africa, Bangladesh, Canada, Gaza Strip, Germany, Gulf Coast, Israel, Indonesia, Pakistan, Russia, United States, and more.

It was updated in 2007! How.. quaint. Somehow I don't think the New York Times should be looking to the EB as any kind of successful business model.

St Wendeler said...

You'd think that the folks at Encyclopedia Britannica would be all over the historic candidacy of Barack Hussein Obama.

I guess we'll have to wait a few more years while their "experts" update their volumes.

Back in 2007, obama was still the novice senator.... Bush was trying to get Congress to get out of his way in Iraq and let the surge work...

that really was a long time ago.

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