Evolution, not extinction: How new business models are reinvigorating traditional journalism

September 29, 2012 by thedailybytetwentytwelve 8 Comments

With the growth of the internet over the past twenty years, never have citizens been able to communicate more freely. From instant global distribution to community participation, advances in technology have enabled journalism to flourish in remarkable ways. The emergence of the blogospehere and social media has shown the wonderful potential for mainstream journalists and citizens to collaborate to disseminate news. With the world at our fingertips and news just a click away, surely there has never been a more exciting time to be a journalist? However when most journalists discuss their profession, whether it be in newspapers or on the web, the talk is not one filled with optimism for the future, it’s one of survival. Just as the internet has revolutionised journalism, it has also played a large part in its financial decline. As audiences of traditional media begin to fragment and migrate online, business models which have been the foundation of our profession since the early 19th Century have begun to crumble. As print journalism steadily becomes less profitable, its demise seems inevitable. Many have begun to ask the question: How much longer can we afford to fund quality journalism?

The onset of the global financial crises in 2008 and the dramatic drop in revenue that followed raised the level of industry turmoil amongst news organisations. “The value of news media companies around the world has crashed since the global financial crises started to bite. In the United States alone, newspapers lost US $64.5 billion in market value during 2008” (Kaye & Quinn 2010). Newspaper closures and job cuts have followed the severe decline in revenue and market valuation. Between 2006 – 2009, the United States regional papers have been hit hardest with major publishers like the Tribune Company and Philadelphia Newspapers filing for bankruptcy and more than 15000 journalists being laid off across the country (Cole & Harcup 2010).

Similarly, the National Union of Journalists in the United Kingdom estimate that in the newspaper sector there have been at least 8,800 jobs lost and 54 local newsrooms closed since December 2008 (Journalism.co.org 2010). And finally this year Australia has lost more than 30 of its leading senior journalists from Fairfax publications, with Fairfax announcing a further 1900 jobs to be axed over the next three years in the company’s bid to cut an estimated $235 million of spending (Zappone 2012). Ultimately, cost-cutting in the newsroom greatly impacts on the quality of the news we get in print, radio and television (Hirst & Patching 2005). These figures are concerning not only because they pose a great threat to people’s livelihoods and news companies bottom-lines, but most of all to the survival of quality news. So what has prompted this crisis in journalism?

By the end of 2008, the global financial crisis had crippled the mainstream media’s primary source of income- advertising. It is declines in adverting revenue across the media industry that drives much of the cost cutting in newsrooms today. The simple fact is that advertising revenue is crucial to increasing newspaper circulation and TV ratings, and making an otherwise unprofitable industry viable. In 2000, only 18% of total newspaper revenue derived from circulation. The other 82% of newspaper revenue came from advertising (Meyer 2009). The effects of losing a significant percentage of advertising have been devastating for newspapers around the world. In 2008 the American newspaper advertising revenue dropped 16.4% to 37.9 billion, and it’s estimated a further $10 billion of advertising income would disappear by 2012, leaving the industry half the size it was in 2005 (Kaye & Quinn 2010).

However, as print advertising revenue steadily declines, digital publications have seen a healthy increase in advertising revenue. Between 2009-2010, print ad revenue in Australia dropped by 3%, whereas digital ad revenue increased by over 14%. The Financial Review reported in August this year that online advertising expenditure passed the 3 billion mark in 2012 financial year and is predicted to overtake advertising revenue for free to air TV next year and print media by 2014 (Holgate 2012). In the United States, internet advertising revenues increased 22% since last year, totalling a staggering $31.7 billion dollars (IAB 2012).

These increases in revenue have been dominated by online search and directories. Mobile phone advertising has also become increasingly significant, doubling it’s contribution to Australian advertising revenue this financial year (Holgate 2012). These are services that people are being drawn to for their convenience and timely delivery of information and that print mediums simply cannot compete with. Consequently, advertising dollars once destined for newspapers now are going elsewhere. “ Many of the advertising functions served by newspapers such as connecting workers with jobs or drivers with card, are being performed by web sites. This issue has become most acute for regional newspapers who previously enjoyed monopolies on classified advertising revenues in their geographical area from these once were hugely profitable enterprises” (Kaye & Quinn 2010).

As audiences and advertisers move online, many newspapers are gradually moving towards new profit models to revive advertising revenue to old levels. Some strategies such as search engine optimisation and premium content creation have been aimed at finding new ways to bolster the long time mainstays of advertising and subscriptions (Briggs 2010).“Newspaper’s online sites have generally employed a commercial strategy that basically followed the print business Model- build the biggest audience it can under the theory that the bigger the audience, the more that site can charge for advertising” (Kaye & Quinn 2010). For some, this has boosted circulation with many newspapers attracting many readers to their online sites, far greater than they ever attracted in print.

The Guardian is a fantastic example of a newspaper group who has been extremely successful in growing it’s online audience. “In 2009 it saw 27.3m unique users, leading the UK quality print online in all five traffic performance indicators, including page impressions (237 million) and engagement, with each user viewing an average of 8.7 pages” (Guardian.co.uk 2009). They reported 47 million pounds in digital revenue, making just shy of 24% of total revenue for the group. But with content mainly given away for free, and online adverting rates far lower than in print, the revenue earned online has not been enough to make up for the drop in earnings on the print side. By 2011, Guardian News & Media, the parent company for The Guardian and Observer, lost £33m on a cash basis for the financial year (Anderson 2011). The Guardian may be leading the way with online engagement, but also exemplifies how applying old advertising models can have many problems in the digital realm.

The largest problem with free online newspaper web-sites are the low online adverting rates and the small fraction of users who click on the ads. “Massive competition to attract online advertisers and an expectation amongst audiences that web content should be free- are two of the biggest factors behind the current crisis” (Kaye & Quinn 2010). Online newspapers may cost next to nothing to distribute, however quality journalism is still very much expensive to produce. So the question remains: In the age of the ‘Google generation’, how do we convince audiences to pay for quality news as traditional sources continue to shrink?

Many new organisations have made variations on the traditional subscription model, combining free content with a pay wall for content which is unique to the paper for which consumers are willing to pay. Micro payments and pay-as-you-go models have been used by specialised business publications such as the Wall Street Journal and newspapers like the Financial Times offer a hybrid model of some free content combined with a pay wall for other types of information (Kaye & Quinn 2010). Newspapers like The Australian have offered 28 free trials which allow access to some content, in the hope people will subscribe to read on. Both the New York Times and The Times in the UK are able to charge for their famous and addictive crossword puzzles. The Sun newspaper in the UK charges users for sending messages to then with updated info about general news, celebrity gossip and sports news and users can also subscribe to receive texts about their favourite soccer teams and horseracing (Kaye & Quinn 2010).

All these news organisations have been able to use their online edition’s special services to help reconnect with their readers’ consumer needs and target specific niche audiences. This is certainly a step in the right direction. However the mainstream media are going to have to be a lot more innovative in the future should they not want to be left behind. “The current business model does not work for newspapers any more so we will have to build a new one that does. We are entering a period of innovation, experimentation and change – there is opportunity here for us as well as risk.”(Guardian.co.uk 2009).

With rising disinterest in mainstream news, the internet has offered a platform which will enable news organisations to reconnect with their readers. Far too long traditional news organisations have not understood their audiences and this has certainly reflected in declining circulation figures. Hybrid models are still ultimately variations on the traditional model all in effort to supplement their print editions. This is not the approach which the traditional media should be taking towards the internet. They should not be looking at the internet as a threat, or even as a way to supplement existing publications to delay their inevitable demise. A new attitude needs to be taken which embraces the wonderful potential the internet offers to professional journalists in terms of targeting niche groups the same way that citizen journalism has done in recent years.

Online content sources such as blogs and niche websites have intensified competition in the news market. “Traditional news providers are competing for attention with outlets offering personality, partisanship and passion” (Briggs 2010). Niche journalism is what has attracted so many readers to the internet and independent technology, political and hyper local news sites have been the first to find success by starting small and concentrating on specialised topics. Independent news sites such as Tech Crunch and Huffington Post have been hugely successful at employing niche journalism as a means of building a large and devoted audience of followers and bloggers who contribute on areas of special interest. Online news sites such as The Conversation have taken a slightly different approach to niche journalism by seeking its source of analysis, commentary and news from the university and research sector to create highly specialised and well researched journalism in a variety of topics. Its team of professional editors work with more than 3,600 registered academics and researchers from 240 institutions and is viewed by 450,000 readers each month (The Conversation 2012).

Following the success of many of these independent news websites and blogs, some mainstream news publications are now experimenting with new models to better suit the online medium, and are recognising the need for collaboration with citizen journalists. The Guardian has recently launched the Guardian Open Platform, which has involved opening up our entire database to outside applications. Digital Director Emily Bell commented that “by opening out our content to external developers and offering them an API, we are harnessing not just the creativity and imagination of our own team of developers but of the entire global web development community and we hope to get some extraordinary and unforeseen uses of our data….Open Platform goes back to our mantra that we should be of the web, not on the web” (Guardian.co.uk 2009).This program is extremely promising step towards professional journalists taking citizen journalists seriously and offering online writers a credible platform to share quality news. The quality of print journalism and its digital products must remain connected, the two must work together to raise the credibility of citizen journalism so it is accepted as a reliable source of news (Filloux 2012).

Independent non-for profit Journalism organisations are also using the internet to crowd-source ideas and human resources for high quality community driven journalism. A great example of this is YouCommNews,a non-profit, people-powered news site run as part of the Public Interest Journalism Foundation based at the Swinburne University of Technology. It uses an extremely unique business model by which it helps citizen journalists to commission the stories they want investigated. “Story ideas are ‘pitched’ here on the site and anyone can then pledge funds to support the projects. The resulting stories will then be available for publication in mainstream, independent and online media, either freely or through the sale of publication rights, in which case there will be refunds to those who funded the journalism” (YouCommNews 2012). Perhaps more large news corporations need to adopt similar models, where they get readers to pitch stories and have sponsors fund the publication of quality articles?

Oh my news in South Korea has adopted this collaborative approach and is the world’s first hybrid between weblog and pro news site. “On a typical day about 70, 000 citizen reporters submit about 2200 stories for the Korean language site and a further 6000 international citizen reporters submit content for Oh my news international. About a third of the stories are rejected for various reason such as poor grammar, factual errors or a lack of newsworthiness and editors fact check and polish stories chosen to appear on the website” (Kaye & Quinn 2010). This is all funded through a combinations automated advertisement placements similar to Google Adwords and readers personal contributions. Although only 30% of revenue is currently funded by contributor’s payments, this number is slowly increasing and is certainly an experiment which offers a lot of hope for news organisations collaborating with citizen journalists in the future.

The final step for mainstream news would be integration of print and broadcast mediums using a single digital platform. Social Media platforms such as Twitter and Facebook will almost certainly play an important role in driving traffic to such online news services. News organisations have started to realise the importance of integrating social media into current models. The Herald Sun, for example have created one of the newspaper industry’s first social media editor positions. This role has been specifically created for experimenting with new methods to drive traffic through social networks and work with the online community (Newsburger 2012).

Perhaps we will even see the rise of virtual newsrooms? Many web- services companies have successfully established virtual companies in an effort to save on costs and allow workforces to tap into wider talent pools around the world. For example, Automattic Inc. has 123 employees working in 26 countries, 94 cities and 28 U.S. States, with all work being submitted via a blogging platform and all meetings being hosted on Skype or internet chat (Silverman 2012).

With so many new online models being trialed by various independent and mainstream news organisations, never has there been such an exciting time to be a journalist. Yes, the Global Financial Crisis posed a huge financial threat to many news organisations, but quite frankly perhaps this is the shakeup we have needed for a long time to adjust outdated approaches to journalism. With online competition rising and the current generation’s unwillingness to pay for content, new innovative ideas need to be accepted to enable news companies to thrive once again. Too long have the mainstream media been unwilling to evolve to suit the preferences of their audiences. Attitudes need to change amongst the profession and perhaps this needs to go as far back as integrating entrepreneurship and innovation within journalism courses when they are being taught.

We are not witnessing the death of journalism, simply a necessary transition period. And with all transition periods there are times of uncertainly and financial instability. As old models die, new ones are beginning to fill the vacuum of dying traditional media. To put it simply: “The mourning over the death of journalism is a pnegyric over an empty tomb. The canal system was decommissioned by the advent of railroads. But it wasn’t the end of transportation” (Briggs 2010). There has come a time for news organisations to embrace the internet, as they did the television before it, and the radio before that. This is a case of evolution, not extinction.

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