OVERVIEW

The Internet has revolutionized the way Americans get their news and how that news is reported and shared with the public. These changes have advantages and disadvantages for the industry and American society.

On the one hand, the Web has empowered the public by creating an exponentially large pool from which to draw news and information. Readers, who once tapped only the TV, newspapers and radio for news, can now access an array of useful information and opinions from blogs, “citizen-journalists,” databases and social media sites such as Facebook and Twitter.

On the other hand, the competition posed by the Internet and other forms of entertainment have changed the economics of journalism such that traditional media are still struggling to compete. The Internet, and the failure of traditional media to adapt to it, has spurred layoffs of journalists and the deaths of traditional news-gathering institutions around the country.

Nearly every major newspaper in the country has reduced staff as profits have shrunk, and those lost are often the most experienced and knowledgeable about their communities. Meanwhile news staffs across America are being told to “do more with less” as their operations are trimmed. We’re hard-pressed to find the benefit of such cuts, which we fear imperil watchdog journalism.

When it comes to digital delivery of the printed word, Newsweek Editor Jon Meacham may have put it best when he recently said the media is at the “Sony Cassette Walkman” stage of innovation. But while rapidly advancing technologies continue to make it easier for consumers to access news and information, the print media has so far failed to invent a profitable model for digital content delivery.

As recently as two years ago, online ad revenues were a healthy source of growth for newspapers, when they climbed nearly 19 percent between 2006 and 2007, according to the Newspaper Association of America. But online ad revenues fell 1.8 percent to $3.1 billion for all of 2008, before plummeting 13.4 percent between the second quarter of last year and the same period this year.

There are two main reasons why newspapers have failed to profit from online ads. First, papers devalued online ads in the mid-1990s just as consumers increasingly turned to the Internet for news. For years, newspapers charged minimal fees for online ads or gave them away in package deals when advertisers paid for print ads.

Secondly, advertisers still await the emergence of an accurate, standard model to quantify the reach of newspapers’ online ads and value them accordingly. Identifying the person viewing an online newspaper ad, how long the ad is seen (if at all) and whether the ad drove floor traffic remain as challenges.

The failure of newspapers, however, to tap online ads as a primary revenue source is not for lack of an audience. Newspaper Web sites attracted more than one-third of all Internet users in the third quarter of 2009, according to the NAA. But advertisers still don’t value online newspaper ads because those visitors often fly quickly in and out of newspaper sites. As often, readers view one story of interest — found through a search engine or a news aggregator Web site — without viewing online ads elsewhere, such as on papers’ homepages and in digital classified listings.

Internet ad revenue on the whole is expected to grow in the U.S. this year (it’s the only advertising medium in which experts anticipate revenue increases for 2009). The media service firm ZenithOpimedia has predicted Internet ad revenue will rise 9.2 percent to $54.1 billion this year. The trouble for newspapers is they face a glut of tough Internet competitors including free classified listing from sites such as Craigslist. And at most newspapers, Internet ad revenue only represents a small fraction of revenues. Newspapers still make more money from print ads.

SOURCE: Source: Business Analysis and Research, Newspaper Association of America / www.stateofthemedia.org

Many online businesses are still figuring out how to make money off the web.  Even with 300 million users and an abundant supply of user-generated content,  Facebook just became “cash-flow positive” last quarter . Twitter is all the rage these days but (as of this writing) still hasn’t turned a profit.

Instead, search engines such as Google have come to dominate online advertising because they are able to customize ads, which pop up beside searches, depending on users’ interests.

When businesses do buy ads online, they often opt for cheaper, more targeted ads, which they purchase through networks and exchanges that bundle ad space from multiple Web sites. Such networks include AOL’s Advertising.com and Google’s DoubleClick Ad Exchange.

For its part, Google uses detailed metrics to measure the effectiveness of their ads, with the site going so far as to suggest the best ad language based on what attracts the most clicks. Meanwhile, newspapers haven’t been able to demonstrate that their online ads, which often command a premium compared with other sites, actually perform better. As a result, newspapers are increasingly looking to tap readers themselves for revenue.

TRYING TO FIND A PROFITABLE MODEL

To different degrees, newspapers of all sizes are charging, or considering charging, for content online. Methods to charge for news online include “micropayments” or small per-article fees, archive charges, an array of Internet news subscription services and various incarnations of “pay walls.”

Traditional pay walls require readers to buy access to a newspaper’s entire site. Other pay walls provide one or more stories for free before charging readers, while some leave most offerings free but selectively charge for unique content such as columns or financial news and analysis. For its part, the Associated Press licenses its stories and photographs to many of the Internet’s major hubs including news aggregators such as Google and Yahoo! News. And its executives have publicly mulled charging more to Web sites for rights to publish breaking news slightly earlier than competitors. But the AP, and the media outlets that make up the nonprofit news cooperative’s members, still don’t feel they’re fairly compensated by the aggregator sites that use their content.

Newspapers’ moves to charge readers for content online, meanwhile, have been equally unsuccessful at producing an economically viable model. That’s partly because many readers have balked at papers’ efforts to charge them for news after years of allowing free access.

The Wall Street Journal, however, has bucked the trend. Not only has it been successful at charging users for online content, it was also one of the few major newspapers that actually increased in circulation this year.

Meanwhile, the media’s search for new revenue sources continues. Some industry experts and newspaper executives predict they’ll seek revenue by:

• Capitalizing on their brands to create and aggregate news. Newspaper Web sites are likely to increasingly serve as online town squares that aggregate content from for-profit and nonprofit news sites of all shapes and sizes.
• Converting traditional sites into information and entertainment portals. In addition to providing news, such sites would be crosses between phone books and encyclopedias, serving as handy reference guides on local issues and topics.
• Collaborating more closely with competing newspapers, media outlets and readers to generate content, avoid redundant stories and pool coverage resources.
• Switching to online-only operations or printing less often, but releasing thicker, pricier copies with more local news and investigative pieces.
• Relying more on income from circulation and new revenue streams rather than advertising. For example, newspapers anticipate revenue growth via charging consumers to access news and unique content on their cell phones and through electronic book devices such as Amazon’s Kindle and the Sony Reader.
• Letting readers selectively pay for news. Experiments are underway to let readers create customized Web sites programmed to supply and charge for only the news and information the reader is interested in viewing and/or printing.

These days, newspapers are in a transformative phase that is as exciting as it is frightening. Many in the industry are now “platform agnostic” in that they no longer view newspapers merely as ink on wood products. Twenty years ago, music listeners with boom boxes and Sony Cassette players likely never envisioned a world of iPods and musical phones. But, to survive and thrive, newspapers will have to anticipate and participate in the latest, revolutionary content delivery systems.

CHANGING HOW WE GET THE NEWS TO YOU

The Internet has not only changed the business side of news reporting — it has changed how journalists go about their daily lives reporting the news for better and for worse.

As online technology continues to develop, more and more tools are available to journalists to help them find the news. For instance, many public records and government databases, from court dockets to environmental citations, are now easily accessible via the Internet, posted there by government agencies themselves or watchdog groups. This makes it easier for journalists to find important stories about what’s going on in their communities.

However, the new news economy has shrunk the staffs of many news organizations, leaving many working journalists feeling as though they’re being asked to do more in less time than ever before, leaving them less time to fully report and find good stories. Gone are the days when many news organizations had dedicated staffs of investigative reporters who were allowed to spend weeks or months working on complicated stories about hidden corruption and malfeasance. Good reporting is often expensive in this way, and investigative reporting now comes at a price many news organizations feel they can ill afford right now.

On the positive side, the Internet is driving some of the strongest and most compelling work out there. Today’s stories include innovations such as searchable databases for readers to conduct their own research, interactive maps that allow them to find, for instance, all the registered sex offenders near their homes and maps that identify road projects in their neighborhoods.

At the same time, the Internet is radically altering how news content is distributed to the public at large. Social networks and social news sites allow journalists to promote and deliver their content straight to their audiences. Anyone who can perform basic functions on a computer can start a free blog and immediately be a citizen-journalist. Likewise, where an advocacy group such as the Sierra Club or the Eagle Forum once needed to “sell” a story idea to a newspaper editor or TV news producer to get its ideas out, those groups now have their own Web sites and can easily communicate directly with the public, offering readers reports, white papers, research projects, fundraising solicitations, and legislative alerts.

ROLE OF GOVERNMENT

The massive upheaval in the news industry — particularly the shuttering of news outlets like the Rocky Mountain News — has prompted many Americans to question what can be done to help the news industry. With that has come much discussion over the impact of government policies and the overall role government should, or should not play, in the news business.

Some people have gone as far as to suggest that government should provide direct financial aid to financially struggling news outlets.  But this raises huge red flags. The term “firewall” may not have existed when James Madison penned the Bill of Rights, but he would have understood what it meant: The First Amendment exists to create a firewall between government and the press, and many journalists feel that such financial support would break down part of that wall. It would also raise ethical questions for the news organizations that received such funds: If the federal government injected funds into private or non-profit media companies, the journalistic integrity of said companies would come into question. How can news organizations perform their role as a watchdog on the very institution that provided them financial support?

At the same time, such funding could create other problems as well. If government seeks to fund “news organizations,” then what organizations will be defined as “news organizations”? And who will have the power to write that definition? Such funding has the potential to place private media outlets in the same position as the one the Corporation for Public Broadcasting found itself in a few years ago, in which elected officials, unhappy with the content airing on public broadcasting, put in place appointees at CPB who sought to change that content. It could create a situation in which government officials use the definition of “news” organizations to dole out taxpayer money to news outlets that create stories they like — such as stories about what a great job those government officials are doing — and to punish news outlets that craft critical coverage. As a hypothetical, would left-leaning government officials use their power to fund one network or outlet, while right-leaning government officials use theirs to push money to another?

COPYRIGHT CONSIDERATIONS

Websites that summarize the content of an article, whether they link to the original source or not, are not violating copyright laws or the ‘fair use’ doctrine. They may more likely be committing plagiarism, which will ultimately affect the author’s credibility in the eyes of the news consumer, but they are not breaking the law.

In an effort to reduce abuse of the “fair use” doctrine, media organizations may decide to go the route that the music industry did – using DRM (digital rights management) – in an attempt to lock down the use of content. However, we should take pause and decide whether it is the business of media organizations to control the use, interaction and distribution of information in this manner. Perhaps as media organizations explore new business models this will be seen as an appropriate route to take. What we have seen thus far with regards to consumption of news and all things Internet is that consumers like free. Getting consumers to buy into the idea of purchasing a DRM tool, i.e., Kindle or buying a subscription to online content may be part of a longer solution to save the business side of journalism.

With the increase in social media tools, some observers say the future of journalism is bright. “Broadsharing” instead of “broadcasting” is happening all across the world, and they say we should be embracing it, not shackling it.  They say gathering and reporting the news is happening on a daily basis on platforms such as Facebook, Twitter, Tumblr, Flickr, YouTube, and MySpace.  They say the challenge we face is how to continue sharing content while still providing sufficient incentives to create that content and not necessarily altering the ‘fair use’ doctrine or copyright laws.

But others believe the polar opposite. Information should not always be shared for free. If a media company provides valuable services and sells products of value, why should they give they give those products and services away for free?  Movie studios do not pour millions of dollars into producing a movie so that it can be copied and screened whenever and wherever consumers want, at no cost to them. The studios make their money by showing the movies in theaters to paying customers, producing limited numbers of DVDs, licensing their images, and making sure their products are protected under copyright law (that’s why there are FBI warnings at the start of every DVD). As it stands, many news media companies are uploading content to platforms like YouTube and Flickr, allowing Google to index their content, and as a result, helping those companies make money. The news media companies are also helping the cable companies make money (after all, most folks pay for Internet access). From a purely money-making viewpoint, if the advertisers aren’t paying enough for online, then why bother posting information on the web at all?

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For more information on the FTC hearings, visit:

http://edocket.access.gpo.gov/2009/pdf/E9-24197.pdf

http://public.commentworks.com/ftc/newsmediaworkshop/

This entry was posted by Hilary Fosdal on Friday, November 6th, 2009 at 12:37 pm and is filed under Inspiring Work. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.