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Funding Journalism in the Digital Age

Business Models, Strategies, Issues and Trends

by Jeff Kaye (Author) Stephen Quinn (Author)
©2010 Textbook X, 186 Pages

Summary

The news media play a vital role in keeping the public informed and maintaining democratic processes. But that essential function has come under threat as emerging technologies and changing social trends, sped up by global economic turmoil, have disrupted traditional business models and practices, creating a financial crisis. Quality journalism is expensive to produce – so how will it survive as current sources of revenue shrink? Funding Journalism in the Digital Age not only explores the current challenges, but also provides a comprehensive look at business models and strategies that could sustain the news industry as it makes the transition from print and broadcast distribution to primarily digital platforms. The authors bring widespread international journalism experience to provide a global perspective on how news organizations are evolving, investigating innovative commercial projects in the United States, United Kingdom, Australia, Norway, South Korea, Singapore and elsewhere.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the Authors
  • About the Book
  • This eBook can be cited
  • Table of contents
  • Acknowledgements
  • Introduction
  • 1 The challenges of paying for journalism
  • 2 How the news business entered the digital age – a history
  • 3 Current journalism business models – new ways to support traditional revenue streams
  • 4 Sponsorship and philanthropy
  • 5 Microfunding and micropayments
  • 6 Collaboration between mainstream media and citizen journalists
  • 7 Family ownership and trusts
  • 8 Narrowing the focus with niche and passion content
  • 9 Partnerships – adding value
  • 10 Microeconomic concepts – creating a framework for new business models
  • 11 E-commerce and engagement – converting users into paying customers
  • 12 Building the news business through innovation
  • 13 Digital deliverance? Electronic paper and e-readers
  • 14 Into the future
  • Index

Numerous friends and colleagues gave us valuable suggestions for this book and we are grateful to the people who agreed to be interviewed for it. We would especially like to thank Paul Brannan, Kris Dahl, Jeff Jarvis, Andrew Jaspan, Tom Johnson, Sandeep Kapur, Katie King, David Nordfors, Keith Perch, Stevie Spring, John Tidey and Stephen Wright. Thank you also to our families for their patience and support while we were locked away writing. ← ix | x → ← x | 1 →

Pay walls versus free access, hyperlocal coverage, search engine optimization, niche content – the discussion about how the news industry will survive in the digital age grows more intense as the speed of its financial decline quickens. Is Google devil or angel? Will Amazon and other makers of electronic readers resurrect the paid subscription model for news? If they do, will they grab an unfair share of the profits?

In newspapers and blog postings, at seminars and webinars, wherever journalists discuss their profession, the talk is of survival. How will journalism be funded when the business models that sustained it for centuries are crumbling?

The onset of the global financial crisis in 2008, and the dramatic drop in revenue that followed, raised the level of industry turmoil as news organizations slashed staffs and budgets to cut costs.

But not everything is doom and gloom – there is plenty to be optimistic about too. Advances in technology have enabled journalism to flourish in remarkable ways – from instant global distribution to community participation and more powerful storytelling techniques. And there are already instances where readers have shown they are prepared to pay for digital news content.

It’s worth remembering too that despite these massive upheavals in business models and technology, the centuries-old perception remains widespread that an informed public is an intrinsic social good.

With these changes crowding into one another, we felt there was a critical need for a book about finding new ways to fund journalism’s key role in fostering democracy. ← 1 | 2 →

In the following chapters we attempt to place these developments in their historical and economic context. We provide an overview of where we are now and look at new ideas and practical solutions that are being developed throughout the world.

Chapters 1 through 3 provide a context for the current dilemma. The first chapter explores the issues and challenges media companies face in trying to fund journalism as the industry makes the transition to primarily digital distribution. Chapter 2 examines how the commercial side of the news business developed, early attempts to move beyond “ink and paper” to electronic news distribution, why newspapers give away their content for free online and the rise of Web 2.0 and social media. Chapter 3 discusses business models that news organizations have used in the past and are using today – with varying degrees of success. Among the models and issues addressed are paid content, classified advertising, aggregation, hyperlocal news, search engine optimization, dayparting and the emerging concept of distributed media.

Chapters 4 through 9 explore new business models to fund journalism that are already being tested around the world. From microfinancing in San Francisco to massive citizen participation in South Korea to passion “blips” in London, we provide case studies of experimental commercial practices. Among other topics included are sponsorship, non-profit organizations, trusts, industry-university partnerships and strategies for creating valuable niche content. We also look at why online users appear more willing to pay for digital content that exists outside of web browsers – on iPhones or PlayStations for example – than on web pages.

The final section of the book, Chapters 10 to 14, looks at how we can adapt and create new products, services and operational methods that could help support journalism. Chapter 10 examines relevant economic concepts that could be used as tools to develop a greater commercial infrastructure for journalism, such as versioning, bundling and unbundling, price discrimination, network effects, switching costs and lock-in. In Chapter 11 we look at how e-commerce offers untapped revenue possibilities for news organizations, why so many online users are unable or unwilling to use current payment systems – and how that can be overcome. We also examine how media companies are engaging their online users and building transactional relationships with them.

Chapter 12 discusses the importance of innovation in driving businesses, why news organizations have been slow to innovate and how that is changing. We provide case studies of innovative practices at media companies around the world. Chapter 13 focuses on electronic reading devices – e-readers, such as Amazon’s Kindle – and the effects this form of distribution may have on journalism. E-reader ← 2 | 3 → owners will pay for digital content, and the number of users is rising steadily. But questions remain about how to split the revenue fairly between content providers and e-reader manufacturers and whether news companies will be able to build their own transactional relationships with customers who subscribe via e-readers.

Finally, in Chapter 14, we highlight key issues and trends we believe will help shape how journalism is funded in the digital age. ← 3 | 4 → ← 4 | 5 →

Summary

The value of news media companies around the world has crashed since the global financial crisis started to bite in 2008. In America alone, newspapers lost $64.5 billion in market value that year. Traditional news organizations are struggling to survive. But the economic downturn has only speeded up a process that has been underway for decades. Emerging technologies and changing social trends began to disrupt established media business models and practices long before the latest crisis on Wall Street. The news industry is making a transition away from print and broadcast distribution to primarily digital platforms. But the advertising and subscription business models that supported traditional media companies in the past appear unable to do so in the digital age. Massive competition to attract online advertisers, and an expectation among audiences that web content should be free, are two of the biggest factors behind the current crisis. Quality journalism is expensive to produce – so how will it survive as traditional sources of revenue shrink? This chapter outlines the issues and challenges that media companies face in trying to fund journalism. It should be read in conjunction with the next two chapters, which consider the business models that have sustained journalism in the past.

The economics of journalism are not straightforward. Most other businesses operate with a simple formula: they offer products and services for sale and people choose to buy them or not. But journalism has mainly been paid for through indirect means. Newspapers and magazines usually charge for a single copy or a subscription, although some publications are given away free. But even for ← 5 | 6 → the ones that charge, the sales revenue is unlikely to meet the cost of production. The real money has usually come from selling advertising space. The news content attracts an audience and advertisers pay to get their message in front of that audience. So, in truth, news publications do not generally receive the bulk of their income from their readers – they get it from advertisers. Therefore, the notion that consumers have been “paying” for news is somewhat misleading. Consumers have been funding only a fraction of the cost of producing quality journalism. Yes, the income from single copy sales and subscriptions has been substantial and an important component of the news industry business model. But that is only part of the story behind journalism’s financial crisis. The bigger picture is that print newspaper readership has been declining for years, that readers have been turning to online sources for news, that there is far greater competition for advertising revenue online than in print and that advertisers pay only a fraction for online space compared with what they pay for print and broadcast ads.

By the second half of the twentieth century America’s newspapers, like many newspapers around the world, relied largely on advertising for their income. Professor Robert Picard of Jonkoping International Business School in Sweden, one of the world’s most eminent media economists, noted that advertising rose significantly during that time as a proportion of total newspaper revenues. Advertising sales accounted for 71 percent of newspaper income in 1956 compared with 82 percent by 2000. The category proportion of advertising also changed. Professor Picard noted that in 1950 retail advertising made up 57 percent of advertising revenue, national advertising 25 percent and classified advertising 18 percent. Half a century later, retail and classified were nearly equal in terms of their contributions (44 percent and 40 percent respectively) and national advertising provided only 16 percent of total advertising revenue. “These shifts made newspapers more dependent on classified employment, automobile, and real estate advertising that tend to be more cyclical and respond more to changes in the economy than brand advertising that makes up the bulk of television advertising,” he wrote in a paper headlined Evolution of revenue streams and the business model of newspaper: The US industry between 1950–2000.

Newspaper advertising is cyclical and affected by the business cycle and other changes in the economy, and newspapers’ revenues mirror these trends. “Although circulation income increased in real terms by more than a third in the half century, that growth rate stopped in the 1980s, and circulation revenue has been flat since that time. Part of this revenue trend is the result of declining numbers of newspapers and their circulation and partly due to the reluctance of newspapers to raise their prices,” Professor Picard wrote. “The newspaper industry was dependent upon ← 6 | 7 → advertising for the bulk of its income across the five decades but that dependence grew stronger during the final quarter of the century.” Newspapers have often used the cover price as a tool to manipulate circulation figures and advertising rates. So they have always been reluctant to raise the cover price for fear of losing readers and having to charge lower ad rates. Circulation at US newspapers peaked at 63.3 million in 1984. By the end of 2008, US weekday newspaper circulation had dropped to a combined 48.6 million. “The declines in print newspaper circulation, which had begun to accelerate alarmingly in late 2003, only became deeper in 2008,” noted the Project for Excellence in Journalism in its 2009 State of the News Media report.

Details

Pages
X, 186
Year
2010
ISBN (PDF)
9781453901014
ISBN (ePUB)
9781454195924
ISBN (MOBI)
9781454195917
ISBN (Hardcover)
9781433106781
ISBN (Softcover)
9781433106859
DOI
10.3726/978-1-4539-0101-4
Language
English
Publication date
2010 (February)
Keywords
ReportersJ Journalism Press Publishing Newspapers Reporters Journalists Media Business models News
Published
New York, Bern, Berlin, Bruxelles, Frankfurt am Main, Oxford, Wien, 2010. X, 186 pp.

Biographical notes

Jeff Kaye (Author) Stephen Quinn (Author)

The Authors: Jeff Kaye is a journalist, media consultant and academic and has extensive experience working in the U.S., Great Britain and Europe. He has worked as a correspondent for the Los Angeles Times in the U.S. and U.K. and the San Jose Mercury News in Silicon Valley. He was a feature writer and columnist in the L.A. bureau of TV Guide magazine and was the London-based European Editor of the entertainment industry bible The Hollywood Reporter. Kaye also spent a year as a freelance writer in Paris, edited a computer games magazine and was Head of Content for consumer websites at British Telecom and World Online. Kaye also lectured in print and digital journalism at the University of London before relocating to New York in 2009. He is an Associate in the Journalism Leaders Program at the University of Central Lancashire in England and has taught journalism at the University of California, Los Angeles. He has a B.A. in journalism from San Francisco State University and an MSc in E-Commerce from the University of London, Birkbeck College, where he focused on commercial strategies for digital content. Stephen Quinn is an associate professor of journalism at Deakin University in Australia. Before becoming a university educator in 1996 Dr. Quinn spent two decades with some of the world’s best media companies, including BBC-TV, The Guardian, ITN, TVNZ, and the Australian Broadcasting Corporation. He also worked for a range of newspapers in Australia and south-east Asia. This is his fourteenth book. Dr. Quinn’s other books with Peter Lang include Convergent Journalism: The Fundamentals of Multimedia Reporting and Conversations on Convergence: Insiders’ Views of Twenty-first Century News Production. Dr. Quinn is a regular contributor to the Innovations in Newspapers annual reports published by Innovation International for the World Association of Newspapers. He also consults for news organizations and is a frequent speaker at international journalism conferences. Between 2000 and 2009 he presented academic papers at more than 150 seminars in 27 countries and trained journalists in eight countries.

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