Sustainability: Reporting back from the New Business Models for News Summit

Posted on 30. Oct, 2008 by David Cohn in Business Summit

[From Chris O’Brien with the Next Newsroom Project]

The biggest challenge the news industry faces these days is creating a new business model to sustain journalism as we move forward. Digital tools have created enormous opportunity to tell stories in new ways and forge deeper connections with our communities. But once you get past that, the discussion always circles back to one question: How are you going to pay for it?

On Oct. 23, the CUNY Graduate School of Journalism gathered 120 folks at its mid-town campus for the New Business Models for News Summit. The event was hosted by Jeff Jarvis, associate professor and director of the interactive journalism program at CUNY who blogs at Buzzmachine.com.

CUNY’s j-school is fairly new, and just moved into a new facility a couple of years ago. CUNY has received a $3 milllion grant to create a Center for Journalistic Innovation. One of the goals of the summit was to help CUNY further define the mission of that center. CUNY needs to find another $3 million in matching funds.

By the end of the day, we probably had more questions than answers. No surprise, right? If a solution could be found in one day, it probably would already have been discovered.

I was blown away by the caliber of folks in the room that day. The conference kicked off in the morning with a series of lightning presentations. The full schedule is here. There were too many presentations to discuss them all. Most folks had five minutes to talk, and usually I was left with about a dozen questions I wanted ask. I’ll probably do that via e-mail over the coming weeks.

My main takeaways from the day were far different what I would have expected going in. I’ve been in search of new ways to generate revenue to maintain the newsrooms we have (or some version of them). But the big lesson of the day was to focus on the other side of things: Cost. There was widespread agreement across the day that cost structures of newsrooms need to be dramatically lower. But before you think I’ve become a cheerleader for the rampant corporate cost cutting plaguing us, hear me out.

The cost reductions being discussed at the summit were aimed at being “smarter” than the strategies we’ve seen. This needs to be done in a different way than most places are trying to do it now. The content creators are the last things you should be cutting, not the first.

Second, at the same time costs are being reduced, the newsroom needs to be transformed into a network to leverage more out of what remains. As Jarvis likes to say, “Do you what you do best, and outsource the rest.” The focus of the newsroom in this new era needs to be more outward focus than inward focus.

Jarvis kicked things off with an overview of the day. He sees news as being distributed, rather than centralized. Instead of going to the news, people expect the news to come to them. “If the news is important enough, it will find me,” Jarvis said. “That’s a whole new world view.”

“Do we even have a newsroom?” Jarvis asked. “Do we need the room? What do we need it for? Do we just need a network?”

Here’s his presentation:

Edward Roussel, digital director of the Telegraph hit both of these themes during his presentation. Roussel said the challenge is for newspapers to recreate themselves as networks. That means focusing as narrowly as possible on the distinct, premium things that you can do for the community, and then linking to everything else. As part of that transformation, Roussel advises: “This is a time, even in a recession, when news companies need to be investing more money in the things that define them.”

Looking at the Telegraph, Roussel said his paper made a big move to lower costs by outsourcing its technology. “Let’s face it, if you work at a newspaper, your technology sucks,” he said. “So get rid of it. We reduced half our technology staff.” But, and this is important, they did not cut their tech budget. Instead, they’re using as many free and open tools and platforms as they can. That budget now goes much further. “The key thing about the network economy model is that you get better service for less money,” he said.

Looking elsewhere, he said there were opportunities to outsource distribution, technology, sales and marketing. “But don’t cut editorial,” he warned.

“People keep asking, ‘How can we raise revenues to match print?’ ” Roussel said. “That’s the wrong question. You need to be thinking about how to lower expenses. In a network economy, your costs come right down. You don’t need to be thinking about something as radical as not having a newsroom.”

Dave Morgan, founder of Tocada, an AOL subsidiary that does targeted advertising, echoed Roussel’s philosophy. Here’s how he summed up the current challenge:

“It’s a market problem, a business model problem, and a cost problem,” he said. “It’s not a journalism problem.”

His advice: Disaggregate the news operation into five pieces: local news and editing; distribution; sales and marketing; printing; digital.

“Distribution is a cost that alone will sink what’s good in newspapers,” he said. So, spin it off or outsource it.

The ad sales department: “They are order takers. They are offering limited, creative solutions.” Outsource this, too.

Morgan also noted: “Tethering digital to side of newspapers is killing digital. Go back to early digital newspaper conferences, and you’ll see that many of the digital executives there left and became successful somewhere else. Those companies couldn’t understand. They built little speedboats next to their cruise ships.” What was less clear to me was whether he was suggesting greater separation between print and online, or more integration.

The other speaker who really left an impression on me was Tom Evslin, founder of ITXC, a voice over IP company. Evslin talked about how to build the networks that people keep talking about. I think most of us recognize at this point that establishing various networks of source, collaborators, customers, etc., can be incredibly valuable and really help leverage whatever it is you’re hoping to do. But creating those networks in easier said than done.

“The value of the network is proportional to the number of people in the network,” Evslin said. “But how do you get a network started if it doesn’t have any value? Imagine how hard it was to sell the first telephone?”

“When anyone proposes a network, you have to ask, ‘How do you create value for initial users so you can get over the hump?’ Don’t let them brush that off. Especially if the goal is be interactive. I thought I would create a wiki around this novel I was writing. Predictably, the discussions never got going. It wasn’t because people didn’t come and look. Only 1 out of 100 would contribute. If you’re trying to get a conversation going, you’ve got to grow very big before you can get a conversation going.”

So, how do you get started?

First, Evslin said, look for communities that already exist and try to bring them over to the network. For newspapers, that might mean finding ways to bring committed, passionate print readers over the online as participants in some form.

A second option is to independently create value for that first user. For newspapers, this means building networks around content. That content has value, whether or not there is a network around it. But if you can take that content, and find a way to build a network around that subject (for instance, green technology, schools, etc.), then you can hopefully use the content you’re creating to jump start a network around it.

In the afternoon, we broke into five working groups. I was assigned to the “newsrooms” work group which was charged with finding new efficiencies and structures for the newsroom. Our official charge is here.

We spent about two hours in the group and had some lively debates. Our group leader, Andrew Heyward, put me on the spot at the start by asking whether we need to have a newsroom. My answer: No, but there are good reasons to have one. A newsroom gives you a place to educate, both colleagues and potentially, the public. Having a place to gather can help spark innovation (as long as it doesn’t have a structure that’s too restrictive). For the most part, the group agreed and we moved on to defining what that might look like. You can see a summary of our discussion here.

We took the approach of essentially creating a new news organization from the ground up. But the other way to look at this question is to ask: How would you make a current newsroom more efficient? After leaving the discussion, a number of things occurred to me that should be explored:

1. Use templates for the print paper. Spend less money on designing the paper every day and use that money elsewhere. Newspapers have been trying to design their way out of their problems for years, and it hasn’t worked. I don’t think this something print readers think about. They want substance and content, not more pictures.

2. Cull circulation. Most newspapers are underwriting a chunk of their circulation to fight churn. What if you stopped spending so much money trying to sign up new subscribers? That costs a lot of money. This would require a change in ad rates. But I think it might save costs in the long run.

3. Reduce editors. I love editors, but it seems a lot of content, especially shorter stories, could be posted directly the Web. Many newspapers now let reporters post to blogs without editing. Why not the main site?

4. Newsroom salaries. I’m not sure yet how I feel about this, but it would seem that how we pay people needs to be rethought. Some online news sites pay employees by traffic they generate. That’s ruthless, but still, I wonder if that might work for some online jobs at newspapers?

So what’s next? The folks at CUNY will be taking what was learned and using that to focus their mission. There are a few things I would love to see CUNY do, and some of these were mentioned toward the end of the day:

1. Create a clearinghouse for information about this subject. We need to know who is trying what, whether it’s working, and why. Sharing lessons learned is going to be vital for all of us. Examine case studies, establish a set of best practices.

2. Create a kind of Harvard Business Review for news business models.

3. Bring more people from the business side into the discussion. They’re passionate about the future of news, but they’ve had even less opportunity to innovate. Could there be a Poynter Institute for helping them rethink and retrain for their jobs?

4. Bring in folks from industries outside of journalism. I’m thinking places like Proctor & Gamble. Companies that have entirely different businesses and so think differently about their relationship to their consumers and their products. These might not be the right lessons for news, but I think hearing radically different business perspectives could help shake things up and generate some new thinking.

5. Be bold. We can’t just be about tweaking advertising models. That’s helpful, but stepping outside of the industry into an academic setting ought to allow for deep, radical thinking that challenges all assumptions about who we are and what we do.

If you want to know more about the summit, you can dig into the tweets here. And check out the summit blog here for summaries of all the sessions.