What We Know About the Business of Digital Journalism

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The Story So Far: What We Know About the Business of Digital JournalismImpact: Digital platforms provide ways for audiences to build quickly withlower marketing costs than in traditional media. And the shift to mobile providesnews organizations with more opportunities for targeted content andadvertising. But increased audiences don’t always lead to proportional gains;in other words, more people may be viewing a site, but that doesn’t meanrevenue increases to the same or greater degree. Witness a recent report byMcClatchy Co., the third-largest newspaper firm in the U.S. The companysaid the number of local daily unique visitors to its websites grew by 17.3percent in 2010, yet digital revenue rose only 2.4 percent for the year. 8 Andmobile ad sales have so far been less lucrative than those on Internet platforms.Chris Hendricks, vice president of interactive media for McClatchy,says that “seven percent of our traffic comes from mobile. The traffic is significant,the revenue is not.”• Digital provides a means to innovate rapidly, determine audience sizequickly and wind down unsuccessful businesses with minimal expense.The substantial capital expenditures that used to be involved instarting a new media company are largely gone. A video service need notbuild tall antennae atop the highest hills in town, and print publishers canavoid capital-intensive investments in printing presses. The large staffs associatedwith getting information to readers—whether they’re camera crewsor printing staffs—aren’t as necessary. It took Sports Illustrated at least 10years to get its formula right and become profitable 9 ; it took HuffingtonPost less than six years to go from an idea to a valuation of $315 million inits 2011 sale to AOL.Impact: The development time from idea to market is shortened, greatlyincreasing efficient use of a firm’s resources. But because competitors canimitate or adapt more quickly, it is difficult to cash in on innovations. Theshorter cycles can lessen the length of time that innovations remain unique,relevant and valuable.• Digital platforms extend the lifespan of journalism. In the analog era, newsstories were as ephemeral as fruit flies. An article was prominent for a day, thenavailable only on a library’s microfiche; a video would be broadcast to millions12
Columbia Journalism School | Tow Center for Digital Journalismon the nightly news, then it would be sent to a network’s vault. Journalismnow can be freely accessible for as long as a publisher wills it to be. In the wordsof one programmer, “There is no such thing as ‘yesterday’s news.’ ”Impact: News organizations can make money from their archives as partof a subscription or pay-per-view service, or as part of a scheme to providemore content and build traffic and ad revenue. But as increasing amounts ofcontent stream into archives, consumers may have greater difficulty findingwhat they want.II. Content and Distribution: A Fundamental Change• Digital disrupts the aggregation model that was so profitable for solong. Almost no one used to read the entire newspaper every morning,and audiences frequently tuned in and out of the network news at night.Yet, news organizations sold their advertising as if every page was turnedand every moment was viewed. Indeed, print publications applied a multiplier—oftenup to 2.5 readers—to account for the audience for eachedition they sold. But in the online world, content has become atomized,with each article existing independently of the next. It is as seamless for areader to go from a tallahasseedemocrat.com story to a video on msnbc.com as it is to read back-to-back stories in Esquire magazine. The economicconsequences of this fickle information-gathering are devastatingfor legacy news organizations, especially because they have ceded manyof the benefits of aggregation to sources like Drudge Report, HuffingtonPost and Google News. Says Michael Golden, vice chairman and presidentof the New York Times Co.: “We’ve lost the power of the package.” 10Impact: News relevant to a particular audience can be assembled cheaplyand easily, with significant benefit for readers seeking divergent and evencompeting points of view. But low-cost aggregators compete with contentcreators for page views, and often win. In the words of Aaron Kushner, aninvestor trying to buy the Boston Globe, “The definition of a competitornow is someone who gives away your story for free.”• Journalists today can find readers wherever there is access to the Internet.This is an enormous transformation after a century in which thereach of print journalism was limited by a company’s printing plants andNews from Everywhere: The Economics of Digital Journalism 13
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