by Dana Blankenhorn
Volume VI, No. V
For the Week of February 4, 2001

This Week's Clue: News Business Models

This Week's Clue: News Business Models 

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

Intel Misses A Clue

Steal of the Year

W3C Gets Closer to Reality on Patents

Clued-in, Clueless

The new dean of Northwestern's Medill School of Journalism, Loren Ghiglione , came to Atlanta recently and, as a loyal alum (MSJ '78) I went to hear him.

These are hard times for the profession, he said. News holes are closing in every medium, leaving journalists scrambling for employment. Newspapers are shrinking, magazines were hammered by the recession, local TV and radio stations are closing their news operations. (Even interest in Internet employment has cratered along with the Internet ad market, he said.) Ghiglione called himself "embarrassed" on behalf of his country recently when, in London, he listened to two English and, then, an American TV network news director discuss their plans. 

Some CNN'ers and CNN alums in the audience added their voices to the chorus. Cable systems once paid for CNN, but Fox then paid cable systems for carriage, they said. Today all CNN revenue must come from ads, and a shrinking audience (which is now shared three-ways). AOL is also desperate to wring profits from news, and thus its CNN plans are driven by celebrity. The hard work - the work of real reporters in bureaus - isn't being done anymore.

Ghiglione is addressing this in two ways. He journeyed from Atlanta to India and South Africa, hoping to build exchange programs that will aid his students' international standing and spread its disciplines worldwide. He is also trying to cooperate more with Northwestern's business school, Kellogg, so journalists will know more about the business and new leaders in the media industry will understand more of journalism. 

All this leads to a central dilemma, I suggested (rather boldly). Journalists lack a business model. Most don't even know they need one - we're wage slaves. 

Then, in answer to a question, Ghiglione said something remarkable. Guess how many people Bloomberg has in London, England, he asked? About 1,000. (And it's profitable - that is why Michael Bloomberg is now Mayor of New York.) Bloomberg gets about $1,600 per month for the first user at a company of its "Open" system (the successor to its "terminal") , and $1,200 for each added user per month. This is a data stream of stock, bond and currency prices with news stories attached. What comes out is dry and to-the-point, but readers pay for it, through the nose. 

AOL's newest strategy is also based on subscriptions - AOL subscriptions, magazine subscriptions, cable service subscriptions, cable telephony subscriptions and (it hopes) music subscriptions. Subscriptions will mean steady cash flow for services. Hopefully that might include a little journalism. 

All those listening to Ghiglione faced a dilemma common to all "mainstream" journalism today. In the news business subscription revenues only pay to get the product in the door. Journalism is paid for by ads placed next to the content. Only very specialized newsletters get editorial revenues from readers. (Bloomberg, thus, is just a newsletter with a very large market, financial market-makers.) 

Thus you have CNN's problem. Growing the audience means fighting for attention, the need for attention overwhelms the content, and pretty soon you're giving Connie Chung big bucks to chat while closing news bureaus.

Internet Time would be one way to address this. As a currency Time could be spent on any content product - music, books, movies, news stories - and (perhaps) delivered via e-mail. So would another recognition of time and news value, the idea that getting something first is invaluable. Thus, Salon's premium service should be to e-mail stories like Scott Rosenberg's piece on Enron a day ahead of its publication, leaving the Web version freely available to draw press attention. 

There's a third route toward gaining a subscription for news content, and that's the newsletter model. The Hotline, now part of the National Journal , was launched by GOP consultant Doug Bailey in 1988 as an online product. (In its free incarnation it launched the career of Mike McCurry, then a Babbitt spokesman and later a Clinton press secretary.) The Journal now has a host of books, magazines, and online products sold (profitably) to political junkies.

Ah, the journalist says, but that's a limited market. So is the market for Bloomberg. So is the market for all content sold to "players" in a market. Somehow, many journalists don't see writing for a market's "players" as real journalism. They want the largest audience possible. This feeds their egos and makes the whole career feel worthwhile.

My response is, so what? Journalism is not a trade or a profession. It's a business. General news audiences are shrinking, and thus general news has become a free good. The only viable alternative is to write news first for those who want to hear your story and are willing to pay your costs. Then you can, like the National Journal and Bloomberg, create tiers of service that will send delayed news out for a lower price (or even free, when that's in your interest). 

The point is the Internet lets you repeat the success of Bloomberg or the National Journal in any market. This is what Reuters has done, and its acquisition of BRIDGE assets last year mean Dow Jones' demise is just a matter of time, because all of its assets are "down-market."

The trick is to build a news service on top of an online database which is essential to a market, and center your marketing on "players" in that market. This means you line up real estate transactions to tackle a local business market, a local legal database for lawyers, zoning and legislative databases for politicians. Price it high for junkies who need it now, and once you have market share, create lower-priced tiers for other readers. Then hire journalists to expand the offering through investigations that start with the database and then use interviews to create real stories. 

The business models needed to reinvigorate journalism, in other words, already exist. They're just not well understood by journalists. My hope is Dean Ghiglione, whose background is in publishing rather than writing stories, can help tomorrow's Medillians integrate this kind of thing into their studies, and produce not just Pulitzer Prize winners but Pulitzers as well. 

SSP (Shameless Self-Promotion)

It's here! Finally, the Print on Demand version of "Living on the Internet" is available for purchase at BookSurge.Com , for $29.99. And you can get the PDF version for just $7.99 (such a deal). The December update to the book is out now, and it's easy to get on the list via e-mail

This month I opened a new market for my articles with Ray Fix of Wildwood Marketing. The first one appeared here . More exciting deals are on the way. You can join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive.Com. You can also read me at ClickZ , BtoB , and Boardwatch . I'm also on the mast-head at Bottom Line Personal , a great print newsletter.

Remember that it's journalism that keeps the Clues coming...

Shameless Promotion

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Takes on the News

Intel Misses A Clue

Intel president Craig Barrett is off in Washington, advocating 30-year depreciation schedules, turning his back on his company's own creation, Moore's Law.

Barrett believes telephone, cable, and satellite are the only routes to broadband, and thus the government should subsidize the ILECs, cable head-ends and the remaining satellite provider (once Echostar finishes buying DirecTv).

But Barrett's Big Government solution is about to be challenged by a host of new market players, based partly on the metaphor that the frequency spectrum isn't an Interstate Highway, but an ocean, where the only rule should be "don't interfere."

Already 802.11 or WiFi is being commercialized through "hot spot" aggregators like Boingo and Metropolitan Area Network (MAN) operators such as U.S. Wireless Online,. The Ultrawideband working group has presented evidence to the FCC indicating all frequency can be shared, and at low power there is no interference. Japan's NTT has delivered wireless speeds of 2.5 Gbps in the lab, and says the ultimate speed limit may be as high as 10 Gbps . The number of broadband wireless providers using unlicensed spectrum keeps growing, according to former Boardwatch columnist Steve Stroh . It reminds me of the early days of the dial-up Internet.

If Barrett persists in ignoring his own company's work and pursuing Big Government solutions when the free market can do the job, he ought to be fired.

Steal of the Year

How would you like to have an irreplaceable network of fiber cables, with virtually unlimited capacity (once you invest a bit in upgrades), and minimal competition from other phone companies, for about 1/20th the cost of building it yourself?

You would? Well, no American would, which is why Chinese and Singaporean interests were able to grab control of Global Crossing last week for the ridiculously-low price of $750 million . The American investors who built these lines will be shut-out of equity, while Asian powers with questionable stands on Internet Liberty will be given a choke hold on the medium's growth.

It's a choke hold because the potential of fiber keeps growing. A lit fiber's capacity can be expanded with equipment on either end of the line practically infinitely. The companies that own these lines will be able to meet the capacity growth of the Internet for years.

And they got it for practically nothing.

W3C Gets Closer to Reality on Patents

The World Wide Web consortium announced a new policy on patents that sounds like it meets the needs of the community, but has enough legal language to drive Bill Gates' mansion through it (and onto your desktop).

According to News.Com W3C members must disclose patents that are applicable to any standard. (So far, so good.) But if a patent is determined to be "essential," a committee can still place it in the standard with royalties, called "reasonable and non discriminatory."

Sparky, for most people in this world, any royalty is too much royalty. The idea that patented, royalty-based technology will be "essential" to the development of any W3C standard is nonsense. This is a smokescreen designed to slip Microsoft technology (or worse) into the Web standard and force everyone else to pay for it. Read the abstract, and if you agree with my interpretation let Dan Weitzner know now.

Clued-in, Clueless

Clued-in is Philips Electronics , which decided to protect its own trademarks by insisting that copy protected CDs aren't true CDs at all.

Clueless is Mendocino, California , which let a local Luddite named Arthur Firstenberg convince it that electromagnetic waves cause health problems , and thus stopping wireless broadband service is healthy. Mr. Firstenberg is a loony.

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