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July 2, 2015, 10:37 a.m.

Newsonomics: On end games and end times

Can publishers find a sustainable business model this new age of Facebook/Apple/Snapchat/Twitter/Google distributed content? And is local news destined to be left behind?

Platish or perish?

With those malaprop-sounding fighting words a year ago, digital entrepreneur Jonathan Glick neatly, if broadly, summed up a question of the moment on Twitter.

We’ve read so many obits for news media over the past 10 years that you’d think we’d be inured to yet another. But the onslaught of off-site distribution initiatives — from Facebook’s soon-to-expand Instant Articles to Apple News to Snapchat Discover, and most recently Twitter Lightning and whatever may next emerge as an offspring of Google News — now offers yet another existential moment. Will anyone go directly to a news or media site or app in 2020? Or are the platforms, now becoming quasi-publishers, all that will matter? (And will anyone come up with something better than “platisher”? And don’t try to make “pubform” happen.)

It’s all got me thinking about end games and end times. We’re in the midst of a new volcanic digital movement and we have little idea what an end looks like. I’ve called this greater movement to off-news site reading the “age of distribution,” but in reality, it’s just a further flowering of distribution, as newer pipes companies — like Facebook and Snapchat — join the restyled ones like Verizon and Comcast in bringing more stuff to their customers. Several publishers have a few years’ experience partnering with Flipboard, and they have some small gains but no tectonic business movement to show for it. The sheer size of the new generation of platforms interested in news gives publishers (and those who like to tell them what to do) both chills and thrills.

Some veteran observers of the distribution game make the point that, though it’s easy to lump all these announcements together, they’re not all created equal.

“They are so different from each other,” says Vivian Schiller, who has headed media units at The New York Times, NPR, NBC, and Twitter, and who now does consulting. “It’s Apple News, though, that could disrupt new organizations’ native apps. You can’t delete the [Apple News] app, and in the demo, it’s a gorgeous experience. We may ask the question, ‘Why do I need a New York Times app?'”

She’s right. Both the potential of the deals and the kind of moneymaking each offers vary, sometimes significantly. Some will offer a curated news mix, while others (like Snapchat) offer it up brand by brand.

Most notable about what most of the new deals offer is the chance for publishers to sell ads contextual to their content off their sites. That’s a potential game-changer, as Frédéric Filloux notes in his Monday Note, “The Redistribution of News.”. While publishers have been able to sell ads off sites, those deals with Flipboard and MSN, among others, haven’t produced big revenue; Apple and Facebook distribution might. For legacy publishers, off-site content deals have been largely focused more on selling digital subscriptions than on advertising — with mixed results.

Hearst’s Troy Young finds this common thread across the deal spectrum: “They feel very similar to us. All of these partners bring our brands closer to readers in mobile environments. All give us tools to tell rich stories. In all cases, monetization follows our content.”

Of course, the big question is what the money will look like when the dust settles. Will this round of changes stop or deepen the struggles of print-based companies? In an age when Taylor Swift acting like Ari Gold can cause a giant like Apple to modify its plans, might all of this distribution form a new business model?

Let’s consider what the new landscape tells us about both end games and end times.

End games

Few has embraced this new news ubiquity (“Newsonomics: BuzzFeed and The New York Times play Facebook’s ubiquity game”) more than Atlantic Media, and few are as bullish as Atlantic’s Michael Finnegan, whose views I recently wrote about in depth (“What are they thinking? Why Atlantic Media floods the zone”). Atlantic Media is in on the ground floor on Facebook’s Instant Articles, one of its initial nine partners, and will be in Apple News as well:

Let’s say we reach 35-40 million people through owned and operated sites today. Five years from now, our brands could be reaching 300-500 million worldwide, but not if we insist that all of them have to interact with us on our terms on our site. Five years from now, if you told me we were reaching a half a billion people with our brands, and you told me only 50 or 100 million were coming directly, that wouldn’t worry me. I’d be confident we’d be able to figure out an amazing business model to pay our journalists.

That’s one possible end game, and fascinating to think about. In that one, the platforms’ rediscovery of news — it drives 20 to 40 percent of a lot of “platform” traffic, given its continuous refreshing; you know, news — creates such a golden age of reading that publishers figure out enough ways to monetize, cut those old tiresome print expenses, and pay lots of journalists.

I put that question — of end games, and of the actual state of off-site metrics and monetization — to a half-dozen of the smartest publishing execs I know. For most, this is the hope: keep their most loyal, paying readers reading through own sites and apps, and expose their news brands to many, many more (younger) readers.

That purely additive result would be ideal, but publishers know it will be far more complex. Few wanted to say anything for attribution, given ongoing negotiations with the distributors.

To the question of how off-site monetization can compare to on-site, the answer was universal. It’s as much art as science at this point. Figure 50/50. Yes, they can do a fair amount of tracking, and of comparison, but the data — and its partialness — limits how much.

How well can they really track a Flipboard deal (now the older fogey of these platform distribution plays) compared to what Facebook, Apple, and Snapchat may offer? How do they look at what Twitter is cooking up, or Google may? As one veteran of numerous deals puts it: “Not perfect, not real time, but enough to know which distributor is performing better in terms of monetization.”

Given that landscape, what’s a benchmark of success? Finnegan believes it is unfair to expect off-site distribution deals to perform at same level as ones on Atlantic Media’s own sites and apps:

I don’t think we hold distributed content revenue deals to the same standard as we do our owned and operated sites. We can offer our clients a much better value proposition on our site, where we can customize, integrate and tailor the experience. Holding distributed content deals to equivalent standard as our sites is an unreasonable expectation because we believe our sites offer advertisers better value propositions.

If a publisher can sell its audience on its own site at a $20 per thousand price, and only gets $12.50 for a thousand readers on another platform, is that a good deal or a bad one? It’s an impossible question, at this point, to answer. Are those $20 readers abandoning a publisher’s site and moving their time spent to Facebook or Apple News? Or do most of the habituated readers, and paying subscribers, stay with a news brand’s own sites and apps, with largely new readers coming in through the new doors? Only tracking of these deals will tell indeed how much cannibalization is actually happening.

Yes, that word — have no doubt, these deals will cannibalize publishers’ direct business. The big question is how much.

That risk gets measured against the potential gain. Go back to Michael Finnegan’s best-case scenario — that tenfold multiplying of audience. He makes the case that “if we could get 20× the audience and only 10 percent of the ability to monetize, that would be something we’d want to look at. “

It’s a math that doesn’t make intuitive sense, but it’s a way of playing that ubiquitous distribution landscape. Here’s where a rational older world approach to metrics throws us off kilter.

As Buzzfeed, Vox, and Vice have taught us, huge digital news audiences can be built on free marketing, a.k.a. free social distribution. This next development of distribution platforms is a logical outgrowth of all that Facebook, Twitter, and Pinterest traffic. This distribution, as disturbing and possibly damaging as it may, is, after all, free. The siren call of free: Given free access to would-be readers who can be reached at close to zero incremental cost, how can you not play, in what seems to be an age of ubiquity? So, if Atlantic Media and others can make money from even a small percentage of a huge new audience, the math could work.

Another big question: How stable are these partnerships? Publishers like much of what they’ve heard so far; for instance, Facebook Instant Articles will allow publishers to sell ads alongside their full content on Facebook and keep all the revenue. Critics guffaw and say: “Sure, that’s what they say now. Later, they’ll want a revenue share.” Sure they will. That, though, doesn’t mean worthwhile longer-term terms of partnership won’t be worked out. Remember when Apple said it wanted 30 percent of subscription revenues from its Newsstand. Outrage ensued. Then publishers recalibrated sales costs into the equation of gaining new paying customers, much as they do in the analog world. The same principle might rationally apply here. Facebook — and other distributors — do provide a service to publishers, offering new audience. Build a reasonable, predictable commission into the sales equation, and we could see a new stability and mutual expectation of revenue that could become the cornerstone of new relationships.

Deal points are one thing. Just as big is something more intangible: publishers’ own direct connection with their readers. “At a minimum, we want to ensure we have a direct relationship with our readers/users,” says Kinsey Wilson, executive vice president for product and technology at The New York Times.

Publishers worry about becoming too dependent on these new platforms. In fact, they already are. Most news publishers get far less than half of their traffic coming directly to their sites already. Google drives a quarter to a third of it, and social is fast getting competitive with search. Then there are the thousands of other sites that provide traffic. In the end, publishers’ dependence on platforms might best be mitigated by working with a number of the big distributors. In search traffic, Google has essentially no competition, and publishers thus have had little leverage in negotiating advantageous partnerships. In the new platform wars, can publishers play Apple against Facebook against Snapchat against Twitter?

End times

If history is any guide, we’d have to answer that question “no, they can’t.” The famously splintered news industry has found itself largely incapable of effective collective action in dealing with large, singleminded, highly mobilized Internet companies. They move at the speed of light while publishers dither.

Fears of antitrust collusion charges slow collective action. Then there’s the question: What would we negotiate for? So publishers worldwide end up simply reacting to the offers of Facebook, Apple, and others; few are in on any early discussions on how to make the programs mutually beneficial. Facebook gets credit, from early participants, for its listening abilities, but still, Instant Articles is a Facebook-driven project. Could it be any different?

Down the road from Facebook’s Palo Alto campus, representatives from eight European publishers broke bread with Google managers in Mountain View last week. At that meeting, they moved forward a joint agenda for cooperation, which I detailed a couple of weeks ago (“Newsonomics: Could a small Google tech change mean tens of millions to news publishers?”). Yes, the meetings were jumpstarted by European legal action against Google, but still it’s an attempt to jointly define a news future. Whatever comes out of that Digital News Initiative, all publishers should consider this: Google is now playing catchup to its two most important competitors, Facebook and Apple in news distribution. Google needs to find a new post-Google News strategy; that product now seems so 2006.

“This seems to be a mobile land grab and it will be fascinating to see what Google will do with Android,” Gordon Crovitz suggests. Indeed, Android — with many more users worldwide than Apple’s iOS — will likely deploy a new Android News or Google News not too long after Apple News hits the market. (It currently offers Google Play Newsstand.)

Google isn’t yet talking to publishers about what could now do for news readers and publishers, or vice versa, and I’ve made the point of how absent North American publishers are from the Digital News Initiative talks.

Let’s also acknowledge that in all the talk of these platform distribution deals, it’s only national/global companies — companies like The New York Times, BuzzFeed, National Geographic, NBC, The Atlantic, Bild, Spiegel, The Guardian, and the BBC — that are named. Where is the regional representation? Most Americans and Europeans get much of their news from regional and local newspapers, yet they’re nowhere in the conversation. Here, as in most things digital, the chasm between the national/global players and the regional players grows, with the latter much constrained in meeting the ever-changing demands of digital publishing. For the local daily press — which in the U.S. means all but three dailies — you can’t win in the new platform wars if you don’t play.

Finally, on this topic, let’s ask one more question: Why haven’t publishers become platforms?

One publisher has indeed made a big splash, going the platisher route. The Huffington Post, which claims 100,000 contributors (though some dispute the claim), just set a goal multiplying that number by 10 (“Arianna Huffington’s next million mark”). From its inception, The Huffington Post has served as a platform for others, from top Hollywood stars to those at the bottom of the economic ladder, as well as a source for news.

“We have seen ourselves as a hybrid — both a publisher and a platform — since day one when we were one part news site, one part group blog,” Arianna Huffington told me Wednesday. “Over the years, we’ve expanded both our editorial team and our platform offerings, including growing to 100,000 bloggers, crowdsourcing user-generated content and partnering with hundreds of non-profits, schools, etc. to cross-post their content.”

Few newspapers have built anything like HuffPost’s system, with the Deseret News one notable exception. Many tested ideas and early technologies (I recall our Knight Ridder Digital late 1990s experiment with community site Koz), but the timing was off and the idea has never been broadly revived. To that end, publishers — which could have become much bigger platforms themselves — left the field wide open for the latter-day pipes companies. Further, newspaper companies haven’t robustly supported real universal high-speed internet, as laid out by Barack Obama, like much of the rest of the civilized digital world enjoys. If we did, Facebook couldn’t easily complain — accurately — about the eight-second lag in reading linked news articles, a digital eternity that it says drove the idea for Instant Articles.

Which gets to the end times notion. It’s not about oblivion, but about people and paper. It really is end times for print. Readers continue to abandon newsprint, trading it in for digital. As importantly, publishers’ aggressive pricing policies have increased circulation revenue but keep pushing down print volumes — toward a inevitable and sooner-rather-than-later end. It’s in people though — the journalists who write the news for us — that we see the whole sense of local news reporting slipping away. Just in recent weeks, we’ve seen dozens more newsroom jobs lost, from Denver eastward to Chicago, Greensboro, and Tampa.

After the Apollo acquisition of Digital First Media fell through in May, DFM began a new round of job cutting affecting dozens, plus additional cost-cutting throughout the company. It won’t be alone. Bleak print ad revenues drive these cuts — and 2016 budgeting is coming. It is, in fact, end times for the now more than 21,000 journalists that have lost their jobs in the last decade. Their readers are being hurt too, drop by drop. As the big national/global publishers do their end game theorizing, much of the newspaper business is being left on sidelines, trying to figure out how to maintain profit for 2016, 2017, and maybe 2018, but with little role in the new platform plays.

Overall, this new age of distribution may be a significant historical marker, as long as publishers try to take the future in their own hands and don’t expect Facebook to come up with its own brainstorm to “save” the news industry. As Mark Zuckerberg took questions on Facebook Tuesday, he said all the right things — and showed himself to be as uncertain as publishers on where all this would or could lead. “There’s an important place for news organizations that can deliver smaller bits of news faster and more frequently in pieces,” he wrote. “This won’t replace the longer and more researched work, and I’m not sure anyone has fully nailed this yet.”

“Death on the Pale Horse” (1796) by Benjamin West is at the Detroit Institute of Art.

POSTED     July 2, 2015, 10:37 a.m.
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