Categories
media economy photography

The new media landscape (3): community, transactions and value

 

The disruptive power of the internet has produced a new ecology of information. As outlined in the first post of this series, this is the inescapable big picture for anyone engaged in creative practice.

This new ecology of information incorporates some hard realities for those of us seeking to support creative practice. In the second post of this series, I argued that community is now an essential concept in the new media landscape.

Throughout I have drawn inferences from what is happening to large media organisations in this revolutionary environment so that independent photographers and visual journalists can understand the challenges they face.

In this third and last post of the series, I want to discuss how some media companies are pursuing different sources of revenue. While their strategies are not easily replicable, they show how the dynamics of the new media landscape are playing out when it comes to the nitty-gritty of business models.

The end of distribution supporting scarcity

The past profitability of many media companies was based on controlling the mode of distribution so that scarcity prices could be charged. What the disintermediation, disruption and disaggregation of the media economy exposes is that this control was unique to a particular historical moment, resulting in prices that were artificially high.

As Google argued in a submission to the US Federal Trade Commission, this certainly applied to newspapers:

The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers. With the Internet, that scarcity has been taken away and replaced by abundance. No policy proposal will be able to restore newspaper revenues to what they were before the emergence of online news. It is not a question of analog dollars versus digital dimes, but rather a realistic assessment of how to make money in a world of abundant competitors and consumer choice.

It also applies to television, movies and music, because “the very model of the traditional entertainment industry is predicated on the inefficiency of distribution” – that is, control over broadcast networks, cinema chains and record companies. Once that content has been digitised and streamed, centralised control and high prices is much harder to maintain.

The hard reality, then, is that business models have to be decoupled from modes of distribution. In a context where publication and broadcasting have become easier and cheaper, running printing presses and managing TV networks are no longer licenses to print money. No business model predicated solely on control over a mode of distribution can succeed in the long-term.

Of course, existing media corporations can go on for some time. Legacy industries don’t grind to an instantaneous halt just because the central principles of their operating environment unravel. But if they fail to innovate, they tend to decline slowly before becoming unsustainable.

Diverse and indirect approaches

If a business model predicated solely on control over a mode of distribution cannot succeed in the long-term, another casualty will be the idea of the single business model behind visual journalism. The new approach will be a series of diverse models producing revenue indirectly.

As John Temple, the last editor of the Rocky Mountain News declared, news organisations do not make money from news; news is the ‘brand’ for the organisation and the money comes from relationships and services only indirectly related to journalism.

There is nothing new in this. Advertising has been the main source of revenue for mainstream media, with a contingent and indirect relationship to the journalism we (mistakenly) assume is the raison d’etre of media companies.

While it seems shocking to say news is a ‘brand’, that is how it has functioned. Oliviero Toscani, who was behind the controversial Benetton campaigns of the 1990s once remarked that we should understand that in a capitalist media economy “editorial was always the advertising of advertising.”

Although advertising will remain important for media companies, and new ways of garnering subscriptions might offer small revenue streams, what are these indirect approaches going to comprise?

The community that pays

That is where the idea of community comes in. Those engaged and loyal people – readers, viewers, listeners, fans – who identify with and congregate around their chosen content streams are where revenue comes from.

It’s fashionable to say nobody wants to pay for anything anymore, and there a plenty of online comment threads that can be mined for anecdotal evidence to support this rather glib generalisation. But if we think about the hundreds of millions of TV episodes, 10 billion songs and 10 billion apps sold via iTunes, or the 23 million Netflix subscribers in North America, or Spotify’s 1 million subscribers in Europe, plenty of people reach into their pocket for quality content. If providers offer availability and ease of use, direct payment for something that is not fungible is forthcoming.

If we look at indirect revenue from communities, then transactions are key. Fairfax (publishers of the Melbourne Age and the Sydney Morning Herald, and the largest media company in Australasia) has seen digital grow into its second largest revenue stream. 60% of their digital revenue comes from transactions, with readers using companies that Fairfax purchased, including a dating service called RSVP and a holiday home rental service, Stayz.com.

Transactions are one way that social networks can be leveraged for revenue, with social recommendations leading to commissions. As one Deloitte analyst predicted,

the next phase of social commerce is about extracting commissions from products which are sold directly as a result of recommendations made…So rather than selling advertising, what you’re doing is taking a commission against a product sold.

A 2011 report by the Columbia University Graduate School of Journalism on the business of digital journalism pointed to a number of indirect transactions supporting editorial content, such as The Atlantic magazine’s events business with $6 million/year in revenue. In a similar vein the Washington Post is running online courses and The Guardian is organising weekend masterclasses.

None of these constitute the holy grail that will replace the unending decline in print advertising revenue. But they are good examples of creative approaches that don’t fight the disruption of the internet and work with the contours of the new media landscape.

Can an indirect approach work for photography? When I reviewed the New York Times paid content scheme at the end of March, I painted a different scenario using transactions rather than subscriptions:

The Lens blog is a high profile site with some 750,000 users visiting each month. Instead of raising money by hoping some of those subscribe on their 21st visit each month, consider the monthly visitors as a community of interest around photojournalism and offer goods and services to that community. There could be Lens-sponsored master classes, special events and workshops for both professionals and the general public; print sales; discounted equipment and photographic services via business affiliates; photo tours and themed travel; equipment, medical and travel insurance for practitioners; logistics and visa services for photographers having to travel at short notice…you name it, anything that interests a broad photographic community, amateur and professional, could be offered by negotiated deals where Lens’s earns a percentage on each transaction.

This strategy would leverage the Lens blog Twitter feeds and referrals providing unlimited free access. It would be based on growing the community that comes to the site, thereby underscoring the value of having quality photojournalism distributed globally and the benefit of having it accessible to as many as possible. It could raise more revenue than subscriptions could achieve, and the revenue could go directly to photojournalism.

This is the emerging logic for media companies. Might it work for independent documentary photographers and photojournalists? Even if the scale is different, why not? This logic comes from the dynamics in the new media landscape affecting everybody.

Paul Melcher claims “photographers, photo agencies and related have no experience in building value around their images.” That has to change. Value will be created indirectly more than directly. It begins with the six steps towards building your own community.

Photo credit: Enol/Flickr, used under a Creative Commons license

 

Categories
media economy photography

Paying for photojournalism: a review of the New York Times ‘pay wall’

Newspapers in the US and UK continue to struggle with growing debt, declining circulation and falling advertising revenue. In the search for additional sources of revenue, new schemes for paid content are being implemented. (For an excellent overview of the issues, listen to WNYC’s On the Media podcast from January 28). After nearly two years planning, the New York Times launched its “metered” system this week.

This development has been greeted positively in the photographic world, with Aric Mayer, Rob Haggart and Joerg Colberg endorsing the thrust of the scheme. While agreeing that news organisations need to find new ways to fund critical journalism, I don’t share this upbeat assessment of what the New York Times scheme means for photojournalism. Indeed, as I’ve been arguing for the last eighteen months (see here, here and here), I think it’s a mistake for photography to pin its hopes on a revival of the long-lost editorial paymaster.

Here I will review commentary on the NYT scheme and suggest an alternative way to think about revenue that would be more beneficial for photojournalism. This a complex issue that demands some key assumptions are questioned, so this is a very long post. I don’t pretend to have all the answers, but I hope you will take the time to read it in full and engage the debate.

The pay scheme that isn’t a wall

Although much of the discussion has proceeded in these terms, the NYT scheme is not a pay wall. As Steve Yelvington argues,

A paywall…is a dumb, blunt instrument that separates content from the general public, prevents sampling, inhibits linkage and sharing, and usually is the product of an unhealthy arrogance.

That view sumps up the approach of the Times and Sunday Times in London, the experience of which demonstrates the limits of that approach. Although there are now 79,000 digital-only subscribers to the Times pay wall, there has been a massive reduction in the paper’s online readership (90% according to one initial estimate), advertisers have become nervous about the decimation of their online audience, and the journalists are cut off from the wider social media conversation because of the block on search engines and the inability to link freely. The small gains in monthly revenue will not make a significant dent in the tens of millions of pounds the Times loses annually, they may not offset the lost advertising revenue, and they come at the price of cultural presence and global engagement, which in turn most likely reduces advertising revenue that depends on reach.

To try and avert the falls in readership that result from demanding online payment, the NYT scheme permits some open access and encourages continued linking. Everybody can access 20 articles a month, after which you are asked to pay $15-$35 every four weeks depending on the device you want to use. If you are a print subscriber, you get access without additional cost, and if you come to a NYT article via a search engine or distributed link (via Facebook or Twitter), that does not count against the quota of twenty. To get it all up and running, NYT is offering, in an echo of iTunes, four weeks access for 99c.

Reactions and estimates

Reactions to the details of the NYT scheme have been many and varied (see eleven mixed responses garnered by the Nieman Journalism Lab here). Whatever one’s initial take, it is clear that the paper’s aim is to limit the number of readers who will encounter the request for payment. As Steve Buttry observed:

they have structured this to apply to a small segment of their online audience (people who read more than 20 pieces a month who don’t subscribe to the print edition and don’t find them through search or social media).

Buttry feels that the result will be “a trickle of revenue, not worth the time they spent developing the plan.”

Given that the NYT spent $40-50 million on planning and implementing its scheme, it needs to produce a significant amount of money just to cover development costs before there is any hope that new revenue will make its way into content creation – the journalism, and then photojournalism.

There is also the issue of lost opportunity cost. As Koi Vinh – a former NYT designer who was involved in the initial planning — asked what else could the NYT have developed with the enormous effort and resources the scheme consumed in the last two years?

I’m not qualified to judge detail of the economic projections, but it is clear from reading the commentary there is a great deal of uncertainty around the plans. From its global audience of 42 million unique users each month, the NYT is hoping to get 300,000 digital subscribers in the first year. That could mean it takes two years to repay the development costs, or it could mean increase in subscription revenue of 10% or more. However, even the latter, more optimistic calculation offers a boost that is marginal in comparison to advertising revenue. Ken Doctor notes that digital advertising makes up 26% of total advertising revenue for the paper, and that sector is growing:

If the Times could nab another half a percentage point in market share of that still-growing pie, that would amount to $140 million a year, dwarfing new digital circulation money.

Personal expense and premium content

The NYT scheme varies in cost depending on the number of access points, and is being sold somewhat disingenuously as a particular amount “every four weeks” which, although it sounds like a “per month” proposition, actually requires thirteen annual payments. At the top end, it is a very expensive deal when compared to others offering similar services. Michael deGusta has visualized the NYT and its competitors, and he concluded by asking:

Does The Times really think the mass audience is going to decide their $455/year is better spent on The Times rather than getting 20+ free articles/month from The Times plus The Wall Street Journal ($207/year) plus The Economist ($110/year) plus say The Daily ($39/year) for good measure, and still having ~$100 left over each year? (emphasis added)

What the NYT is requiring for its digital-only subscription has lead deGusta and others (such as Frédéric Filloux) to argue that the NYT scheme is a defensive strategy designed to stop existing customers from cancelling their print subscription revenue rather than a creative approach to generating new digital revenue.

Another part of the NYT scheme underscores its defensive nature. At first glance the scheme is a “freemium” approach in which a certain amount of free content is provided in order to build up demand for premium, paid-for access. Yet while the NYT is requiring payment from its most regular readers, it is not offering them anything new in return. The scheme requires payment for content they have accessed for free until now. As Dave Winer remarked, “they’re not offering anything to readers other than the Times’ survival, and they’re not even explicit about that.”

Still free for many

The NYT scheme is also not a pay wall because it is porous and easily avoided.

Part of that is intentional. To ensure it remains in the global social media conversation, the paper allows the front page of its blogs to be freely accessed, and has no limit on the number of articles that can be read by following a link on Facebook, Twitter and some search engines. Indeed, the paper has its own Twitter account @nytimes with more than 3 million followers, all of whom can follow as many links as they like each month. The Lens blog has discussed all this overtly in a special note.

In addition, NYT journalists and columnists with their own followers – such as the Lens blog’s James Estrin – will get more articles, posts and galleries for free. This is all before the computer literate pursue other ways to maintain free access, which involves little more than four lines of code to get around.

Can it emulate other successful pay schemes?

People who want to see good journalism well funded have been hoping that the NYT scheme might replicate the Financial Times success with digital subscriptions (although there is now a debate how successful the FT actually is). Nonetheless, the fortunes of the FT (or the Wall Street Journal) are not replicable for general news and daily journalism. The FT and WSJ provide time-sensitive market information that has direct value to subscribers, many of whom get it as a business benefit rather than through personal expense and are therefore not price sensitive.

Much as we may wish otherwise, even the investigative journalism of the NYT is not a scarce or fixed commodity like an FT market analysis or a music track from iTunes. With other credible news sources (e.g. the BBC, Guardian et al) pledged to remain globally free, and the news stream constantly updating, readers are resistant to paying for online content that has been and will remain freely available.

If that makes you wish for a chance to rewrite history – imagining that ‘if only’ newspapers had ganged together and set up universal walls at the beginning of the Internet age we would now be handing over money without complaint – then pause for a moment and reflect on this. The Internet is an intrinsically open system. If all the legacy media outlets had withdrawn into walled gardens, do you not think that sometime during the last fifteen a bright spark would have set up a free global news site attracting millions and funded via advertising or related sources? Something like, you know, that Harvard graduate and his little project called Facebook…

What is the purpose then?

The NYT scheme is expensive, complex, porous, and easily worked around. Even if it functions as desired it won’t generate anything like the revenue that would flow from the growth in online advertising. It is accompanied by risks, such as alienating the NYT’s most engaged and loyal users and reducing the reach of NYT stories. And it has potentially large lost opportunity costs – an on-going commitment to a print-based strategy that will run its course in the years ahead, and the lack of investment in creative alternatives during that continued decline.

It is possible that all the sceptics are wrong, and we shouldn’t knock the willingness to experiment in these revolutionary times. There is great uncertainty about the details of the economic projections, but even if the scheme succeeds beyond anyone’s wildest dreams it is only going to provide a fraction of the needed revenue to fund critical journalism. Paid content schemes, no matter how flexible and nuanced, are subscription models, and subscriptions have historically only ever provided approximately 20% of a newspaper’s revenues with 80% from advertising (although papers like the WSJ have a 50/50 split). Given the availability and culture of freely available general news, who would bet on digital subscriptions reaching even that historical share?

So why have they done it?

I think the NYT scheme is less a business model and more a moral imperative.

It is based on the claim that people should pay for quality journalism. It is a scheme designed to defend the worth of the paper’s journalism. This has been explicit in a number of arguments in favour of such schemes that talk about a “value proposition.” It appears when an editor says

the act of placing a value on our journalism may be more important than any penny we ever collect

And it is to be found in Aric Mayer’s statement that

it [content creation] is a thing worth paying for, and requiring the audience to pay for it demonstrates its value.

Of course, quality journalism and photography costs, and it should be paid for (though I am not as misty eyed about the USP of the NYT as some). The question is how and by who is content paid for. Taking an historical perspective again, we have to note two important things.

First, news and investigative journalism has never made money by itself in order to pay for itself. We should not, therefore, be judging current plans by the flawed assumption that we are looking for a single business model that will do what has never previously been done.

Second, we as readers have always paid for modes of distribution but never directly for content. Viewing the NYT scheme as a device for readers to value content though direct payment is wishing for a historically unprecedented change of behaviour in the most unlikely of circumstances. As Steve Buttry caustically observed:

My friend and former boss Jim Brady says that you can’t build a business model based on what people should do (and newspaper people believe in their bones that people should pay for their content). You build a business model based on what people will do. This tortured maze of exceptions and trigger points is a laughable effort to collect because people should pay but to find a way not to lose the people who won’t pay.

The NYT scheme also comes up short as a value proposition because of it offers subscribers nothing new, there being no exclusive or premium content to go with the newly demanded payments. And quite how a company rationalises asking patrons at the front door to pay while the very same goods are being handed out the back door free (via its own Twitter feeds) remains a mystery.

But above all else we should recognise that value has different forms and manifestations. It is a mistake to see price or payment as the only index of value. Circulation, distribution, engagement and global presence have considerable value.

Fine, but where does the money come from?

In his welcoming assessment of the NYT scheme, Aric Mayer wrote:

Journalists and Photojournalists should be applauding this move. It signals an effort by the New York Times to uncouple content creation from direct dependence on online advertising. Without online subscription prices or online newsstand sales, there simply is no other way of generating a predictable online revenue stream.

There are, of course, problems with a dependence on advertising, although that has historically been the mainstay of the legacy media many continue to view fondly, and online advertising is growing and will soon overtake print advertising.

Diversifying revenue has to be a good strategy. But is it that case that without online subscription “there simply is no other way of generating a predictable online revenue stream”? I disagree with that claim.

There are many other ways of generating predictable revenue streams, and this is where the news business has to learn from other sectors like the music industry, which encountered digital disruption before journalism. Pursuing these routes could mitigate the risks of the paid content approach.

John Temple, the last editor of the Rocky Mountain News, argued we have to appreciate that news organisations do not make money from news – news is the ‘brand’ for the organisation and the money comes from relationships and services only indirectly related to journalism. Instead of a single business model for journalism emerging, we need to see a series of diverse models producing revenue indirectly.

For music, the idea that content creation (the songs) is what provides significant revenue through fans paying directly is slipping away as album sales fall. For some of the mega acts, only a tiny fraction of their revenue comes from the music they write. The bulk comes from things that revolve around the content – concerts, merchandising, video games, advertising, and sponsorship. And some of these mega acts give their content, the music, away for free in order to enhance their revenue from the related but indirect sources.

This means that instead of just advertising and subscriptions, transactions are a major alternative revenue stream. Indeed, a Fairfax media executive has remarked that transactions rather than advertising or paid content were the best on-line revenue streams. Crucially, transactions require news organisations to build a community around their brand and product, and then take a percentage of the transactions (hotel bookings, financial advice etc.) those community members conduct through the associations, links, and relationships provided. The various ‘reader’s offers’ that papers have long provided are a pre-web version of this.

How might this work for the NYT in relation to photojournalism? Here is a proposal that is much more direct that the newly proposed scheme and the hope that some of its revenue trickles down to content creators. (BTW, has anyone reported a rise in photo fees or a spike in demand for photographers by News Corporation since the Times pay wall went up?). If someone takes up this proposal for a photography site, I might even coming calling for a consultancy fee, but for a limited time only I am offering it for free!

The Lens blog is a high profile site with some 750,000 users visiting each month. Instead of raising money by hoping some of those subscribe on their 21st visit each month, consider the monthly visitors as a community of interest around photojournalism and offer goods and services to that community. There could be Lens-sponsored master classes, special events and workshops for both professionals and the general public; print sales; discounted equipment and photographic services via business affiliates; photo tours and themed travel; equipment, medical and travel insurance for practitioners; logistics and visa services for photographers having to travel at short notice…you name it, anything that interests a broad photographic community, amateur and professional, could be offered by negotiated deals where Lens’s earns a percentage on each transaction.

This strategy would leverage the Lens blog Twitter feeds and referrals providing unlimited free access. It would be based on growing the community that comes to the site, thereby underscoring the value of having quality photojournalism distributed globally and the benefit of having it accessible to as many as possible. It could raise more revenue than subscriptions could achieve, and the revenue could go directly to photojournalism.

Funding critical journalism and photography has always been difficult and will remain difficult. Hoping for a paid content scheme to offer salvation strikes me as being like a cargo cult. Paying for premium content, or content with longevity – like the move to make magazine articles saleable as in-app downloads or Kindle singles – has a future, through the amounts may not be large. But there is little historical or contemporary evidence to suggest people will start paying for daily news in sufficient numbers, and remonstrating with individuals about what they should do is something best pursued by priests rather than corporations.

Equally, scepticism about paid content is not a theological position dependent on the virtues of free. I think an appreciation of how ‘free’ functions on the web is essential but that means seeing how it connects to paid. Like many I happily pay for multiple modes of news distribution. Having stumped up for a seven day print subscription to the Guardian and Observer, a digital replica subscription of the same papers and two versions of the Guardian iPhone app, while eagerly awaiting their iPad app, GMG has many of my hard earned pounds. They would get even more from me if they had a photography blog that offered equipment transactions, because purchasing that new tripod I need or shotgun mic I want could earn them affiliate revenue.

But if the Guardian was to go back on its commitment to free access to quality content through those modes of distribution, I would be heading elsewhere for my general news and comment. That is the nature of media ecology in the twenty first century, and only a realistic assessment of how people function in the world of social media will provide a sound basis for funding new content.

Featured photo: borman818/Flickr, used under a Creative Commons license