Abstract
It’s not only new media that threaten the age-old tradition of news delivery – the economic crisis has played its role too, says
Though it wasn’t the first newspaper ever, Notizie Scritte (‘Written notices’), launched by the government of Venice in 1556, completely justified its name. It was handwritten; and it was noticed – not only by Venetian citizens of the time. It is widely accepted to have been the first paper to be actually sold – for a fee of one coin, called a gazetta. So not only did it give a name to newspapers, it also turned news into an industry.
With the introduction of the first tabloids in the 19th century, the idea of a newspaper began to change. The idea was to make news light and more entertaining and to cut the price per copy, thus attracting big audiences; and big audiences, in return, would attract advertisers to supply new revenue streams. The scheme became popular and widespread, later labelled ‘a traditional business model of news media’, and proved to be viable for centuries. Throughout this time, over the last 200 years, journalism has been at the core of the industry, and also of society as a whole: honest and courageous reporting has been vital for democracy and journalists have been dubbed its watchdogs.
The new world of communications, led by modern technologies, and the internet most of all, has changed the shape of the media industry. Quality journalism is still important and the traditional news media still have an audience: almost half of the world’s population, 2.5bn people, read daily newspapers. But when, in 2008, the global financial crisis started, trends set in motion by the internet revolution intensified. ‘The problem is not one of audience. We have the audience. The challenge is largely one of business, of finding successful business models for the digital age,’ declared Larry Kilman, Deputy CEO of the World Association of Newspapers and News Publishers (WAN-IFRA), at an industry forum in Kiev in September 2012.
Global newspaper circulation continues to rise – but the increase is driven by huge Asian markets, in China and India in particular, where the level of internet penetration is still not very high. In Western Europe and North America newspaper print runs have shrunk by a disastrous 17 per cent in the last five years. The decrease in advertising revenues is even more dramatic – according to the most recent numbers by WAN-IFRA, globally, newspapers earned US$76bn in advertising in 2011, 41 per cent less than in 2007.
So, how can gazettes keep collecting gazetti, those precious coins, to keep their news operations running – or, in other words, who pays for journalism? And how?
New technologies have essentially eliminated media’s traditional business model, where scarcity drives up the value of the product. If there is a limited amount of something – whether it be food crops, currency or media – it will be worth more. There is only a certain amount of pages in a newspaper – either for articles to attract an audience, or for advertising to sell products to this audience there is a limited number of frequencies analogue radio stations or TV channels can use. The digital world has erased those frontiers – now one can have an unlimited number of pages on a website and there are thousands of digital channels. As a result, the cost of advertising online is much less – and a lot of information is now available for free.
A man reads La Gazzetta at a bar in Rio Terra di San Leonardo, Venice
So news media find it harder to continue using their well-known business model – selling content to audiences, and selling audience to advertisers. The media industry is trying to find new ways to sustain operations. The main divide seems to lie in the question of whether to charge audiences for online news.
Just a brick in a paywall
Today, media outlets that adhere to the traditional business strategy build paywalls on their websites, so readers must pay for access to this content. This paywall model, in all its various forms, refutes a long-established mantra heard throughout the industry: people will never pay for news online. It works in some cases – but the paywall model still has a long way to go to prove charging for news online will save journalism.
The so-called hard paywall means that all content of a website is closed unless a user or customer subscribes and pays. The most well-known examples of this model are The Times and the Boston Globe. Its main drawback is that introduction of a paywall as a rule leads to a dramatic decline in visitors (immediately after a paywall is introduced, up to 90 per cent of an online audience disappears). Still, The Times reports 133,000 paid digital subscriptions and fewer operational losses.
A soft paywall, or a metred model, is more popular. It allows a user to access a certain amount of content free of charge, but suggests a paid subscription for unlimited access. Several influential news media organisations use this model, including the New York Times (NYT), the Economist and the Financial Times.
After several disastrous attempts since 2005 to introduce a paywall to its online platform, the NYT launched its current ‘soft’ version in March 2011. At the moment they allow their visitors to access ten articles on their website per month free of charge, and ask for a premium for further access.
Who will pay for journalism? And how?
Up to 80 per cent of an average news site’s audience visit the site occasionally (just several times a month), and reach a website via search engines, social networks or other external sources. The soft paywall model allows a media company to retain its audience, thus remaining attractive to advertisers. In October 2012, the NYT website reported 48.7m unique visitors, the second largest audience in the world for online newspapers. At the same time, the NYT has managed to get the second part of the ‘traditional model’ (selling content to audience) right: they have 500,000 paid digital subscribers and the figures keep rising. Across the industry, the NYT case is considered a success – or rather a hope for success – and thus an example to follow. Pew Research Center’s Project for Excellence in Journalism reported in March 2012 that ‘as many as 100 newspapers [in the USA] are expected in coming months to join the roughly 150 dailies that have already moved to some kind of digital subscription model’.
Another paywall model is ‘Piano’, named after Piano Media, a Slovakian media company that invented it. It was recently launched in several countries in Eastern Europe and operates like cable television, allowing a user to buy a subscription for multiple news sites. The revenue from the subscription is then distributed among the sites behind the paywall, depending on the amount of time users spend on each of them. Reports from Piano Media show this model is more profitable than individual paywalls.
Platforms, not destinations
The main criticism of the paywall model is that it maintains an artificial scarcity resonant of the pre-digital world, allowing media companies to apply the traditional business model to the new media environment rather than changing their operations to adopt to the new realities this environment presents. Opponents of paywalls suggest that there must be an acknowledgment that news is a service rather than a product. Consequently, as Jeff Jarvis points out in What Would Google Do?, news media outlets today are no longer destinations but collaborative platforms that provide their readers and partners with a possibility to create their own products, services, businesses, communities and networks.
One of the most well-known examples of such an approach is the Huffington Post, an online news publication that relies to a huge extent on user-generated content, blog posts first and foremost. Another incarnation of this idea is the Guardian, known for its open model. It regards the business of a news organisation to be not only about content creation and distribution but also, according to the journalist and blogger Mathew Ingram, about ‘content-generating engines with multiple delivery methods, or as platforms for data, around which other things can be built’.
In other words, external developers are allowed to use databases of a newspaper to program their own applications. It’s what the Guardian Open Platform does. The newspaper, known for its ‘digital first’ approach, huge investments in online performance and expansion to foreign markets, primarily the United States, reports significant growth in digital revenues – but still has huge overall losses.
The big problem for the news media, whether they use soft paywalls or the open model, lies in the advertising market. In the era of print, newspapers were natural destinations for advertisers. But online, they don’t have this privilege. The global advertising market is on the rise, and the internet, argues media agency ZenithOptimedia, shows the main growth area. Growth is expected to be around 16 per cent annually between 2011 and 2014. The online advertising market is largely dominated by Google (44 per cent of the world’s online advertising expenditure in 2010), followed by Microsoft, Yahoo!, AOL and Facebook, which together commanded 17 per cent of global online ad revenues in 2010. Not much is left for online newspapers, which need to compensate for the increasing losses sustained through producing traditional print publications. In 2012, Pew Research Centre found that for every US$1 earned by newspapers in digital advertising revenue in the US, $7 are lost in print advertising revenue.
Let us all pay the price
Not all news media in the world actually earn the money they spend from their own business operations. There’s nothing really new about it – public service media, like the BBC, have long been funded through state budgets. Nowadays there are other ways journalism can be paid for directly by its audience – and in return, this type of journalism is expected to benefit the public interest.
Quite a few media projects are funded by grants from foundations and media development organisations. They specialise, for instance, in investigative journalism, like ProPublica, a non-profit newsroom that has won numerous awards for their reporting, including a Pulitzer Prize. ProPublica received substantial funding from the Sandler Foundation and other donors, allowing them to concentrate on journalism and not have to focus on the business side of the enterprise. ‘We spend more than 85 cents out of every dollar on news – almost the exact opposite of traditional print news organisations, even very good ones, that devote about 15 cents of each dollar spent to news’, ProPublica claims on its website. Another model emerging in the US suggests registering newspapers as Low-Profit Limited Liability Companies (L3C). Such entities are businesses formally, but non-profits in essence. Laws are being adopted in a number of states, allowing these types of media companies certain flexibility in terms of fundraising. Several local US newspapers, such as Point Reyes Light in California, have already started implementing this model; they believe it helps to return news publications to communities – both in terms of ownership and in terms of the social responsibilities of journalists.
The public is also invited to fund media outlets and projects directly through crowd-funding. The latest successful example of this model is Matter, a project launched by two journalists on Kickstarter, an online funding platform for creative projects. They raised over US$100,000 in just nine days after they promised to produce high-quality investigative stories on science and technology. The public, or a ‘crowd’, donated money, from between $10 to $3000 each. In return, private donors receive different benefits, both material and intangible – from copies of stories and corporate T-shirts, to shout-outs and credits on the website and positions on the editorial board.
There is no winner, for now. Several new models have emerged, but none of them has proved to be a saviour of news media in the digital age. It’s not an easy task, especially when several global trends come together: changes to the way news is consumed, new communication technologies and the financial crisis. It’s a riddle to be solved in years to come. Journalism is at stake, too precious a thing to lose. Present-day ‘written notices’ need to have clarity about how well they will be written and how noticeable and relevant they will remain.