Listening to news executives talk about micropayments, Kindles, public subsidies, micropayments, collusion, blocking Google and anything else that might save their businesses, it occurs to me that they may have missed some developments in, ah, well, the past ten years. For those and anyone else who is interested, I offer the following primer on how things have changed.

Any attempt to create a viable news operation needs to recognise and take advantage of these changes. I will probably have missed some – I’m hoping you can add them.

UPDATE: Jay Rosen suggests reading this post alongside this one by David Sull: “newspapers are essentially a logistics business that happens to employ journalists”. He’s right – it makes some great points.

1. Atomisation of news consumption

In the physical world news came as a generic package. You had your politics with your sport; finance news next to film reviews. You might buy a paper for one match report. No longer.

It’s probably no coincidence that majority news consumption recently shifted from regular consumption to sporadic ‘grazing‘.

2. Measurability of users

If you placed an ad on page 3 in a newspaper with a circulation of 100,000 or a broadcast watched by 5million, you didn’t think about the readers who only bought that paper for the sport; or the viewers who popped out to put the kettle on – and that’s before we talk about circulation figures inflated by the assumption that every paper was read by 3 or 4 people.

Online you know exactly how many have looked at a specific page. Not only that, you know exactly how many have clicked on an ad. And you know exactly how many made a purchase (etc.) as a result.

There’s more: you know what page the user was coming from and went to; you know what search terms they were using; you know what country they are in, how high spec their computer; and depending on how much data they’re provided, a whole lot more besides.

There are two huge implications of this measurability (which many advertisers are only just waking up to). 

Firstly, advertisers expect more. Online, advertising has moved from a print/broadcast model of paying per thousand viewers (CPM) to paying per thousand clicks (CPC) to paying per action – i.e. purchases, etc. (CPA).

Secondly, it means that editors and managers now know in much more detail not only what readers actually read – but what they want to read (what they are searching for). My name’s Britney Spears, by the way.

3. Mutually conflicting business models

In print you could have your cover price and your ads; online, any paywall means vastly reduced readership because you are cutting out distribution channels – not just Google, but the readers themselves who would otherwise pass it on, link to it and blog about it. You either square that circle, or look for other revenue streams.

4. Reduced cost of newsgathering and production

The technologies were dropping in price long before the internet – satellite technologies , desktop publishing. But the web – and now mobile – technology has reduced the cost of newsgathering, production and distribution to almost nil. And new tools are being made all the time that reduce the cost in time even further. When publishing is as easy as making a phonecall, that causes problems for any business that has to maintain or pay debts on costly legacy production systems.

UPDATE: Robert Brand takes me to task on this one in the comments but also on his blog, where I have responded in more detail.

5. End of scarcity of time and space

Sometimes people need reminding of the basic laws of supply and demand. From a limited availability of journalism to more than you can ever read, any attempt to ‘sell content’ must come up against this basic problem.

6. Devaluation of certain types of journalism

If a reader wants a book review most will go to Amazon. Music? Your social networks, Last.fm, iTunes or MySpace. Sport – any forum. Anyone producing journalism in those or similar areas faces a real issue. 

7. The end of monopolies

Just as the scarcity of space has been broken; the scarcity of distribution networks has been blown apart. To distribute information in a pre-web era required significant investment. To distribute information in the web era requires an email account or a mobile phone. Social networks are more powerful and efficient than delivery vans, and you don’t need to sell a certain amount of information to make them viable. 

Oh yes, and that makes news even more perishable than it was before.

Meanwhile, the monopoly on advertising has gone. Where before an advertiser might have had a choice between you and a local freesheet, now they can choose from dozens of local media outlets, national directories, international outlets, search engines, social networks, or spending money on becoming media producers themselves. This competition has driven the cost down and innovation up. What have you done to stay competitive?

8. Cutting out middlemen

Because anyone can publish and anyone can distribute, retailers can talk to customers directly. If Threshers can release a money off voucher directly to customers and it become wildly (too) successful, why should they advertise in a newspaper or magazine? If councils can publish news on their own website, or indeed publish and distribute their own publications, why should they publish announcements in a newspaper? If Coca-Cola can create a ‘brand experience’ on its website, and gather consumer data at the same time, why should they limit themselves to 30 seconds in the middle of Britain’s Got Talent?

9. Creating new monopolies

Google rules this space, not you. Amazon rules this space. iTunes rules this space. eBay rules this space. Facebook rules this space. Craigslist rules this space. If you want to thrive in the new environments you have to understand the contexts within which users operate. Search Engine Optimisation is one aspect of that. Social Media Marketing should be another. Understand how one website’s domination of a particular space of the web impacts on your strategies, and acknowledge you no longer control your own destiny. Yep, Google stole the delivery trucks and Amazon stole the newsstand. Oh, and you gave away a whole lot more too.

10. Digitisation and convergence

When everything is digital, new things become possible. Audio, video, text, photography, animation – all becomes 1 and 0. You need to understand the efficiencies that makes possible, from broadcasting live from your mobile phone to releasing images on a Creative Commons licence or publishing raw data to allow users to add value through mashups. The value of your organisation lies not just within its walls but beyond them too.

11. The rise of the PR industry

The PR industry is often overlooked as an economic influence on the news industry.  Its first influence lies in the way it has provided cheap copy for news organisations, meaning an increased reliance by news organisations on fake events, reports and releases. This will become increasingly problematic as the PR industry starts to cut out the middleman and appeal directly to audiences.

Secondly, the PR industry has an enormous effect on recruitment and retaining of talent in the news industry. In short, news organisations have become a training ground for the PR industry. Journalists who cannot live on newspaper wages have been leaving for PR for some time now, meaning increased costs of training and recruitment (partly because there are few older journalists able to train informally). Furthermore, good graduates of journalism schools are often recruited by PR even before they enter the news industry, meaning the news industry has a problem attracting the very brains that could save them.

12. A new currency

Oh yes, and that money thing? It has competition. The rise of social capital is a key development that must be considered. Anyone who thinks nonprofessional media is not important because it doesn’t have a ‘brand’ or because people will lose interest, doesn’t understand the dynamics of social capital. Many people read blogs and other UGC because they trust the person, not the ‘brand’; many people self-publish because of the benefits in terms of reputation, knowledge and connections. And many people link to news articles or contribute user generated content because a journalist invested social capital in their communities, or an organisation built a platform that helped users create it.

That’s it. Unless you can come up with some more…?

PHP Freelancer

I only recently came across this video of Umair Haque talking about some of the economic changes we’re living through and outlining 5 principles for businesses looking to adapt to those. Well worth watching.

Umair Haque @ Daytona Sessions vol. 2 – Constructive Capitalism from Daytona Sessions on Vimeo.

PHP Freelancer

I once had a job interview with a national broadcaster where I was asked about the then-current Lewinsky-Clinton scandal. When I replied that I felt it was time to move on, the interviewer frowned. I didn’t get the job.

This interview came to mind this week when I read Journalists and the information-attention markets: Towards an economic theory of journalism by Susanne Fengler & Stephan Russ-Mohl.

According to them, my opinion on the Lewinsky story meant I was something of a journalistic spendthrift.

Because Fengler & Russ-Mohl’s paper argues that, just as we treat publishers and newsroom managers as economically motivated, we should do the same for journalists.

“Journalists can be described as rational actors seeking to promote their own interests, reacting to material and non-material incentives and rewards, calculating risks and benefits,” it says. “They seek to maximise attention for their work, they try to minimise costs of investigation and research and to use their sources to their greatest professional benefit, and so forth.”

‘Pack journalism’, for example, is considered an example of ‘free riding’ and the tragedy of the commons: ‘hot news’ – such as the Lewinsky story – will be “overused”:

“The fixed costs of learning … tips the balance in story selection toward continuous coverage of a given event rather than undertaking new investigations.” (from James Hamilton, All The News That’s Fit To Sell, 2004)

The paper’s greatest strength is its description of the interaction between journalists and sources – and how the vested interests of both serve to create ‘blind spots’:

“While most agents in all the principal-agent relationships involved in the flow of news processing may, in general, be committed to telling the truth, all of them have incentives to either exaggerate or to withhold some of the truth to their ‘principals’ in order to look better and more professional. The ‘blind spots’ of media coverage are not merely accidental. They are, most frequently, the result of self-interested behaviour.

“If withholding chunks of relevant information can be seen as highly probable, iterative behaviour of all actors involved in news processing, this may add up to a cumulative effect.”

More research, say the authors, will help identify and predict these blind spots more systematically, which can then “possibly be solved by adjusting the parameters and incentives under which journalists operate”.

We live in hope.

In the meantime, this is an essential piece of reading, including an overview of how economic factors have shaped journalism over the past 150 years – helping it move towards from a partisan to an objective format (for mass audiences and unoffended advertisers), influencing content, and providing an “indirect information subsidy” in the shape of public relations. Oh, and don’t miss the footnotes, too.

But it also comes at a curious time. Just as the business models of news institutions have been shaken, so the economics of journalistic interaction are becoming vastly different to those of the past 100 years: a source no longer needs a journalist in the same way. The balance of power has shifted. Journalists have no idea where best to invest their time – in blogging? Social networking? Video? Good old fashioned talking? Press releases? Twitter?

Anyone who can pick apart the economics of that deserves high praise indeed.

PHP Freelancer