Business Success

A fundamental shift in the mode of news production

Changes in news production and journalistic employment are often simplistically explained as the results of technology, recent economic conditions, or changes in audience preferences. All these factors have played roles, but a more fundamental and consequential shift is altering the nature of news work and news production.

For more than a hundred years news production has been characterized by the industrial mode of production in which news factories mass produced news. They brought together the resources and equipment necessary for gathering and disseminating news and they relied on trained and professionalized news workers. The product became property exchanged in markets, with geographical, market, and economic factors constraining competition to provide news products.

Although some elements of that production mode remain in place, one can observe news provision splitting into two new production modes—a service mode and a craft production mode. These have enormous implications for the work of journalists and how news is provided in society.

The service mode is one in which news products (newspapers, broadcasts) are being transformed into services with news providers streaming news and information across a variety of platforms, such as print, computer terminals, tablets, and smartphones, and other screen-based devices. They are now focusing more on distributing news rather than gathering and producing it and are relying more on news and commentary produced by news services, content provided to them by the public, and links to other news providers than on their own production.

These news service providers are using pricing models that differ from those of the original product base, with varying prices for access to different bundles of platforms and different levels of access to premium and specialized news content. Pay systems such as those of Press+ and Piano Media are providing mechanism for paid access to multiple news providers—a new form of service. The shift to the service production mode follows that of the paid streaming audio and video services that have proliferated in the past decade.

The shift is making news service providers increasingly dependent on acquisition of news content produced by others, leading them to offer their content at relatively low prices, and inducing them to create better user experiences. We will increasingly see such services offered at the national and international levels by larger news enterprises.

Concurrently, a different form of production is developing and gaining acceptance–the craft mode of news production. This is production by journalist entrepreneurs and small-scale journalistic cooperatives that are emphasizing the uniqueness and quality in their news. Those working in the craft mode are focusing on special topics such as climate or defense, employing specialized techniques such as investigative or data journalism, or serving smaller localities as general providers. Most are providing news directly to consumers, as well as providing materials to those practicing the service mode.

These new modes have important implications for how journalists work, the resources available to them, and how they organize their careers, compensation, insurance, and pensions. To date, little consideration has been given to how cooperative institutional support for news workers should be organized in this new environment. Journalists unions remain an artifact of the industrial mode of production and are changing very slowly and professional associations remain focused on issues other than work and labor. Something needs to change.

Media, communication and struggles over transparency

Issues of transparency are not new, but have been magnified in the information society—often because of the scale and scope of information available—and because news media are increasingly part of the story, not merely, the storytellers.

The roles played by leading newspapers worldwide—the New York Times, Washington Post, The Guardian, Le Monde, O Globo, El Pais and others—in reviewing and publishing stories based on disclosures by Wikileaks and Edward Snowden’s NSA files have thrust them into the debate about how much transparency society needs. Arguments over information they published and whether disclosures serves public purposes have been animated. These debates highlight differences in views about transparency in security matters, but they also are forcing society to address more fundamental issues about transparency involving many other issues.

Transparency debates are not just a struggle over information and secrecy, but about the bases of human interaction and experience. Transparency is a philosophical and ideological concept based on the view that disclosure is good for society. From a philosophical standpoint, however, transparency is not good in itself—like serenity, beauty, or truth—because for thing to be good in itself it cannot produce harm. Transparency, however, can produce negative consequences by harming dignity and modesty, creating surveillance and means for coercion, endangering public safety, fuelling violence and conflict, and exposing proprietary information in ways that harm economic development.

Transparency does have functional value for achieving desirable outcomes, such as understanding the environment, exposing corruption and abuse of power, promoting trust, facilitating democratic decision making, and making price evaluations in markets. Information must be available or effective choices cannot be made. But it is not exposure merely for the sake of exposure, so it must be balanced with concepts of privacy, solitude, and security—which lead to debates about when and how transparency is practiced.

The debates taking place today are part of a highly visible struggle over transparency in information age. Digital platforms and all media are playing central roles in debates about the proper extent of transparency involving government, business, banking, and our personal lives. Media themselves are also gathering and using data from their users for their private gain, just as are other companies.

Some of the debates are occurring because of the differing norms and mores of the material and digital world. The norms of the material world tend to involve structure, authority, control, hierarchy, and formality; whereas the norms of immaterial world involve amorphous arrangements, collaboration, empowerment, egalitarianism, and informality. These differing norms and the struggles over the norms have significant implications for government, business, and personal life. They are part of a fundamental struggle over the political economy of information and data.

Wikileaks, Anonymous, and other actors are active participants in the struggle and battling powerful commercial and governmental forces that wish to impose the norms of the material world into the digital, non-material world. It is not surprising they have brought major media into their campaigns, nor should not be surprising that they have fallen afoul of state power. Activists with libertarian and anarchistic tendencies have historically generated backlashes from the state and elites because threats to power typically result in the exercise of power—a very Machiavellian response.

The debates over transparency, the use of information and data, and who should be transparent about what will grow more heated in the coming years. Media and media businesses will play important parts in the debates, not merely as conveyors of information about others, but also about the extent to which they will become more transparent on their own.

The deinstitutionalization of journalism

The most important change in news production today is probably the deinstitutionalization of journalism—the separation of journalism from structural arrangements that significantly influenced its development in the twentieth century.

The practice of journalism was heavily influenced in the past century by regular employment in news enterprises, hierarchical arrangements and organized beats, trade unions and professional associations, and common values and training.

These created strong institutional influences on journalistic work from employing organizations and professional colleagues. They provided institutional support to journalistic practices, journalistic specialization, and expanded news and information provision. The arrangements provided the foundation on which better journalistic working conditions and compensation were built.

The newsroom was a construction of the institutional arrangements and became the focus of journalistic life. The newsroom developed in the late nineteenth/early twentieth century after telephony altered the need for journalists to be constantly roaming the city and it has undergone several conceptual changes since that time.

Ironically, it is the development of better communication technologies and the digital era that are markedly changing the centrality of the newsroom in journalistic work. The number of journalists physically located in newsrooms is diminishing because of the ability to work fully from other locations and because of the reductions in regular employment.

In the new environment, the number of independent journalists working as freelancers or journalistic entrepreneurs—or within small journalistic cooperatives—is growing. There is growing pressure to expand the boundaries of the definition of a journalist to include non-professionals who regularly create and disseminate news and informational content.

These developments are changing the context of journalism, its norms and practices, the organization and direction of journalistic labor, perceptions of journalists’ identity, and its reward systems and career paths—all of which are visible signs of the deinstitutionalization of provision of news and the profession and trade of journalism.

In the twentieth century journalism was provided by insular news organizations that rarely cooperated with other news organizations, detached themselves from the society they claimed to serve, and often relied on news and information clues from elites and official sources. New, more flexible means of obtaining and providing news are emerging in the deinstitutionalized environment that rely on public accounts and data previously unavailable to journalists. Where these are taking us remains to be seen.

The deinstitutionalization raises a host of questions: How are these changes altering journalism practice? What does deinstitutionalization means to news, information, and an informed public? How can and does innovation takes place in non-institutional settings? How do the transformations underway benefit journalism? How does the declining importance of the newsroom affect the institutional nature of journalistic ethics and decision making?

These are fascinating questions in an intriguing transformational period.

The cachet of communications: Why city planners are enamored with media

Policymakers worldwide believe they can create vibrant media cities and are heavily investing public funds in hopes of reaping economic and cultural benefits from media and communications developments.

They believe media cities will help improve transportation systems and the provision of a range of public services, rejuvenate existing media firms, promote entrepreneurship and innovative start-ups, and create well paying employment for a new generation of workers. Policymakers believe media cities have transformative power to modernize the economy and support renewal of industrial or urban districts. These are highly optimistic beliefs.

The biggest problem is that few cities have monopolies on information and media production although the scope, scale and types vary. If that is the case, how can one community stand out as a media city?

To be unique the city must find new ways to use communication and media to make life easier and help the public interact better with each other and society as a whole. But it is hard to keep others from adopting those practices as well. To be unique a city must provide a locale for information and media firms that is more attractive than other places. Locations with strong social and cultural amenities, skilled labor forces and supportive cultural and/or industrial policies tend to produce that result, but media cities also need a pre-existing base of media and information companies and need to build relationships among those companies and social institutions.

The idea of the media city is attractive to policy makers because media and digital products are fashionable, contemporary, and desirable. They are environmentally clean businesses and don’t produce heavy traffic and social disturbance. Policymakers also like them because they can connect the media city idea with other economic, industrial, and cultural policies such as telecommunication infrastructure policies, information and communication technology policies, and cultural policies supporting national identity and culture expression.

Political realities also come into play because media cities provide politicians opportunities that manufacturing, logistics and service industries do not. Pictures of politicians with celebrities and media proprietors tend to provide positive images and lead to access to people who can help them politically. The media city thus becomes a mechanism of political power and policies to create media cities tend to gain great political backing.

The fundamental question one has to ask is whether the hopes and benefits sought by policy makers and politicians are realized through media cities. Clearly transport and public services are improved by better information systems that inform the public and allow better management and deployment of public resources. Media cities have not, however, been highly successful at providing the value added, employment gains, and economic multiplier effects found from other types of industries. This is primarily because most information and media firms are microenterprises and dependent upon contract work.

Media cities have more successful in their transformative goals for modernizing perceptions of the local economy and renewing urban districts. They are especially effective as real estate development projects that benefit construction and building owners. But are those the best outcomes for a media city policy and the use of public funds?

There are downsides of media cities because the highly mobile nature of employment and production in information and media industries permits companies to play off competing governments for funding and tax advantages and to move when they are no longer available. Information and media firms also have higher product and firm failure rates than other industries and this tends to reduce long-term economic benefits by comparison.

The results for media cities are mixed, but they still carry cachet among policy makers. A good dose of realism is required in considering whether a media city policy is desirable in a community. To be effective, they policy must be nurtured and configured so it actually produces results beyond mere urban renewal and changing perceptions of the economic base of a city. Merely calling a place a media city is not enough.

What the Washington Post and Boston Globe Sales Tell Us About the New Breed of Owners

The sales of the Washington Post to Jeff Bezos and the Boston Globe to John Henry raise the question why people would want to own newspapers if they aren’t doing so for obvious financial gain.

There are clearly people who want to own papers for political purposes so they can directly influence debate and policy. This is certainly the case for the ultra-conservative Koch brothers, who have been trying to buy the Los Angeles Times this past year. But Bezos and Henry don't seem to fit that mold.

Bezos’ purposes for buying the Post are not the pursuit of profit. He certainly would produce better returns putting more effort into Amazon or another commercial firm. John Henry can expect far more returns from effort in his investment firm or his sports empire than the Globe. So why are they buying legacy media?

The answers lie in human traits. All of us need diversions. We need toys to play with; things to spark our interest and imaginations.

Bezos can clearly bring ideas and expertise gained from shifting the mail order catalog concept to the web and contribute his innovative spirit to the Post.The challenges of learning the media business and trying to transform its distribution and operations are clearly interesting and attractive. And the price for the Amazon creator isn’t high.

John Henry doesn’t bring great digital expertise to the Globe, but he does bring strong organization, marketing, and turn-around skills and experience to the effort. He also has strong local community ties and bringing ownership back to Boston is a gift to the city. Especially because hating everything associated with New York is the city's pastime.

The newspaper ownership will also make both of them more respectable as citizens, not just as businessmen. There is a long tradition of wealthy U.S. merchants, industrialists, and traders playing citizenship roles in public life and philanthropy after achieving immense personal success. These range from Andrew Carnegie to J.P. Morgan and J. Paul Getty to Bill Gates.

Some who moved into public roles have done so to gain respectability that eluded them because of harm they caused while climbing to the top; other because of a genuine desire to make society better.

The sales of the Post and the Globe reveal a breed of owner who wants not just respectability or making contributions to society, but a place to use their knowledge and abilities to tackle new challenges. Whether it will help the newspaper industry remains to be seen, but it will at least inject new ways of thinking into the industry.

Ambient news: All the news most people want

Ambient news is proving a significant challenge to news organizations trying to serve readers on multiple digital platforms and maintain their print and broadcast news operations.

Contemporary technologies all around us are now delivering breaking news, sports scores, and market updates on electronic screens and displays in elevators, taxis and buses, bars and restaurants, on the sides of buildings, through smartphones, and via social media.

In years past, we all had to deliberately turn to newspapers or radio and television newscasts, or at least glance at headlines at news stands, to get a quick overview of major events. That era is past.

Today news is free and ubiquitous and, unfortunately, provides all the news that most people want. This is bad news for those trying to provide news commercially.

In the past, newspapers and newscasts filled their space and time with non-news features and information designed to attract audiences that wanted only a little news. Most newspapers, for example, rarely carried more than 20 percent hard news during the past 50 years and provided a heavy diet of sports, entertainment, lifestyle and other diversionary content. Today, light news readers who formerly bought papers for non-news articles find plenty of that information for free on television and the Internet and they are abandoning newspapers and news broadcasts.

Those who remain the audiences of newspapers and new broadcasts tend to be heavy news consumers, people who want significant amount of news and serious information. They value the kind of news reporting that provides social benefits. Unfortunately, they are getting less and less of that news as publishers, news producers, and editors continue pursuing the audiences that have left them and are satisfied by ambient news. In doing so, news executives are leaving their prime audiences of heavy news consumers increasingly dissatisfied and without much incentive to pay the increasing prices needed to maintain established news organizations.

If print and broadcast news organizations are to survive and serve the purposes for which they were established, they are going to have to start paying attention to the audiences they have, rather than the audiences they wish they had.

European private TV has matured, but needs new strategies for development

The European television industry is one of the most balanced in the world, with public service broadcasters, advertising-supported broadcasters, and pay television operators reasonably dividing television revenues among themselves. For the 27 countries of the EU, pay TV accounts for about 38% of total revenue, public funded broadcasters for about 34%, and advertiser supported television for about 28%.

Unlike the US where private television dominates, most Europe private television began after liberalization broke the monopolies held by public service and state television in most countries. It has taken decades for private television to establish a mature place in the market.

When looking specific countries, however, total spending on TV (advertising, subscriptions, public funding) is not evenly spread. Adjusted for population, it ranges between €5 and €30 per person among nations, with an average of €15. There a notable differences between southern, central, and eastern European nations and nations in the north and west of Europe, where public service and pay TV are strong players.

Some markets are skewed with unusually strong TV subsectors. In Germany and Sweden publicly-funded TV is unusually dominant; there is unusually poor performance of advertising-funded TV in Bulgaria, Estonia, Hungary, Latvia, Montenegro and Romania.

Today, pay television is the most positive sector in European television, with subscriptions for basic services and payments for video-on-demand services growing and the sector benefiting from the growth of video viewing on smartphones and tablets, particularly for its original programming.

Advertising-supported television is being squeezed between the more stable funding of public service broadcasters and pay TV providers and being hurt because advertisers in some countries remain reluctant to accept catch-up viewing in audience measurements for program broadcasts. It is not benefiting as much from video-on demand services as public service and pay TV broadcasters because much programming on advertising-supported TV is not original production owned by the broadcasters.

In order to survive in the new television environment, advertising-support TV in Europe has developed a diversified revenue, combining income from advertising, paid programming (home shopping, religious programming, etc.), product placement, sponsored events such as concerts and fairs, telecommunication promotions and services related to programming, income producing contests and lotteries, and renting studio space and providing video production services for advertising and corporate use.

Despite find their niches, both advertising supported and pay TV operators are now mounting efforts to obtain public funding to improve domestic program offering. In a number of countries they are asking policymakers to create contestable public funding to produce quality domestic content. They have asked cultural ministries to set aside funds for the purpose or asked regulators to divert portions of public service license-fee payments for the purpose.

In the contemporary environment, the business model of European advertising-supported TV needs significant addition, primarily because traditional TV advertising has low value for both viewers and advertisers today and there is a need to seek news ways to connect the two commercially. The extent to which they will rise to the occasion remains to be seen.

[Re-] establishing the relevance of legacy news organizations

Legacy news organizations (newspapers, magazines, and broadcasters) are confronting three critical relevance challenges as the digital world matures: Changing business configurations and characteristics, declining value of traditional news and informational content, and unhealthy attitudes toward audiences. These challenges will need significant attention if they are to be successful in the new information environment.

During the twentieth century news products were widely used, fast-moving consumer goods. Because media operated in relatively inefficient markets, news organizations were cash-producing investments with high cash flows that yielded high profits. Newspapers had asset-heavy balance sheets and excellent equity positions.

The business drivers of the legacy news industry in the latter half of the twentieth century were growing consumption in absolute audience sizes (but declining penetration that most executives ignored). Companies changed high prices for advertising and set low prices (or no price) for consumers. They had the ability to self-finance operations and growth, carried relatively low debt loads (with the exception of a few firms during acquisition binges in the late 1990s and first decade of the millennium), and their shares were highly desired by investors.

Those conditions have changed markedly. The emergent business characteristics are that news is a low-demand consumer good with niche audiences, producing low cash flow, requiring asset-light balance sheets, and producing normal rather than excess profits.

Today there is diminishing consumption of news in traditional forms by audiences and advertisers, increasing prices for audience consumption and decreasing prices for advertising in many media. Low debt loads have become a necessity and most news organizations are no longer attractive investments. These changing characteristics and business factors are not a short-term problem, but represent a comprehensive transformation of the industry.

Compounding these business challenges is the reduced value of news and information content provided by most news organizations. Fifty years ago, you had to read a newspaper if you wanted to know what the weather was going to be, whether your favorite team won the match last night, whether share prices of your investments were up or down, what was happening in the school your children attended, whether the government was planning to increase taxes, whether the conflicts in other parts of the world were going to affect you, and what commentators were saying about public affairs.

Today, we have enormously increased amounts of news and information available from a wide variety of paid and free sources. At the better end of the spectrum is expert journalism in which economists, scientists, bankers, and other cover many topics of interest and specialized independent journalists and news organizations that are covering military affairs, social benefits, and corruption. Unfortunately, the overall trend is toward a narrower form of news and information, with reduced focus on issues, oversight, and analysis, and an inordinant supply of celebrity, sports, and entertainment news.

If legacy news providers are to overcome the content challenges, they will need to rethink and improve the value of content on all their platforms and strive to make their news and information unique. The content of news organizations will need to be reconceptualized and can’t just be moved across platforms because each is a different product, used in different ways by consumers, and needs different types of news and information to be prominent and presented in different forms.

Of equal importance, news organizations and journalists will need to interact with audiences in new ways that are outside their comfort zones. This is problematic because journalism has traditionally had highly paternalistic role definitions, seeing its functions as educating the rabble, guiding thought and opinion, protecting social order, and comforting the people. These definitions combine with professional values promoting wariness of social alliances and distrust of sources of information to make most journalists stand separate from the society and people they cover.

Those attitudes create significance relevance problems in the digital world because it is networked and collective, based on relationships and collaboration, and relies on connections built on shared values and interests, acceptance, transactions, reciprocity, acceptance, and trust. The public is increasingly adopting values and norms of the digital world and this is creating many conflicts with journalism.

Journalism remains firmly rooted in the material world which is based on structured relationships, privacy and concealment, property, hierarchy, control, and formality. But the digital world is based on more amorphous relationships, revelation and transparency, sharing, collaboration, empowerment, and informality. Consequently many news organizations have difficulties relating to the public in the digital world and are struggling to adapt.

For news organizations, adjusting to the new world is not simply a matter of finding new revenue, moving content to new platforms, and maintaining existing relationships with the public. It will require a complete rethinking of the roles and functions of news media, how they fit into peoples’ lives, and where they are positioned in the new information environment. These are enormous challenges and need to receive increased attention.

Division of Labor, Talent and Journalistic Branding

A clear divide exists between generic labor and talent in media companies and it is now increasingly dividing journalists. The divide initially appeared in the motion picture industry and moved into broadcasting as competition led companies to vie for the talented people—or at least those who could generate the largest audiences and revenue for media companies.

The talent concept moved into journalism with the development of television news and salaries for news presenters and leading correspondents that were far above those of average television reporters. In print journalism, talent initially involved columnists and then encompassed a few well-known reporters.

Today, the appearances of journalists at events and on talk shows, individually-authored digital news sites, and the increasing uses of blogs and social media by journalists is transforming many into individual brands that are being using to improve their social standing and connections with audiences. This journalistic branding no longer primarily supports employers’ interests for audience creation and retention. Instead, it creates an individual brand that increases the demand for the services of the branded journalist. This, of course, can be translated in higher wages, better employment opportunities, or self employment via the digital media.

The fact that individual journalists are finding ways to increase their value isn’t a problem, but journalists need to thinking about the point where branding transforms them into celebrity—thus moving them from being an observer to a participant in the news they report.

The development of talent—whether as journalists, investment managers, sports personalities, and even publicly recognized scholars—represents a significant shift in capital-labor relations. In industrial society, capital had disproportionate power because it controlled factories and labor had few ways to counteract that power outside of collective bargaining. In post-industrial society, however, power is shifting toward talent because these branded professionals are a new class of personnel who are crucial for companies—but talent doesn't fall into the traditional capital or labor categories.

One of the downsides of this shift, according to Roger Martin, dean of Rotman School of Management at University of Toronto, is that it is creates two classes of labor: generic labour and talent. The first is often undervalued and the second sometimes overvalued. The process is creating disproportionate incomes, opportunities, and mobility for the latter group and there is growing animosity between generic labour and talent because they do not share similar experiences or have a common identity.

What talent will mean to the future of journalism is uncertain, but digital communications are clearly making it possible for some journalists to separate themselves from others and to move into the talent category. It is something we should be watching.

What we now know about news and news revenue in the digital world

There has now been enough experience and research to draw conclusions about how news is transitioning to the digital world and what it means for news companies. If one objectively views the developments, one sees that the current developments are is neither as bleak as some journalists portray them nor as rosy as some digerati frame them. Instead, we have reached a point where digital news is becoming workable in commercial terms, but is not yet mature enough to erase the industry's business challenges.

News consumption in the digital environment is significant and audience reach is now 5 to 10 times larger across digital platforms than for print editions of most newspapers. Many large news organizations are now generating 15-25 percent of their revenue from online, tablet, and smartphone platforms and benefits are starting to appear for some mid-sized players as well.

If we look at what has occurred in the past decade, there are some important lessons to embrace about news businesses in the digital environment:

Commoditized news does not create economic value; you have to provide something unique if you are going to get the public to pay for it
Consumer payments are becoming a more important revenue source than advertising and success come through creating more sources of revenue than merely audience sales and advertising sales
Paid apps for news on smartphones and tablets are gaining better acceptance than general online payments, and
new partners, networks, and value configurations are needed in the digital world.

When it comes to payment issues we now know that:

Willingness to pay is affected by the platform used (partly because of expectations and traditions and partly because of better payment interfaces), as well as the number of free digital competitors in the market
Willingness to pay ranges from about 4 to 12 percent of the public in markets that have been studied
Larger legacy news players seem to have advantages when seeking digital payments because of their offline size and resources and the strengths of their brands
Instituting a paywall reduces website traffic between 85-95 percent
Metered ( freemium) models provide brand and marketing advantages and reduce traffic loss somewhat
Cooperative paywalls involving multiple newspapers are beginning to work in some locations and provide economies of scale and transaction cost saving that are useful for smaller organizations
Public affairs magazines are finding it easier to get the public to pay than newspapers, especially on tablets. This may be due to differences in how they approach and present content.

It is also apparent that users expect more from digital environments than the print environment and that they are more willing to use and pay for news if it offers a better experience (convenience, simplicity, ease of reading/viewing, enjoyment), if they can influence the presentation and consumption and interact with content and other users, if content includes more analysis and access to additional material, if it includes audio-visual material, and if it offers various usability tools. Those factors mean that news organizations have to offer digital content that differs from the print newspaper in many ways.

We have learned that to make money from news in the digital world companies have to focus on customer needs (not the needs of the news organization), must be realistic about financial expectations (you won’t make as much money as in the 1990s and growth won’t be highly rapid), and that you cannot just transfer the same content among platforms because each platform requires different types of presentations, story forms and navigation.

Some news organizations are making good progress in getting things right and the public is increasingly seeing value provided by news on digital platforms and evidencing increased willingness to pay. Most news enterprises still have a long way to go, but we have no reason to be highly pessimistic about the future of news in the digital world.

Many journalists can't provide the value-added journalism that is needed today

Journalists pretend they spend their time investigating the intricacies of international affairs, covering the inner workings of the economic system, and exposing abuses of political and economic power. Although many aspire to do so (and occasionally do with great effect), the reality is far from the imagined sense of self.

Most journalists spend the majority of their time reporting what a mayor said in a prepared statement, writing stories about how parents can save money for university tuition, covering the release of the latest versions of popular electronic devices, or finding out if a sports figure’s injury will affect performance in the next match.

Most cover news in a fairly formulaic way, reformatting information released by others: the agenda for the next town council meeting, the half dozen most interesting items from the daily police reports, what performances will take place this weekend, and the quarterly financial results of a local employer. These standard stories are merely aggregations of information supplied by others.

At one time these standard stories served useful purposes because newspapers were the primary information hubs of the community. Today such routine information has little economic value because the original providers are now directly feeding that information to the interested public through their own websites, blogs, and Twitter feeds. Additionally, specialist topic digital operators are now aggregating and organizing that information for easy accessibility.

Town councils place their agendas and voting reports on their own websites, many police and fire departments operate continuously updated blogs and twitter feeds that provide basic emergency reports and what is being entered in their blotters and logs, performance centers and concert promoters offer websites and digital notifications of upcoming activities and events, and companies and business information media offer direct distribution of financial reports and news releases to the public. All of these are stripping the value from newspaper redistribution of those kinds of information and making people less willing to pay for provision of that news.

To survive, news organizations need to move away from information that is readily available elsewhere; they need to use journalists’ time to seek out the kinds of information less available and to spend time writing stories that put events into context, explain how and why they happened, and prepare the public for future developments. These value-added journalism approaches are critical to the economic future of news organizations and journalists themselves.

Unfortunately, many journalists do not evidence the skills, critical analytical capacity, or inclination to carry out value-added journalism. News organizations have to start asking themselves whether it is because are hiring the wrong journalists or whether their company practices are inhibiting journalists’ abilities to do so.

Changing frequency of newspaper publication is not a sign of the apocalypse

The number of newspapers that have reduced their publication frequency in response to market changes and economic conditions continues to rise.

This year the Times-Herald in Newnan, Georgia shifted from 7 days a week to 5 days per week. The New Orleans Times-Picayune moved to 3-day per week schedule, as has The Patriot-News in Harrisburg, Pa., and many papers in the Advance Publications group.

In doing so, the papers are bolstering their digital publications and producing in physical form only on days that most interest retail advertisers. From the financial standpoint, these moves make a great deal of sense.

Reactions to the changes have ranged from disbelief to resignation in the journalism community. Many have bemoaned the loss of dailies and argued non-dailies cannot possibly serve their communities as well. That argument is problematic, of course, because there have typically been 3-4 times more weeklies than dailies in the U.S. and many have done far better jobs covering towns and neighbourhoods than dailies.

The assumption that 7-day per week publication is, and has been, the norm is another example of ahistorical and baseless views spread about the industry these days. In 1950 less than one-third of newspapers (549 papers) published a Sunday edition and the number with Sunday editions peaked at 917 in 2000, being published by just two-thirds of all papers. Saturday editions were not the norm until well after mid-twentieth century. The appearance of high frequency daily publication was fueled by the demands of advertisers.

If one considers the definitions of daily publication one finds that it is nowhere near 7 days per week. The internationally accepted definition of a daily newspaper is a paper published only 4 days per week.

This is not to say that the industry is without problems. The changes in publication frequency do reveal how the inordinate dependence on advertising revenue has shaped the industry and how wealth continues to be stripped from newspapers.

The changing frequency should be seen as part of the evolutionary shift toward digital only publication--a shift that is occurring at a varying pace in different types of papers and markets. But it does not mean that journalism in print, in print and digital combinations, and in digital-only forms cannot serve community needs.

Canadian Media Merger Creates High Market Power and Runs Against Concentration Trends Elsewhere

The proposed merger between Bell Canada Enterprises and Astral Media will shortly be considered by the Canadian Radio and Television Council (CTRC). The merged company will own 70 television and cable channels, more than 100 radio stations, and some of the country’s most popular websites.

The combined company will serve nearly one-third of the national TV audience, more than 40 percent of the national cable TV audience, and about 30 percent of the nationwide radio audience. In addition the merger will increase Bell’s vertical integration and its power over distribution systems used by competitors. This later factor is particularly important because Canada lacks much of the regulatory control seen in Europe and the US over business practices of distribution systems that are also used by competing firms.

The merger will benefit the two companies by giving them more market power and permitting efficiencies at the corporate and divisional levels. It is also likely to produce efficiencies at the operational level by using more common content, something that is especially likely in its radio operations.

Investors will see benefit in the future. Share prices often go up before mergers as speculators jump into the market and then sell before the merger is completed, but prices typically decline after mergers when the realities of the costs of integration reduce short- to mid-term performance. It will take some time before the benefits of the consolidation reach investors as dividends and heightened share value.

The downside of the merger will be borne by consumers and advertisers because the combination will create more market power to push up prices and reduce incentives for better service and quality. Competitors will also face a stronger company that controls the distribution infrastructures for their products and this should lead to higher prices. Additionally, one can expect social harm because the merger reduces plurality of those selecting content and the original content made available—particularly in radio—will probably be diminished.

How the CTRC will respond is unknown. However, Canada has traditionally permitted far greater media concentration than other countries arguing that it helps strengthen Canadian ownership. It has permitted media concentration levels 2-3 times higher than those found in US and Europe and has one of the most concentrated media markets in the world.

Most other countries have been using broadcasting law and competition law in recent decades to reduce concentration in content provision and those policies have been quite successful. Why not Canada?

Canadian policy has been hampered by its nationalistic rhetoric, a significant degree of regulatory capture, and also because there are inconsistencies among broadcasting and competition policies that allow regulators to downplay public and consumer interests. The CRTC deals with station ownership, for example, but has set a market cap of 45% on total national television audience—about twice that in most countries. The Competition Bureau can review media mergers, but has tended to be concerned only about effects on advertising prices. Existing policies do not effectively address cross media ownership effects.

Ironically, the public service broadcaster (Canadian Broadcasting Corp) was heavily criticized when it served about 40 percent of the television audience. Commercial firms were particularly vocal arguing that having such a large firm distorted the market and their complaints led Parliament to reduce support for the CBC and over time its audience has been cut in half.

It will be interesting to see whether CRTC is willing to take a broader view and is willing to stand up to the interests of Bell and Astral when it considers this massive merger.

Contemporary Trends Change Magazine and Newspaper Printing Markets

The markets of magazine and newspaper printing firms are undergoing significant changes, reflecting on-going transformations in the customers they serve.

Some of the changes have been under way for 2 decades with traditional printing companies morphing into printing service companies offering more profitable value-added services and products. These included high-end specialized printing capabilities and services, database printing, and wide-ranging distribution services. At the same time, the increasing number of magazine titles, accompanied by lower average press runs, pushed the companies toward higher efficiency and acquisition of presses and systems designed for lower press runs.

In this environment, many printers could not effectively compete and consolidation began creating large regional players in the industry.

Shorter-term trends have also played havoc with the printing industry by killing off some magazine and newspaper titles, lowering the average number of pages printed because of advertising reductions, and by decreasing demand for catalog printing by mail order companies.

These changes created excess capacity and financial problems for many printers, opening the way for private equity firms to purchase trouble companies, restructure their operations, and consolidate the industry even further. Walstead Investments, for example, bought the St. Ives Group, Southern Print and Wyndeham in the UK to do just that.

About the only bright spot for the printing industry has been that many newspapers have now decided to outsource printing—increasing the number of customers in that segment for the short term, at least. Even some large newspapers that had given up commercial printing decades ago have changed the size capacity and flexibility of their presses to gain more production options and they are now offering printing services to other publishers and advertising service firms.

The consolidation has allowed big players to grow bigger. Donnelley has expanded by acquiring firms across North America. Quad/Graphics has moved into Europe and Latin America. The German publisher Guner & Jahr acquired Brown Printing in the US and Prisma Presse in France.

The current economy is limiting the ability of these firms to push up prices, but one can expect that to occur when better times return and capacity utilization increases.

NBC's Olympic Coverage Shows Audience Expectations Aren't in Its Cross Media Strategy

NBC’s Olympic coverage in the U.S. reveals the conflict media companies face as they try to simultaneously manage traditional media delivery and digital distribution.

The company is getting it right with the traditional broadcasts, garnering excellent audiences and more than $1 billion in advertising—a figure that surprised even its most optimistic executives and may allow the broadcaster to break even on the games which have traditionally been a loss leader for the company.

The company is also giving audiences more coverage than every before by streaming additional content on cable channels and digital live streams. These are provided on platforms that consumers have come to expect will give them the power to choose when, where, and on what device they will be viewed.

In order to support its traditional, advertising supported services, however, NBC has used tape delays on the broadcast services and has excluded many sports or blacked them outs on live streams—angering millions of consumers and setting off one of the greatest storms of criticism in the history of social media.

In trying to put its feet in both distribution markets, NBC is forcing the digital community to live by broadcast rules and in doing so has disrespected the audience and norms of cable and online platforms. The result has been widespread audience frustration and anger.

The only thing keeping audiences from going elsewhere are the exclusive national rights and the fact that most users don't have enough technical skills or inclination to bypass the ISP-based protections against streaming material from other countries.

Hopefully, NBC will learn from the experience and get the formula better for the 2016 Olympics.

The Daily’s rocky performance shows legacy brands create digital advantages

The News Corp’s launch of the tablet newspaper The Daily in February 2011 was heralded as the future of news and revealing opportunities for major new entrants in the news market. After a year and a half of operation, the digital newspaper has lost more than $30 million, managed to gain only 100,000 subscribers—not a trivial amount but low for a global player, and has just announced that it is cutting 1/3 of its editorial staff and ending original production of sports news and commentary.

Journalistically The Daily is not a bad news product and its app is facile and effective. So why hasn’t it been more successful? The fundamental problem is that the digital-only paper has been overshadowed by the success of legacy print newspaper brands in the market for digitally delivered news.

The Daily has never been so brilliantly written and edited that it could gain the significant attention and acclaim needed to overcome the brand advantages of legacy news providers. Major newspaper—such as The New York Times, The Guardian, and The Financial Times—have used the strengths of their reputations and brands to make the largest inroads in digital subscriptions. Concurrently, larger

local and regional players have also been grabbing paid digital customers in their markets and providing additional competition to the digital startup.

The Daily has also had to compete with widespread availability of free digital news from news providers such as BBC.com, CNN.com and aggregators such as Yahoo! and Google. These have all been successful in attracting consumers who are less attached to print news providers and paid services.

Those who predict the demise of legacy newspaper companies often forget the critical importance of the credibility and trust those companies have with news consumers and many assume that print organizations cannot transform themselves into digital players that may become so successful they may one day drop their print editions.

Brands are important for habitual news consumers and they tend to be highly loyal consumers of specific news brands. The Daily has been unsuccessful in breaking that loyalty, but more successful in creating relationships with persons who have not been strongly bonded to legacy brands. It remains to be seen whether News Corp. will be willing to maintain a relatively small news digital brand among its holdings, even if it manages to move The Daily into operating profitability.

Facebook's business problems are symptomatic of many large digital firms

Facebook is wrestling with a business challenge more traditionally found in legacy media: how do you translate consumers that don’t think they have a commercial relationship with you into relationships that that other firms will pay for?

Despite 955 million active users and increasing revenues, the company has lost a third of its share value since its IPO in the spring. The exuberance that surrounded its IPO and overpriced its shares has worn off and investors are realizing that being big isn’t enough to ensure business success. Its latest earnings reports show the firm lost money, $157 million, in the second quarter on income of $1.18 billion.

Facebook’s challenges are symptomatic of a long line of “successful” digital firms that are experiencing monetization problems, including Yahoo, You Tube, AOL, and Twitter. Despite large numbers of users globally, they still lack effective business models to generate revenue levels congruous with their size. They may provide great communication functions for users, but they are not transforming very well from innovative users of technologies to highly profitable commercial enterprises.

Part of their challenge is that they have to focus so much effort on non-paying customers and those customers think of the services as personal communications—making them resistant to many efforts to monetize them. This problem has long plagued traditional media, but they are conceived as mass rather than personal media and have been around so long that many people are now used to a certain level of commercial exploitation. They also have a proven track record of return on advertisers’ investments that digital media have not yet been able to deliver for many types of advertisers.

Large digital players will continue to evolve and can be expected to improve their financial performance over time, but it will take a good deal of innovative thinking about the business rather than about the technologies and social value of their services.

Digital journalism reaches sustainability, but transitional business problems interfere

The income streams of digital news providers continue to grow and many have now reached the point of sustainability. Fundamental financial and business problems, however, are keeping publishers from moving out of print and becoming digital-only operators.

This leads many publishers and journalists to continue bemoaning the fact that digital media do not provide as much income as print and many still argue that organized, regular newsgathering and distribution cannot survive in a digital-only environment. They point to the fact that digital advertising produces only about 15 percent the income of print advertising—largely because it does not appeal to retail, display advertisers--and that paid circulation for digital products is growing slowly.

Their analysis is flawed, however, because publishers do not require as much revenue online as offline because the costs of digital operation are so different.

Editorial operations account for only about 10-15 percent of total costs of operation of print newspapers, but they are the primary cost for digital operations. About half of the costs of print are taking up by printing and expenses for getting papers to readers; when the costs of paying for and maintaining buildings and land used to house presses and circulation equipment are factored in, those costs rise to about 60 percent of total costs. Expenses to maintain the large advertising operations found in print newspapers add another 10 percent to overall costs and the managerial costs due to the large number of personnel and functions in non-editorial activities add about another 5 percent. Thus, switching to digital operations can take out at least three-quarters of the costs of print newspaper operation, making the lower revenue of digital operation sustainable.

A growing number of newspaper companies are already generating 15-20 percent of their total revenue from digital operations, making nearly enough money to sustain the kinds of journalism practiced by legacy news media. So why does negativity about the future of journalism remain so high and why are newspapers not yet moving to digital-only operation?

There are three primary reasons:

Print newspapers still continue producing above average returns compared to all industries. No publisher is willing to throw away those operating profits even if the costs of print operation are higher than digital.
Retail advertisers get more return on investment from newspaper advertising than any other form of advertising, including digital. As long as they remain willing to advertise in newspapers, no publisher is willing to give up the revenue stream and operating profits that they now provide.
Owners of print newspapers have a great deal of capital tied up in facilities, printing and distribution equipment that cannot be withdrawn because few buyers want to acquire the used equipment today.

The fundamental challenge today isn’t that digital journalism has not reached sustainability; its how does a publisher transition from the print to digital-only operation in a way that is financially feasible and desirable.

The transition is critical for society because it will bring with it the reportorial strength and organization that exists in newspapers. That is something that digital startups do not provide because they generally lack the capital to build and sustain staffs as large as those of print newspapers and because they lack the reputations and brand identity of established papers.

Newspaper owners, publishers, and journalists then need to stop decrying the digital revenue problem and start focusing on solutions to the business challenges of when and how to realistically reduce and end the print operations. It will happen at some point in the future; the problem is how to plan and manage the switchover.

Cable firms and Facebook Continue to Disappoint their Customers

Serving and satisfying customers is a crucial part of value creation in any business,but U.S. communication firms continue to struggle with the very basics and are being heavily criticized for poor service, price gouging, billing problems, and generally poor customer relations.

40 percent of the top 15 companies that most dissatisfy customers are communications firms, according to the latest data from the American Consumer Satisfaction Index.

The companies American most dislike include Facebook and cable systems, which operate as near monopolies and consumerss have no real competitors to turn to for better service. The scores for the companies are:

Direct TV: 68/100

Facebook: 66/100

Comcast: 61/100

Time Warner: 63/100

Cox Communications: 63/100

Charter Communications: 59/100

These are failing scores on any grading system.

The companies have little incentive to spend time and money to improve service and relations with customers because there is no real competition that can discipline the market and promote consumer benefits. The problem is compounded because cable services are largely unregulated and there are no watchdogs to demand better behaviour in the absence of market-imposed sanctions.

That means the only thing that can drive improvement is company pride, but it is abundantly apparent that these firms have no shame and really don't care what their customers think.

Letting go: Making sense of social magazines and news readers

Applications that aggregate articles based on what others in one’s social network are reading and reformat them into an attractive magazine and presentation formats are growing in popularity, but they are raising concern among some publishers.

The processes build upon the referral and curating functions of colleagues and friends in social networks and reduce the need for users to go to multiple sites for content on their own. Some of the best known social magazines are Flipboard, Newsmix, Currents, and Pulse. Some publishers are starting their own social reading apps, such as New York Times that has a Facebook app pulling together stories that friends have read in NYT.

Many publishers are fearful of these developments, however, because they represent another step away from publishers controlling when, where, and how readers use their content, reduce the impact of the publishers’ brand strategies, and diminish control over the presentation and marketing of their content.

But publishers really don’t have a choice whether or not social magazines and readers grow in importance. That ship has sailed. The real choices is whether publishers use them for best effect and whether they are willing to accept the benefits of having more readers driven to their content and reaching persons who haven’t used their content before.

In coping with this and other disaggregation of content, however, many publishers need to adjust their own ways of presenting digital content. Because readers from social magazines, other aggregators, and search engine are directed to individual articles, it becomes more important to think about how that material appears to these new readers and what can be done in its layout to attract the new readers to stay on the site and sample more content. They are not entering through the home page so greater thought needs to be given to what appears on article pages.

Social magazines provide another mechanism by which deliver content to new readers and to existing readers in new ways. They are not the ‘silver bullet’ for solving publishers’ digital challenges, but they are another means by which benefits can be obtained and pursued.

Focusing on what control social magazines transfer to users and their branding downsides is a distraction for publishers who are beginning to learn the value of letting go of the control in the digital environment. Digital media are now bringing 15-20 percent of the traffic to many publishers’ digital content and they are feeling the benefits of letting readers decide the means and uses of that content.