Lots of buzz this a.m. over a new project backed by Court TV-founder Steven Brill and former Global Crossing CEO exec Leo Hindery called Journalism Online LLC. Most of the stories have focused the company’s plan to offer newspaper publishers ready-made tools to administer and manage various schemes for charging readers directly for content online, as well as a plan to launch a global subscription tool that would give users access to content from all participating publishers for a single flat monthly fee.
The really interesting news, however, is the company’s third planned initiative, described in the press release as a plan to “negotiate wholesale licensing and royalty fees with intermediaries such as search engines and other websites that currently base much of their business models on referrals of readers to the original content on newspaper, magazine and online news websites.”
That strikes The Media Wonk as a much more promising idea than a standardized pay wall for content. As Henry Blodget points out over at Silicon Alley Insider:
- A universal commerce system makes sense, but the company would only likely be able to charge a few percentage points of the subscription fee as a processing fee. It would therefore have to have massive scale to make a profit itself.
- The “one-pass” portal would have to sell a staggering number of subscriptions in order to send meaningful revenue back to the participating newspapers. For example, if the “one-pass” cost $100 a year and the company got 10 million subs, it would make $1 billion in gross revenue. If it had to share that revenue with 100 participating papers, however, that would only be $10 million of revenue apiece. That’s just not a lot of money compared with the size of most newspapers’ current subscription revenues.
Wholesale licensing fees probably aren’t going to bring in a lot of coin in the near term, either. But the idea is a step in the right direction.
Much of what troubles the newspaper business, as with the music business, is its own vertical integration between the production of content and distribution. Virtually all of its revenue comes from monetizing the means of distribution to pay for production. As digital drives the cost of distribution drops to zero, however, distribution gets harder and harder to monetize because it has very little inherent value, either to advertisers, who enjoy a bounteous supply of ad space inventory, or to end-users, who are far more interested in the content than the package.
What newspapers need, ultimately, is a way to monetize the content they produce directly that isn’t dependent on distribution, so they don’t get into the sort of situation that the LATimes found itself in this week when it ran an ad on its front page designed to resemble a news story, leading to protests from its own newsroom staff and even subscription cancellations.
The answer is to sever the connection between production and distribution, at least in the digital realm, and place each in the hands of separate companies. The key to making that work would be for a marketplace to emerge between the two, so that news producers could sell their wares directly to distributors/aggregators on a non-exclusive basis and let the distributors/aggregators worry about monetizing their service.
Most of the innovation in online journalism is happening on the distribution side anyway, as it should. If anyone is going to figure out a business model to sustain great journalism online its more likely to be the Huffington Post or Newser.com than the New York Times or the Wall Street Journal. That’s just not their bag, and shouldn’t be. Their bag is and should be producing first-rate journalism, not software tools.
Go ahead and print on paper if you feel you must. But leave the online distribution to someone else. Let them create a competitive market for your content and then sell into that market.