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| Robert Picard speaking to class at University of Navarra. |
Robert G. Picard is one of the founding fathers of the academic discipline known as media economics. The field has attracted more attention lately as news outlets, ravaged by digital competitors, have gutted their reporting staffs and slashed public-service coverage.
Policy makers, media executives, investors, and journalists themselves look to experts like Picard for answers about how to deal with the industry’s financial crisis and the diminishing supply of news.
Picard admits that he is unsure of exactly what the future holds for the industry. What he does know is that the people who are running media organizations–TV, radio, newspapers, magazines, and even digital outlets–know far too little about their readers, viewers, listeners, and users.
Publishers need to invite these consumers into the processes of creating and distributing content, he said. They need to think about how to create value that will satisfy the needs and solve the problems of their users.
Readers first, not advertisers
With advertisers flocking to digital platforms like Google and Facebook, the most likely source of revenue in the future is readers.
“Traditional media know far more about their advertisers than they do about their readers and viewers,” Picard said during a master class at the University of Navarra School of Communication Sept. 28. “And that’s a problem, given that they are getting far less advertising than they did a decade ago. They need to focus on creating value for individual users, on creating a strong, emotional relationship with the users so that they feel a connection to the media outlet. They need to feel like members of a club.”
Picard made his remarks to Prof. Ramón Salaverría’s class on Digital News Media Models. Publishers these days talk a lot about creating new business models, but that is not what they are doing. They are really trying to generate more money. Changing their business models would mean changing the way they create value, Picard said. They should focus on creating value in the product, the customer relationship, the distribution, and the partnerships. If they do that, the money will come.
News has never made money
The news business was fabulously profitable in the five decades after World War II, Picard said, but that time period was an aberration. For most of the roughly 250 years since newspapers emerged, they have always required a subsidy–from political parties, power-seeking individuals, government, or, more recently, advertising.
Advertising is going away to the digital platforms, so publishers will need to look to readers for financial support, via subscriptions, memberships, crowdfunding, etc. “The people really interested in the news are only about 20-35% of the population. But they tend to be very influential. These are the people who are the most active politically, socially, and economically.” These are the people most likely to pay for news.
For a deeper understanding of the history, Picard recommended the book, “Making News: The Political Economy of Journalism in Britain and America from the Glorious Revolution to the Internet”
People won’t pay for the kind of commodity news that is available free everywhere. To get people to pay, news organizations need to create more value. But creating high-value news is expensive. How will publishers generate the revenue?
Higher value services
News publishers can create more value by offering a higher level of service, he said. One example is an email delivery of news on topics selected by users for delivery at certain times or on certain days.
- As an example of innovative customer service in the media industry, Picard pointed to the Dallas Morning News. The newspaper lies in the heart of the nation’s energy-industry, so the editors decided to create a high-value newsletter on energy that it markets around the world for a subscription of several hundred dollars annually.
- News outlets might work with other organizations in a product development relationship–say, with another media organization, a nonprofit, or a university–to reduce costs of producing news and increase the reach through combined distribution.
- Or they might engage in co-creation of content, such as the crowd-sourcing of information that ProPublica has done on its investigation of health insurance costs.
- Or they could raise money through philanthropy—donations and crowd funding–used by publications such as De Correspondent of Holland and eldiario.es of Spain.
Just how clueless are publishers?
The day after Picard’s visit, I came across Thomas Baekdal’s withering analysis of how newspaper and magazine publishers misunderstand, manipulate, and misrepresent data about their audiences. Someone attempting to buy advertising gets numbers that are laughably unusable.
Baekdal looked at the readership data of one magazine in the way an advertiser might: if you wanted to use this data to reach women age 25-34, who have household income of $75,000, and kids aged 6 to 11, the publisher would have no way of knowing which of its readers actually had those characteristics. The publisher would likely know only the reader’s name, address, phone number, email, and maybe some personal data if the reader had offered it voluntarily.
Facebook, on the other hand, could deliver that specific targeted audience to an advertiser, estimate how many people fit all those criteria, and say how much it would cost to reach each one. Facebook and Google and other social platforms have far more data about that publisher’s readers than the publisher does.
One of the many other sins Baekdal cites to show the ignorance of publishers about their audiences is what he calls “the biggest number syndrome”, in which they combine the total of paid subscribers with additional readers per copy, estimated web audience, and social media followers to achieve a total that often wildly exaggerates the actual number of people who are exposed to the publication’s content. And the publishers themselves know that the information is bogus.
Adaptation, not innovation
Back to Picard. As a group, traditional media are still doing rather well for themselves financially, even though they have gutted the product that they are delivering to consumers. They have cut costs to protect profit margins, which are still in the very attractive 10% range, Picard said. This is down from the 20% to 30% margins of 15 years ago, but still above the margins of many other industries.
However, they have not been spending on the innovations they need to compete with digital media platforms. They have merely adapted, not innovated. They use social media for distribution but didn’t invent it. They have rushed into producing video without understanding it or innovating in its forms for digital platforms. “Most videos produced by publishers haven’t brought value to the consumers,” Picard said.
As if to prove Picard’s point, an article in the Columbia Journalism Review by Heidi N. Moore, The secret cost of pivoting to video, arrived in my inbox two days after his talk. It provides a cautionary tale of how many digital news outlets shifted people and resources to producing video with the hopes of generating more revenue.
These news outlets overestimated the potential traffic, produced unwatchable, unimaginative talking-head reports, lacked the production talent, and relied too heavily on third parties like Facebook for distribution.
On the third day after Picard’s master class, another piece about how to deal with journalism’s existential crisis came to my inbox. This one was by Tristan Ferne of BBC News Labs, who gave examples of how news media are, in fact, innovating in the types of products they offer the public.
His article, Beyond 800 words: new digital story formats for news, offered 13 ways to use innovative news formats that create new kinds of value for news consumers.
While the traditional media are busy protecting their profit margins, there are thousands of digital media innovators, many of them not journalists but experts in other areas, who are working on ways to provide valuable information that serves communities. A good thought to end the weekend.
If you can think of other ways we should be creating value for users, don’t hesitate to add them to the comments section below.
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