Left Bay’s Musings on the Media

Searching for answers in sales and marketing

Clay Shirky’s Message to Old Media: Change or Die

Author and academic Clay Shirky has a re-tooled message to old media: Change or die. In his new post called “The Collapse of Complex Business Models,” Shirky asserts “When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to.”

One example he uses is the move to return to having users pay for journalistic content. Many newspapers, magazines and entertainment outlets say that content shouldn’t be free and that they will start charging for it. But the fact is, users now have choices. There are free outlets.

Another example he uses is video. It used to be complicated to record, edit and air video — say nothing of expensive. But with the advent of better technology and free methods of distribution — think YouTube — anyone with a camera phone can upload and show their favorite video. And while we still enjoy our movies, riveting television shows and other highly produced extravaganzas, it’s now often the cheapest that entertain us the best.

If truth were told, says Shirky, these media titans would seem to be saying something like this: “Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”

Asks Shirky — What’s the most watched video in the last five years? “Baby Charlie biting his brother’s finger. (Twice!) That minute has been watched by more people than the viewership of American Idol, Dancing With The Stars, and the Superbowl combined. (174 million views and counting.)”

Old media has to change because the economic “ecosystem” has stopped rewarding complexity. Simple is better. And those who figure that out will be rewarded in not only the present, but future too.

Metering the NY Times

How many users will pay for the online version of the New York Times?

Last week, the Times announced that they were implementing a metered system whereby they would start charging their high-volume users a flat fee to continue reading their articles. At what point that fee kicks in is still to be determined. In fact, how the entire system works is still very much up in the air, as the Times gave themselves until sometime in 2011 for implementation. But a question that I wonder — just how many users will pay for content?

And it turns out that I’m not alone in trying to figure it out. Frédéric Filloux of Monday Note crunched the numbers and produced a chart that shows that even a 5% subscription rate, priced at $2 to $8 month, would boost the Time’s online revenue by 7% to 29%.

But is a 5% subscription rate likely? Yes, apparently, as that’s about the percentage that the Wall Street Journal is getting, according to analyst Ken Doctor of Content Bridges:

“Isn’t it suicide to charge your best digital customers for content, while allowing others to get some for free? Not really. In fact, that’s what the Wall Street Journal has been doing for years. Remember the numbers: about a million paying online subscribers…..and another 19 million uniques, who get to Journal content through search engines and all manner of side doors for free.”

The Times isn’t saying what percentage of its readers fall into the category of “frequent readers,” the folks who will get hit by the meter. But pulling from the Pointer Online blog of Bill Mitchell, who takes from the Times David Carr, the number looks like 2 million out of 17 million uniques, which would be an ambitious 11%

So, maybe 5% – 10%?

That leaves plenty of room for a crowd-funded platform like Kachingle whereby users would voluntarily pay for content they’re otherwise getting for free. Would users do so? Look at public broadcasting. If the appeal is done right, if it appears others are giving, then yes, people will pay for free. Our models for Kachingle are based on a 1% – 2% adoption rate in year 1, jumping to 3%-4% in year 2, and then growing by 1% annually until it tops off at 6% – 8%.

You can mix free and paid. It can work.

Who Will Pay For News?

President Obama recently weighed in on the crisis in journalism.

“Journalistic integrity, you know, fact-based reporting, serious investigative reporting, how to retain those ethics in all these different new media and how to make sure that it’s paid for, is really a challenge,” Mr. Obama told a reporter from the Toledo Blade. “But it’s something that I think is absolutely critical to the health of our democracy.”

About the same time I was reading this article, I came across another — this one quoting the results of a Harris Interactive Survey on who would pay for news.

The research, commissioned by paidContent:UK shows that most readers would, in their words, “run a mile” and NOT pay. Nearly 75% would switch to free sites, 8% would read only the headlines and move on, and 12% weren’t sure. That left a measly 5% who would actually pay for content.

As reporter Robert Andrews asks, “The big question for publishers: Is five percent of your readership enough to offset the decline in advertising revenue that would come with putting your content behind a pay wall?”

Actually, that 5% would choose to pay is in line with the anecdotal evidence we’ve heard at Kachingle, which is that between 5% to 10% of readers would pay for content. Journalism Online is using the higher number. NYTimes said they received 12% for their failed effort called “Times Select.” Others in the business I talk with seem to think you can get at least 5% to pay. So in and of itself, the numbers are not surprising, and reinforce what we’ve been hearing.

What’s surprising, and frankly somewhat baffling, are the results broken out by age. Harris reports that 13% of 16-24 year olds and 6% of 25-34 year olds said they would pay; as opposed to only 1% of 45-54 year olds. Harris Interactive is a big name in polling, but these results go against everything we’ve seen, and seem totally out of whack. If anyone is going to be willing to pay, it’s the baby-boomers, not the “kids.”

But the big picture remains true: “As long as free alternatives exist, consumers will turn to them for their daily information.”

At Kachingle, we get asked a lot about statistics like these. There’s some comfort in knowing that some percentage of users will pay for content. What’s disconcerting is that so few actually will.

We’re not about getting users to pay for content; we’re about getting them to build online personas. They’ll Kachingle in order to associate themselves with sites and build their personal brand. That’s why in our demos, we show side-by-sides of a Yugo and a Porsche. What does contributing say about YOU? Our question hasn’t been asked yet. But it will, soon…

Why 15-Year-Olds Won’t Pay For News

There’s a terrific journalist for the Financial Times by the name of Andrew Edgecliffe-Johnson whose articles on the media appear in my inbox with some frequency. Today, he wrote a piece, quoting a Morgan Stanley report, on the media habits of 15-year-olds that will come as no shock to newspaper publishers. These teens will find ways to ignore ads, and pretty much won’t pay for anything, from music to news.

Coincidentally, Edgecliffe-Johnson was also referenced in a separate story published in Slovenia’s Delo Saturday Supplement that lays out the global challenges content providers face in finding alternatives to advertising (and among other things, has some nice references to Kachingle). Reporter Sonja Merljak provides an overview of how charging for online content hasn’t yet worked, citing the New York Times “Times Select” attempt to charge access to its opinion writers, only to abandon it 17 months later.

But given the new desperation and fortitude of publishers, can they now get users to “pay for content?” Merljak asks. This is where it gets interesting. She pulls from Edgecliffe-Johnson piece How much would you pay an article online? Edgecliffe-Johnson figured out that it should cost about “10 cents” for the cost of his 2,000 word online article. How’d he come up with that?

“At about 2,000 of the 50,000 or so words in the printed version of the Financial Times, it should in theory be worth about 4 percent of the newspaper’s cover price – 10 US cents, 17½ euro cents or 8p.” He acknowledges that for some people, an article will be worth more than that; for others, less.

“Micropayments will be only a small part of the solution, but the fact that such ideas are being pursued demonstrates the extent to which online advertising, media owners’ current dominant business model, is failing to live up to its promise.”

In our own informal surveys, most users can’t tell you if an article is going to be worth 10 cents — or more or less — until after they’ve read it. But that’s not how most proposed micropayment systems will work. You’ll get a two or three line synaposis upfront and then be asked to pay. Will you click, or like the 15-year-olds, look somewhere else?

Says Edgecliffe-Johnson: ‘Digital delivery encouraged the unbundling of the album, allowing consumers to buy only their favourite music tracks. Now other media owners face the threat that customers will want to pay for just the online equivalent of the sports section or their prime-time hits, leaving them struggling to sell less valued parts of the paper or broadcast schedule.”

Who has the time to figure what an article is worth? A different model — a better model — would automatically distribute funds you’ve already set aside for paid content. It would allow you to mark the stories and sites you liked, and then at the end of the month, split up your $5, $10 or however much, fairly. With Kachingle, we’re building such an easy-to-use approach. Sign in once and tell the world what you support. Stay tuned.

Why Pay Walls Won’t Save Newspapers

I’m reading an online New York Times article about how “Pay Walls Alone Won’t Save Newspapers.” Of course I’m not paying anything to read this piece, or any other, as I peruse today’s headlines. But will I in the future? Author Eric Pfanner argues that though the case for charging for online content seems pretty clear, “if only because publishers have nothing to lose.“ But pay walls, he predicts, will only likely be a “transitional step.” Why? There are too many advertising dollars to lose, and too few people willing to pay for content.

Look to the music industry for an analogy, he says: In spite of iTunes and laws against unauthorized sharing of digital music, industry analysts suggest that 95% of music is still pirated “and record industry sales are still falling at double-digit rates.”

Pfanner says that while pay walls may be a start, few people are going to want to dozens of newspapers online. Instead, it might be possible to get people to pay if access to newspapers were bundled with other things people want from the Internet, like “films, music, games, and social networking.”

I think we’re going to have to try lots of different options. But what we’re creating at Kachingle seems the most simple of all. Erect no pay walls. Continue allowing articles to be freely distributed in order to maximize advertising. At the same time, put the power to choose to pay in the hands of the users. Put aside a fix amount of money each month. Allocate it fairly by the percentage of daily visits to Kachingle-enabled sites.

Above all, make it easy to use.

Still Trying to “Save” Journalism

There are a lot of ideas being floated about for “saving journalism.” None alone may work, but all should be tried. We at Kachingle are developing our own model, of course, one that combines an easy contribution approach with social recognition.

A lot of folks believe a subscription approach may still work. In mid-April, we heard about JournalismOnline, which will be a subscription model with a passport key to access member-publisher’s websites. “The website will provide a way for publishers of quality journalism to charge whatever they believe is a reasonable amount for their content in ways that are seamlessly convenient for readers,” explained co-founder Leo Hindery.

The challenge with such a model is that most users have shown they won’t pay for something they haven’t read. That’s the problem with all subscription-based models – there are too many free alternatives. Clearly, JournalismOnline wants to get a critical mass of publishers signed up. The question is, can they do it?

Now comes word that News Corp’s Rupert Murdoch has assembled a high level team that is devising a system to charge for web content. The New York Post reports that the team is looking to create a “user-friendly device akin to Amazon’s Kindle“ to deliver content from News Corp newspapers, like the Wall Street Journal, The Times of London and the New York Post.

Traditionally, print advertisers have preferred paid subscribers to free recipients because there’s a higher perceived value if someone is paying for the product. However, one of those perceived advantages – demographic data – has diminished as online cookie-based behavior-tracking has allowed publishers to back out data about its visitors, which in turn, has helped advertisers better target their message.

It’ll be a neat trick if they can make it all work.

Do Newspapers Matter?

There’s a been a lot of talk about the death of newspapers, and how this impacts the very foundations of our democracy. The thinking goes something like this: Newspapers are the watchdogs over government. If newspapers go away, so too, will responsible government. Not all of it, of course. Just the few who might otherwise be smoked out by aggressive reporting.

But do newspapers also encourage citizens to get involved with local government? That seems to be the conclusion of a study by Princeton University’s Sam Schulhofer-Wohl and Miguel Garrido. Their study, Do Newspapers Matter? Evidence from the Closure of the Cincinnati Post suggests “fewer candidates ran for municipal office in the suburbs most reliant on the Post, incumbents became more likely to win re-election, and voter turnout fell.”

The authors are careful to note that their results are “statistically imprecise,” and that they simply looked at one suburban municipality, and that more work needs to be done. Nonetheless, it does give us a data point to begin a discussion. Also, as other others are suggesting, “It would also be interesting to see of the trends continued or were simply short-lived effects until new information sources filled the void.”

What might replace the newspapers? Bloggers, perhaps. The problem I see is that while bloggers offer an alternative voice to newspapers, it’s akin to reading only the editorial page: there’s no original research. Who’s going to do the work of digging into courthouse records and filing stories, ie, who’s going to “create” the news, unless they’re paid for it? Advertising is providing some of that revenue, but not enough. There have to be other means for journalists to get paid.

One such solution might be Kachingle, one of the companies I’m working with. It provides a credible, crowd-funding alternative that allows users to support any site they want, and get social recognition for doing so. If open source sites like Wikipedia can be supported with voluntary dollars, then maybe journalists can, also.

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