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A New Financial Model For News, Straight From The Cable Industry

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Amos Gelb is an associate professor at George Washington University School of Media and Public Affairs. Previously, he was a television producer at CNN and ABC, among other places.

The challenge facing the news business today is now so worked-over that any edges have become smooth. The well-worn dilemma: more people than ever are consuming news and information, but the free internet distribution driving that audience growth has washed away legacy journalism

9 Responses to “A New Financial Model For News, Straight From The Cable Industry”

  1. i think the idea is interesting, but i would turn it the other direction.   what sort of additional services connected to content offerings could newspapers and magazines build that would allow them to build direct revenue relationships around — could Money Magazine build a bundled service with Intuit for a new kind of Turbo Tax meets Mint and charge $4.99 monthly for it?     ESPN Insider (not 360) has does this already, and bundles the print (or digital) magazine subscription with a $2.99 monthly price.     what would the Dallas Morning News need to build around their newspaper to create a $19.99 (or higher) monthly revenue driver? 

    once you get subsets of your audience paying these super premiums for content products and specialty services, then you could explore higher end tiers (Wine Spectator options) or lower tiers ($.99 add-ons).

    building a direct consumer relationship with an associated credit card on file would allow publishers to then start to dabble in the world of e-commerce in a meaningful way.     going back a few years, part of the Wall Street Journal’s secret was more than the straight value of content, but rather it was the ability to drive incremental sales to a database of paying customers; that’s what kept Murdoch from going all free!

  2. While I agree that a charge could be implemented for news coverage I don't agree with the amount. The average daily newspaper is anywhere from 25 to 50 cents and about $1.00 for the Sunday paper. Internet access is already expensive (in my opinion) to add an additional $5 plus surcharge and plus tax. Now you are looking at around $10 per month added to your bill and the risk that if the internet provider does not pass the money along, the subscriber would be penalized and their subscription interrupted. For people like me, it would be just easier to go and pick up the newspaper than dealing with a potential hassle or additional cost. Maybe a poll could be done on how many people are avid, 7 days a week news readers vs. how many only read the paper once or twice a week and then determine if it'scost effective and if it's worth going through all this.

  3. It seems that even professors of journalism can make huge mistakes.

    A newspaper is not news only, not for everyone. One buys the NYT for its front page headlines, another for an specific commentary or a weekly column, comics strip, word puzzle, etc. And this is how online newspapers should be sold as well: as a collection of creative or informative content. Each piece of this content with a different market value (micro-price, credit, popularity rating, etc.) and made available as a stand alone piece or bundled with other pieces, including archival and 3d party content, or as an expanded coverage with pictures, video clips, an interview with the author or author's journal, to name a few.

    The main idea though should be the readers' preferences and choice of what they like and want to pay for, pay in a very simple and safe manner, a few cents or credits per view or download — the choice!.

    Any large ISP-media "cost transference" scheme will not work here; as it will only make content monetization more complex and expensive. The fixed monthly subscription models are also problematic, for the same reasons. They work now, but on a small scale and mostly because of the strong loyalty of the core readers of such distinct media like WSJ or the Economist.

    For the rest, it has to be the readers' choice and the Internet-enabled ability to go from one site to another, compare and select what is perceived as the most popular, interested or reliable, and then pay for it accordingly, preferably with the help of a micropayment system using a dynamic pricing algorithm to set up a fair market micro-price. The payments could come form a pre-paid account, like in Znak it! or Zong, for example, or even PayPal, but it has to be "on demand," as you surf the net, never forced or piggy-backed on some other bills.

    There are technologies and pay-as-you-read platforms most of the newspapers and magazines (and many other premium content providers) could use right now to monetize their digital content and get up to 94% of the online price as their return. Why to (re) invent the CNN model?

  4. to be fair, the concept isn't bad. on the one side, we've got content providers who are creating a lot of content, and this boatload of content is driving demand for access. on the other side, we've got access providers who love that the content providers are creating droves of content, feeding a frenzy for a better internet connection; and a better internet connection is driving up prices for, well, that better internet connection.

    but the argument above just doesn't work, or at least doesn't work well, for news print. why? because making news "unique" is very hard. a multitude of different ways exist to tell the same story. plus, very few people will walk (and i think very few really means none) on their ISP provider if the NYtimes, for example, is no longer available online, and very few internet providers believe that demand for, what has become a necessity (at least among people who would read news online), will increase just because they can offer access to a news website.

    For the model above to work well, three things must exist: (1) the difference between an ala carte offering (direct bill to a subscriber) and the amount paid by an ISP per subscriber offering has to be remarkably different (like $30/month vs. $0.01/month), (2) the newspaper offering has to create a lot of unique information or functionality 'behind the wall', and (3) the the end user needs to be able to authenticate himself/herself when accessing the internet other than through his/her home ISP provider.

    So, (1) if NYT has all sorts of tools and functionalities and some marquee writers behind the wall, charging $30/month as the only way to get those materials and utilities, and (2) GooglyMoogly ISP offers me free access (and pays to NYT a low per sub fee plus giveds GooglyMoogly the right to advertise/use NYT branding in marketing) and (3) I can authenticate myself as a GM subscriber when I'm accessing the web via, say an ISP service provided by RoadRunner, then, yes, I might just sign up for GooglyMoogly over RoadRunner. But that's a lot of moving parts. Plus my flight is now boarding, so I have to run…

  5. Whenever I speak with a group of journalists, I'm struck by the fact that the solutions they propose for the economic crisis in their industry rarely involve asking anyone for money, or doing any direct sales and marketing. The proposal Mr. Gelb makes above is a good example of this kind of solution, since cable and telecom companies would be the ones doing the direct marketing to customers, and news organizations would be riding on the back of that effort.

  6. Respectfully submittted, this is not a practical suggestion at all. The reality is that the business model for cable networks is a legacy of the history of the cable business, and is dependent on several key factors that could not even be replicated today in the cable business, let alone transferred to the internet access business.

    1) Cable MSO's could pass costs along because they were monopolies. ISP's are not, and will likely become even more competitive as wireless internet access technologies improve.

    2) Cable MSO's agreed to these fees because they needed cable networks to emerge in order to entice people to sign up for cable — since without cable networks, their only value proposition was better reception for free TV. By contrast, demand for internet access is already enormous, so ISP's do not have to make their case more compelling.

    3) Cable networks could get away with this because there were relatively few of them, and so each one was meaningful to cable's overall value proposition to consumers. By contrast, the internet is infinitely more fragmented — not even the loss of every single newspaper website altogether would materially reduce the demand for internet access.

    4) When this practice began, these fees were tiny. With the benefit of hindsight, knowing how huge these fees have become, it would take an enormous struggle to get MSO's to go down that path again.

    Net, newspapers will never be the ones to crack this code — not in a million years — nor any other purveyor of written content for that matter, since written content — especially news and information — is simply too easy to substitute. That said, it is possible that this could be achieved by a purveyor of video entertainment, which is much harder to substitute. The key is locking up exclusive online distribution rights for a significant portion of branded video content (think Hulu). It is doubtful that even they will succeed at this though, since by the time they have enough market power to pull it off, they'll have too much to lose by trying to play chicken with a group of ISP's that will resist this fiercely.

  7. Tim Barkow

    Holy crap, this is a bad idea. I echo Brett's comments. Why not try charging consumers directly for the service you're offering? Oh, they don't want it? Then make something people WILL pay you for!

    A "cost transference" program would simply be impossible to manage or police. In fact, I'd imagine that the costs to simply run the program would far outstrip the revenues it might bring in.

  8. It seems if consumers are willing to pay extra money to ISP to read news online, then why don't the news organizations just buck up and start charging, maybe charging a minimal monthly charge like $5 a month to be able to read full stories otherwise a user would only get landing pages which present snippets.

    Before the net, if consumers wanted to read news, we had to pay for the newspapers. Instead of whining about the woes of the internet, start charging a monthly subscription fee instead of doing a smoke and mirror game to get money.

    It seems this article is about forcing the third party to take the heat instead of the news organizations. Very bad in my opinion.