Tue, 06/27/2017 - 18:23

Posted by H.G. Watson on June 13, 2016

By Stephen Maher

In September, Joshua Benton, the director of the Nieman Journalism Lab at Harvard University, gave a talk about trends in the media business to the incoming Nieman fellows, 23 journalists from around the world spending a year at Harvard.

He marked the first slide with an asterix: * Warning: May be depressing.

We needed the warning. Benton, who has been watching the business closely since he founded the journalism lab in 2008, wasn’t optimistic about the immediate future.

Here were the six trends he identified:

In the next 10 months of my Neiman fellowship, we had regular discussions about the state of the industry in off the record shoptalks with many of the best and brightest in the business. We had cheerful, slide-filled presentations from executives from digital start-ups, chats with Harvard Business School professors, futurists and social media experts.

We talked about what’s happening in the online ad business, the emerging world of social media networks and what fading legacy properties were doing to try to generate revenue.

Here’s what I learned.

Print continues its agonizing decline

First there was the expected bad news. Print continued its agonizing decline. When we went on a fall field trip to Boston Globe, one of the most innovative and successful papers on the continent, we were warned to expect long faces. Editors had just announced a round of buyouts. Bad news about newspapers continued to roll in all year. In the spring, as we were preparing to leave, the Globe announced another round of layoffs

And then there was unexpected bad news, from the digital-first media entrepreneurs.

Buzzfeed, Vice, Mashable and Huffington Post all had business problems, which suggests their rise to digital media dominance might not be as inevitable as it appeared.

Until these bad news stories emerged, the new players seemed to have figured out how to make journalism pay in the 21st century. They were young, had no presses to pay for and have new ways of thinking. They embraced listicles, social networks, native advertising and mobile devices. They were able, as disrupters, to drop the old ideas holding back legacy media outlets, like the once-sacred wall between advertising and editorial, or the idea that writers should be paid for their work.

Grumpy legacy journalists may be tempted to smirk at the upstarts’ problems, except that they are bad news for the whole business.

I don’t care, personally, whether journalism outlets print their pages, or have been around for 200 years. What matters is that events get covered. And that matters because we can’t govern ourselves if we don’t know what’s going on. Without pesky reporters, crooked politicians will fleece us.

In the Parliamentary Press Gallery in Ottawa, as the legacy companies shed staff, the upstarts have been hiring. Vice, Huffington Post and BuzzFeed all have good journalists covering the Hill. iPolitics has a lively mix of older columnists and reporters straight out of college. In Toronto, Canadaland has been shaking up legacy media outlets. 

Nobody is picking up the slack when smaller papers lay off reporters, but the new organizations do a good job on some stuff.

But it’s not clear that the click factories are any more sustainable than the fustiest old digital-last broadsheet. 

Who is making money from journalism?

The new electronic titans have been growing fast, which is what draws in the venture capital, but that doesn’t mean they are profitable. They have a lot of money, in the form of investments from dot-com billionaires and frantic legacy media outlets looking to buy a piece of the internet. But all that capital is making it hard to figure out who is good at earning revenue from journalism, as opposed to convincing investors.

Almost nobody is good at generating revenue from journalism, because unless you are earning clicks on the most massive scale, it is darned hard to make any money from advertising these days. 

The old internet—full of websites that people visited—is dying, because people are spending their time, and getting their news, on social networks: Facebook, Twitter, Instagram, Youtube and Snapchat.

The money is following them there. In the first quarter of 2016, and 85 cents of every new advertising dollar was expected to go to Facebook or Google. Advertisers like those sites because they are less likely to have to deal with fraudulent click counts or ad blockers, and because Facebook and Google have so much data about individual consumers that advertisers can target exactly who they want to target.

When elephants struggle, they sometimes step on ants”

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This leaves publishers—content producers—outside the new walled gardens of the social media networks, where all the money is. If they want to get in, and they have no choice about that, since nobody is visiting their web sites, they have to do so on the terms set by the social media networks, chiefly Facebook, which now has more users than there are people in China.

Facebook not only sets the terms by which publishers can share news—it also controls what shows up in people’s feeds. It recently starting pushing video, because it engages people longer, which means news publishers saw their traffic fall sharply

This may be good for Mark Zuckerberg, but it has put publishers in a bind. My Nieman colleague, Grzegorz Piechota, a Polish media executive, studied the strategies they’re using, especially BuzzFeed, which had seemed to have found the key to prosperity in the social web, growing aggressively across 45 platforms, until April, when it slashed its 2016 revenue targets by half.

There is money to be made on social networks for publishers that can figure out how to co-operate and compete with corporate “frenemies,” Piechota says, but they face serious risks, since the networks and their algorithms are so unpredictable, and given to aggressive technological switches designed to wrong foot their competitors.  

“When elephants struggle, they sometimes step on ants,” Piechota writes.

More cities will have no newspapers

But what other options do media organizations have?

Some big newspapers companies are trying to succeed through scale, Benton told us at an end-of-semester panel discussion, trying to manage declining ad revenues by consolidating, keeping management and printing costs down.

When that doesn’t work, we will see people who don't know or care about journalism buying papers, stripping them of assets and shutting them down.

"We're going to start seeing more cities that don't have newspapers.”

And no big paper, except the New York Times, has discovered a way to make much money on subscriptions, Benton says.

Legendary investor Warren Buffett, who bought newspapers when other people were selling them, hasn’t given up on them yet, but he hasn’t found a model that works, because readers have grown accustomed to free online content: "What surprised everybody is that the rate of decline has not slowed for circulation or advertising." 

Benton expects newspapers’ revenue slide to continue, because there is still a significant gap to be closed between their (declining) share of the public’s attention and the amount of revenue they get from advertisers.

Urgency is an important driver”

There is some good news. We had a great talk from Melissa Bell, co-founder of Vox, which is managing to produce excellent long form journalism, paying for it with smart in-house-designed advertising.

And an interesting Dutch publisher, Ernst-Jan Pfauth, came to town to tell us how he and a small group of journalists managed to start De Correspondent, a crowd-funded online magazine that has so far signed up 48,000 subscribers. 

There are similar user-supported startups in other cities, including Canada’s own Canadaland, although none as successful as De Correspondent

But there are very few sites that have found a way to make local news pay. I’m been impressed the success of AllNovaScotia, a subscription-only Halifax site that is approaching 10,000 subscribers. But there are few similar sites. In most communities, only newspapers are doing the important but unglamorous work, covering municipal council meetings and court cases, and with revenue crashing, papers have fewer reporters doing that all the time.

In May, I went to New York for the World Media Economics and Management Conference, where executives and academics from around the world gathered to try to figure out how to, for example, monetize the first three seconds of scrollng Facebook video.

I had the chance to ask Martin Nisenholtz if he sees any hope for newspapers.  

Nisenholtz, now a Boston University professor and publishing executive, set up the New York Times paywall and has been wrestling with the business problems for online journalism ever since. 

He told me he is hopeful about the future, because newspapers are going to learn how to win support from readers. He struck an optimistic tone, but his message was actually mixed.

People still like to read print newspapers, he said, but “advertisers have left the building,” so “print is going to sunset.”

For years, newspaper execs couldn't accept that print was sunsetting, he said. They can no longer keep thinking that, and so may finally be forced to figure out how to get readers to pay.

'Urgency is an important driver.''

Stephen Maher spent 10 years covering federal politics, first for The Chronicle Herald then for Postmedia News. He recently finished a year as a Nieman fellow at Harvard University. His second novel, Salvage, will be published in August.

J-Source and ProjetJ are publications of the Canadian Journalism Project, a venture among post-secondary journalism schools and programs across Canada, led by Ryerson University, Université Laval and Carleton University and supported by a group of donors.