Putting a price on legacy news – really

Several classmates noted the Pew report finds the decoupling of advertising from news is at the core of the painful transition that all news media are experiencing. One noted that the Pew report attaches the problem to all news media, even new media utilizing Internet advertising. Another focused on how newspapers are tied into this problem. Her lucid summary included the proposition that any newspaper valuation discussion should measure storytelling excellence, coverage depth in the market area, and other journalistic performance levels.

My analysis also focused on the decoupling of advertising from news. The report clearly states that this fundamental tear in the business model is the underlying problem for revenue declines.

For decades the news business has been one of those rare for-profit symbiotic enterprises that is paid for what it produces with money from clients who are not its primary targeted customers: advertisers rather than readers. It charges advertisers for the privilege of “riding along” with the core product. News consumers form a mass market for those advertisers. The news media came to depend on advertisers and advertisers valued the mass markets the news media provided.

That is changing. Advertising is paying less and less of news media’s bills, even, according to the Pew report, those of Internet news media.

Clark Hoyt, the New York Times public editor, touched on one aspect of the problem in his Sunday, June 22, 2009, column is titled “Putting a Price on News.” But his approach is more about values and newsroom staff sizes than the real nitty-gritty of price. And it entirely ignored the problem that pops up everywhere in the Pew report about where the money always came from to pay for high value news content that those superior newsrooms produced.

It seems to me that if we really want to put a price on news we should start by asking how much it costs to produce without advertising subsidies.

So I thought I’d do a simple country-boy calculation based on my own (at least formerly my own) newspapers, based on some basic facts and accounting. I figured I should be able to calculate how much producing an all-news/no advertising newspaper costs by subtracting all the expenses associated with advertising from the total expenses. I used annualized numbers for my two weekly Washington community newspapers from 2006. Since I don’t own theses newspapers anymore I will use percentages to report my model but they are derived from actual P & L numbers. Anyone who has access to Inland Press numbers could do the same thing across much larger groups.

Here, in summary, is what I learned:

Total sales-related expenses as a % of total costs

Employee costs – 19.47 percent
Production costs – 7.18 percent
G & A costs – 6.48 percent
TOTAL – 33.13 percent

Some of these percentages are based on weighting certain expense line items, like web press, postage and delivery costs using the advertising to editorial ratio we usually run. These aren’t down-to-the-penny calculations but they are pretty reasoned estimates. If they error they error on the low side of costs. I double-checked these calculations on two of my other weekly papers in another state that have different overall cost numbers, page counts and paid subscribers, and came up with all sales-related expenses at 31.96 percent of total costs, so the numbers seem to be in the ballpark.

This means for these papers the actual cost of producing and delivering news only (no advertising costs whatsoever) was about 66 percent of what it cost with advertising added. Keep in mind that I am ignoring the revenue side here.

Dividing the dollar amount that 66 percent represents by the number of paid subscribers, then factoring in the number of editions gave me the following:

Actual gross cost per edition per subscriber $6.83
Annual gross cost for 52 weekly editions per subscriber $355.29
Annual projected gross cost for 365 daily editions per subscriber $2,493.85

That is my best country-boy guess on what news produced via legacy newspaper modalities (web press, newsprint, postal delivery, etc.) actually cost us. Now don’t think I equate those weeklies one-to-one with the New York Times. All I’m saying is that it is possible to roughly calculate the cost of news as we have traditionally produced it by subtracting the costs associated with the advertising side of things. Other legacy news media can do the same.

Putting a price on that actual cost, Mr. Hoyt’s column headline promise, would simply require adding a markup. Choose one. A 20-percent markup takes the price to $8.20 per copy, $426.35 for an annual weekly subscription, and a whopping $2,992.62 outlay for an equivalent daily annual subscription.

Putting a fact-based cost on news gives us a much truer idea of its real value in society. Will society be willing to pay that unsubsidized price? In his Times column, Mr. Hoyt quotes a subscriber, Michael Norris, saying “Count us in for whatever rate you decide to be necessary to ensure the continued survival of The Times.” But can we really count on Mr. Norris when the minimum starts at a minimum of $3,000 a year? And remember, that is for one news source.

Moving to WordPress

I needed to push myself into new realms so I’ve decided to move 20 CENTS: NEWS PARADIGMS before I get too many posts put up. I will be movin the early posts over here and lower casing the title. I also hope to have a little more design flexibility. The result of this is that a flood of posts will appear in short order here and then should start to space out to six a week. That’s the plan anyway. So, here is No. 1 with more to follow.

A word on dates. WordPress, I found, allows redating of posts. After I posted this originally I went to Blogspot and just brought over bunches of the 20 cent essays in two sittings. The dates were all wrong and the essays were clustered in the wrong order. Ever anal about such things I went back and put the original post dates on the essays so that date accompanies them now in WordPress.

Gnawing on old bones

The Pew 2009 State of the Media Report has been out long enough that it has elicited more than a few comments. But I continue to gnaw over parts of it like a one bone junkyard dog. And whatever juice emerges just seems to nourish my contrarian ideas.

That is really not the direction I intended and still intend to take most of the time here. I intended to turn my mental pockets inside-out and empty all my portentous thinking about new paradigms of news on the community table. But I read stuff and keep wondering two things:

1. Are we really just at the bottom of the continuing, ever-present cycle of demassification instead of in the void between paradigms?
2. Did we try hard enough to sell the long list of benefits of legacy media?

I have put forward a hyperbole of incompetence for media’s self-promotion efforts. And it is just that, hyperbole. I know there have been brilliant branding and self-promotions done by newspapers and other legacy media large and small.

I have criticized the lack of internal R&D departments with yet another broad brush of totality with equal unfairness.

Yet here we are, pretty much a failed state of media, with refugees running to the camps of academia or public relations jobs and strange new media lords populate the unexplored corners of our geography.

Could we have fought harder? More effectively? Smarter?

Herb MacLean, who was definitely the boss of me in my pre-journalistic years in sin working for his ad agency, would get out his yellow legal pad and start a list of benefits.

It’s a no-bull, full truth, tightly specific list. If I started the list in a creative conference he would cross out most of it. Then he would start us making similar lists for our client’s competitors. Then we tried to sell each of the products to Herb. Now that was war.

But you came away from that battle with a damn sharp copy writing pen and illustration brushes sopped with color. You could craft a subtle approach or a full out, head on, point-by-point compare and contrast.

I read stuff from the Pew report like “In 2008, audience gains at sites offering legacy news were far larger than those for new media” and “The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem–the decoupling of advertising from news.”

And I have a sneaky suspicion that maybe we forgot to sell and keep selling how legacy news media has powerful benefits that these upstart media lords and their jibbering conversations not only don’t have, but won’t and can’t ever have.

If only it’s not too late.

Fighting demassification: Soft vs. hard porn…er, promotions

If media audiences have always been under the attack of demassification by new entries into media, what the heck, if anything, will save the mature newspaper industry?
My classmates are discovering answers both weird and profound. Here is a sample of the former: http://www.youtube.com/watch?v=52VdW8qFJ6Q&NR=1

Another classmate recently posted this YouTube post for class consideration of the latter. I was gassed that someone is taking a swing back at newspaper’s detractors, any kind of swing. And this last one isn’t bad. It has solid production, it is emotionally powerful – or at least was for this Median – and the background song was a great match. We needn’t raise any nagging questions here about copyright infringements or the like.

So, all in all a bangarang effort employing the tools of marketing and promotion that the media has pimped for all these many years while mostly using badly or not at all for our own self-promotion.

But the problem/wonder of YouTube is that right there by the video you are watching is selection of related videos and I succombed. I put up this Wall.Strip post and lapsed back into angry frustration and quickly did a mild flame on my classmate (school rules forbid downright firestorms on the discussion board).

I noted that the pro newspaper video had 1,084 views while the newspapers-are-dead-and-should-stay-that-way video had 6,062. “So,” I wrote, “does this say anything about emotive messages with great art and songtracks in the background compared with nice-looking women presenters and nerdy side graphics punching out hard, fact-based attacks?”

Time has allowed me to edit my original comment, I admit, but that was essentially my meaning. Time also enforced posting this before I had a chance to check how long each of the YouTube videos had been up for viewing, but that didn’t stop me from proclaiming the enemy ahead by six to one.

Still, the answer to stopping the audience erosion of demassification is for media to figure out how to identify and successfully promote the real, existing benefits of traditional forms. And I’ll also posit for this post benefits of traditional forms sans the fol der rah of new forms.

Old paradigms made new again, you might say. How contrarian is that?

D-d-d-direct mail – a de- and re- massifier

A friend has pointed out that 20 Cents left out (at least) one or two forces of media demassification in the last post: direct mail pieces and Total Market Coverage shoppers. There are two other categories I can think of off the top of what’s left of my head: free (stand or counter delivered) classified publications like Little Nickel, and free alternative (usually) weeklies. Usually in resort towns or other locations where demographic and geographic characteristics combine favorably, there were free dailies. I believe Colorado ski resorts like Aspen and Vail were among the first, but I might be mistaken and a California or Wyoming ski resort may claim dibs.

High quality printing and access to mailing databases made direct mail viable. But Valassis Communications, one of the big direct mail houses, is riding a downward curve similar to that of newspaper companies, according to Morningstar. Five years ago their stock sold for about $30, today it was running at about $5.72.

TMC shoppers deserve and will get a separate post. Some of the others listed here as well.

There are two points to this apparently feckless regurgitation of historical fact interesting only to fellow Medians. First, the idea that newspapers in particular, ever enjoyed a monopoly of market as a mass medium is not correct. Demassified media was the norm while mass media existed only as a percentage of the market, as a theoretical ideal, as it were.

Second, while many of these media achieved a market majority audience, meaning they were at least delivered to, sold to, listened to, or broadcast to a majority of households within their defined market, it is probably safe to say none every achieved total mass market penetration.

And I guess there is one other thing that is probably the most significant. Whenever any other kind of media entered the market, some of the audience always abandoned ship. Maybe it became a habit to not fight hard or smart enough to prevent it in the first place, or recover them in the second.

There were roaring fights where we tried, for sure. But can anyone remember any with a success rate more than mediocre?

This ain’t church no mo’ – demassifying media

Conventional Wisdom only thinks it is based in solid historic antecedents. But like much of current opinion, history is an old relative dimly remembered and glossed with each history-tellers own etchings.

We Medians (n. pl. of Median, after media from advertising, circa 20th century, + n after math notation for gluttonous but indeterminate, as in “raise that to the nth power”; connoting those addicted to endless discussions of the media) have difficulty recounting an accurate genealogy for mass media and mass communication.

Only recently 20 Cents provided two voices on how j-schools can remain relevant in the current media terrain. Neither of those pointed out a very obvious and fairly inexpensive step: Remove the Mass Communication ending if your name includes it, as in …School of Journalism and Mass Communication. Mass Communication is nomena dubia and probably has been since the early 1920s. Philip Meyer says that’s when the newspaper industry peaked at a whopping 130 percent average daily circulation per household. Yep, per household. It’s right there spread between the forth and fifth pages of his book, The Vanishing Newspaper. It has certainly been downhill since.

Rather than spend a lot of time with his math I’m going to return to the idea of mass communication and its antithesis, demassification of communication. By the way, we Medians have appropriated an equality of meaning between communication and media. So, saying mass media and demassification of media is much the same as saying mass communcation and demassification of communcation. I have just about run out of italic letters, so I’ll need to come to the point, or try anyway.

Denis McQuail starts his swing at defining mass media by applying scale, time and distance. Personal communication, by contrast to mass communication, is most often limited in scale, or distance, or time, or some combination of the three. The mechanism, or media, or tool, used for the two types are therefore different. Denny, as his mother called him, bullets four elements that are part and parcel of telling mass media history:

• certain communicative purposes, needs, or uses;
• technologies for communicating publicly to many at a distance;
• forms of social organization that provide the skills and frameworks for production and distribution;
• organized forms of governance in the ‘public interest’.

McQuail, Denis. (2006). McQuail’s mass communcation theory. SAGE Publications, Ltd.:London, p. 24

An example: The Romans posted summaries of the Senate’s deliberations and outcomes outside its chambers for citizens to read. Messengers also carried copies to the far corners of the empire where they were posted and also read aloud. Scale, time and distance and the four bullet points merge and voila!, mass communication through mass media results.

The Christian Church also had an effective form of mass media for the spread of religious awareness and obligations – you guessed it, the Mass. Before you laugh at liturgical forms as ‘mass’ media think hard about the ritual element in the communication theory of James W. Carey, upon which McQuail greatly depends for his four bullet points (See Carey’s essay “Reconceiving ‘Mass’ and ‘Media’ “).

Mass media’s latest iteration arguably began with the telegraph, which paved the way for the great urban penny and nickel newspapers and shocked the populace with the speed at which information could be delivered. Before the birth of the great urban newspapers, remember, objectivity was not even a sparkle in any editors eye. Early American newspapers might be thought of as effective and successful niche publications serving like-minded political, religious, or economic/geographic audiences and making a barely decent living for a few people at any one publication. Edwin Emery first, then with Michael Emery, traces this evolution and the next iteration of “general interest urban newspaper” in the several editions of The Press and America.

But demassification started almost concurrently with newspapers’ meteoric rise – from 1870 to 1900 the number of English-language, general-circulation dailes increased from 489 to 1,967 and weeklies from 4000 to 12,000+. Daily circulation went from 2.6 million copies to 15 million copies in the same period (Emery & Emery, p. 159). The interlopers were magazines and the telephone. If it weren’t for those two upstarts newspapers would have been the only mass media in the U.S.

Then came radio, then came television, then came internal niches in radio and cable television. In there somewhere came business-to-business pubs, and independent and chain business journals, and newspapers directed at seniors and ethnic groups. Then came the internet and its spawn.

My point is simple. We Medians have never really seen mass media. They have always been approximations. I just thought it was time to reshine a little light in the chapel of orthodoxy.

Leaving stories “out there”

Pigs and people aren’t that different.

I was rooting around in some old work done last year and rediscovered a thought I had captured about the changing journalistic mindset – or more accurately, the journalistic mindset that is evolving in non-journalists. I wrote it as a response to Jeremy Littau’s inspired new media instruction at MU. He liked it and buzzed it over to Carrie Brown’s blog, The Changing Newsroom. Her intro, sans the brilliant part, adds the backdrop, so I have included it. The original essay is slightly edited and updated, I hope.

“My friend Jeremy Littau, who is also finishing up his PhD in journalism at Mizzou, taught online journalism to Master’s students this summer [2008]. Jeremy recorded weekly “video chats” and uploaded them to You Tube for students, and one week he discussed how a “Web 2.0 journalist” approaches their work differently than a “1.0 journalist.” He argued that there is no longer a “two-step process for the journalist (think of story idea, do story) but rather a conversational approach (think of story idea and often the result of conversation, ask yourself what the best way to present this story is in a way that both gets the info out there and also creates conversation, do story, remain involved with discussion afterward).”

***** ***** ***** ***** *****

My mind took another step around the corner today. I’m talking about the Web 3.0 corner. But it feels like I’ve walked right into heavy traffic.

I have been struggling for some time now, knowing that the next phase of journalistic evolution requires an entirely new mindset. I think I have grasped more intuitively than deductively that the old processes I grew up with are flawed somehow; that they don’t correspond to the reality in which we now live. But when Jeremy said that we can’t just leave our stories out there, the balls started to drop.

If Jeremy is right, and I think he is, journalists will move from detached production units of manufacture – measured in information bits – into the stream itself that provides the information. Moreover, they will shoulder a financial responsibility largely downplayed to this point. Jeremy characterized the current process as gather, publish, move on – “leaving them out there.” Whether people read or watch or listen with interest to those stories has never directly been accurately measured, something that would enter a job review for instance.

I know there are some exceptions to this. Ongoing stories do get followed to a point. Cable TV made its bones by never letting go of a story until it was three times dead. The assumption of financial responsibility for audience involvement has been with the managers of journalists, however, and only a vague discomfort to the journalists themselves. The exception regarding journalists who practice their craft in book length media form makes the point. Those folks are directly linked to the financial success of their enterprise by the perceived quality of their output. The reality, however, is that we don’t often use the tools available to determine the extent individual stories contribute to overall financial success as a standard measure.

The new paradigm of stories that don’t start when the journalist becomes aware of them or stop when the journalist finishes publication is another aspect of this evolution. The idea that the new species of journalist must continue to engage the story as it evolves and mutates is dramatically different than the compartmentalized stories of the old journalistic universe. Web 2.0, 3.0, the Cloud, or whatever we call it, goes far beyond updated editions. It seems to be calling for the tenacity of intellect and social skills that far exceed any current working journalistic mainstream media model and perhaps even tests the limits of New Media.

I disagree with those who compare this new paradigm with afternoon papers and the idea that this new world is just a more featurish approach with a zingier presentation added to what we currently do. I think Jeremy’s point about creating a story platform for interaction does most to argue against that approach. Blog motivations study author Barbara Kaye said it clearly, “…users may but are not required to respond to a blogger by sending comments and links to additional information.” In the future world of Web 3.0, if there is any recognizable element of the mass media journalists of today, their effectiveness will be measured by precisely how many users do respond. Blind hits alone will not lead to the subsidies necessary for the sort of work load we have envisioned.

This is a scary new world of almost unimagined and undeveloped skill sets. It should provide lots of educational jobs if only there will be someone to hire the graduates.