Eat Sleep Publish

Being first to innovate in the startup space is a great thing. Be the first to build a comprehensive home-prices database. Be the first to effectively integrate stock market chatter into Twitter. Be the first to invent teleportation.

Everyone wants to go first because you get recognition and you get a head-start on your competition. You establish a gap in quality that acts as a buffer against other companies who are trying to steal your customers.

In the news business, nobody wants to go first.

The first objection I hear from newspaper staff when I talk about new business models or new products is “nobody else has done it yet.”

Given that the whole industry is flailing at the moment, I’d say originality is a good thing. The companies that succeed in the news business over the next five years are going to be the ones willing to try things that no one else has tried yet. Or even better, try things that others have already dismissed as failures.

It’s scary to try something new. But this industry can not reinvent itself by sticking to the beaten path.

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I read an interesting post about “Free” as a component of a business model. I encourage you to go read the whole post on Techdirt, but the bit I’m interested in is here, where Mike Masnick presents, and then disagrees with, an argument against the use of “free” –

Unfortunately, both Pogue and Poole then use this to bash the entire concept of free-based business models, with Poole getting unnecessarily offensive in his response:

“I’ll call it, for short, “the Slashdot argument”. It says that books, music, films, software and so on ought to be freely distributed to anyone who wants them, simply because they can be freely distributed. What is the writer or musician to do, though, if she can’t earn money from her art? Simple, says the Slashdotter: earn your money playing live (if you’re one of those musicians who plays live), or selling T-shirts or merchandise, or providing some other kind of “value-added” service. Many such arguments seem to me to be simple greed disguised in high-falutin’ idealism about how “information wants to be free”. Perhaps it’s not empty pedantry to point out that “information” doesn’t want anything in and for itself. The information in which humans traffic is created by humans. And most information-creating humans need to earn dollars or yuan to survive.

While I’m sure there may be some Slashdot-types who may make this argument, it doesn’t mean that it’s an accurate representation of the more important discussion of these business models. The main problem is his use of “ought,” as in people saying things “ought” to be free. It’s not that things ought to be free because they can be free — but that things will be free because that’s just basic economics. Price gets driven to marginal cost in a competitive market, and the reason it happens is because others do learn to put in place business models that work, and then if you’re the lone holdout, people start to ignore you.

When you unpack this, I think there are really two claims that Mike is making:

1. When the marginal cost of something becomes close to zero, economic forces will make it impossible to charge money for it.
2. Digital goods qualify as “something close enough to zero” that economic forces will make them free.

I’d agree with those statements if humans were “homo economicus” (rational beings that always behave in their best interest), but we’re not. The value of something is what people will pay for it, which is based largely on what people feel it is worth.

People will pay for digital goods. What’s the marginal cost for Flickr to add a new Pro account? Zero. What do people pay? $25/year.

Almost free and free are totally different things, and if you take the cost of almost nothing and multiply it by millions, you end up with a big cost. You need to be able to sell a lot of other stuff to make up for the cost of giving things away free.

You’re especially in trouble if your product goes rotten (old news), and it requires scarce goods (work) to create the abundant goods (digital news).

If that’s your production method, the real cost of your “free” product isn’t all that close to zero after all, which throws a huge wrench into the idea that market forces will force the market price to $0. It won’t do that if at a $0 price point, all news companies go out of business.*

Again, it’s not a matter of “should be free,” it’s a matter of economics; if the real cost of producing it turns out to be noticeably higher than zero (and I’d argue that it is), then it won’t be free.

The really scary thought is that even if the news business can make good money selling people’s attention to advertisers, partners, and data companies, then the business isn’t about selling news anymore.

And, well, there are much cheaper ways to build an audience that will support the real business (selling ads, events, who knows what else), and then the need for news as a method for building an audience goes away.

Worse than that, those organizations that try to use news as an audience-building method will find themselves at a terminal competitive disadvantage to those organizations that use cheaper audience-building techniques.

In a sense, the news industry has been using “free,” for decades, since subscription fees barely factor into print revenue – the real killer is that the cost of a newspaper’s true product (reader attention) has plummeted as the supply of attention-grabbing-material has blossomed.

What’s the answer? You change tactics and build a business model selling digital goods. If you really care about the news and not just the ads, then forget large audiences. Build a product that appeals to a smaller number of people in such that they will pay for it.

“Give it away and pray” is not a working business model. But for the news business, neither is “give it away for free and make money on the ads.”

To get more opinions on the future of the news business, subscribe to the Eat Sleep Publish RSS feed – always free!

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* I’m well aware that many content producers on the internet are making money by selling ads against free-to-the-consumer content. That seems quite possible for small operations, but I don’t think it will ever scale well, and I do think that a significant portion of the news necessary for democracy requires a certain amount of scale to produce. ( return )

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Copy editing is now a choice. As a reader pointed out the other day, TMZ doesn’t often bother with grammar; the reader gets the point.

It used to be that you just needed copy editors, because typos were embarrassing. But now typos are stylistic. Blogging mogul Jason Calacanis of Weblogs, Inc. (and now Mahalo) once pointed out that he doesn’t fix typos on his blog posts because it helps convey the immediacy of his thoughts.

Once again the internet surfaces niches where mass audiences once ruled. There’s a subset of people who want clean copy, and there’s a subset of people who don’t care, and there’s a subset of people who find clean copy pretentious.

Which audience do you want?

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This is becoming a much harder question to answer.

It used to be that experts were often certified or obvious. You were an expert if you’ve published on the subject. You were an expert if you’ve been through enough school. You were an expert if you were widely recognized as an expert.

Broadly speaking, “are you published?” is no longer a useful metric. You might argue successfully that I should shut up and go home, because all I’ve ever done is post my opinions on Eat Sleep Publish.

School seems to be lagging behind the times now, too. It’s still the cutting-edge place for expensive scientific research and any kind of progress that requires huge institutional resources, but what about software development and network effects? What about social media?

Becoming a real expert is just as hard as it ever was. You need to acquire real knowledge and real skills by putting in the time and work to get there. But faking expertise is easier than ever.

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If you’re a Seattle media company, you should be paying close attention to Neighborlogs.

In a community where there are dozens of passionate, skilled citizens who are actively building their own news following online, what’s the best move you as a legacy news institution can make? I’ll give you a hint: “compete with them” is not the right answer.

Embrace and extend.

Offer complimentary services so that you both win. Bring them into the fold. Neighborlogs provides technology infrastructure for individuals who want to start a neighborhood blog, and it just takes a little off the top. Good model.

Why not offer technology or network advantages to good neighborhood blogs in exchange for a revenue sharing agreement?

We’re past the point where blogging is a novelty, where good writing happens for free (trust me, even free blogs make money now). The benefit to a publisher in the new market is that you don’t have to promise a salary, you can promise a cut of the winnings.

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Romenesko links to the WSJ today, citing a paragraph where John Malone, chairman of Liberty Media, said he couldn’t figure out how Twitter would make money because there’s no ad model for it:

Malone said he didn’t think that an advertising model made sense on Twitter, but there was some hope for a subscription model. “Sooner or later people will be willing to pay for these services,” he said.

Of course, ads and subscriptions aren’t the only models available for online services. Companies like Twitter produce an incredible amount of valuable data that could be sold to third parties.

The thing about ads is that they’re kind of a cop-out, because you don’t actually have to sell your “core” product to an audience, you just have to sell that attention to an advertiser (which is often easy to do; advertisers are looking to buy attention, you just have to meet the right price point).

It’s a great arrangement when the price point is high. But now it might be time for newspapers to develop a product and sell it the old fashioned way.

And don’t worry about Twitter, they’ll be fine

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One of the big differences between small business and large business is the number of hats you wear as an employee. At a newspaper, you have reporters, photographers, developer (usually just one??), editors, illustrators…the list goes on.

They all have specializations, and they all cost money. A full salary. Benefits.

Neighborhood blogs have newspapers shaking in their shoes not because those blogs are real editorial powerhouses, or because they have the resources to compete on citywide coverage, but because they can do so much more with so much less.

I’m about to move to Eastlake, where former P-I staffer Curt Milton runs the Eastlake Ave blog. He keeps a part time job, makes tons of local connections, writes his posts, edits them, and shoots and edits and uploads video and pictures.

One person.

How can you compete with that?

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