12/3/12

What we now know about news and news revenue in the digital world


There has now been enough experience and research to draw conclusions about how news is transitioning to the digital world and what it means for news companies. If one objectively views the developments, one sees that the current developments are is neither as bleak as some journalists portray them nor as rosy as some digerati frame them. Instead, we have reached a point where digital news is becoming workable in commercial terms, but is not yet mature enough to erase the industry's business challenges.
News consumption in the digital environment is significant and audience reach is now 5 to 10 times larger across digital platforms than for print editions of most newspapers.  Many large news organizations are now generating 15-25 percent of their revenue from online, tablet, and smartphone platforms and benefits are starting to appear for some mid-sized players as well.

If we look at what has occurred in the past decade, there are some important lessons to embrace about news businesses in the digital environment:
  • Commoditized news does not create economic value; you have to provide something unique if you are going to get the public to pay for it
  • Consumer payments are becoming a more important revenue source than advertising and success come through creating more sources of revenue than merely audience sales and advertising sales
  • Paid apps for news on smartphones and tablets are gaining better acceptance than general online payments, and
  • new partners, networks, and value configurations are needed in the digital world.
When it comes to payment issues we now know that:
  • Willingness to pay is affected by the platform used (partly because of expectations and traditions and partly because of better payment interfaces), as well as the number of free digital competitors in the market
  • Willingness to pay ranges from about 4 to 12 percent of the public in markets that have been studied
  • Larger legacy news players seem to have advantages when seeking digital payments because of their offline size and resources and the strengths of their brands
  • Instituting a paywall reduces website traffic between 85-95 percent
  • Metered ( freemium) models provide brand and marketing advantages and reduce traffic loss somewhat
  • Cooperative paywalls involving multiple newspapers are beginning to work in some locations and provide economies of scale and transaction cost saving that are useful for smaller organizations
  • Public affairs magazines are finding it easier to get the public to pay than newspapers, especially on tablets. This may be due to differences in how they approach and present content.
It is also apparent that users expect more from digital environments than the print environment and that they are more willing to use and pay for news if it offers a better experience (convenience, simplicity, ease of reading/viewing, enjoyment), if they can influence the presentation and consumption and interact with content and other users, if content includes more analysis and access to additional material, if it includes audio-visual material, and if it offers various usability tools. Those factors mean that news organizations have to offer digital content that differs from the print newspaper in many ways.

We have learned that to make money from news in the digital world companies have to focus on customer needs (not the needs of the news organization), must be realistic about financial expectations (you won’t make as much money as in the 1990s and growth won’t be highly rapid), and that you cannot just transfer the same content among platforms because each platform requires different types of presentations, story forms and navigation.
Some news organizations are making good progress in getting things right and the public is increasingly seeing value provided by news on digital platforms and evidencing increased willingness to pay. Most news enterprises still have a long way to go, but we have no reason to be  highly pessimistic about the future of news in the digital world.

No comments: