Yet Another Successful Model For Local Journalism

from the it-works-it-works-it-works dept

All too often we’re accused of being “negative” around here, by showing stories of failing businesses — but we love the success stories even more. With various newspapers going out of business, and their bosses complaining that there are no business models other than charging readers (something that won’t work for almost every newspaper out there), it’s always good to see other examples that do work. A few folks have sent in a great writeup by Jonathan Weber, discussing a business model that can work for some types of online journalism. Weber knows because he’s actually making it work today via his company, New West, which just so happens to compete in the same market that recently “lost” the Rocky Mountain News.

As a four-year veteran of a journalism-driven local online media start-up, I believe there’s a very viable business formula that’s actually quite simple, and here today: take advantage of new tools and techniques to cover the news creatively and efficiently; sell sophisticated digital advertising in a sophisticated fashion; keep the Web content free, and charge a high price for content and interaction that are delivered in-person via conferences and events. And don’t expect instant results.

And indeed, while Weber notes that his operation is still quite small and certainly isn’t a replacement for a full newspaper (yet), it seems to be working for his operation — with a big part being embracing new communities and new tools to make journalism much more efficient:

The editorial model relies on a combination of professional journalism (currently two full-time and four part-time professionals, as well as a number of freelancers); what we think of as semi-professional journalism (talented writers or subject-matter experts who do something else for their day job); and citizen journalism (bloggers and others who contribute on specific topics, sometimes for small sums of money). We don’t have copy editors, but rather copyedit each others’ stuff. We’re direct and conversational in our style, which is actually easier and quicker once you get used to it, and more appealing to readers than old-style newspaper formulas.

We have a very active photo group on Flickr, and get great feature photography from that. We mostly use Google for fact-checking – not fool-proof, but it works. We use Twitter and Facebook and RSS to push our stories out into the world. We do great video-driven stories when we can, and happily link to others’ videos. In fact, we happily link to a lot of stuff, sometimes in combination with our own reporting and sometimes not. We have lively comment threads, which we manage with as light a hand as we can and which are often additive to the stories in addition to being entertaining. We have very active event calendars in our local markets – separate from our main sites but well-integrated, and with a dedicated editor. We’re experimenting with a new social media site in Missoula, and we’ll see where that goes.

And for all the complaining about how online advertising can’t support such a journalistic endeavor, Weber points out that the “common wisdom” is simply wrong:

On the business side, we’ve found that the conventional wisdom about plunging display ad rates is simply wrong. If you have a quality site, with good editorial that drives meaningful traffic, and you work closely with advertisers and offer them flash ads, video ads, good stats reporting, and the opportunity to help understand a new medium, they will pay a premium. A critical thing we have learned is that selling online advertising is more different from selling print or broadcast than mostly people think. I’d suggest that the difficulties traditional media outlets have in getting good prices for online advertising have to do not with the medium itself, but with the learning curve involved in figuring out how to sell it properly. It took us a couple of years, and we didn’t have any legacy issues to deal with.

Everything on the Website is free, but we have about 1,000 people who pay $150 or $300 or $500 a year for their NewWest experience. This experience comes through conferences and events, which have been a major revenue source and an excellent promotional vehicle for our site. The conferences are content-driven – programming a conference is in many ways very similar to editing a magazine – and thus we see it as part-and-parcel of the journalistic mission, not a distracting commercial add-on. If anything, people like conferences even more when they spend so much time interacting via a computer screen. Conference attendees are our loyal subscribers, and they pay a lot for our content.

Yes, it’s still an experiment, and it may only work for certain types of reporting — but it’s yet another example of a business model that works — similar to numerous other ones that we’ve pointed out. I’m sure that, just as with the recording industry, some folks will continue to insist this is an exception and “it can’t work for x, y, or z…” but just like in the recording industry, the more such “exceptions” we post, the more people will realize that these new business models aren’t exceptions at all… but the rule.

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Companies: newwest

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Comments on “Yet Another Successful Model For Local Journalism”

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Weird Harold (user link) says:

I think you brushed over the key element here:

Everything on the Website is free, but we have about 1,000 people who pay $150 or $300 or $500 a year for their NewWest experience. This experience comes through conferences and events, which have been a major revenue source and an excellent promotional vehicle for our site.

I have to wonder firstly would they be in business without doing this? It would appear to be a pretty big part of their income (based on staff numbers of 2 full + 4 part time, they money from these conferences could cover all of that). So are they in the newspaper / online news business, or are they in the conference business?

It sort of also makes me wonder how long people will continue to pay far over market price for this sort of thing. If these “overpaying fans” (my term) disappear, does the website still exist?

Or put it another way, do the end up like the Guardian, complaining about too much free traffic?

JJ says:

Re: Re:

I have to wonder firstly would they be in business without doing this?

Um, that’s the WHOLE POINT.

They came up with a better business model that didn’t rely on charging for the content directly, but are charging for a scarcity: the events.

Your question is like saying: man, I bet pizza parlors wouldn’t be in business if they didn’t sell pizza. Here’s a site that comes up with a good business model, and your response is “man, that would never work if they didn’t use that business model!”


Weird Harold (user link) says:

It’s like talking to the peanut gallery around here.

My point is this: If they are entirely dependant on something which is not the core business, is that not then the core business?

Calling it a “newspaper” when in fact it is a conference company that happens to have a local news blogs isn’t exactly the same thing.

More importantly, can a business truly survive on massively overcharging a small group of customers in order to allow all the free loaders to enjoy the product?

I understand it is the point, just too bad you guys can’t think past the end of your noses and see my point.

Peter Thomas says:

Re: Re:

If they really are “massively overcharging a small group of customers”, surely those customers would realise and go to competitors with a more attractive price? As they do not, this renders your argument invalid.

Look, it just works. You do not know how, and you don’t even seem willing to learn.

Take a look at the model of public commercial television. They spend huge amounts of money on actors, make-up, cameramen, studio hire, lighting, researchers, writers, etc, etc… and it’s only the bunch of guys in the sales dept who bring in the money from adverts. It just works, and has done for decades. Learn. Please.

Weird Harold (user link) says:

Re: Re: Re:

Peter, sorry – but the TV people sell airtime to a small group of advertisers, and charge them according to measured viewership. That in no way matches up to charging end users $500 a year for access to what is already a free website and some conferences.

Public commercial broadcasting works by collecting together an audience and selling eyeballs. it doesn’t overcharge the end users at all.

So I don’t get where you are going with this.

Peter Thomas says:

Re: Re: Re: Re:

They’re not charging end users $500 a year for “access to what is already a free website”. They’re charged for the conferences.

This local journalism model is also about selling eyeballs. Yes, the majority of people are getting something for nothing (just like commercial television), while a select few are choosing to pay to get access to the conferences.

Giving out the website content for free enabled that to happen. That is “selling eyeballs” in a sense.

It’s been said here before: with a scarce resource, you give away 1% of your product to sell 99% of it, ie: a perfume sample. With an infinite resource, people are giving away 99% of it to sell 1% of it (ie: virtually any successful website).

No matter what you say, it is working, they are in profit so why even bother arguing against it? I wish I thought of it. Good luck to them.

Mike (profile) says:

Re: Re:

More importantly, can a business truly survive on massively overcharging a small group of customers in order to allow all the free loaders to enjoy the product?

It’s not overcharging if people are willing to pay. That’s the whole point that we’ve been making. A transaction where both parties are happy with the result is a perfectly reasonable business model. I’m not sure why you’re so anti-capitalist that you dislike such business models.

Weird Harold (user link) says:

Re: Re: Re:

Mike, that is a short term answer. It isn’t being anti-capitalist, it’s about being realistic. Part of the problem is that the only upsell from free is expensive, and it has to be to allow maybe 1 in 1000 people to pay enough to make the other 999 enjoy free service. It is often way harder to make one large dollar sale than it is to make 1000 smaller ones.

Another example, sort of off track but the same thing: The UFC does something that drives me mental. They give away a fair bit of their product on TV (on Spike, including a live fight card that was on last night). But when it comes to pay per view, well, $44.95. (wrestlemania is a stunning $64.95). My problem is this: Watching the event alone, I have a very hard time justifying 44.95 (in part because much of it is on free TV the rest of the time, which for me dinimishes the value of the product, and in turn changes what I am willing to pay).

I wish like he they offered it up at $19.95, I would be all over it. Instead, and $44.95, the places I can see are the local bar (they probably don’t pay for it either), or I end up with a group of friends to watch it if I can find a big enough group.

Basically, they priced it out of my value range, and left me with two choices – overpay for a 2-3 hour show, or wait and see it for free later on TV, and enjoy the weekly shows that are on Spike for free anyone. Yes, the stuff on Spike is doing a good job, but because they have priced their upsell too high, I’m not buying it (and I don’t know anyone else who buys it to watch alone or with their girlfriend, who likely isn’t interested anyway).

It’s a functional (but in my mind horrible) business model that is predicated on a smaller group of people paying way over the numbers for the product, while the rest of us do whatever to enjoy it for free because they didn’t offer us the right numbers.

$500 for conferences from a local media source that is now web only? That is paying over the numbers, thank god for those over spenders, but how long before they realize they are overspending?

Mike (profile) says:

Re: Re: Re: Re:

WH, I suggested a few times in the past that you learn some economics. I will suggest it again.

Your example makes no sense. You talk about your own experience and then ignore the difference between individuals and the aggregate. UFC has realized that it makes more money WITHOUT you paying for their PPV product. That’s how it works. They’ve segmented the market. The fact that you are in a different segment doesn’t mean the whole world is.

Same with NewWest and its conferences. The people paying $500 aren’t overpaying. If they were, they wouldn’t pay it. They’re happy to pay it — and having run a few conferences in my life, I know that people are willing to pay much more than that in many cases.

Martin Langhoff says:

Overcharching vs Freeloading

The freeloaders have been around for ever

– the radios play music that you “overpay” to get on vinyl, tape or CD
– radio hosts quote and read from newspapers without paying them
– books are available in huge quantities for free at the library
– people quote from books, speeches and various other works, for free
– people “overpay” to watch movies the week theyare released — when they can wait a couple of months and watch it cheaply on DVD, or years and watch it open TV
– all satire authors are ‘freeloaders’, riding on the popularity of other peoples’ work

So… it comes with the ‘intellectual property’ territory. Ideas are hard to contain in a box, luckily! So successful models always have to work with a large number (often majority!) of freeloaders.

If the freeloaders increase the value of your sellable goods, you have a chance at a business model. If the freeloaders _decrease_ the value of your sellable goods, you are in trouble.

In terms of background reading: Yochai Benkler’s The Wealth of Networks provides good economic theory to explain how these models work; and Larry Lessig’s books on copyright give a fantastic legal and historical perspective.

So, Weird Harold, the situation is that all the other posters here already expect a mix of freeloaders and payers. The game is on to find which mix can be turned into a workable model.

Weird Harold (user link) says:

Re: Overcharching vs Freeloading

ALmost all of your points are just wrong:

– Radio stations pay for the music they play, and we pay with our attention to their ads (or subscription fees to XM)

– Radio hosts don’t read you the full newspaper

– libraries rarely have enough copies of the books, and you cannot keep them for yourself after.

– Again, they don’t read you the whole book.

– The movie theatre experience for some is worth the extra price, but they aren’t charging $200 or $300 for a 2 hour show.

– satire isn’t freeloading. I don’t even know why you put this on your list.

So if this is what you learned from Larry Lessig and Yochai Benkler, I am only hoping there is more to their ideas that what you are posting.

Easily Amused says:

It’s all semantics Harold… If I knew of a place that rotated my car tires for free whenever I wanted, and charged for minor service and new tires were sold at cost – I would call that a good tire shop. Now what if they didn’t even cover their costs doing auto work, but made all their profit selling bail bonds. Would that make them less of a good tire shop?

The point is that people are trying new models that work with the scarce resources they can sell, not just giving away content for ‘FREE!!!!!!’.

cram says:

“UFC has realized that it makes more money WITHOUT you paying for their PPV product.”

And why is it that the PPV product is priced out of WH’s range? Is it because UFC wants to make up for perceived lost revenue as a result of all the free stuff, or has UFC decided it’s just gonna milk whoever’s crazy enough to pay 44.95? Isn’t WH right in saying that if more people weren’t freeloaders, he wouldn’t have to pay so much for the PPV? After all, it is a matter of scale.

Trent Reznor priced his ultra limited edition box set at $300, perhaps because he thought it would be easier to find 2,500 people who’d pay $300 than, say, 25,000 who’d pay #30 or 250,000 who’d pay $3 (for a no-frills CD with just the music).

Since the music’s free, it makes sense for him to create something exclusive and price it real high.

“That’s how it works. They’ve segmented the market. The fact that you are in a different segment doesn’t mean the whole world is.”

The whole world is freeloading…which is probably why he is in that segment.

You wrote about Kodak changing its free site to a pay site – isn’t that a consequence of everyone expecting everything for free? Or maybe they don’t know basic economics or haven’t applied the correct business model.

And why aren’t you addressing WH’s main point? If a company is making all its money from conferences, doesn’t it mean it has stopped being a newspaper company that runs conferences and has become a conference company with a free blog? Is that a good thing? Is that what newspaper companies are destined to end up as?

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