Farai Chideya on new business models for journalism

Let's all attend the talk on Wednesday, November 19, Noon.

 

School of Journalism seminar with Farai Chideya on new business models for journalism

Farai Chideya will discuss new ways that news media outlets are funding journalism, and ways in which digital and pop-culture media are reshaping what we consider journalism. For example:

“Vice” was a skate magazine that became a multi-media empire doing a foreign-affairs show on HBO.

Twitter hired the former head of NPR, Vivian Schiller, to run its news division. She believes Twitter is integral to news yet says, “[W]e don’t have any reporters, and we don’t have any editors, and we’re never going to have those.”

Buzzfeed gets a $50 million investment, and its revenue stream is based partly on controversial “native” advertising, an evolution of the “advertorial.”

Public radio, newspapers, and network broadcasts are scrambling to adapt to a world with new competitors, many of which repackage and monetize the content they paid to report. How do journalists and journalism educators stay abreast of changes in media models, and also teach students how to make wise choices about their careers given the tensions between revenue-generation and editorial mission?

Location: Belo Center for New Media, Room 3.206

Online newspapers company are earning something more than money from readers

           This week’s readings are about that why is online information free. Facebook, google and youtube don't charge users but they make a huge profit that hard to be ignored. Why? The reason might be that users are the tools for companies to make a profit. I think it is the nature of Internet, sharing. Companies are making a profit by network externalities. They don't charge users because they need users to earn money.

            The other interesting question came to my mind. Readers are so used to reading free online newspapers but electronic versions of magazines are not free, ebooks are not free. Magazines and books have identical content with print counterpart. Why can emagazine and ebook charge but not online newspapers? Network externality seems to explain why can e-magazine charge but not online newspapers ? People reading online newspapers are likely to share the news they read, by sharing with others, online newspapers company can reach more viewers. This is very different from the way reading emagazine or ebook. Readers don't share magazines but online newspapers.

            Not all online information is free. I accidentally use free trial of Business Insider. It costs $500 per year. Their content is really useful and good. They charge for reasons. Report of Business Insider and online newspapers are digital content, but the former charge a lot. I guess the content for Business Insider is not for sharing. That’s why it charges like e-magazine or e-books. A major difference from people reading print newspaper and online newspapers is that people reading online newspapers are to share. Media companies are not earning money from readers but earning their interpersonal networks and their ”sharing ” to reach larger viewers. 

            If the goal of online newspapers company is not earning money from readers’ pocket but to raise advertising price by readers’ sharing, then the question that “how much readers should pay for online newspapers” might be a wrong question. Probably we need to ask “how to attract audience with free information?” or “how to make online newspapers cheaper than being free?”

Week 9 Reflections

(I accidentally read this stuff weeks ago and am reposting my old post with some new links)

My initial reaction to Ghosh's article was "wow, the Internet has changed so little in 16 years."We continue to see the sharing of free, intrinsic assets between citizens of different digital communities. Ghosh makes a case that people can develop social capital and reputation through online engagement however that doesn't translate to real money.

I argue however there is evidence that money can be made in the knowledge economy. Within digital communities is a wealth of free knowledge about peoples' purchases, questions about products, consumption patterns, etc. Within the last 10 years the cost of producing hardware as a result of cheaper microchips, the adoption of rapid, small scale fabrication using laser cutters and 3-D printers has greatly reduced the cost of bringing a product to market.

Within the online film communities I frequent, people not only are presenting knowledge or tutorials, but they've begun developing their own products/solutions which lead to companies. Some examples include, Jag35, HondoGarage, or VideoCopilot (software example). These small entities can fabricate new ideas quickly and also bring the ideas of their clients to fruition. A lot of these companies aren't large scale manufacturers and in many cases already the necessary equipment to produce. This allows them to be more agile as they don't have to mass produce to recoup costs.

Additionally, companies like Google and Amazon offer affiliate programs that allow opinion leaders or people with digital reputations, the ability to make a small fee from their blog postings.

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While reading Gladwell, Ghosh, and Anderson, I couldn't help but think about the environmental effects of our transition to a digital media model. What is the environmental cost of having on-demand access to produce and consume media/content? We've replaced printing presses with data centers that require a lot of energy. People are also upgrading their televisions, tablets, and phones at a pretty rabid rate that creates a huge amount of waste, much of which gets shipped to the developing world. There isn't a lot of academic literature I could find about this, though I think it could be an interesting space for inquiry.

The value of love and information

Ghosh, Anderson, and Gladwell open a great discussion about the value of information/content in a troublesome online economy where everything seems to be free. The main question without an answer here is what would be the economic model(s) that would support the production of professional content in online settings.

Ghosh attaches himself to basic economic principles: Prices rise with scarcity and fall with abundance. Because there is too much information available, the price of content would drop dramatically. Ghosh also argues that the economic model of the Web (if any) would reflect the real economic model of societies so it wouldn’t “contradict the economic principles that have generally worked.”

The most controversial idea of Ghosh is when he compares love and information in order to explain the new economic reality of the Web. He says love and information are extremely valuable even if they don’t have price tags on them. Of course love doesn’t have a cost that necessarily involves a transaction or hard cash (let’s not talk about prostitution or arranged marriage), but people never want to get a cheap love. Love is so important that they don’t want to get whatever is available.

Anderson, for his part, finds value in externalities such as attention and reputation, while Gladwell considers the quality of the content itself carries some value, and remembers the cost of maintenance and distribution.

Anderson centers his discussion around the idea of cross-subsidy: Costumers could get one product free (a dinner) if they buy another one (wine and beer) or acquire a different service.

His understanding of news as a subsidize product that lacks an economic model in the online environment is outstanding. Sharing the cost or finding an external value beyond the product (content) itself is an open challenge for online media.

However, Anderson falls short when he explains that cost of maintaining the network  (storage, processing, and bandwidth) is close to zero. That is not the case for many organizations that expend millions of dollars just to keep their users connected.

Gladwell wrote a harsh article in reaction to Anderson’s free content theory. His strongest points were around the quality of the content and the invisible expenses of maintaining the network. He does not believe in iron laws toward intellectual production. He considers a common error of “technological utopians” to assume that a particular scientific revolution would erase any traces of its predecessors.

He also talks about the invisible costs behind any product: “The expensive part of making drugs has never been what happens in the laboratory. It’s what happens after the laboratory, like the clinical testing, which can take years and cost hundreds of millions of dollars.”

Diversified market

In the “cooking pot’ article, Ghosh mentioned that “The cyberspace earnings come in the format of having a network of people that know me and trust me, and that I can depend on in return.” The word, ‘network,’ grasped my attention. I believe that networks can boost the development of technology and else. Such networks are totally free to join, thus, people whoever have some interests in the process of development can join without no restrictions.

Also, Gosh mentioned that reputation is “a measure of value placed upon certain producer-consumers - and their products - by others and the flow and interaction of reputation is a measure of the health of the entire cooking-pot economy.” This is totally true. On online sphere, like online opinion leaders, reputation is a credible and decisive factor for followers to consume the information that such opinion leaders are producing. They might be amateurs and might not want to earn money from their activities. We should feel thankful for such free works.

Consumers preferred free stuffs. It is human nature. They might be one of the participants for the developmental process of technology by giving fruitful feedbacks. BUT, I want to mention that besides free stuffs, there are other stuffs that consumers are willing to pay. Our market is diversified! Free vs paid stuffs.

When this division goes to Journalism, audiences can freely join some production of Journalism stuffs, like live-tweeting, blogging and Reddit. However, still some paid online Journalism stuffs are enriching (pay-wall). This means that some audiences are willing to pay those stuffs. Also, there is a clear difference between free and paid Journalism in terms of credibility. Journalists are well-trained and decent writers. This is the reason that journalists should be required to do more than ever. Their reputation on online does not guarantee their living. Of course free stuffs are keeping on developing, but journalists should precede such trends, to maintain their position and popularity all together.

Is This Real Life?

As I consider the thoughts of Ghosh in his article about the Cooking Pot, I ask myself "Is this real life?" When it comes to an online economy, different people make the same observation as the one found in Ghosh's article, "Many things found on the Net, though, can be found off it." So which is the primary product? Is it the one that is sold online, or is the one in the world of the physical. Do they both exist? Or are we going to eventually live our lives through online Surrogates. There are so many aspects of an online economy that seem a little strange to me.  Ghosh talks about the online use of value and not money, but isn't the concept of money just value associated with a piece of paper from a specific producer?

The consideration of posts, comments, likes, and shares as economic transactions is an interesting way to approach the purpose of the internet in an economic sense where people participate in order to contribute to discussions, meet people, and share ideas. Ghosh is, in affect, claiming that the internet is a knowledge economy, and "in a knowledge economy, every exchange of knowledge in any form is an act of trade." I understand his point and believe that the major difference between online and offline interactions of this sort lies in the duration that information exchange can last, as well as the accessibility to it by others. This brings up the consideration of value. Just because the information is available to people for free doesn't mean that it doesn't have value. However, in like manner, just because information is taking up space on the internet doesn't mean that it's valuable. How, in a market of infinite size, can we provide quality/value control for the information and economic transactions of an online world?

Reflections on This Week's Articles (Available Online for Free)

The articles we read this week nicely tie in a couple of things we’ve explored, including Picard’s first piece on journalists being overpaid and the notion of disruptive technologies. I think that Ghosh’s piece on Cooking Pot markets accurately depicts open source economics, and the value gained in reputation by contributing to them. Since the Internet’s roots are firmly implanted in open source and sharing information, I suppose it is no surprise that so much of the web is quote unquote free.

Of course, this stuff isn’t really free – our data, personal and behavioral, pays for it. But in order to make money you need lots of data and that means you essentially need a ton of users viewing your site. Google, Amazon, Facebook – sure, these companies traffic in data. The part I struggle with is what Gladwell I think rightly points to – namely how do you sustain things like journalism or the music industry when marginal costs drop to zero online, but the labor costs (paying journalists, compensating artists) remain in place. 

As we have seen, print sales and a few digital subscriptions subsidize the online free editions. Would a crock pot market approach work for news? Already, journalists are relying on Twitter feeds and other social media for some breaking news reporting. But admittedly, a completely open source approach to news is difficult to imagine, even with reputation of writing quality stuff as a form of currency. And yet, IMDb, to use Anderson’s example, has harnessed the free contributions of millions of users to build a massive and generally accurate database of the world’s movies. Could we imagine an Internet News Database (INDb) where users contribute articles for fun, with a handful of fact checkers paid through ad revenues? The luxury of IMDb is that it has no real competitors, but its strength is that it has also diversified by partnering with Amazon, which essentially buys the IMDb users so that it can market its products to them (streaming video, DVD sales, etc).

What strikes me the most is that when stuff becomes "free," attention becomes currency (as data), reputation and externalities become value, and content proliferates in a limited attention economy then competition becomes immense. You can make a movie (write a news blog, compose a song) on the cheap and distribute it online but so can millions of other people. At the same time, the market becomes fragmented – only some users will have time to see your movie (read your news blog, listen to your song). Since you need vast resources to invest into advertising your product so that it can reach the largest possible audience, most people will consume stuff with a lot of money behind it, or with an already established reputation. When you’re churning out free content for fun, such reputation can take time to build. So professional journalists should make journalism their hobby and focus on pursuing a more lucrative profession.