Journalism’s 3.0 Business Model(s)

    by Dan Gillmor
    May 6, 2009

    (Note: This posting is from Jeremy Pennycook, a graduate student at Arizona State University’s Walter Cronkite School of Journalism & Mass Communication. He wrote this originally for our class website.)

    By Jeremy Pennycook

    The Internet killed journalism.

    At least, as we know it. 


    Legacy media is on a serious decline.  It’s hard to argue with the numbers. The often named champions of web 2.0 – Google, Facebook, Twitter – these tools didn’t destroy the foundation of a business model which supported journalism and promoted a free, democratic, and open society for decades.  Instead, the real culprit is a fundamental shift in how society communicates, collaborates, and disseminates information. 

    The Internet is no longer a network of connections, linking various documents.  Web 2.0 brought about a revolution in content creation, granting the ability of self-publishing to anyone with an Internet browser.  Lines between consumer and producer blur at an ever-increasing speed.  And as web 3.0 looms ominously on the proverbial horizon, these trends will multiply exponetially.

    The Internet is evolving into a cloud of knowledge and data.  Content independent of format.  This precludes the possibility of a more widespread decline of the stand-alone website as an end-user experience.  With RSS, XML, RDF, and a myriad of other formats available for users to build their own media experience, the Web is atomizing into a sea of data, rewritable and reusable in any way one sees fit.


    These trends confuse more than just journalists.

    Journalism’s fatal mistake may lie in depending on selling eyeballs to advertisers.  At least, ad revenue is the problem surfacing to the top of the list of declines legacy media faces.  Despite some signs of life in the internet advertising market, the advent of more precise, dynamic metrics measuring clicks, page-views and engagement times has exposed the little secret journalism milked for years: advertising is not as effective as people thought.  Huge cost structures built on basic assumptions of cost per thousand models have become outmoded.  At this point in time, and for the near future, they simply cannot support the vast organizations of legacy media.

    These models appear to be drawing their last breaths.

    Picking through the corpses

    While many old guard journalists lament the death of tangible newspapers, the real tragedy for our industry resides in the commitment to denial some of these former juggernauts continue to espouse.  White papers manage to emerge claiming such ludicrous suggestions as 97 percent of reading still happens in the print form of newspapers.  Regardless of the validity or accuracy of statements such as this, the Internet represents a core paradigm shift in everyday life.  We as an industry should not attempt to fight these new dynamics of human behavior. 

    We cannot win.

    Adding insult to injury, companies such as the Associated Press attempt to attack the messengers of this movement, wasting valuable resources in tough economic times.  But the Googles of the world are symptoms of change more than a cause.  Google, and other entities, are tools, filling basic needs in society to access information.

    If the dying husks of traditional mainstream media are incapable of or unwilling to recognize these nascent truths, then there may be no hope of resuscitation.

    But there is hope

    As we stand at a crossroads, prophets and pariahs shout out the new pillars of our transformed society.  CollaborationFlatness Long tails.  The digital revolution changes how we communicate, but it isn’t the end.  Barriers to entry are lowered, syndication becomes almost limitless, and publishing is faster than ever before.  Legacy corporations watch with fevered interest from their ivory towers, even as their castles burn around them.  Whose ideas should we flock to?  Which tenants of this new digital world will catch hold?

    While much of this conversation could pan out to by hype and fluff – and of that we must beware – I believe the components to rebuild journalism rest within.  If we wait to find out who the winners and losers are, it should be obvious what category our industry will find itself in.  Those who experiment and adapt quickly will survive.

    One truth that seems to weave its way throughout the fabric of this conversation is openness.  We must tear down the walls within organizations that prevented media companies from developing search engines.  The divides which allowed journalism to exist in a silo, separated from business models.  How many brilliant ideas did media companies lose by keeping the technologists in the basement?

    Sitting on double digit profit margins, stagnation may have seemed ok, but it seems those days are over.  Ripping out the walls of companies already on deathbeds doesn’t sound like an effective solution.  We need triage.  As sad as it may be to let some of the dinosaurs die, perhaps their time is over.

    A new breed of journalism

    If compartmentalizing journalism companies stagnated the industry – preventing them from evolving – how can we avoid this in the future?  The journalism business must more agile, responsive, and open.

    Media company employees must be prepared to fill multiple and sometimes overlapping roles.  Perhaps, the journalist of the future is part content producer, part businessman, and at least a rudimentary programmer

    So what’s the answer?  How do we resurrect the industry in a new form?  If we intend to rebuild the journalism business from the ground up, we must address three fundamental concerns: content, cost, and business model.  If we fail to deal with these questions we cannot hope to merge these roles into a more fluid, dynamic, and adaptable company.

    There is no panacea

    The key to survival of this new breed will be diversity.  No single model will work for everyone, nor should our industry invest its entirety in one mode.  Like a solid stock portfolio, we should diversify with the understanding that not everything will succeed, but realize failure didn’t mean it wasn’t worth trying.

    Advertisers still have money, but at this point they seem confused as to where to spend it.  Ad revenue online don’t seem to be growing fast enough to offset the decline in print advertising.  This does not mean that journalism should abandon advertising entirely, but we cannot depend on it as a primary source of revenue.  Another problem facing advertisers online is the continued atomizing and syndication of content.  The metrics simply don’t exist to effectively create cost models based on web dissemination.

    Some might argue journalism should enter a holding pattern until advertisers figure these things out.  It is my assertion that relying on advertisers got us into this mess in the first place and that our industry will be dead by the time these questions get answered.


    But if media companies continue to lose money, what recourse do they have but to cut costs?  We can cut costs until we have no journalists left and it still won’t revive the failed business model of mainstream media.  We need innovation and entrepreneurship.  Innovation doesn’t happen when companies are cutting staff and shedding resources.  

    Companies with resources left should put money into research and development.  If newspapers went completely digital, sold the logistics and printing assets they own, they could reinvest that money without losing coverage.  The Googles and Amazons of the world see this time as an opportunity to grab up the talent and ideas floating around.  Other media companies should follow the leadership of the Knight Foundation and fund start-ups willing to try new models.

    These new media organizations will probably have to produce more with less.  This paradox precludes a new content creation model for news.  Multi-skilled journalists will have to collaborate like never before.  We may have to not only tear down the walls inside journalism companies, but those surrounding them.  Owned content and walled-gardens may need to be abolished in favor of a more productive dynamic with other media companies and the public at large.  New journalists must utilize citizen journalism and new media creation tools to create content optimized for a non-linear, dissipated web.

    Own the technology

    The dilemma facing journalism today and tomorrow may not be relevancy, but obscurity.  If information has become commodity, one way to add value would be to create mechanisms to sift thought he extraordinary amounts of information bombarding us daily.

    Tools already exist capable of deconstructing the web into fragments and reassembling those shards back into something meaningful.  Journalism should invest in creating tools and/or devices allowing people to take advantage of atomized content and create their own news experience.  The BBC is already starting down this path, having reworked their homepage into a dashboard full of widgets and RSS feeds. 

    Perhaps, content on the web is fundamentally incapable of being monetized.

    Handheld digital products similar to E-ink and the Kindle could replace paper as a medium, but still allow news to be tangible.  If journalism could own the device, similar to how cable companies own the digital TV boxes and modems they rent out.  Journalism could adopt a similar model and sell not only devices, but also subscriptions.

    In this model, journalism would make money on a product, not just eyeballs, which would help produce the revenue to support content creation.

    Multiple revenue streams

    No one knows which business model will work.  Should all journalism companies file for 501 3c non-profit status?  If all journalism moves online, will that solve everything?  Is journalism finished?

    None of these statements is true in its entirety, however, there may be truth to be gleaned from all of them.

    The good news is the demand for media consumption is higher than ever, but it is dissipated and unfocused.  This means variety will add voracity to the industry.  We need more, smaller media outlets, each attempting to take less of the pie.  Some should be non-profits, some could try micro payments, and others should build tools and devices.  Not only should journalism companies try different approaches, but also even within companies, various revenue streams should be pursued. 

    This isn’t a knockout punch, no deus-ex-machima to save us, but this is probably closer to reality.  It isn’t glamorous and it isn’t easy, but from the ashes of legacy media, new journalists can arise and rebuild a more agile, vibrant, and diverse industry with the same core values and goals.

    Tagged: business model collaboration newspapers reinvention
    • Look, I’m not going to nitpick all your assumptions here, but let’s talk through one big issue here:

      Journalism is alive and well, and the Internet and all the communication tools and platforms it brings have been nothing but good for journalism and the free flow of information.

      Most of the issues you address are related to professional news organizations with conventional revenue models at best, and debt-laden corporate ownership at worst.

      So here are my assumptions:

      1. Is journalism broken? No. I don’t know anyone who thinks so.

      2. Is the professional press a flawed and fading institution? Maybe.

      3. Are the business models which have supported the professional press for the last 200 years fundamentally broken? Most likely.

      Let’s start there. At least, that’s where I like to start. There are plenty of obvious truths that it helps to power through before you start building potential solutions, but it’s 2009. Let’s get past the obvious and start building the tools to put our ideas in action.

    • Dale Harrison

      Very insightful article!

      Monetizing the value of online content (and advertising) is really at the heart of what’s killing old media.

      However, the future of media will not be anything that looks like the current structures…

      A lesson worth remembering is that at the turn of the 20th century, people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.

      And one should note that the Ford didn’t arise out of the “horse industry’s” R&D efforts, nor the “Horse Industry Revitalization Act” nor the horse industry’s attempts to experiment with new Business Models.

      I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.

      What’s historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.

      Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970’s).

      Unfortunately the Internet came along and changed all the rules!

      The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

      An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.

      To paraphrase Nietzsche, “God is dead. God remains dead. And we have killed him with the Internet…”

      The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero…infinite supply pushes price levels to zero!

      What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won’t allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.

      Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.

      This is at the core of why Google can extract $25B a year from the economy without creating ANY content…what they create is meta-data about content (which CAN be monetized)…and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.

      The lesson is that Google DOES NOT monetize other people’s content…it monetizes its OWN meta-data. This is certainly one path to making the news profitable…not search per se…but various other approaches to the monetization of meta-data that’s within the reach of publishers.

      So the exquisite irony is this:
      In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)

      There are certainly ways to make online news profitable…and many of us are working to develop such approaches…but I can assure you they don’t involve inventing a “faster horse”…

      Dale Harrison
      [email protected]

    • @ Jeremy. Quick question: what is your source to say : “The good news is the demand for media consumption is higher than ever.” Everybody is saying over and over this sentence in our industry but is consumption of news or media. Not the same.

      The only serious work that I know around news consumption is the research paper written by Robert Picard for the Joan Shorenstein Center of the Press: Journalism, Value Creation and the Future of News Organizations — http://www.hks.harvard.edu/pres…arch_papers/r27_picard.pdf

      His research does say that news penetration among US citizen has been divided by two, in the past fifty years, for the newspapers (from 353 copies for 1,000 US citizen in 1950 to 183 in 2004). Same for TV news (from 229 viewers for 1,000 in 1980 to 97 in 2004). News magazine penetrations went from 42 readers per million in 1988 to 31 in 2004. The largest news site, Yahoo news is visited by only 17% of Americans. And 24h TV news cable is viewed by only 2% of American family.

      So if there is an increase in demand for media consumption apparently it is more for iPod than for news. Which does not solve our problem… at list the way we have been thinking about it.

    • Some very nice points, but . . .
      “White papers manage to emerge claiming such ludicrous suggestions as 97 percent of reading still happens in the print form of newspapers.”

      Actually the thrust of the story is 97 per cent of newspaper reading (not reading) happens in print.” From my read there is nothing ludicrous about this well defined thought piece.

      As I read the piece I was looking for the business model as in “how to make money now.” You have some interesting suggestions about “money in the future.’ But that doesn’t help the fine journalists or newspaper enterprises that need how “to make money now.”

      In my opinion, a do now, might be to use the meta data harvested from web traffic to the news sites to identify niche communities of interest. Then sell those niche communities niche appropriate products they will be glad to buy.

      It’s being done every day with events and book offers. It just means focusing on it a little more.

      Middle term, I’ve been on a little soapbox about the possiblities of reframing the newspaper in education programs that most newspapers already have.

      Very soon K -12 textbooks are going to seriously morph. That opens an opportunity for ad supported standards aligned newspapers to deliver useful learning tools to classrooms.

      The ads would be limited to public health and other government supported campaigns, to eliminate any conflict with the ed systems.

      The really useful discussion is for money now. The money in the future discussion is interesting, but doesn’t speak to the issue at hand.

    • Just one more thought: The crisis of the media industry is also – or maybe even more – a crisis of the internet. The foreseeable abandoning of net neutrality for certain (rich-data) service types is just one indicator for this. At last I believe the disruptive effect of the internet on journalism and its business models is (and will be) much weaker than we might think now.

    • Tassilo,
      I think the underlying crisis is the reorganization of the global economy.

      We’re moving from a world where the base of power was an information advantage to a world where that advantage is melting away.

      The leading edge was in the financial industry. Now we are seeing the same in government. It will soon move through health and education. It undermined the fundamental credibility of the newspaper.

      At the same time we are looking at world where the center of global economic activity is moving back to Asia after a 500 year interlude in the West. The internet is an enabler, but it is only a dependent variable in a much larger and longer story.

    • I like the suggestion that all journalism companies be 501(c)3 nonprofits. A corporate structure that puts public service ahead of commercial profit is a good first step. A good second step is a revision of the way we incentivize and reward innovation and efficiency in nonprofits and socially-funded operations: some hybrid approach where (from schools to newspapers) we ensure social needs are met and equal opportunities are provided, but also encourage innovation and performance.

    • Tony, I think your second point makes a lot of sense, but I respectfully disagree with the 501c3 part.

      A better model is some kind of social entrepreneurial approach. If doing well by doing good is part of the way to get clear signals on whether the service your offer is valued by the clients you serve.

    • Feel like every time I read something about journalism and the future three things come up predictably: internet, ad revenue, denial of legacy medial.

      Then there are the solutions: internet, collaboration, and start-ups.

      Very seldom do people talk about the quality of journalism or the lack of a discerning audience, and when I’ve brought it up, I think the quote was “media has bigger problems.”

      I could really give a rip about the entertainment industry’s brand of media that has always matched eyeballs to ads. There has always been a headcount.

      What I care about is the level of education and the level of access to internet per capita.

      You want to save journalism — worry about the elimination of journalism from schools and the rise of standardized testing— and worry especially about the decline in critical thinking. .

      Because if those vested in journalism want a career, you are going to need those eyes connected to brains which know about coal sludge and water tables as well as global power-shifts and national plays for alternative energy resources for your newsy (journalistic) articles.

      Otherwise, say good bye to by lines and hello to aggregation. Additionally, say welcome to misleading headlines and sludge raking blogs.

      Is it any wonder that “Sandra Bullock” was on everyone’s minds, according to an Atlanta based CNN reporter? Or that Time had a poll that rated Lady Gaga the most influential person?

      Do we have a news hungry culture? or a news-as-entertainment culture delivered in a fast-food format?

      Journalism has got to care about the level of education and the level of access.

      Otherwise, build a lean business model with easy sell content and call it a day. But don’t call it journalism just because it once would have appeared wrapped around a fish.

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