Nieman Foundation at Harvard
[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]
Maybe it’s a trend, or maybe it’s a bubble, but Jim Romenesko’s blog is chockablock with high-level journalist movement. The Newsweek Six are on the auction block, sought by eager bidders, as Time Warner solidifies its relationship with Fareed Zakaria, making him a wholly owned, cross-platform phenomenon, and Howard Fineman gets tapped on the shoulder by The Huffington Post, soon after it hired away The New York Times’ Peter Goodman.
Daniel Gross jumps from his long-time Slate home to Yahoo Finance. The National Journal makes acquisition after acquisition, this week reeling in Dave Beard, the well-respected editor of Boston.com, where he joins numerous other veterans (AP’s Ron Fournier, Newsweek’s Michael Hirsh, The Atlantic’s Marc Ambinder, Fox’s Major Garrett, among them) who’ve recently made a switch. After an apparent flirtation with AOL, Kara Swisher and Walt Mossberg stay safely in the News Corp bosom, while AOL spends its bonus dough on TechCrunch, buying a brand and an established news operation.
Other well known journalists are also suddenly fielding calls of interest — and often moving on to new adventures. Bloomberg’s been hiring pedigreed journalists by the dozens, for Bloomberg Government and other initiatives. Patch is snatching many of its regional editors from daily newspaper ranks.
What we’re seeing is a market develop. This is market that newly prizes talent, but a certain kind of talent. Most of the hiring is at the minor star level, though the lumens emitted vary. How do you measure — critical to digital success — the light?
First off, the hiring companies believe they know sustainable models of building businesses on higher-quality content. That may seem basic, but when we look at the much of the newspaper, broadcast, and consumer magazine worlds, that belief is flagging. They look at well salaried, professional staffs and see high “cost structures,” which are harder to justify, given current levels of advertising and the lack of successful digital revenue models.
We know that Yahoo and AOL, increasingly competitive with each other, believe they’ve found a working formula to make good content pay profitably. Tim Armstrong, AOL’s CEO, talks about “sparking a content revolution.” His formula, and Yahoo’s, is fairly straightforward, and borrows its commandments from the Demand Media bible. It’s all about the efficient ad monetization of content, with analytics — know the nature of the content, target the reader and align the advertiser — that seem to grow better week by week (see The Newsonomics of content arbitrage).
(AOL, ironically, is milking its online access business — yes, lots of people still think of AOL and Internet service as the same thing — drawing 43 percent of its revenue from it. That’s similar to newspapers milking the print business for as long as possible, as they can make the inevitable digital transition. By that comparison, AOL’s lifeline is much shorter, with a 25-percent 2Q drop in customers paying for that access, while most newspaper companies’ circulation revenue down only in low single digits.)
The newsonomics of the star hires is intriguing. Think of these “star” hires as individual SKUs, “products” whose value can be estimated against the customers they bring in the door. Those conversion customer metrics are evolving. Counting pageviews is the simplest way. Take those views at whatever (premium?) rate you can sell them, and you’ve got a first number. The intangibles are how many new unique visitors the Zakarias, Finemans, and Grosses bring with them from their old haunts. How many of those new customers become regular customers of the outlet? That gets you to some annual and/or lifetime value metrics. As metrics are collected and tested, we’ll see some more science brought to what is now a star-search art form.
There certainly are other intangibles. What is Yahoo News exactly? What is HuffPo? What is AOL? As they define themselves as legitimate news companies, the new stars bring cred — and legitimacy. In addition, they are magnets to other, lesser-known talent, signaling, “it’s okay to come here.” There’s economic value in that, too.
Notably, few established legacy brands are hiring new top-end talent; Time’s Zakaria hire is a smart, though unusual one, enabled by the Newsweek uncertainty and Time/CNN linkage. For the most part, legacy news companies’ growth scenarios are borrowed, curiously, from those now hiring those stars: multiplying the amount of content available under their brands, harnessing amateur and lower-cost stuff from local bloggers, licensing from Demand Media and aggregating content through FWIX, Outside.in, and OneSpot. They’re the ones paying heed, at least indirectly, to Wikipedia’s Jimmy Wales’ observation that hiring six-figure columnists in this time is silly: “The best of the political bloggers are easily the equal of the opinion columnists at the New York Times. I don’t see the added value there and question whether a newspaper should be paying large sums of money for that any more.”
The hirings at the National Journal and Bloomberg point to a different kind of business model. Those companies have found niche models involving significant reader and/or enterprise payment, and now are building out, and around, those businesses. They, too, believe they can make a new business out of superior content.
It’s complicated, and there are more than two phenomena happening here. Yes, some players that have built successful enterprises — think Yahoo, AOL, Huffington Post — on non-professional staff content (through aggregation, pro-am sites, and more) are now adding the pros at the top, to reinforce brands and put faces on them. At the same the high-cost, pro-based enterprises are going the other way.
It’s not an equilibrium, nor will these models meet in some neat middle, but there’s some sense of coming at a similar solution from two ends of the spectrum. It’s a blend of old and new, expensive and cheap, and no one yet knows the best formula.
Arianna Huffington explains it as a maturation, and indicates the hiring of pros was part of the original Huffington Post plan: “From the day we launched, it was our belief that the mission of The Huffington Post should be to bring together the best of the old and the best of the new. Bringing in the best of the old involved more money than we had when we launched. But now that our website is growing, we’re able to bring in the best of the old.”
The likely result of these moves? By 2015, news companies will pay top dollar, and pound, euro and yen, for top-end talent, and they’ll pay as little as possible for good-enough newsy content that fills many topical and local niches. Over the next several years, the most successful media brands will have mastered better the economics of pro-am journalism.
