A not very well recognised but fundamental transition is taking place in many sectors of the economy. Up until the last century, most industries organised themselves through institutional, centralised and hierarchical structures. Production economies were capital intensive and shareholder returns were central to company objectives.
Although customer-centric marketing philosophies reigned, most industries pushed their products with production efficiency, volume and profit as main KPIs. Today, we see a transition towards distributed or networked models. Centralised production is scattering, distribution is diversified and consumption is increasingly tailored to customer needs, with sectors like energy, retail and finance as interesting examples.
In recent years the media industry also consolidated rapidly, creating large organisations with large portfolios. They have central ownership and are subject to profit maximisation for owners and investors. Seemingly specific to our industry, and contrary to many others, is that the production chain is integrated.
Content production and distribution, as well as client-ownership through subscriptions are “owned” by publishing companies, whereas in virtually all other sectors, they are separated parts of the chain. Subsequently, only about 25 percent of the publishers’ revenue is available for journalistic production, the core of its proposition. Also, as a consequence, we produce content only for our own customer base, through our own distribution channels. This is very inefficient, expensive, wasteful and it hinders our resources to create the best journalism possible.
Not a crisis in journalism, but in publishing
The demand for high-quality, curated and trusted content has never been higher than it is today. With increased, highly-educated and informed customer bases for whom information is an essential product, both privately as well as professionally, the means to produce and distribute information have also never been more accessible and affordable.
So, theoretically, we should be in the much aspired “golden age of journalism”. However, the supply of content has grown much faster and stronger than the demand driven by new suppliers and distributors that have entered the market space. Today’s consumers have enormous access to the widest variety of content imaginable.
Traditional publishing models have not been able to adapt to the shifting dynamics in supply and demand. It can be argued therefore that we are not experiencing a crisis in journalism, but a crisis in publishing. One root of that crisis is in the crucially wrong assumption that advertising could and would sustain our online business models. Our industry supplied its product free of charge, hoping to monetise online traffic with advertising. What value could a product possibly have if it is provided for free?
Research: smaller institutional newsrooms, tailored distribution and diverse monetisation
In 2015, I was involved in a large study into the fundamental changes taking place in the publishing industry. First of all, we found that production, across the board, was very rapidly moving out of the shrinking institutional newsrooms, towards a rapidly growing ecosystem of freelancers. So basically, production is being decentralised, with small, core editorial teams and a network of freelancers. With content available in larger volume and as a commodity, media brands are or should be increasingly focused on their distribution function rather than their production function.
Secondly, we found that distribution is becoming more decentralised: where consumers would traditionally use two to five media brands, today’s consumer has up to 30 sources of information, daily. That has to do with, thirdly, consumption of information that has very strongly decentralised. The reader is in the cloud and 70 to 95 per cent of media’s online traffic is generated through social media and customer networks. Bundled content propositions are by definition not effective in optimally serving the individual needs of customers.
On average, subscribers consume only 18 per cent of the content offered in their subscription and are increasingly using a multitude of sources of information, putting pressure on subscription models. Currently, the paywall is the revenue myth of the season for publishers. Research shows that only five to 10 per cent of potential readers will commit to a subscription, leaving a very large group of people un-monetised. The industry should seek to move away from the 'push models' towards curating, enabling models.
So effectively, all three elements of our production chain (production, distribution and consumption) are moving away from the current centralised and bundled proposition of publishing organisations. Their constitutions and models are strongly non-compliant with the demands of today’s consumer.
5 thoughts to consider
Adapting to this new reality may however, not be as difficult as one might think – it could even prove to be very lucrative for publishers. We have identified five features publishers could consider adopting:
- Brand proposition: Content is only a part of the total publisher proposition – a sense of belonging, connection to peers, events, retailing, selection and other elements are possibly of more value. Publishers should increasingly carry their brands as places of recognition and distribution and not primarily of production (see 4).
- Single article sales: Content consumption is increasingly content driven. Making sure that a reader gets content that matches her needs as closely as possible is key. Social media is unparalleled in connecting customers to the relevant content. Publishers should re-design their infrastructure to adopt this new potential and focus on targeted selling of single articles. The net yield on selling one article ($0.20 to $0.99) is much higher than any other type of sale. User data of single-article buyers can be used to upsell or convert to subscriptions. Additionally, we have learned that readers’ willingness to pay for content is highly dependent on its quality and added value. This is an important stimulus for authors to improve the quality of their work.
- Industry-wide micropayment standard: In order to monetise the single article sales, we need an industry-wide micropayment capacity. This would allow customers to pay small amounts for reading one article and it would tap into a very substantial new revenue source, as well as identify regular buyers as potential subscribers. Blendle and others have the technology to make this happen and it is crucially important that we create one standard for optimal user comfort.
- Syndication: Creating one’s own content and distributing it only on one platform is a huge waste of our industry’s capacity. Only a fraction of potentially interested readers would read it. In most cases, the content is already available somewhere else. Publishers should re-sell their content to others and buy existing content in return. Distributing and monetising articles on several channels increases penetration and exposure to relevant audiences and dramatically increases the revenue per article. Syndication strongly reduces production costs, increases volume and traffic and very likely, the overall quality of the journalistic proposition.
- Freelancers: Freelancers will, expectedly, produce up to 70 per cent of all journalistic content. More than their full-time eployed counterparts, they have the capacity to specialise on subjects and reach a higher level of quality, efficiency and means to monetise. They can and will increasingly be able to sell directly to their audiences and circumvent legacy publishers. Publishers could capitalise on this distributed production ecosystem by innovating their relationships with freelancers. They could, for example, distribute articles on a profit-share basis, lowering their cost base, increasing their volume and profits as well as increasing freelancers' revenues.
The media customer has changed their behaviour dramatically over the last years. The demand is there, as is the business case if we chose to diversify our models and adopt a wider variety of means to produce, distribute and monetise. The industry is too slow in adapting to the new reality. Creating a fundamentally different networked ecosystem will generate lower cost, higher efficiencies, higher revenues and, as a result, more vital, sustainable and relevant journalism.
Teun Gautier is a publisher, entrepreneur, consultant and founder of De Coöperatie (The Cooperation) a collectively-owned media group. He was co-founder of De Correspondent, founded Publeaks and was involved with a wide variety of innovations in media. He holds several board positions with media organisations in The Netherlands.
Free daily newsletter
- Lottie Gross, freelance writer, on how to make travel writing work when you cannot travel
- Solving the revenue maximisation problem for publishers
- Six new journalism podcasts to help you get through the pandemic
- How personal essays can help you win commissions
- Local or global, a virtual network of contributors improves newsroom resilience