Members Only

This past week I found myself in a flood of articles on membership, subscriptions, paywalls and the monetization of online journalism.

An opinion piece in this morning’s Wall Street Journal makes the argument that consumers are willing to pay for news. Peter Funt argues that we’ve already seen consumers are willing to pay for television if it includes “convenience, commercial-free viewing, high video quality, plus various ‘bonus’ features that (create) perceived value.” The same is true with radio when it has “high-quality audio, largely free of ads, with a vast array of channels to please many tastes.”

Funt is correct in pointing out that in paying for television and radio programming that has traditionally been free, consumers expect added benefits in terms of quality and exclusivity. DVDs, HBO, satellite radio all improve the experience of watching TV and listening to music or talk radio. What can news outlets do to improve the experience of reading or watching the news?

Sites like The Texas Tribune and MinnPost are looking to answer that question and pick up revenue in the process via membership. Ken Doctor explains the state of membership in a recent piece for the Nieman Journalism Lab. According to the article, The Texas Tribune has 1,700 members, with a goal of reaching 10,000 members. Members, on average, pay $100. Over at MinnPost, there are 2,000 members. In 2009, membership brought in $360,000 for the site.

Doctor then gets into some interesting math. MinnPost found people who visited the site at least twice a month were the most likely to sign up as members. Of those 40,000 visitors, executives hope to turn 5 percent – 2,000 people – into members.

GlobalPost is another news site that is pursuing membership as a revenue source. Phil Balboni, who runs the site, hopes to get 1 percent of his 900,000 unique monthly visitors to become members. With each member paying $30, that would generate $270,000.

After reading these articles, I started playing around with some numbers for Project Goldfish. I am proposing that the revenue streams for the site be:

• Advertising
• Membership
• Subscription

My current proposal and business plan call for all articles to be free and available to everyone. Membership would provide access to the online community, The Watercooler, where readers could pose questions, converse and debate with other audience members. I would hope and expect that with paying customers posting under their real names, the conversation would elevate above derogatory and off-topic comments.

To figure out how many members I can expect, I first had to estimate the overall traffic to the site. Using Compete, I researched traffic metrics for 27 news sites in Los Angeles. Specifically, I looked at unique visitors. My goal with Project Goldfish is to have 100,000 unique visitors two years out from the launch date. That would put my traffic somewhere between The Jewish Journal and LAObserved.

With 100,000 unique visitors in mind, I used a 1 percent conversion rate and 5 percent conversion rate and assumed members would pay an annual fee of $30:

Membership, I think, would appeal to individuals.

A subscription would appeal to firms and corporations. A subscription would provide access to pay:

• PDF copies of ordinances, government reports and non-confidential correspondents
• Budgetary documents and amendments
• City contracts
• Complete listing of City Hall council and committee meetings
• Complete listing of Neighborhood Council meetings and events
• Weekly video chats with newsmakers
• Access to early morning and late-night news roundups via email

It is basically an aggregation of documents, both paper and electronic. Think of it as a one-stop reference tool. The subscription would cost $100 a year.

Make It Rain

I anticipate the greatest challenge of Project Goldfish will be finding a way to make it profitable. Obviously that’s the challenge of any business but it is especially true in journalism, a field that has for far too long relied on advertisers. Consumers, whether subscribers or newsstand readers, never paid the bills for newspaper companies. It is the fault of media management that readers were conditioned to pay as little as 50 cents for a wealth of news, sports, comics, horoscopes and coupons.

I never understood why it took – and continues to take – newspapers so long to catch up with the digital age. Aside from The New York Times and Wall Street Journal, newspapers have failed to enhance news coverage through their news sites and, aside, from the WSJ, almost all have failed to monetize content in any real way. In the fall quarter, I had a professor point out that it was difficult for traditional media companies to drop what they were doing and move their operations to the Web because of sunk costs and existing infrastructure, such as printing presses. When there are millions of dollars and hundreds of employees invested in a production plant, it is difficult to switch courses.

Then there is debt. The Tribune Company is in bankruptcy. It seems there are weekly updates on plans to pay creditors, pay bonuses and cut costs. At the same time, the company is profitable. Yes, the Chicago Tribuneand Los Angeles Times make money. They just don’t make enough money to keep up with the debt payments.

The good news for Project Goldfish is that it doesn’t come with any of that baggage. I’m starting from scratch, without debt and very little overhead. I’m starting from a place where the answer to every question is: “There’s no money for that.” This philosophy will force me to decide what is a need and what is a want. It will also force me to get creative. Perez Hilton’s office was a Coffee Bean & Tea Leaf. He may be onto something.

In “Clues in the Rubble: A User-First Framework for Sustaining Local News,” Bill Mitchell lists a variety of funding and payment options. They are:

Advertising: Behavioral Targeting; Advertisers as information-providers

User Fees: Memberships; Metered use

Foundation Help: News Services; Direct Subsidies

Government Help: Policy Changes; Direct Subsidies

Crowdsourcing: Donations; Story-funding

Partnerships: with Competitors; Users; Government; Foundations; Universities

Related Businesses: iPhone apps; Books; Info services; Events

Mitchell quotes the 2008 State of the News Media study from the Pew Research Center as saying consumers “still care about such traditional journalism values as accuracy, fairness and independence.” Well, that’s good; at least we haven’t lost everything. What I think this shows, however, is that our financial decisions should remain aligned with these values. “Independence” seems the most likely to be jeopardized. This is why the suggestion of government intervention continues to be, in my opinion, a terrible suggestion and one I hope never comes to fruition. If the “media elite” are already accused of being biased (left or right), just imagine what would happen if there were given direct government subsidies. Actually, look at what people say about PBS and NPR. Both are fine news organizations that are dinged for real or perceived political bias.

The first order of business is to determine what it would cost to start Project Goldfish. Then, what would it cost to maintain the business on an ongoing basis? Only after I’ve answered those two questions can I tackle the equation that will keep Project Goldfish online.

AP, Yahoo Negotiate Fee for News

The Associated Press and Yahoo are in the midst of negotiating restrictions and payment for wire stories that appear on the search engine’s news site. This appears to be the latest step toward charging for online news. Similar talks with Google have prompted the company to temporarily stop posting AP contest on its news site. In a Jan. 14 Wall Street Journal article, an AP representative says the current deal with online portals “helped make AP material ubiquitous … also diluted the value of the AP’s news offerings by not limiting availability or distinguishing articles that were unique.” (http://online.wsj.com/article/SB10001424052748703672104574654741484604838.html?mod=djemMM)

I think this article relates to a number of interesting issues. The first is AP’s assertion that portals like Yahoo and Google News do not distinguish between the quality of articles. In aggregating news, all news is created equal. How can a media company make its material stand out when it is an algorithm that determines its placement on a news search? Popularity may be a factor in that equation but popularity is not the same as objective, accurate reporting and writing. (In “Googled,” Ken Auletta describes the creation of Google News. “The placement and selection of stories is made, Google announced, by ‘computer algorithms, without human intervention.’ … It would, Google said, broaden newspaper readership, and allow newspapers to sell advertising once a user clicked on the newspaper’s link. … However, newspapers didn’t all jump up and down with glee.”)

I think that aggregate news sites only hurt online news sources. Let’s say a Google News search directs a consumer to a Chicago Tribune article on the earthquake in Haiti. While that is one more hit on the Tribune’s site, there is a slim chance the consumer will stay on the page or click through the rest of the Web site. I predict the consumer will click out of the site and search for more articles on the earthquake (that is, search through Google News). What can news organizations do to keep consumers on the newspapers’ page? I think it starts by conditioning consumers to go directly to the original site for news and bypassing aggregation sites all together.

Setting aside the issue of quality and access, the Wall Street Journal article explores another important topic – payment. The owner of the WSJ, News Corp., is in talks to eliminate its excerpted content from Google’s search but allow it to remain on Microsoft properties. The Wall Street Journal is one of the few publications to charge for online content and as a result, executives do not want to see any of its work given away for free through an aggregated site. I agree. I strongly believe that consumers should have to pay for online news in some way. It is pragmatic – news organizations need to make money – and it forces the consumer to have some skin in the game. It is easy for a consumer to think, why should I have to pay for content when I can go to Yahoo or Google?

I think people are so overwhelmed with content that they do not even realize how much news, entertainment, music, television programming, blogs, movies and so on they actually consume. Faced with the option of paying $50 a month for a bundled package of the previously mentioned media or a complete shutout of content, consumers will pay.

(This was originally a discussion post for a class at Medill; January 2010).