Branded Journalism: It's already happening

Dave Chase has a great post on Reflections of a Newsosaur about the problems in online ad sales. He's right that news organizations need to make basic changes to their ad sales channels in order to maintain revenue in the short term. Boston.com admitted as much during the launch meeting for Boston.com/Newton in which the sales executive noted that many advertisers complained that ads on Boston.com were too high. The solution for Boston.com was to focus on a smaller geographical area in order to offer cheaper and more targeted advertising opportunities.

But as I mentioned, I still think the ad model is irrevocablly broken and the while Chase offers a short term solution, something else needs to happen over the long term.

I believe that long term news and information will be supported directly by brands. That is, thsoe brands will hire news people to work independently and they will start to offer information. While to the average consumer this information will appear to be the same as before, there will be a subtle bit of branding going on.

When I suggest this to friends the response is one of horror. The idea that a Coke could be supplying entertainment news sends a shudder through their system, leading them to use terms like "icky."

Of course, this move will happen slowly and will have to be handled carefully, but it's already going on.

Tonight while doing the dishes I turned on the MLB Channel to hear some Hot Stove chatter. The MLB Channel is, of course, owned by the Major League Baseball brand and there to promote MLB teams. Both the NFL and NHL have similar television networks, all look like copies of ESPN, often with former ESPN anchors and reporters doing the work, but focused just on one sport.

Sure, there is an advertising play here, but advertising is just one of the revenue opportunities, the rest are about attracting viewers to promote the MLB brand and that of its associated teams. This leads to other licensing opportunities and sales of MLB branded materials.

The "news" is the loss leader.

Fundamentally, News Broke

During a recent podcast, Harvard Business Professor Clayton Christensen gave an overview of his recent HBR article on how companies need to change their business models to adapt to new threats. It's a very interesting concept and I plan to read the article as soon as I can get my hands on a copy.

The premise, as I understand it so far, is that traditional business models don't work when new threats arrive. As an example he pointed to IBM, which focused on mainframe computers, but when mini-computers hit the market IBM opened an entirely new division in a new location with new profit and loss models to combat this. It did the same thing when PCs hit the market, opening a different office utilizing different skillsets.

During the recent podcast interview Prof. Christensen praised the Boston Globe for taking steps to change its business model to combat the new reality. Not having spoken with Prof. Christensen yet I have to assume he is referring to Boston.com and the digital arm of the publication.

The concept, as I currently understand it, lines up with something I've been thinking about for a while: the fundamental problem with the journalistic business model. Traditional journalism is built on the concept that it can be supported by advertising, but separate from it. The journalist reports on the news, the news brings readers, the advertisers then pay for access to those readers.

This model extends back to the penny newspapers of the 19th century. Why sell a newspaper for a penny when it cost more to produce? So you can get the readers and sell access to that distribution channel to advertisers. The more people who read the paper, the more you can charge for the ads. This concept has grown up over the years but it's fundamentally sound.

The New York Times, for example, earned $1,950,021,000 from advertising in 2007, compared with $889,882,000 from circulation revenue according to its financial statements. Advertising figures in 2006 and 2005 were certainly more robust, but the same calculation applies.

Today it's not just the number of people who read your publication, but the type of people. If you're the Boston Globe, for example, and have great penetration in the affluent suburbs, then you can charge more for access to those readers. Most news organizations regardless of medium use the same basic concept: gain an audience, charge for access to the audience.

A main reason this worked was the high barrier to entry for any new news organization. In order to start one you needed:

• Capital for production;
• Access to production equipment (printing press, TV cameras, etc.); and
  
• A method of distribution (broadcast license, subsribers, newsstands sales, etc).
  

Each one of these factors made starting a new publication an uphill battle. Sure, there could be a "lonely pamphleteer," but the chances of that person gaining the reach and scope of a Washington Post were remote at best.

Now flash forward to the Internet. Today instead of a printing press you can use a free and publicly available blog, Facebook page or Twitter account. Instead of capital you can simply use the computer at the public library, or the $400 computer you bought for the house. As for distribution, any blog is technically available to anyone on the globe, you just need to tap into the right search terms to attract the audience from Google.

In other words, the news organizations no longer have the monopoply on the audience, so the advertisers no longer need them to reach an audience. The fundamentals are completly broken.

So what now? More on that later.

An Angry Farewell

Way back when, during my career as a TV producer, I did some freelance work over at The Ten O'Clock News on Channel 56, WLVI-TV. At the time the local Fox affiliate had just started its competing newscast, but it had yet to gain a footing. Channel 56 was putting on a very good newscast, even if it had a slower pace and felt a bit dated.

I produced a couple of shows in my stint there but eventually decided not to stick around. I wanted out of TV by that point and while doing a bit of freelance work was just fine, a full-time job just wasn't on my to-do list.

Well, last night I watched as WLVI shut down its newscast. Venerable newsman Jack Hynes delivered an angry farewell, pulling no punches to come right at Sunbeam, the company that purchased and effectively shut down the station. It's interesting to note that I came to 56 from Channel 7, where I'd just wrapped up a couple of years working the overnights.

Hynes pointed out that in his career he'd never witnessed the shutting down of a station. Former 56 anchor Karen Marinella was right when she pointed out that with the closing of 56 Boston loses a voice. However, in today's news world this isn't the last shutdown we'll see. Especially when you consider the massive options for information and entertainment available at nearly any time of day.

So, what does my future of TV look like? How about personalized newscasts. That is, a group like 7 News produces stories, maybe they even produce a full newscast. But each of those stories are saved as pieces, tagged, and then distributed via any possible method, such as the Internet, broadcast, cable, cellular, etc.

A device, be it the computer, TiVo, or your cell phone receives those pieces and then puts together a personal newscast based on information you have provided. Maybe it just reads your preferences and feeds you the newscast you want. Perhaps it's even geographic, giving you only the information you need for your area. That way I don't hear about a fire in Chelsea and the folks in Chelsea don't get the information about the Newton school system. Maybe you tell the DVR what stories you prefer.

All this is possible with today's technology. People just need to learn how to use it.

Christopher Glenn

CBS News Reporter Christopher Glenn died on Tuesday. I bring this up only because I loved his Saturday morning segments when I was a kid. I can remember shushing my brother when they came on, and they made more of an impact on me than the hours of cartoons I watched.

It's part of what seeded my interest in the news business. And I know I'm not alone on that one.