Who is the customer of a media company? (Not so fast … think before you answer)

Media companies would do well to do some soul searching about who their customers are. Why? Because knowing who your customer is helps focus your efforts and your mission.

The easy and obvious answer is that, for a media company, the customer is the same thing as the audience. But allow me to be heretical for a second and propose this counter point: the audience is only truly the customer if the audience is paying directly for content.

You see, there are two classic business definitions of “customer.” One would be the person who pays money for a service or product. The other would be the final consumer of a service or a product. But, guess what? Unless the audience is giving the media company money, they are not the customer according to either definition — instead the audience is the product.

Hear me out.

Sure, if you are a subscriber to a newspaper, then you are one of the customers. And if you are paying a cable company to access a news channel, again, this makes you a customer.

BUT, if the audience isn’t paying directly for content, the content ceases to be the product and then becomes the raw material — the thing used to create the product … the audience.

So, how is this useful?

Because, in newsrooms across the country, we go out of our way to advocate for our audience, and this is a great thing — to a point. If our audience is paying for the content, then, by all means, give them all that they want.

If our audience is not paying for the content, then we need to reevaluate why we are producing it. For example, if producing it and giving it out for free allows us to make money from another customer — namely advertisers — then terrific.

But if the audience neither pays us directly, nor is an attractive target for advertisers, then it sounds harsh, but we should reconsider whether they are an audience worth cultivating. We should instead use our efforts to create content that attracts customers — paying customers.

Now, as I said in the 4-D Funding Model, some content is not profitable but serves a higher mission. That content is still worth producing, but again, we need to find a customer for that content, and that customer is someone who will support our mission — namely donors and patrons.

Making content that attracts customers is paramount. Without customers, profitable media cannot survive.

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The Revenue Model: the four ways journalism companies can make money

The business model that will save our industry starts with a revenue model — but what does that even mean?

A revenue model is a company’s plan to get money from customers in exchange for a product or service.

By my way of looking at it, there are four – and only four – ways media companies can get revenue from their customers. It doesn’t matter what media company we are talking about, they use the same four methods: what I have taken to calling the 4-D Funding model.

4-D Funding:
Dimension 1. Get paid for your content
Dimension 2. Get paid for access to your audience
Dimension 3. Get paid for your expertise
Dimension 4. Get paid for your mission

All media companies use a mix of those four dimensions – daily newspapers, local TV stations, public broadcasting, nonprofit news outlets, even Disney, Apple, the music industry and the cable companies. If it’s a media company, this is how they get paid.

Now, that is not to say that all these media companies are using every available funding source. In fact, most media companies latch on to one or two, and if they are progressive, three funding sources. Very few media companies use all four dimensions.

Neglecting these other dimensions leaves their business flat at best, and unstable at worst. Without rounding out their potential funding sources, the decay of a key category can cause their entire operation to teeter and topple. Just look at the hoops the print industry is jumping through because it got so reliant on advertising and subscription revenues.

Each of these dimensions deserve entire posts of their own. But for now, let’s take a quick tour of what I am laying out.

RevenueModel

OK, so, how do you use this? Well, first, you start by examining the stable of offerings your company has on its menu. What do you do well? What could you do well? Who finds these offerings valuable. What customers would be willing to pay for that content.

If you jump in here and say nobody wants to pay for news, then maybe you need to reevaluate what you are producing. If it isn’t worth paying for, then is it truly valuable?

And if you say “but information wants to be free,” I just might slap you.

Next, take a look at the audience you are pulling together when you are creating that content.  What do you know about them? Who are they? How old are they? What gender are they? What do they spend money on? What are their hobbies? Once you know those metrics, then you know who you need to be targeting – business who find that audience attractive are the ones who will pay you for access to them.

Now, think about ways in which you can get those businesses’ messages in front of that audience.

OK, so here is where the old journalist in me comes out – you need to make sure that when you are matching audience with business, you are using methods that are ethical. 2013 seemed to be the year of the “native advertisement” – advertorial content in other words. I abhor the idea of native advertisements. If the only way you can make money is by selling your credibility, then drop me a line. I will see if we can come up with some better methods. But please don’t offer your content and your credibility to the highest bidder.

Now, everything I have said here so far should be a refresher for anyone who has even a passing interest in media business — newspapers have been selling access to content and access to audiences for hundreds of years now. It is the next two dimensions that actually can help round out the news industry.

Think about all the things you need to know how to do to produce good, high-quality news. Reporting, writing, design, production, distribution, sales, marketing … all those things are hard. And they are things that we have learned to do rather well. Take a look at your operations. Do you have spare capacity in any of those areas? Take a look at your market. Are there people who would be willing to pay you to help them do some of these things?

Newspapers have been printing papers for commercial clients for years. But look at the rest of the operation — what is within your core competencies that can be monitized? It might actually be worth hiring a few extra designers if you can then employ them on commercial products.

The real challenge of this exercise is to critically identify your customers. Why would they choose to give you some of their hard-earned money? Are the things that you are doing contributing to efforts that will make them want to give you more of their hard-earned money? If not, then maybe you need to drop those activities that do not add value, and instead focus your efforts on the things people value.

One of my favorite sayings in the nonprofit industry is “no money, no mission.” If you don’t have revenues, then the rest just doesn’t matter because you won’t be able to afford to do anything. You can have all the most noble intentions, but without cash, professional journalism dries up. And without customers, there is no cash.

This is typically when people say “oh, great. So, it is nip slips and cat videos from here on out! Will nobody then cover the poor? Will nobody do the civic duty of journalism?”

And that is where I say “I’m glad you asked.” Because that is where that last dimension of funding comes in – getting paid for your mission.

There are customers out there who will support the mission of good journalism. It is now our job to find them. Whether those customers are interested in supporting journalism from a philanthropic stance, or a civic stance or a nostalgic stance, we need to be actively finding those patrons and getting them involved in our industry.

Because remember, if you insist on covering news that is noble, important, and that nobody pays you for – you have already found a patron: YOU. Without someone paying you to do this journalism, you are donating your time and resources for this cause.

Now, if that is your organizational goal and mission – then great. But you need to make sure that you have other dimensions supporting your mission work. But I contend that you would be better off finding patrons, rather than being drafted into the role of reluctant patron yourself.

Now, for a real confusing question, let me jump back to something that I just glossed over and ask you this … what is a customer? In the media, the answer isn’t as clear-cut as you might think.

I’ll be happy to go into detail on that in the next post…

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The tale of the broken car: why working harder won’t save the journalism industry

Let’s talk today about what will not fix the journalism business model — working harder.

First, let me just say this: After being in newsrooms now for 17 years and after serving on the boards of directors for two nonprofit media organizations, I can assure you, journalists are a hard working group. I have yet to meet a truly lazy reporter.

Sure, we have all had our moments where we didn’t check that one last detail, or where we just had to blow off the rest of the afternoon. But truly lazy reporters don’t make it through two years in a professional newsroom.

I can’t think of a single time in my life when I have looked out into a room full of reporters and said to myself, “you know what’s wrong — it’s that we just don’t work hard enough.”

American journalists are already working hard — I would contend that they are being overworked. So, let me go on the record right now and say this once and for all — to save our industry we do NOT need to work harder, and we do NOT just need to do more.

We are dealing with a systemic breakdown in the news industry. No amount of working harder or doing more will fix this. Why? Well, let’s play a little imagination game here for a second.

Imagine that you are driving down the road and your car starts sputtering. It finally gives out and you are stuck on the side of the highway and your car won’t go anymore. What do you do? Well, you could try harder and do more of what you had been doing – push that gas pedal to the floor … I bet the car still won’t go anywhere.

To be sure, you could work harder and get that car moving again. Don’t believe me? Go ahead, just hop out and start pushing. The harder you push, the faster it will go. But is that the best solution? I think not.

The better solution would be to figure out what went wrong with the system and address that. But when you haven’t been in the habit of thinking your system could fail, you also don’t get in the habit of evaluating that system critically.

In the case of the news industry, we have been fat, enjoying an industry monopoly for a half century, and we began to believe our own myth: “we do things right, and everyone else just needs to appreciate us.”

In the case of our car, we need to figure out if it needs more gas or needs a new engine, or maybe something went wrong in an internal system we know nothing about. Interestingly, the same is true of our industry.

What neither situation needs is for someone to simply to work harder.

And that’s where we are right now. Ad revenues have sputtered and are now failing to make the industry go anymore. What has the news industry’s solution been? It has been to ask journalists to work harder, post more content to our websites, work longer hours to cover every shift and posting on weekends, all while trying to eek out another 10 cents per thousand page views.

We pushed the gas pedal to the floor, and when that didn’t work, we hopped out and we pushed.

Instead we need to be looking at the engines and the fuels that will get us moving again. Ad revenues are a piece, but they aren’t the whole. Subscriptions are nice, but they don’t translate well to the web (though hats off to everyone trying out pay walls. I’m in your corner. Don’t get me started on the whole “information wants to be free” debate. That is a post all in itself.)

We need systemic solutions.

As best as I can find, there are four possible revenue sources for media companies. Period. Advertising and subscriptions are great. But we need to be looking for other ways to support the industry.

More on that later.

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The search for a new model: a quest to find ways to pay for journalism and save the industry

So, what’s wrong with the news industry?

If you said something akin to “bias” or “quality,” then you need to grow up. The one and only answer to that question right now is “revenue.” Because, to paraphrase the great philosopher Tyler Durden, if we don’t take care of revenue,  we are just polishing the brass on the Titanic — this ship’s going down.

For all of you who are on the same page as me, then stay tuned. For the next few months, I am going to discuss what went wrong with the news industry’s revenue streams, and begin to propose some ways we can fix this and move forward.

I have no interest in sitting on the sideline while the news industry chooses between Buzzfeed drivel and Fox News partisanship. I want to continue to work as a professional journalist, producing high-quality news for an engaged audience.

There is an answer, but it isn’t a silver bullet. Finding revenue to support professional journalism is going to take hard work. It is going to take creativity. And it is going to mean we make some hard choices. But it does not mean we lose our ethical soul in the process.

I have some ideas. There are ways we can continue to make money. The news industry just needs a new business model, and I hope we can discuss that over the next few months. Stay tuned and share what you have learned. Call me on my BS. And let’s fix news together.

You can reach Michael Giusti at mikegiusti@cox.net

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