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Business Models and Financial Trends Category

Wallpaper, Hidden Gems, and Water-Coolers

Posted March 1st, 2010 by Dana Scherer - Senior Policy Analyst, Media Bureau

 

After they lost their radio jobs, deejay Mike O’Meara, sidekicks Robb Spewak, Oscar Zeballos, and “news guy” Michael Elston opted to take their show to the Internet.  Zeballos argues that listening to traditional radio programs and advertising is like watching wallpaper:  you know it’s there, but you don’t pay much attention to it.  In contrast, he says, podcast listeners actively seek out programs, making them far more likely to be engaged in the accompanying commercials.  (See Mike Musgrove, “With this Radio Gig, Who Needs FM?,” Washington Post, Feb. 21, 2010 at G1.) 

 

Paul Camp writes in a Future of Media comment that readers who self-select news and information online miss out on the serendipity factor.  When you listen to the radio or thumb through a newspaper, you may encounter a hidden gem of a story that you otherwise might have missed.  Paul calls this an “unsung beauty” that neither advertisers nor consumers have fully valued.

 

Another facet of online-offline media dynamics is the “Water-Cooler Effect.”  Brian Stelter in the New York Times discusses how the Internet can enable television viewers to alert each other to and engage in national conversations about politics, sports, and entertainment.  While consumer split their time between computer and television screens, the two screens reinforce, rather than compete with each other.  (See Brian Stelter, “Water –Cooler Effect:  Internet Can be TV’s Friend,” New York Times, Feb. 24, 2010 at A1.) 

 

Do you think these forms of gathering news and information will co-exist in the long term, or do you expect one will dominate?  What do you think are the public interest costs and benefits of each? How do you think advertisers will react?

Posted in Ideas and Debates Business Models and Financial Trends Commercial TV and Radio Internet and Mobile Newspapers and Magazines
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Newspaper Advertising: Paper Dollars vs. Digital Dimes?

Posted February 3rd, 2010 by Dana Scherer - Senior Policy Analyst, Media Bureau

In Entertainment Industry Economics, Hal Vogel estimates that about 80% of newspaper revenues have traditionally come from advertising, with the remaining 20% coming from subscription and newsstand sales. [Hal Vogel, “Publishing,” Entertainment Industry Economics (Seventh Edition) at 342.]

Standard and Poor’s has a similar estimate in its August 2008 Publishing Survey.  [James Peters, Industry Surveys: Publishing (includes Advertising), Standard and Poor's, Aug. 21, 2008, at 26.]

As newspaper readership migrates online, however, this ratio may change. Ken Auletta states in his latest book, Googled that:

The rule of thumb is that an online ad brings in at most about one-tenth the revenue as the same as the same ad in a newspaper. There are two reasons for this: readers spend less time reading a paper online than they do a newspaper, and because ad space is not scarce on the Web, advertisers pay lower rates.” [Ken Auletta,”Chasing the Fox,” Googled, 2009, at 165.]

Do you think that these estimates are valid? Do you think these estimates will persist? If so, could the paper dollars vs. digital dimes ratio apply to subscription revenues as well?

 

 

Posted in Ideas and Debates Business Models and Financial Trends Internet and Mobile Newspapers and Magazines
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Would You Tip for Good Content?

Posted January 27th, 2010 by Elizabeth Andrion - Deputy Chief, Office of Strategic Planning and Policy Analysis

Mark Nadel, an attorney in the FCC's Wireline Competition Bureau, has long been thinking about the following idea for supporting news and information production:
 
One business model to consider is creating a new “social norm,” similar to the one that currently leads American consumers to voluntarily contribute on the order of $40 billion/yr to food servers.* PSAs would teach consumers that they should feel obligated to make appropriate financial contributions to individual journalists, journalistic organizations, or any producer of a creative work if the consumer finds the work valuable and wants to encourage the creator to continue producing more.
 
Testing the idea. The idea could be tested by suggesting to media news organizations that they hire arrange to produce an ad that attempted to create a new social norm: consumers of journalism should feel obligated to reward journalists for their work. It might use a voice over that said something like this: 
 
“While journalists are happy to make their work easily accessible to you online, they also need to make a living. Right now limited revenues from online use has helped force newspapers and magazines to “release” hundreds of reporters, if not go out of business altogether. If you enjoy and value the work of a particular journalist or media firm and want them to continue to produce that kind of material, then show them with your wallet. Next time you enjoy a story, before you click to the next link, look for the “$” icon to make a payment for the valued content. Most of you tip food servers at least a dollar a meal for their efforts; make it a habit to do the same for those who provide you with food for thought.”  The visual might include clips from famous films about journalists, e.g., “All the President’s Men,” “Deadline USA” [Humphrey Bogart], “The Pelican Brief.” Talented writers and producers could do better and produce multiple versions.  The ads would then be tested to evaluate their effectiveness.
 
Adoption. If some ads were effective then the FCC could designate them as PSAs and expect that any broadcasters offering news online would find it in their own interest to broadcast them. One would also expect the music, film, and television industries to ask to collaborate on PSAs that applied to all creative content.
 
This social norm concept is discussed in much greater detail an 8-page section of a 2004 law review article published in 19 Berkeley Tech. L.J. 785, 837-45 (2004). It is posted on the FTC’s website at 
 
 
* See Paul Wachter, “Why Tip?”, NY Times Magazine, Oct. 12, 2008, at p56.

Posted in Ideas and Debates Trial Balloons Business Models and Financial Trends
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Corporate Campaign Money and Media

Posted January 25th, 2010 by Steve Waldman - Senior Advisor to the Chairman

Ellen Goodman, a professor at Rutgers University School of Law and expert on media policy emailed me with this fascinating point about last week's Supreme Court ruling:

In a 5-4 decision, the Supreme Court this week overturned statutory controls on corporate funding of campaign advertising (Citizens United v. FEC).  It is a hugely significant decision in that it will allow corporations to expend unlimited funds to promote or defeat candidates for office.  Before this decision, the corporations were limited to directly funding “issue ads” and funding candidate advertising only through PACs and political parties.   The decision will mean a flood of advertising dollars onto broadcast television, cable, and every other medium.
 
Putting aside what this will mean to electoral politics, what will it mean for news and information?  In the short term, it will probably mean tons more advertising dollars especially for local broadcast stations.  One could imagine a scenario in which these dollars were re-invested in local journalism, and it was the kind of journalism that supported beat reporters and the other kinds of information gathering that has been under threat.  But it’s not at all clear that this is the kind of journalism the market would support or, therefore, that ad dollar recipients would choose to expand.
 
One thing that seems fairly clear is that the influx of ad dollars will REQUIRE more journalism.  Corporations will be required to disclose when they are responsible for advertising (over a certain dollar amount).  But it may not always be obvious why they are supporting a certain candidate.  Journalism will be required.  This might be just the kind of database journalism that the “crowd” or citizen journalists can do, if they have access to the right kinds of data.  Or it might be the kind of journalism that only intrepid, “feet on the ground” full-time journalists can do.  Probably, it will be a combination of both.  Will the news and information apparatus up to making meaning from increased corporate spending on elections?

 

Posted in Ideas and Debates Trial Balloons Business Models and Financial Trends
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Comment on: Business Models and Financial Trends

Posted January 20th, 2010 by William Freedman - Associate Bureau Chief, Media Bureau

The Future of Media project encourages comments and suggestions on the key questions about the changing media landscape.  This post includes questions about business models and financial trends in media.  (The full public notice can be found here.)

 

12)  In general, what categories of journalism are most in jeopardy in the digital era?  What categories are likely to flourish?  While much is still to be determined as media companies test various business models and payment approaches in the coming years, based on what is known now, are there news and information needs that commercial market mechanisms alone are unlikely to serve adequately? 

 

13)  Many media companies are struggling, but others are reporting healthy profits.  What explains the differences in performance?  What roles are played by debt levels, consolidation patterns, government policies, geography, diversity of and/or decline in revenue streams, technological innovation, cost reductions, and audience growth?

 

14)  How do trends in advertising affect the viability of different models? Will the abundance of advertising inventory prevent web advertising rates from rising to a level that could support more online content models?  Or will demographic or locational targeting or other technologies raise advertising rates?  What effect will such advertising trends have on consumer privacy?

 

15)  Does the efficiency and specialization of the Internet make it less likely to support the cross-subsidies that existed for many decades within newspapers (in which, for example, popular human interest content effectively cross-subsidized news reporting)?

 

16)  In the aggregate, how much money do Americans spend on news and information media and how has that changed over time?  Which companies and industries have benefited from these shifts and which have suffered?

 

Please weigh in on any of these questions, or offer your own.

Posted in Public Notices Ideas and Debates Business Models and Financial Trends
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