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Back to the Future – The Economist’s special report on the News Industry

July 29, 2011

A special report published in The Economist recently both reinforces and expands upon the findings of Columbia University’s “The Story So Far” study into the future of journalism.

A PDF version of the report can be purchased from The Economist site however an edited version of it, with links back to the specific section, can be read below.

This detailed report offers an in-depth view of the current news climate and predictions into the direction it’s likely to take in the future. From a PR perspective, it’s a valuable insight into how the media is evolving and transforming in the Digital Age.

The transformation of the news business is unstoppable, and attempts to reverse it are doomed to failure.

The great irony this report demonstrates is how all that is old is new again. It highlights how myopic our understanding of the distribution of news really is.

Part 1 – Bulletins from the Future

In recent times the daily news has undergone a transformation, making it more participatory, social, diverse and partisan.

Clearly something dramatic has happened to the news business. That something is, of course, the internet, which has disrupted this industry just as it has disrupted so many others. By undermining advertising revenue, making news reports a commodity and blurring the boundaries between previously distinct news organisations, the internet has upended newspapers’ traditional business model.

Traditional media initially saw the participatory shift as a threat however they are now coming to appreciate the benefits.

The ability to share news items and interact with it by commenting has proven to be hugely popular with the masses. Referrals from social networks are now the fastest-growing source of traffic for many news websites.

Twitter, Facebook and Google part of the news ecosystem and have brought an unprecedented breadth and diversity of news and opinion to the business.

It is, in many ways, returning to the more chaotic, freewheeling and politically charged environment of the era before the emergence of mass media in the 19th century. And although the internet has proved hugely disruptive to journalists, for consumers—who now have a wider choice than ever of news sources and ways of accessing them—it has proved an almost unqualified blessing.

Part 2 – How newspapers are faring: A little local difficulty

Believe it or not, worldwide newspaper sales are up by 6%. You wouldn’t know it from the doom and gloom of established markets which have indeed taken a significant hit in circulation over the last 4 years. Emerging markets like India, Brazil and China have been booming and the reason for the newt increase.

Circulation, which has in fact been in decline for decades in the US, is only half the story. The loss of advertising and classified-ad revenue is a far more significant blow to traditional media enterprises.

These technological shifts brought about by the Internet have hit American newspapers particularly hard because of their heavy reliance on advertising. According to the OECD, in 2008 America’s newspapers collectively relied on advertising for 87% of their total revenue, more than any other country surveyed. Between 2007 and 2009 newspaper revenues in America plummeted by 30%.

In retrospect it is clear that the industry became too dependent on local advertising monopolies. The internet has undermined that business model by providing alternatives for both advertisers and readers.

The US experience should be put into perspective by comparing it to other markets.

In Japan, home to the world’s three biggest-selling daily newspapers (the Yomiuri Shimbun alone has a circulation of more than 10m), circulation has held up well, in part because over 94% of newspapers are sold by subscription.

There is certainly no sign of a news crisis in India, now the world’s fastest-growing newspaper market. Between 2005 and 2009 the number of paid-for daily newspapers in the country increased by 44% to 2,700. In 2008 India overtook China to become the leader in paid-for daily circulation, with 110m copies sold each day.

Television news is also booming: of more than 500 satellite channels that have been launched in India in the past 20 years, 81 are news channels.

China is another market where news media are growing rapidly, but the strict controls on them mean must dance skilfully “between the party line and the bottom line”, in the memorable phrase of Zhao Yuezhi, an analyst of the Chinese media scene.

No matter the experience the news business faces different countries, to survive, news organisations will have to make the internet part of the solution.To survive, news organisations will have to make the internet part of the solution.

Part 3 – Making news pay: Reinventing the newspaper

The Sun newspaper in New York is credited with developing the business model that relied mostly on advertising for revenue rather than readers. It was a great deal for all concerned: readers got their news cheap, advertisers could reach a large audience easily and newspapers could afford to employ professional reporters instead of relying on amateurs.

This model has worked well since 1833 but it has come unstuck in the internet era as readers have shifted their attention to other media, quickly followed by advertisers.

As a result, traditional news providers are scrambling for new revenue sources from charging for web or mobile content to entirely new sources like wine clubs or dating services.

While it’s easy to dismiss the woes of newspapers as part and parcel of capitalism, many argue that news is a special case. It may be a business, but it also plays an important part in a democracy: finding a new model to support journalism is in the interest of society as a whole.

The forerunner for increasing revenue is the paywall concept. News providers are starting to restrict access to unsubscribed (paying) users even though a decade ago the idea of a paywall appeared to have been widely discredited.

The trouble is that online advertising typically brings in less than 20% of a newspaper’s advertising revenue, and rates on all but the most prominent pages are falling. Revenue from online advertising is growing, but not fast enough to fill the gap opened up by the decline in revenue from print advertising and circulation.

Metered payrolls, which lets visitors read a certain number of stories a month before asking them to pay, appears to be best compromise. It keeps audience numbers up and allows for content sharing, satisfying advertisers, while at the same time increasing revenue from the audience itself.

Mobile devices are likely to be the turning point for paid content. Strong sales of smartphone “apps”, or software, suggest that readers are prepared to pay for content on mobile devices. But the market seems unlikely to produce substantial revenue quickly enough to replace declining print income.

Existing readers of newspapers and magazines are generally unwilling to pay for news online or on mobile devices if it costs them extra. But many publications are adopting an “all access” model that grants print subscribers free access to digital editions as well.

Bundling digital access with print subscriptions not only offers readers choice but also gives them an added reason to go on buying print editions, which still pull in the lion’s share of advertising revenue. Moreover, there is limited evidence that suggests papers may be able to publish less frequently in print and yet retain most of their print advertising.

Juan Señor of Innovation Media Consulting, a firm that advises newspapers around the world, reckons that “you won’t fix the business model without fixing the editorial model.” He believes that as well as looking for new forms of revenue on the web, newspapers should overhaul their print editions to make themselves more relevant and thus boost circulation.

This redesign concept has been successful for Brazil’s Correio da Bahia and France’s Libération however American newspapers have shown no interest in trying it.

Another tack, now being tried across America, is to build new, internet-native metropolitan news organisations supported by philanthropy. The big question is whether the not-for-profit news model is sustainable.

What is clear is that starting with a clean sheet—using the latest digital tools, being free of printing presses, not depending on print advertising—gives not-for-profit news organisations an optimistic sense of being part of something new rather than of an industry in trouble.

Part 4 – Social Media: The people formerly known as the audience

Surveys in Britain and America suggest that 7-9% of the population use Twitter, compared with almost 50% for Facebook. It is significant to note that the audience isn’t on Twitter, but the news is on Twitter.

Thanks to the rise of social media, news is no longer gathered exclusively by reporters and turned into a story but emerges from an ecosystem in which journalists, sources, readers and viewers exchange information. The rise of “horizontal media” makes it quick and easy for anyone to share links (via Facebook or Twitter, for example) with large numbers of people without the involvement of a traditional media organisation.

At first many news organisations were openly hostile towards these new tools but in the past few years mainstream media organisations have changed their attitude. The success of the Huffington Post, with a combination of original reporting by staff, blog posts from volunteers and links to news stories on other sites has lead the way and encouraged other traditional media to follow.

Journalists are becoming more inclined to see blogs, Facebook, Twitter and other forms of social media as a valuable adjunct to traditional media.

Many journalists use Twitter to solicit leads, find sources or ask for information. It’s important to note, however, that Twitter is a public forum where anyone can say anything so it may not provide reliable information.

There is clearly a role for people—including journalist to select, filter and analyse the torrent of information being posted on the internet. This process is known in social-media jargon as “curation”, and a growing number of tools are available to do the job.

Social media have both done away with editors and shown up the need for them.

The way readers gather their news is also changing. Typically around 20-30% of visitors to the websites of big news organisations come from Google’s search engine or its news site, Google News.

The proportion of visitors referred from Facebook is smaller, but growing quickly as social-sharing features become more commonplace and easier to use.

Friends are a good proxy for one’s tastes and social recommendation is far more efficient than maintaining lists of keywords relating to topics of interest.

In addition, there is an emergence of apps and websites that allow you to personalise a magazine or newspaper from articles and items recommended by your contacts on Facebook and Twitter. Such services are needed because the explosion of content online in the past decade means you spend a lot of time filtering, and not much time reading.

Rather than thinking of themselves as setting the agenda and managing the conversation, news organisations need to recognise that journalism is now just part of a conversation that is going on anyway. This requires journalists to admit that they do not have a monopoly on wisdom.

A Pew Research Centre survey published in March 2010 found that 37% of American internet users, or 29% of the population, had “contributed to the creation of news, commented about it or disseminated it via postings on social-media sites like Facebook or Twitter”. The figure is probably much higher today, because the Pew survey predates the introduction in April 2010 of the Facebook “Like” button, which makes sharing a news story (or anything else) as simple as clicking a mouse.

Part 5 – WikiLeaks and other newcomers: Julian Assange and the new wave

Wikileaks is perhaps the most notorious but is far from the only among a group of unconventional new actors in the news business that have emerged lately.

These are non-profit organisations that are involved in various forms of investigative journalism. As funding for such reporting by traditional media has been cut, they are filling the gap using new methods based on digital technology.

The leak of the Pentagon Papers by Daniel Ellsberg to the New York Times during the Vietnam war, which ultimately led to a Supreme Court ruling that “only a free and unrestrained press can effectively expose deception in government.”

Yet if American prosecutors can show that Julian Assange encouraged Bradley Manning, an American soldier who has been charged with passing confidential information to WikiLeaks, they may try to charge WikiLeaks’ boss with conspiracy. That would be worrying for news organisations in general, because it would strike at the idea that journalists should be able to develop relationships with confidential sources without fear of prosecution.

The Sunlight Foundation, based in Washington, DC, also campaigns for government openness and transparency, but in a different way from WikiLeaks. Its aim is to make government data more easily accessible, both to journalists and to ordinary citizens.

The line between activism and journalism has always been somewhat fuzzy, but has become even fuzzier in the digital age.

In the developing world, transparency campaigners are pushing for greater openness about aid flows and the governance of natural resources, and campaign groups are often the most credible sources of information about human-rights abuses. In the past, bringing such information to wider attention meant working with news organisations and getting them to publish the information. Yet thanks to the web, non-governmental organisations (NGOs) can now also publish material independently.

Human Rights Watch (HRW) now sends photographers and radio producers to work alongside its researchers in the field. Amnesty International is creating a “news unit” staffed by five journalists, and Médecins Sans Frontières produces photographs and video of its work.

Such groups may not give sufficient weight to opposing views or fully reflect nuances in the subject. In the end what matters isn’t whether or not particular people qualify as journalists but whether the work they produce is thorough, accurate, fair and transparent enough to qualify as journalism.

There is also growing interest in investigative news organisations that operate on a non-profit model, particularly in America. The oldest, The Centre for Investigative Reporting (CIR), was founded in 1977. The Centre for Public Integrity was founded in 1989 and a more recent entrant to the field is ProPublica, launched in 2008.

All three organisations produce stories that are syndicated to newspapers, television and radio stations and websites across America.

ProPublica has already won two Pulitzer prizes for its work, including investigations into the financial crisis and the provision of health care in the aftermath of Hurricane Katrina (with the New York Times magazine). But although these three organisations are well funded for the next few years, the long-term viability of philanthropic funding is still uncertain.

The discussion about where lines should be drawn between non-profit journalism and journalism by non-profits is still evolving. But it is clear that non-profit groups of various kinds are beginning to fill some of the gap left behind as traditional news outfits shrink.

Part 6 – The end of mass media: The end of mass media

There is a great historical irony at the heart of the current transformation of news. The industry is being reshaped by technology—but by undermining the mass media’s business models, that technology is in many ways returning the industry to the more vibrant, freewheeling and discursive ways of the pre-industrial era.

Until the early 19th century there was no technology for disseminating news to large numbers of people in a short space of time. News traveled along social networks because there was no other conduit.

The invention of the printing press meant that many copies of a document could be produced more quickly than before, but distribution still relied on personal connections.

Newspapers had small, local circulations and were a mix of opinionated editorials, contributions from readers and items from other papers; there were no dedicated reporters. All these early media conveyed news, gossip, opinion and ideas within particular social circles or communities, with little distinction between producers and consumers of information. They were social media.

The invention of the steam press in the early 19th century, and the emergence of mass-market newspapers such as the New York Sun, therefore marked a profound shift. The new technologies of mass dissemination could reach large numbers of people with unprecedented speed and efficiency, but put control of the flow of information into the hands of a select few. In modern media organisations news is gathered by specialists and disseminated to a mass audience along with advertising, which helps to pay for the whole operation.

In the past decade the internet has disrupted this model and enabled the social aspect of media to reassert itself. In many ways news is going back to its pre-industrial form, but supercharged by the internet.

News is also becoming more diverse as publishing tools become widely available, barriers to entry fall and new models become possible, as demonstrated by the astonishing rise of the Huffington Post, WikiLeaks and other newcomers in the past few years, not to mention millions of blogs. At the same time news is becoming more opinionated, polarised and partisan, as it used to be in the knockabout days of pamphleteering.

Not surprisingly, the conventional news organisations that grew up in the past 170 years are having a lot of trouble adjusting. Some existing media organisations will survive the transition; many will not.

The biggest shift is that journalism is no longer the exclusive preserve of journalists. Ordinary people are playing a more active role in the news system, along with a host of technology firms, news start-ups and not-for-profit groups. Social media are certainly not a fad, and their impact is only just beginning to be felt. Successful media organisations will be the ones that accept this new reality. They need to reorient themselves towards serving readers rather than advertisers, embrace social features and collaboration, get off political and moral high horses and stop trying to erect barriers around journalism to protect their position.

Part 7 – Impartiality: The Foxification of news

One of the world’s most profitable news organisations is Fox News, an American cable-news channel that is part of Rupert Murdoch’s News Corporation. Though the channel insists that its news reporting is unbiased, Fox is famous for being opinionated rather than for being profitable.

In a world where millions of new sources are emerging on the internet, consumers are overwhelmed with information and want to be told what it all means.

The idea that journalists should be impartial in reporting news is a relatively recent one. “A lot of newspaper people treat it as one true religion, when it’s an artefact of a certain set of economic and historical circumstances,” says Joshua Benton of the Nieman Journalism Lab. By appealing to a wider audience, they were able to increase their circulation and hence their advertising revenue.

With the professionalisation of journalism in the early 20th century came a more detached style of reporting. In effect, a deal was struck between advertisers, publishers and journalists. Journalists agreed not to alienate anyone so that advertisers could aim their messages at everyone. That way the publishers got a broader market and the journalists got steady jobs but gave up their voices.

These days different countries have different preferences. In Europe overt partisanship in newspapers is widespread and state-run television channels often have partisan allegiances: Italy’s three state channels are each aligned with specific parties, for example.

If impartiality is already the exception rather than the rule, the internet is now eroding it further. The internet has also compressed the news cycle, with headlines delivered instantly by smartphone or Twitter, creating a demand for immediate analysis and opinion.

By undermining many of the traditional arguments for objectivity, the internet may thus cause a wider “Foxification” of news and a return to the more opinionated and partisan media landscape of the 18th and early 19th centuries.

One way forward, suggests New York University’s Jay Rosen, is to abandon the ideology of viewlessness and accept that journalists have a range of views; to be open about them while holding the reporters to a basic standard of accuracy, fairness and intellectual honesty; and to use transparency, rather than objectivity, as the new foundation on which to build trust with the audience. In part, this involves journalists providing information about themselves.

Transparency also means linking to sources and data, something the web makes easy. Bloggers have long used the technique to back up their views. WikiLeaks’ Julian Assange, a fan of radical transparency if ever there was one, makes a similar argument. “You can’t publish a paper on physics without the full experimental data and results. That should be the standard in journalism,” he said last year.

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