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A New Model for News Syndication By David M. Cole and Dr. Stephanie Nelson www.mochila.com What if you could quickly look through the content of dozens — hundreds — of other publications, find and inexpensively license that story that would just perfectly fit into the package you’re planning? E Every day, publishers around the world are faced with the same dilemma: Whether they are putting out a daily newspaper, a weekly magazine or a web site (or anything in between), they are constantly juggling the desire for quality stories, features and pictures against the very cost of those quality stories, features and pictures. An editorial budget is a finite thing, yet it determines the underlying quality of the publication, by setting the rules on how many staffers get hired and how many freelance pieces get purchased. Conversely, staff-produced material has little after-market value and while there is probably a lot of existing material out there a publisher would like to buy, how could it be found, negotiated or purchased? But what if the inherent value of staff-produced content could be extended? What if a publisher on the other side of the country (or in a different country or a totally different niche) could digitally peek into your current edition and buy a one-time use of a story or a photo? What if you could quickly look through the content of dozens – hundreds – of other publications, find and inexpensively license that story that would just perfectly fit into the package you’re planning? And what if both the sale and purchase of these stories, features and photos was virtually painless – and potentially free? You could unlock the extended value of all the content you create and be able to expand the quality of your publication, all the time sitting at your desk, at 2 o’clock in the morning or 2 o’clock in the afternoon, whether you are a big publisher or a small publisher. To fill this need, a group with equal understanding of technology and the editorial process would have to be created. ‘THE LONG TAIL’ With technology, traditional news distribution can move from – in the words of futurist Alvin Toffler – “a few messages sent to many people to many messages sent to a few people.” As Toffler explained in his book, The Third Wave, information technology will inevitably lead to mass customization and the invention of ways to share relevant information at an ever-more blinding speed. Internet pundit and Wired magazine editor Chris Anderson has dubbed this phenomenon “the long tail,” noting that the 21st Century media economy will not be about one size fits all, but profoundly about customization and choice. Freed from the tyranny of having to aggregate readers and marketers into one large-scale geographic domain, “popularity no longer has a monopoly on profitability.” Indeed, As Anderson points out, the average Barnes & Noble bookstore has shelf space for about 130,000 book titles, but more than half of the book sales on Amazon.com are from books that aren’t on its 130,000 best-seller list. A New Model for News Syndication, May 2006 — Page 2 In other words, there is big money in small sales. This is something Apple Computer Inc., the creator of the web site iTunes – which sells individual songs for 99 cents – has discovered. Revenue from single purchases such as music downloads accounted for 22 percent of online content revenues, which surged to $2 billion, in 2005. Other content seems to be following the same pattern: Getty Images noted that 87 percent of its sales are from royalty-free single images. Even book publishers are getting into the à la carte sales act, with Random 2003 2004 2005 House Inc., the world’s largest trade publisher, beginning to offer its books directly to consumers on a paid, page-per-view basis. Ad spending percentage of growth by media 25% 20% 15% 10% 5% 0% -5% -10% -15% Source: TNS Media Intelligence, 2001-2006 2001 2002 How big is the marketplace for content? According to the research firm IBISWorld, in 2004, about 16.8 billion words and 1.8 billion photos and graphics were sold over wire services such as those Magazines Spanish provided by The Associated Press, Newspapers Internet Reuters Group plc, Dow Jones & Co. Inc., and Bloomberg L.P., at a price of about $2.5 billion. These enterprises served primarily the daily newspaper market and The AP alone comprises 1700 daily and weekly papers that provide content for 8500 news subscribers, which include magazines, radio and television. This market is growing: Analysts at the investment firm Bear Stearns have predicted a $4.4 billion market for editorial imagery alone by 2012, and that one of the fastest growing business-to-business segments is online news services. Of the nearly 56,000 news publications listed in the 2006 Standard Periodical Directory, 3665 are exclusively online or delivered via e-mail, and 24 percent of print media also offer online editions. Another rapidly growing content market is ethnic – particularly Spanishlanguage – periodicals, which have nearly tripled in the last 10 years to 1.7 million copies distributed a day. As of 2005, 24 percent of U.S. adults are either primary or secondary consumers of ethnic media. As the face of the nation changes, independent and ethnic media continue to grow in size, quality and credibility, with niche publication revenue predicted to overtake general publications within five years. A third content growth group is magazines, which enjoyed an ad revenue increase of 5.4-percent in 2004, compared to newspaper ad revenue growth, which only grew 1.3 percent. Despite a stagnant early part of the decade, combined magazine circulation rose 3.3 percent in 2004 and almost one percent in 2005. In comparison, newspaper circulation has steadily declined throughout the decade. But in comparison to the Internet, magazine ad spending is of small A New Model for News Syndication, May 2006 — Page  consequence: According to the Internet Advertising Bureau, total ad spending in consumer magazines in 2005 was $12.9 billion. But Internet ad spending – which has grown about 8½ percent annually in recent years – had annual total ad spending of $12.4 billion. Logically, it would be safe to assume that sometime in the first quarter of 2006, the rate of ad spending on the Internet surpassed that of the spending in consumer magazines. But missing from the content market are syndication portals to serve individual professional photographers, writers and the small agencies that participate in the media market. Photographers currently relinquish all rights and half their margin to license a photo over a secured service like Corbis or Getty Images. Writers typically give up over half their fee to a syndicator – a dilemma that inspired many of the best freelance writers to turn to independent syndication companies like Featurewell. Included in this need for better sales portals are better search models and more advanced key-wording of U.S. advertising market spending comparisons 2005 (In billions of dollars*) U.S. advertising market spending comparisons — 2005 ($ billions) Direct mail Newspapers Broadcast & syndicated TV Radio Cable TV Consumer magazines Internet Business magazines Outdoor $0 $7.8 $6.2 $10 $20 $30 $40 $50 $12.9 $12.4 $21.7 $35.0 $47.9 $56.6 $18.9 $60 *The total U.S. advertising market is estimated at about $267 billion and includes other segments not charted here. Sources: IAB Internet Ad Revenue Report; PricewaterhouseCoopersLLP; Universal McCann images and files. And finally, online news sites and blogs continue to represent an underserved news consumption market. Internet users visiting online newspapers hit an all-time high in November 2005, numbering 55 million visitors, a 30 percent increase over the same period a year previous. According to the University of Southern California’s Digital Future Report, slightly more U.S. news readers favor the Internet over print. An early 2006 Gallup Poll found that 40 million Americans read blogs, many of them on a frequent basis. And there are a lot of blogs to read. Technorati put the number of them at about 29 million in early 2006. Entrepreneurs have calculated the currently unserved or underserved news market to amount to about $3 million a year. What is more important is that this market segment is growing at a rate of 87 percent a year, and is predicted to overtake traditional media in the next seven years. A QUICK HISTORY OF NEWS SYNDICATION The popular press (which begat radio, which begat television, which begat the Internet) was founded on the notion of efficiency: when newspapers could only be printed in the hundreds per day on a flat-bed printing press, news distribution was a costly affair. With the mid-1880s deployment of the steam rotary printing press, hundreds of copies printed a day expanded to tens of thousands of copies printed per hour. The penny press had been invented. A New Model for News Syndication, May 2006 — Page  Initial efforts at news sharing and distribution included practices as varied as using rowboats in the New York harbor to meet ships from England laden with London newspapers to using telegraph lines from Nova Scotia to get those same newspaper stories days earlier. A leased, dedicated telegraph circuit for news was installed between Washington, D.C., New York and Boston in 1875. At the dawn of the 20th Century, the familiar news services of today began to take shape; The Associated Press of Illinois became the New York City-based Associated Press news cooperative, Reuters Telegram became Reuters News Service and the United Press and the International News Service were started (the latter two by archcompetitors Edward Wyllis Scripps and William Randolph Hearst, respectively). News syndication originators: Edward Bennett of the New York Sun and Horace Greeley of the New York Tribune (left and center) helped create the first news syndicate, which pooled resources to send rowboats out into New York harbor to meet ships laden with London newspapers. Paul Julius Reuter (right) sent pigeons aloft with stock exchange information, thereby starting the first European news agency. It was also during this period that what grew to be called the “supplemental wires” were developed. Just before the 1920s, major newspapers such as the New York Times, the Washington Post, the Los Angeles Times and the Chicago Tribune all began distributing stories selected from their daily report for use by their smaller contemporaries. At the same time, feature syndicates came into being: they gathered comics, editorial cartoons, columnists and other lighter fare and distributed them to papers large and small. Until the 1970s, most of the information was delivered via the U.S. Mail, but over the following 30 years, all syndicated content was eventually distributed electronically. By the mid-1950s, the technology had improved from the telegraph to a Teletype that transmitted 300 words per minute and “wire photos” were commonplace. It was during this time that the merger of UP and INS created United Press International, much to the delight of The Associated Press. That merger was the beginning of the long-term downfall of UPI, which was sold by The E.W. Scripps Co. for $1 in 1982; the following year, the news organization filed for Chapter 11 bankruptcy; three years after that, UPI was sold for $41 million; in 1991, it again filed for Chapter 11 and the following year it was sold for $4 million, and in 2000, the venerable wire service was sold to News World Communications Inc., which was founded by the Rev. Sun Myung Moon, leader of the Unification Church. Today it is a shadow of its former self. The interest in business news was whetted by the mergers and acquisitions of the 1970s and 1980s and with that interest, the Dow Jones Newswires began offering more and more content to daily newspapers. When A New Model for News Syndication, May 2006 — Page  Bloomberg News first tried to get a foothold in Dow Jones’ market for stock exchange information in the 1980s, it won over the business journalists at large dailies by providing the Bloomberg terminal for free. Reuters began a concerted push into the U.S. news market in the 1980s and provided attractively priced picture services in the early 1990s. Agence France Press also began trying to get a foothold in the U.S. news picture market at this time. THE RISE OF THE NEWSMAGAZINE In the lore of contemporary journalism, it is believed that Henry Luce created what we know today as the newsmagazine; in fact, Luce was a secondary participant in the second generation of an idea. The UPI man: Though constantly bringing new technology to publishers — early wire photo transmission and a years-lead in radio news were just two — the merged United Press and International News Service was always in financial trouble. Shortly after the merger, when money was tight and Teletype services charged by the word, UniPressers came up with an entire lexicon that included the word ‘downhold,’ used by bureau chiefs to explain to reporters that costs must be held down. When referring to the competition, UPI people transmitted the word ‘Rox,’ which apparently referred to The Associated Press’ Rockefeller Center digs. Starting out as rivals at the preparatory school Hotchkiss, Luce and Briton Hadden worked on student journalism projects through their management of the Yale Daily News in the early 1920s. Hadden, first in his Yale class, was clearly the more creative of the two, but while in school, they hatched the idea of a weekly “paper” that would provide the news of the world in a quick, 30-minute read. Following Luce’s stint at England’s Oxford University and Hadden’s stint at the New York World, the two ended up as reporters at the Baltimore News. On their off hours, Luce and Hadden fleshed out the details of what they then called Facts. But, as Luce biographer W.A. Swanberg pointed out, they didn’t have to look far to find an operational blueprint: They studied the newsmagazines they would have to buck, headed so decisively by the Literary Digest that they hardly had to consider the others. The Digest seemed to settle any doubts that “old news” was readily marketable It was a national institution, circulation 1.2 million, fat with advertising, seen on every fumed-oak table and assigned to high school and college students for its coverage of current events. It’s “news service” was very nearly scotfree. It consisted of subscriptions to the more important American newspapers and a few published elsewhere in the world. The Digest frankly stole its news from these papers, usually quoting them directly. The victims seldom complained because the magazine gave them full credit and because by the time it used their property it was several days old – waste material by daily journalistic standards. In that sense, the Digest ran the most profitable news junk shop in the world. And that’s how the duo ran their “paper” as well: a handful of reporters and editors rewrote stories from leading newspapers – quoting verbatim, A New Model for News Syndication, May 2006 — Page 6 giving full credit – distilling the week’s events into a 30-minute read. But that doesn’t mean they didn’t have a little trepidation about the process; while shopping around their prospectus, Swanberg says Hadden and Luce consulted with Melville Stone, a recently retired Associated Press general manager, who “assured them that news was public property after a day or two of aging.” Hadden (who was in charge of the editorial side of what Luce would eventually rename Time magazine) and Luce (the business-side partner) were to eventually beat Literary Digest at its own game: Time, founded in 1923, purchased and folded the Digest in 1938. At about the midway point between the founding of Time and the closure of Literary Digest fell the startup of a newsmagazine then called News-Week. In 1937 a new Condensing the news, weekly: Two young Yale graduates decided in the 1920s that editor – undoubtedly influenced what American needed was a magazine that provided the week’s news in a compact, fast by Hadden’s creation of a patios read. Briton Hadden and Henry Luce invented the modern news magazine when they first called “Time-speak” which featured published Time in 1923. Within a decade, a solid competitor was founded in News-Week, a number of linguistic anomalies, which in 1937 lost the hyphen in its name. Time dominated through the 1950s, but in the including the running of dissimilar 1960s the Graham family of Washington Post fame improved Newsweek greatly. words together – renamed the magazine Newsweek. It was an also-ran throughout Time’s heyday of the 1940s and 1950s, but in 1961 was purchased by Philip Graham of the Washington Post and by the midpoint of that decade in fact sold more copies a week than did Time. In the same year that News-Week was started, another newsmagazine, U.S. News, was founded as well. In 1948 it merged with World Report to become U.S.News & World Report. Today, U.S. News is the country’s third-largest newsmagazine. Though eventually retaining their own vast reporting staffs and intricate system of bureaus around the world, all three newsmagazines continue into the 21st Century to use as a major resource daily newspapers and the services of The Associated Press. THE WIRES GO DIGITAL From the advent of the 60-word-per-minute Teletype in 1933 until the introduction of “high-speed” digital transmissions of the early 1970s (1200 words per minute), wire service distribution technology remained stagnant. Of course, the American Telephone and Telegraph Co., which owned Teletype Corp., made incremental changes in the service and from the 60 words per minute of 1993, the speed of the system’s delivery had increased to 300 words per minute. Further, both The Associated Press and United Press International had carved up their distribution systems, so that stories were moved on the “A” wire (for important, breaking news), the national A New Model for News Syndication, May 2006 — Page  wire, the world wire, the regional wire, the state wire (and there were one for each), the business wire or the sports wire. This carving gave each service more time to send words, even if they were only 300 words per minute. At a newspaper, magazine, radio or TV station, each of these wires was represented by its own Teletype machine. A smaller paper would have two or three machines; a radio station might just have one; a major daily had a room full of the clattering, noisy, smelly machines. Between the founding of news services in the mid- to late-1800s and today, the way publishers have received syndicated news has been consistent: to use Internet terms, heretofore news services have been a “push” medium. Customers (or members, depending upon the service) have had no choice but to accept the hundreds (or thousands) of news stories delivered – or pushed – each day by the service. This in large part has stemmed from the fact that the technology was broadcast-based, with each story (or photo) blanketing the entire network for the dozens of seconds it took to transmit it. Whether you were in Springfield, Mass., Springfield, Va., Springfield, Ohio, Springfield, Ill. or Springfield, Mo., everybody got the same story on the “A” wire at the same time. But as the technologies that were pioneered in World War II moved into the public sector, it slowly dawned on publishers that they could adapt some of this stuff for their own use. The speed of a telegraph wire was limited by the speed of the telegrapher to send dots and dashes in a recognizable form. The first iterations of the machines that would ultimately become Teletypes worked this way: imagine two old-fashioned typewriters, each with a keyboard connected to the metal arms that hit a piece of paper through an inked ribbon, which the character corresponding to the key appearing. An operator at one end of the wire hit a key on the keyboard and at the other end of the wire, the metal arm flew up and the letter was printed through the inked ribbon onto paper. The technology’s speed was limited to the speed at which a typist could perform (about 60 words a minute). In the early 1930s a method was created to store the keystrokes and then have them sent at high speed. Instead of driving a far-away typewriter, the local machine created a long strip of punched paper tape that had row after row of small holes, with a group of holes (or no holes) indicating an individual character. The technology was remarkably similar to that used in automatic fabric looms that had been developed decades earlier. Hot off the wire: Teleprinters from wire services such as The Associated Press and United Press International spat out miles and miles of endless wire copy on rolls through the 1970s. A New Model for News Syndication, May 2006 — Page  Paper tape not only paved the way for higher speed text transmission – 300 words per minute – but for newspaper publishers offered an interesting automation technique. In addition to having the Teletype create a typed manuscript, newspapers attached paper tape punches to their news wires. The resulting paper tape was given to the composing room, which used it to drive the typesetting machines. If an editor decided to run a wire service story verbatim, it didn’t have to be retyped on the Linotype machine; it could just be output via paper tape. Operator intervention was still needed, though, because each line of type that was output had to have a determination about hyphenation and justification made. (Of course, if the editor had minor edits, the composing room outputted the wire service story as a galley and then made corrections as noted by the editor, a time-consuming process. In the real world, this meant that the vast majority of newspapers ran wire service copy unedited.) In the late 1950s and early 1960s, publishers bought computers that handled the hyphenation and justification routines automatically, thereby cutting out any operator intervention in the process. Unjustified punch tape was input into the computer and hyphenated and justified punch tape was output, and the result was fed into tape-driven Linotype machines. Subsequently, as publishers began to adopt offset lithography as a method of reproducing daily newspapers, machines that handled photocomposition – rather than hot metal – were driven by the punch tape. But it was another decade – into the 1970s – before digital technology became commonplace at newspapers and news services. Both The Associated Press and United Press International began experimenting with the satellite delivery of real high-speed transmissions (1200 words per minute), which were sent and received not by Teletype machines, but by video display terminals attached to the most sophisticated computers of the day. The technology really began to take off in 1974 and that November a former reporter and editor at UPI who had the new title of “news technology coordinator,” Travis Hughs, wrote to his colleagues in the company newsletter about the changes on the immediate horizon: Anybody care to guess where newspaper technology will be one year from now? A year ago, the wire services announced plans to experiment with high-speed delivery. At the time, only a few newspapers were ready to experiment with these programs. Now, dozens of newspapers have signed contracts or plan to One-thousand bucks a month: The first truly commercial computer, the IBM 1170 provided mid-sized businesses with power then-unknown to behemoths and government. The machine rented for $1000 a month in the 1950s (that would be about $7000 a month, adjusted for inflation). A New Model for News Syndication, May 2006 — Page  subscribe to DataNews and DataStream. The Detroit News was the only big city daily into electronic editing one year ago. Now, almost everybody has plans, or plans to plan. All UPI ComCenters (Boston, New York, Washington, Pittsburgh, Atlanta, Chicago, Dallas and San Francisco) are linked by 9600-baud lines (roughly 9600 words per minute) to a central computer in New York. The 90 UPI line bureaus are starting to receive their equipment. The Regional IS&R project involves 300 video terminals, all linked to the common computer. All bureaus will have instant access to all UPI copy produced in the United States. UPI is producing over a dozen different abstract wires, each designed to notify a set of users when copy of interest to them is available. The abstract includes the first paragraph, a word count and retrieval number. There are input and output abstracts for internal UPI use and sports and regional DataNews abstracts for use by newspapers. ... State news at 1200 words per minute! For some reason, that’s the part of DataNews that turns me on. I guess it goes back to my newsside days of waiting for a split; waiting for an operator. It is frustrating for a state editor to have a hot story that he just knows will be the play item of the day, and not have the capability of getting it out to the newspapers. DataNews – with the help of the Regional IS&R program – allows the statehouse reporter to get his copy to the subscriber within seconds. Here’s how it works: The UPI reporter writes his story on a Harris 1600 video terminal. When it is ready to go, he pushes a file button and it travels to New York by one of seven super-high-speed links. When it arrives in the Regional computer, an abstract is produced on a 100-wordper-minute printer at the state editor’s desk. The editor calls up and reads out the copy on his Harris 1100 editing terminal and sends it back to the computer with coding that will put it on one or more low-speed wires. The story also switches to one or more of six DataNews files, serving different geographic regions. Each of these DataNews files carries the national basic report – A-wire, B-wire, sportswire, financial newswire and racewire. Additionally, they carry a mix of state reports. The reports are from the states within the region – plus any desired border states. Selectors are used to pass through to the newspaper only those services it is entitled to and desires. Selectors on the abstract wires permit even further selection, allowing, for example, sports desk abstracts on both national and state sports items. High-speed delivery always brings to mind getting the hot items to newspapers faster. But it also permits UPI to clean up the a.m. and p.m. reports earlier. To the newspapers that can mean closing out a page sooner. So far, the improvements described have been limited to UPI. When these distribution improvements are coupled with the speed a newspaper gains internally with its own editing system, the re- A New Model for News Syndication, May 2006 — Page 10 sults are breathtaking. It means statehouse copy, edited several times, from writer to type in minutes. In that same article, Hughs also wrote about a system a feature syndicate had recently adopted: One of the most interesting electronic newsrooms and production facilities belongs to United Feature Syndicate in New York City. UFS is faced with the Earth’s problem of delivering in a rotation variety of formats its columns, including the North American Newspaper Alliance, London Express and 36,000 km Women’s News. Take for example the Jack Anderson column, a daily NANA feature. Geostationary satellite UFS delivers Anderson by electronic feed, hardNews from outer space: The notion of a geostationary communications satellite was copy online printers, mail first put forth by the writer Arthur C. Clarke (‘2001: A Space Odyssey’) in the 1940s. The copy, scannable copy in satellite orbits the Earth, once a day, over the Equator, in effect, ‘hovering’ over a spethree fonts and cameracific area on the globe. An earlier technique, called a geosynchronous satellite, was first ready copy in three colused in 1963, while it was a decade before the first geostationary was launched. umn widths. And UFS does this without rekeyboarding after the copy is input to the UPI system. UFS, which is linked by terminals to UPI, retrieves the copy and files it to the NANA wire which is generated by the system. UFS also sends the copy to its own mini-computer which records it on a cassette. This cassette, with the proper coding added each time, drives the photocomp machine that sets the camera-ready copy. Then the cassette is used in an automatic typewriter system that produces the scannable copy. Geostationary satellites transform wires, television But as Hughs wrote, “the improvements described have been limited to UPI.” While The Associated Press rarely originated new technology or new products, it had no trouble copying UPI. Within 24 months of Hughs’ memo, The AP had similar products and was providing newspapers and syndicates with similar services. Interestingly, though, the vast majority of U.S. newspapers still receive their wire and syndicate information in much the same way today as they did 30 years ago. The speed has been increased from 1200 words per minute, but the same “push” technology is in place today as was in the era of Jimmy Carter’s presidency. DISRUPTIVE TECHNOLOGIES The successful unseating of the television networks’ evening news by former billboard salesman Ted Turner and the overtaking of the financial news industry by upstart Mike Bloomberg in the 1980s are illustrative of A New Model for News Syndication, May 2006 — Page 11 the impact disruptive technologies can have on the media landscape. Both efforts were based in part (Turner’s a lot; Bloomberg not so much) on the relatively new technology of communications satellites. Both were more equally based on the development and introduction of the microprocessor. Though the first of the breed of geosynchronous communications satellites – which, effectively, hover over a specific spot on the globe by orbiting as fast as the earth turns – was launched for the military in 1963, and the first commercial satellite launched in 1965, it wasn’t until the 1969 launch of the Intellisat 3 series of satellites that provided worldwide communications coverage that TV networks began to depend upon satellites to get TV pictures from one side of the continent to the other. It was in the late 1970s that Turner, who had inherited his father’s billboard business at age 24, determined that if he provided the broadcast signal of his Atlanta TV station, WTBS, to local cable operators for free, he could increase his national ad revenue from only the cost of putting the signal onto a geostationary communications satellite. Turner’s WTBS was the first independent television station that was carried by satellite. The initial success of WTBS – Turner coined the term “superstation” to describe his satellite venture – prompted him to come up with another idea: why not emulate the current fad in radio – all news, all the time – in a satellite broadcast that could be used by cable operators? Launched in June 1980, the fledgling Cable News Network was at first almost better known by the name “Chicken Noodle Network” – critics and skeptics taking a dig at Turner’s low-funded operation – than by what its initials really meant. But within a four-year period, according to the Museum of Broadcast Communications, “CNN first began to earn wide-spread recognition and praise for its nearly around the clock coverage of the Democratic and Republican conventions. By 1990 Ted Turner’s 24 hour-a-day creation had become the major source for breaking news. Praise became so routine that few were surprised when a mid-1990s Roper survey found viewers ranked CNN as the ‘most fair’ among all TV outlets, and the Times Mirror’s Center for The People & The Press found viewers trusted CNN more than any television news organization.” While the traditional Big Three TV networks all had used satellite technology – the 1964 Olympics from Japan were broadcast live in the United States using the Syncom 3 geostationary satellite – until Turner, none saw the potential of using satellites and cable systems to distribute news programming. (The American Broadcasting Co. and the ‘History shows that any gutsy entrepreneur (Joseph Pulitzer, William Randolph Hearst, Henry Luce, B.C. Forbes, Ted Turner) can enter the news business anytime he wants. ... We saw a need. We went ahead and filled it.’ — Mike Bloomberg A New Model for News Syndication, May 2006 — Page 12 Westinghouse group of TV stations started the Satellite News Channel to compete with CNN, but within a few years Turner bought them out and folded the operation.) Bloomberg made a new space for his business in the financial news world because he found niches that competitors Dow Jones and Reuters didn’t fill. “We went against giants, and giants are usually easy to beat,” noted Bloomberg in his autobiography. The New York Stock Exchange now lists three publicly held financial news organizations: The 117-year-old Dow Jones, the 150-year-old Reuters and 20year old Bloomberg. Bloomberg claims that all he had to do was find a value-added service not currently available to his potential clients. “I conceived a business built around a collection of securities data, giving people the ability to select what they thought were the most useful parts, and then providing an intuitive computer software platform that would let non-mathematicians do analysis on that information.” His customers agreed. “In the end,” conceded one former competitor, “Reuters never managed to think far enough out of the box.” What customers liked about Bloomberg was the “Bloomberg Box,” the proprietary microcomputer that Bloomberg leased to financial traders. Bloomberg’s key disrupting technology was the microprocessor, which allowed his company to create that “intuitive computer software platform,” whose popularity was so essential to his success. Bloomberg’s growth rate was phenomenal. The company had 10,000 terminals in the market within eight years of its alliance with Merrill Lynch and 175,000 in place by 2003. Despite the bear financial market in the wake of the Sept. 11, 2001 terrorist attacks, Bloomberg weathered the storm and finally topped Reuters’ market share when the market slump forced traders to choose between their Reuters’ terminals or those from Bloomberg. Clients chose the Bloomberg’s boxes at a rate of four-to-one. Another disrupting technology was the Internet. A variety of companies have parlayed the basic technologies of the Internet into vastly profitable businesses. When one thinks of successful Internet businesses, three come readily to mind: Amazon, eBay and Google. Amazon was an early pioneer of online shopping. Initially focusing on books, founder Jeff Bezos believed that his company would ultimately carry a vast array of consumer goods (he chose books as the initial product because they were easy to inventory and easy to ship). Eleven years after its founding, Amazon today has 21 fulfillment centers around the world encompass more than 9 million square feet. It did about Smooth transaction: The buyers and sellers on eBay each rates an auction as ‘positive,’ ‘neutral’ or ‘negative.’ Those ratings are aggregated and posted for the entire community to see. A New Model for News Syndication, May 2006 — Page 1 $8.5 billion in revenue in 2005 and today has a market capitalization of almost $15.4 billion. Initially looking for a way to help his wife with her hobby of collecting dispensers of the Pez candy, Pierre Omidyar created what we know today as eBay, the vast online auction system. While others developed online auctioning systems, only Omidyar added the concept of the feedback and rating system, where both sellers and buyers rate each other on each transaction. Sellers on eBay who have a bad rating and poor feedback are usually unsuccessful in their auctions; only those who have high ratings and good feedback get returning buyers. In 2005, eBay did almost $4.6 billion in revenue and in early 2006 had a market capitalization of almost $56.8 billion. Both eBay and Amazon are comparative old-timers at the Internet business, while probably the biggest success – Google – is a relative newcomer. Starting from a 1995 collaboration on a research project at Stanford University, by early 1998 graduate students Larry Page and Sergey Brin had an operational Web search system that had been cobbled together running out of Page’s dorm room and that was a good proof-of-concept. The system was answering 10,000 search queries per day even though the service was still in beta development. Brin and Page were encouraged to create a business out of this proof-of-concept by fellow Stanford alum David Filo, a co-founder of the web directory Yahoo! Unfortunately, beyond Filo, there seemed to be little interest in a high-quality search engine. One potential investor is alleged to have told them that “nobody cares about search.” But their idea resonated with some key people and friends and family kicked in enough that the business was started with $1 million. By the end of 1999 the company was in a third set of offices, had 39 employees and was handling 3 million searches a day. Within a little more than a year it was up to 100 million searches a day. It is at about this time that the company introduced AdWords, its cost-per-click system of delivering potential customers to advertisers. An AdWords advertiser sets up an account that includes a variety of keywords that are triggered by specific search queries. When a keyword is activated by a search, a small blue box is displayed on the far right of the Google results web page. The box contains a link, about a dozen words explaining the product or service, the company’s URL and a bar chart indicating the degree of compatibility the ad has with the search query. Boxes at the top of the page cost more than boxes lower down and the row of boxes is topped with the warning, “Sponsored Links.” Tuning in iTunes: One of the most successful illustrations of ‘micropayments’ — small commerce transactions — is Apple Computer’s iTunes on-line music store. A New Model for News Syndication, May 2006 — Page 1 Search-based ad revenue shows growth Search 39% E-mail Lead generation/ 2% referrals 3% 2004 Classifieds 18% The advertiser pays only for those potential customers who click through using the AdWords link and advertisers can set two variables with their account: the maximum amount they are willing to pay for a click and a daily budget – or a maximum amount they are willing to pay per day. In this way the advertiser can control its costs and adjust an ad campaign in an completely interactive manner. Google monitors the click-through rate on the ads and if they fall below a certain threshold – five-tenths of a percent for those boxes at the top of the page – the company may well suspend the campaign and E-mail implore the advertiser to modify the Lead generation/ 2% keywords being used. Payment is referrals Search 6% conveniently handled through bank 41% cards, which Google electronically debits as necessary. Display ads 38% 2005 Classifieds 17% Display ads 34% From this humble beginning, in 2005 Google had revenue of $6.1 billion and is capitalized at $122 billion. Perhaps more importantly, since becoming a public company in 2003, its total revenue has grown an average of almost 20 percent, year over year, while total Internet ad spending has grown a more modest 8½ percent, year over year. Pie chart caption: In just one year, search-based advertising — that is, ads that are placed in context on pages — rose two percentage points among all the Internet ad categories. At the same time, classified ads dropped a percent, display ads droped four percent, e-mail ads remained stable and lead generation/referrals grew three percent. Sources: IAB Internet Ad Revenue Report; PricewaterhouseCoopersLLP. In fact, figures from the Interactive Advertising Bureau show that searchbased advertising – Google’s specialty – took percent points away from both display advertising and classified advertising when comparing full-year spending in 2004 to 2005. Though not as well known as its larger online commerce services, Getty Images – provider of stock and royalty-free photography – has had a similar meteoric rise. In the fourth quarter of 2005, the company’s operating net income grew 48% to $42.5 million. How can news organizations react to these vast changes in technology and society? In the case of the British Broadcasting Corp. (BBC), the idea is to give customers news on demand. The BBC not only runs TV networks and radio stations in the United Kingdom, but is also the publisher of 21 magazine titles and associated web sites, including the 1.1 million-circulation weekly Radio Times. In response to a call by Parliament to revamp its offerings, in 2005 the organization created 10 cross-divisional teams that researched where the BBC should go in the next five years. The result was the report Creative Future, which was released in April 2006. While the report addressed not only journalism, but entertainment as well, nonetheless many of the general recommendations will be adopted by both news and non-news as well. Key recommendations of the report include: A New Model for News Syndication, May 2006 — Page 1 • Relaunching the BBC’s website to include more personalization, • Create easy access points for audiences via broadband portals richer audio-visual and user-generated content. around key content areas like sport, music, knowledge building, health and science. • Start commissioning more 360-degree cross-platform content. • Shift energy and resource into continuous news on TV, radio, broadband and mobile, making BBC News 24 [England’s verGoogle sion of CNN] the center of the TV offering, moving talent to it and breaking stories on it. The team focused on journalism, led by Deputy Director General Mark Byford, made some astute observations: they wrote that, “in a growing world of opinionated news, partiality, blogging and citizen journalism, the BBC must provide the best journalism in the world, rooted in its enduring values of accuracy, impartiality and independence.” Percentage of Internet ad growth, Google revenue growth 30% 25% 20% 15% 10% 5% 0 Q3 Q4 2003 Q1 Q2 Q3 2004 Q4 Q1 Q2 2005 Q3 IAB Google grows faster: On a quarter-byquarter percentage basis, since it began reporting numbers, Google’s revenue — primarily search-based advertising — has always out-paced the growth of overall Internet ad revenue. Source: Google quarterly reports, IAB Internet Ad Revenue Report; PricewaterhouseCoopersLLP. Byford’s team also said that “audiences want change.” The team wrote that audiences say “trust is as much about responsiveness as it is about reliability.” The group said that audiences also recognise the difference between an unfolding story and a program of record – such as the BBC’s 10 o’clock News. Specific recommendations for BBC journalism included: • Shift energy and resource to continuous news. • BBC News 24 becomes the centre of the TV operation with key • BBC News 24 becomes the place to break stories and follow un• Develop the on demand offer in news with more convenience • Using folding stories. and better search and video/audio offerings. existing content, develop outstanding services for mobiles [cell phones] and portable devices. • Improve the quality and depth of sport and entertainment journalism. For all intents and purposes, in reaction to disruptive technologies and societal change, the BBC is completely revamping the way it handles journalism and entertainment. It is focusing more than ever on delivering news on demand, regardless of the platform the customer uses to get that news. talent moving to the channel. A New Model for News Syndication, May 2006 — Page 16 BROKEN BARRIERS LEAD TO A NEW NEWS MODEL A new world where news is syndicated not through “push” technologies, but by “pull” technologies – where editors purchase only those stories and photos that they want – is possible only because of the barriers broken down by Turner, Bloomberg, Bezos, Omidyar and Brin and Page. Turner and Bloomberg proved that it is possible to create new news distribution systems without being one of the big media companies; Bezos and Omidyar proved that high-quality online service coupled with comfort levels about with whom you were dealing made Internet commerce not only possible, but profitable, and Brin and Page proved that a devotion to not only technology, but also an utmost concern for the content that is handled by a web site, can create a wildly successful business. The publishing industry has radically changed in the last two decades: while daily newspapers continue to lose circulation and readership, more and more niche publications – be that ethnic or neighborhood newspapers, specialty magazines, financial newsletters or even more narrowly focused web sites – are attracting more and more readers. Yet, today the publisher of any of these niche operations has only a small handful of choices for news and features, none of them inexpensive or easy. In short, the publishing industry will increasingly become niche-driven and news syndication needs to evolve along with it. The old central-hub-andspoke news distribution model is no longer has valid; the news distribution industry must change into a more economical, peer-to-peer distribution model – enabled in its immediacy, relevance and granularity by Internetbased technology – if it is to meet the challenges of a changing world. A New Model for News Syndication, May 2006 — Page 1 RESOURCES AND BIBLIOGRAPHY Anderson, Chris: The Long Tail: Why the Future of Business Is Selling Less of More. Hyperion, 2006. ISBN: 1401302378. See also http://www.thelongtail. com/. Bloomberg, Michael; Winkler, Matthew: Bloomberg by Bloomberg, 1997. John Wiley & Sons. ISBN: 0471155454. British Broadcasting Corp.: Creative Future, April 2006. Available online at: http://www.bbc.co.uk/thefuture/pdfs/creative_future.pdf. The Cole Papers, December 2003: “Growth fueled at Google by creating new services, products.” Pacifica, Calif. ISSN: 1062-6727. eBay Inc. Feedback and rating system, on-line at http://pages.ebay.com/help/ feedback/. Gordon, Gregory; Cohen, Ronald E.: Down to the Wire: UPI’s Fight for Survival, 1989. ISBN: 0-07-023804-9. Gramling, Oliver; Barrow, Henry C.: The AP: The Story of News, 1940. Farrar & Rinehart Inc. Hughs, Travis: Roundup of News Technology, 1974. UPI internal document. Available on-line at http://www.downhold.org/lowry/tech.html. IBISWorld: News Syndicates in the U.S. IBISWorld. NAICS: 51411. Internet Advertising Bureau, PricewaterhouseCoopers: IAB Internet Advertisng Revenue Report, 2005. April 2006. Available on-line at http:// www.iab.net/resources/ad_revenue.asp. Magazine Publishers of America. Industry statistics, online at http://www. magazine.org/Circulation/circulation_trends_and_magazine_handbook/ and http://www.magazine.org/Advertising_and_PIB/Ad_Trends_and_ Magazine_Handbook/. Museum of Broadcast Communications, Chicago. Cable News Network: http://www.museum.tv/archives/etv/C/htmlC/cablenewsne/cablenewsne. htm. Superstation: http://www.museum.tv/archives/etv/S/htmlS/ superstation/superstation.htm. Newspaper Association of America. Industry statistics, on-line at http://www. naa.org/thesource/. Swanberg, W.A.: Luce and His Empire. Charles Scribner & Sons, 1972. SBN: 794-12502-7. Tebbel, John; Zuckerman, Mary Ellen: The Magazine in America, 1741-1990. Oxford University Press, 1991. ISBN: 0195051270. Toffler, Alvin: The Third Wave. Random House Value Publishing, 1987. ISBN: 0517327198. A New Model for News Syndication, May 2006 — Page 1 RESOURCES AND BIBLIOGRAPHY (con’t.) University of Southern California Annenberg School Center for the Digital Future: Digital Future Report. Reports and synopsis available at http:// www.digitalcenter.org/. Whittemore, Hank: CNN: The Inside Story: How a Band of Mavericks Changed the Face of Television News, 1990. Little Brown & Co. ISBN: 0316937614. ABOUT THE AUTHORS David M. Cole is a consultant to newspapers and newspaper supply companies and is editor and publisher of NewsInc., the weekly newsletter on the business of the newspaper business. For more than a decade, he was a columnist for the Newspaper Association of America’s publications Presstime and TechNews. Earlier, he was an assistant managing editor at the San Francisco Examiner and an assistant music editor at Rolling Stone magazine. Dr. Stephanie Nelson is an professor in the School of Engineering & Technology at the California State University at Los Angeles and a research affiliate at NASA’s Jet Propulsion Laboratory in Pasadena, Calif. She is a recognized expert in professional communication, organizational leadership and organizational wellbeing. A New Model for News Syndication, May 2006 — Page 1