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Diversify revenue: Why these gaps exist

In order to overcome them, first understand the barriers to succeeding at diversifying and growing revenue.

This is an excerpt from “Table Stakes: A Manual for Getting in the Game of News,” published Nov. 14, 2017. Read more excerpts here.

Culture, habit, language, inertia and orientation hinder people across the entire news enterprise from embracing shared risk taking and accountability for economic sustainability

Church-versus-state. Edit side versus business side. This division of labor worked during the monopolistic/oligopolistic print era. Today, it cripples metros through perpetuating a strong belief that “X” or “Y” is not my job. It’s their job.

When journalists shroud themselves behind this veil (“church-versus-state”), they idealistically, reflexively, fearfully or cynically close their minds to the basic economics of their enterprise as well as holding themselves accountable for contributing to those economics.

Newsrooms, though, are not alone in this self-defeating habit. Too many ad sales folks remain stuck in taking orders for print ads as opposed to working with potential advertisers in ways to help them solve the difficult problems they face today – problems that demand coordination with the newsroom –and, like newsroom folks, learning and practicing new ways of doing their jobs. Publishers, marketers, technologists, controllers and others also can see themselves in ways that favor ‘what our role has been’ versus ‘what we together must do today.’ The deep habit, for example, of limiting revenue possibilities to subscriptions and/or advertising arises from enterprise habits tied to outdated conceptions of who does what jobs.

Impossible to meet criteria block risk taking and experimentation

Senior leaders who use print economics to judge whether to move forward with investments in digital and other experiments disserve themselves and their enterprises. This is the ‘fumbling the future’ problem that takes its name from the book recounting how Xerox fumbled away the opportunities in personal computing created at Xerox PARC because Xerox executives could not see a fast or immediate path to replicating copier financial performance with a technology whose uses were still being discovered and whose economics remained uncertain.

Reviving metro financial sustainability – and especially sustainability built on creating and reaping value as opposed to cost cutting – demands a broad portfolio of approaches, no single one of which will reproduce print economics. No single digital effort will do this. And no single new service or product with non-subscription, non-advertising revenues will do so either. Yet, if senior leaders insist on looking only for ideas that will replicate attractive print economics, their enterprises will fail to find ideas that, while smaller today, can alone and together move the enterprise toward sustainability.

News enterprises do not set aside enough resources for innovation

Hard-pressed by eroding economics, too many metros, locals and regionals fail to invest in fundamental innovation. While this pattern is understandable, it nonetheless trades off near-term financial results for medium-to-long term economic sustainability. Fundamental innovation is not the same as continuous improvement. Both matter. It is essential, for example, that metro newsrooms get continuously better at driving traffic and engagement through an audience-first orientation supported by excellent data and analytics while also reaping maximum revenues by funneling random users into habitual and financially attractive loyalists (see Table Stake #4).

That’s necessary but not sufficient. In addition, metros must take risks – be willing to spend valuable financial and human resources – to discover fundamental new ways of creating and reaping value. When Belo purchased SpeakEasy, CrowdSource and other companies necessary to their ecosystem strategy – just as when they asked a team to spend time creating GuideLive – they were attempting fundamental innovation as opposed to experimenting at the edges of continuous improvement. The same describes the Minneapolis effort to build a multi-layered, strategically driven events business.

Innovations like these are fundamental because success or failure turns on figuring out serious uncertainties about the existence, needs and responsiveness of customers as well as whether the metro can blend required technology and capability to deliver on the necessary promises. While disciplines exist for minimizing the cost of failure for any single effort, an entire portfolio of efforts demands levels of investment and risk that legacy metros find difficult to make. Limiting the revenue side of such efforts to subscriptions and advertising unnecessarily raises the bar – and jeopardizes the resources – for innovation.

News enterprises lack institutional disciplines for innovation

Traumatic declines in print subscriptions and advertising are just that: traumatic. While understandable, the desperation produced too often fuels a blend of cost cutting and random ‘moon shots’ instead of a careful, strategic and disciplined portfolio of revenue generating efforts grounded in a dedicated pool of financial and human resources.

This pattern is at odds with one of the best capabilities of the print era: capital budgeting. Newspaper companies regularly confronted capital-intensive choices related to new plants and equipment. They used well-understood capital budgeting analysis and problem solving to make those choices. That kind of rigor, though, has yet to mirror itself in the new and different challenge of innovation. As a consequence, news enterprises have yet to build, practice and get good at the innovation disciplines required to move forward with confidence.

News enterprises suffer from too little imagination regarding new and different ways to solve civic and economic problems that arise from the disruption of all things local

Local is broken. How people – as well as private, nonprofit and governmental organizations – function and relate locally bears little resemblance to what prevailed when metro newspapers flourished in the mid-to-late 20th century. At an abstract level, people and enterprises confront problems not dissimilar to earlier times. But, the much more concrete ways in which they go about solving such problems locally has undergone tectonic shifts caused by digital disruption, widespread industry consolidation, winner-take-all economics, extremist politics and more.

This provides a blank canvas for local news enterprises that embrace the opportunity and responsibility to lead. Consider, then, the elements of the following syllogism:

  1. We live in an age of information.
  2. Metro, local and regional publishers have trusted brands for local information
  3. Therefore: (You fill in the blank)

The conclusion – and the myriad opportunities arising from it – ought to be clear. Yet, taking advantage demands mindsets open to possibilities beyond providing general news to general audiences in return for subscriptions and advertising.

Think, for example, about membership. Many nonprofit news enterprises use membership as a pathway to financial sustainability. Moreover, the range of meaning – and opportunity – for membership tap into several problems: (1) the need for a sense of belonging locally; (2) the need to have purpose(s) shared with others locally; (3) ways to connect with others locally; (4) sources of local information vetted by providers and other members; and, (5) economic value provided in return for regular participation locally.

When folks in news enterprises say and hear the word “membership” only as a slick or fluffy way to repackage ‘subscriptions’ – say, with tote bag gifts – they miss out on reimagining their own purposes, roles and ways of contributing to the revitalization of local.