Who said Journalism is dead?

The death of journalism

It is no secret that print media is suffering. From 2000 to 2015, US newspaper print advertising revenue fell from $60 billion to $20 billion. [1] This, however, is less a reflection of high-quality written content going out of style, and more a reflection of a fundamentally misguided online business model. The core issue is fragmentation: over 1,300 newspapers are running verticalized content creation, distribution, and monetization models. [2] While this may make sense for content creation, it makes less sense for distribution and monetization, since their success online relies on scale. Consequently, newspapers have been trading in analog dollars for digital pennies. While newspaper revenue dropped $40 billion between 2000 to 2015, the entire online ad industry grew from $8 billion to $60 billion, with only two players captured a staggering 67 percent of market share and 95 percent of growth: Google and Facebook.  [3] Consequently, the number of newspapers per hundred million in population dropped from 1,200 in 1945 to about 400 in 2014. During that same period, per capita circulation declined 35 percent in the mid-1940s to below 15 percent. [4] While this industry dynamic suggests that high-quality journalism, as we currently know it, is economically unviable, there actually is a green shoot: The Washington Post.

A New Hope??

The Washington Post was founded in 1877, over 141 years ago. The storied American newspaper gained considerable fame and notoriety in 1971 as it published excerpts of a top-secret U.S. Department of Defense report, later published in book form as The Pentagon Papers, and it subsequently published articles about the Nixon Administration’s involvement in the Watergate scandal. [5] The Washington Post, however, found itself in the headlines when in 2013 it was purchased by Amazon founder, Jeff Bezos for $250 million. [6] While some news outlets characterized this move as one of many “wacky” moves by the retail billionaire, it actually was the beginning of a renaissance in the industry. [7]

A Red Herring

While under new ownership, The Post reinvested in its editorial staff, thereby reorienting the paper’s focus to capture a national and global audience. It now publishes over 1,200 articles a day, and relies heavily on  Facebook, Twitter, Amazon Prime, and Kindle to amplify its distribution capabilities. All of this resulted in The Washington Post surpassing its longtime rival, The New York Times, in US unique web visitors in October 2015. [8] In September 2017, The Post announced that it had signed up over 1 million digital-only subscribers in just 12 months — up 300 percent from the prior year. [9] However, this rebirth–driven by a fresh injection of capital and a strategic reorientation–is nothing more than a red herring. In my view, this chapter of The Post’s existence will be defined by the storied media house turning into a software company.

Who Says Elephants Can’t Dance? Who said Journalists Can’t Code?

In a masterstroke, The Post offered “Arc Publishing” — a publishing software platform originally used to run WashingtonPost.com — as a service to other publishers starting in 2014.  [10, 11] This strategy struck at the core of the journalism industry’s key structural problem: over 1,300 newspapers running verticalized distribution and monetization models. Fast Company wrote, “By offloading the creation of publishing tools and the hosting of sites, media companies can concentrate on the journalism itself rather than the technical requirements of getting it in front of readers.” [12] In other words, this service allowed papers to focus on their core capability: content creation.

Arc Publishing has gained significant traction by signing up prominent customers, such as the Los Angeles Times, the Boston Globe, Canada’s Globe and Mail, the New Zealand Herald, and others.” In May 2018, Digiday wrote that “Arc supports 90 sites and apps representing 500 million monthly unique visitors,” and that the firm expects to serve between 150 and 200 sites by the end of the year. Though The Post does not disclose Arc Publishing’s financials, it reports that the division’s revenues have been doubling year-over-year. Moreover, “According to Post CIO Shailesh Prakash, the company sees the platform as something that could eventually become a $100 million business,” writes Fast Company.

More recently, Harvard University’s Nieman Journalism Lab wrote that “The Washington Post’s ambitions for Arc have grown — to a Bezosian scale.” Apparently, The Post will begin testing an ad network in 2019. Code named “Zeus,” Arc’s advertising initiative purportedly “does a more effective header bidding,” which has already helped the paper increase CPM ad rates by 30 percent. Moreover, Arc intends to launch a paywall product to help publishers monetize through a freemium model. This product would allow for frequent paywall testing, which would help publishers optimize their model for their context. Described by Nieman Labs as the provider of the “holy trinity,” Arc Publishing offers technology “that can improve the publishing process, digital advertising optimization, and digital subscription development.” [13]

A New Hope?

To the casual observer, this playbook may seem eerily familiar. Indeed, this is because The Washington Post is running precisely the same playbook that Amazon ran with Amazon Web Service. In short, the media house is transforming a traditional cost center — IT infrastructure — into a margin accretive profit center. [14] In doing so, it is allowing other indsutry players to shed onerous fixed costs and focus on their core strengths. It indeed is ironic in an industry brutalized by technological innovation and flooded with tech-enabled new entrants like BuzzFeed, that an older stalwart with a new trick up its sleeve may emerge as the white knight.

While The Washington Post continues to scale Arc Publishing, it is critical to note that the platform still is in its infancy. Facebook and Google still dominate digital advertising, and the Content Management System product space is still dominated by homegrown solutions and incumbent providers. However, Arc’s early traction provides hope that journalism may once again discover an economically viable business model. Also, if Arc were to become the ad platform of choice for long-form written media companies, it has yet to be seen whether The Washington Post would extract economic rents as severely as Facebook and Google do. If successful, however, Arc Publishing’s strategy indeed  speaks to the old adage that the true winners in gold rushes are those who sell shovels.

References

[1]  https://www.aei.org/publication/creative-destruction-newspaper-ad-revenue-continued-its-precipitous-free-fall-in-2014-and-its-likely-to-continue/

[2]  https://www-statista-com.ezp-prod1.hul.harvard.edu/statistics/183408/number-of-us-daily-newspapers-since-1975/

[3]  https://www.statista.com/statistics/183816/us-online-advertising-revenue-since-2000/

[4]  https://www.brookings.edu/wp-content/uploads/2016/07/new-media.pdf

[5]  https://www.britannica.com/topic/The-Washington-Post

[6]  https://www.washingtonpost.com/business/economy/washington-post-closes-sale-to-amazon-founder-jeff-bezos/2013/10/01/fca3b16a-2acf-11e3-97a3-ff2758228523_story.html

[7]  https://money.cnn.com/2013/08/06/technology/bezos-investments/index.html

[8]  https://www.businessinsider.com/how-the-washington-post-changed-after-jeff-bezos-acquisition-2016-5#bezos-continues-to-be-very-involved-with-the-posts-operations-he-holds-one-hour-conference-calls-with-executives-every-two-weeks-and-brings-them-into-seattle-twice-a-year-for-longer-meetings-11

[9]  https://www.fastcompany.com/company/the-washington-post

[10]  https://www.fastcompany.com/40495770/the-washington-post-is-a-software-company-now

[11]  https://qz.com/1341589/amazon-can-make-loads-of-money-when-it-actually-feels-like-it/

[12]  https://www.fastcompany.com/40495770/the-washington-post-is-a-software-company-now

[13]  http://www.niemanlab.org/2018/09/newsonomics-the-washington-posts-ambitions-for-arc-have-grown-to-a-bezosian-scale/

[14]  https://www.computerworlduk.com/galleries/cloud-computing/aws-12-defining-moments-for-the-cloud-giant-3636947/