The startup trying to save a media dinosaur
Newspapers are hurting. Can a new pricing approach reverse declines?
“The news out of Philadelphia, is that there is no news,” declared Mark Dillen of the USC Center on Public Diplomacy in early 2009. “No newspapers, that is. The Philadelphia Inquirer and the Philadelphia Daily News have joined the swelling ranks of American print media that have gone bankrupt.”[2]
How did we get to this point? How did an industry that attracted $65B in advertising revenue in 2001 fall to around $20B only a decade later? [8]
The Print News Industry, Disrupted
The answer begins by looking at the four primary roles of newspapers and the competitive pressures enabled by technology in each:
- News source: A newspaper’s primary role has always been to create and deliver news to subscribers. The Internet broke the “information monopoly” that newspapers enjoyed. Bloggers and online media entered the competitive fray without burdensome overhead. Getting consumers to pay for content continues to be the billion-dollar question.
- Community forum: Newspapers provide a medium for community connectedness, including wedding and funeral announcements, birthdays, anniversaries, and accomplishments. Social media offered a free medium through which to reach friends and family, with a more targeted delivery than newspapers.
- B2C marketing medium: Where businesses previously relied on newspapers to reach markets, and broadly marketed to entire cities, they now can reach consumers through a plurality of technology-enabled media, including television, social media, and search engine optimization. In addition to being more targeted, these media often also provide trackable metrics that inform the effectiveness of a marketing campaign.
- Individual marketplace: Through classifieds and personals ads, newspapers made it possible for people to market to each other. Craigslist and later Facebook Marketplace have largely displaced the newspaper’s classifieds section.
As a result of these parallel pressures, print media found itself in a crippling cycle: flight of advertising revenue leads to smaller papers, layoffs and decreased talent, limiting a newspaper’s quality and breadth of coverage. This decline causes subscribers to be dissatisfied, and they turn to other media sources. Advertisers see declining circulation numbers, and further cut newspaper advertisement budgets, restarting the cycle. [2] [9]
A tech response to a tech problem
Media companies have scrambled to innovate in the face of such intense and existential pressure. They have turned to content paywalls, subscription smart device applications, and online advertisements to try to offset advertising and subscription revenue, but this has only covered ~10% of a ~$45B industry decline (figure 1). [6]
Figure 1:
Among the most promising technology startups to target the media industry is Blendle, a journalism “micropayments” startup attempting to modernize the way readers purchase content. [4]
Blendel’s fundamental hypothesis is that people are willing to pay for the journalism they consume, but not in the way people used to pay for it. Instead of subscribing to a single news source and paying for blanket access to all content, Blendel sources articles from many media outlets and allows customers to browse and “buy” articles that they are interested in. When the user clicks into an article, their account is automatically charged for that content (per-article prices range from about $.09 for a standard newspaper article to $2.50 for headline, long-form articles). [1]
Blendel keeps 30% of the revenue, passing 70% to the media source. The opportunity to participate in this “media marketplace” has drawn news sources including The New York Times, The Washington Post, The Economist, and Fast Company. [1]
The technology combines convenience (available on smartphone, laptop, or tablet), flexibility (access to a wide range of news sources, including newspapers and magazines), trust (users can request refunds for disappointing content, discouraging publishers from creating “click-bait” and encourages quality), ease (being able to debit a “wallet” or charge to a credit card reduces the friction of pay walls and multiple log-ins), and targeted content delivery (generating customized recommendations based on preferences and history, reducing content search time).
One year after conception, Blendel has a million paying users in Germany, the Netherlands, and the U.S. (beta version only). [7]
If scaled, this model would give newspapers access to a global market of potential readers. The model also rewards “unique” or complex (and expensive) forms of journalism, as these types of articles are more likely to be attractive to customers. [7]
Pushing even farther
Blendel should seek to be embedded in the websites and apps of media outlets. Instead of having to subscribe to The New York Times, The Economist and Wall Street Journal to read content from their websites, users could use their Blendel account to pay for articles on each site.
This would reduce the friction of purchasing articles from different publications and allow newspapers to continue to collect on other website advertisements. It would also appeal to the consumer who wants an unabridged view of available content from a news source, without having to pay for content that isn’t relevant.
(794 words)
Sources:
[1] Greenberg, Julia. “Would You Pay 25 Cents to Read an Article? Blendle Certainly Thinks So.” Wired.com. Conde Nast Digital, 3 Mar. 2016. Web. 18 Nov. 2016.
[2] Joyner, James. “The End of Print Media.” Outside the Beltway. USC, 9 Mar. 2009. Web. 18 Nov. 2016.
[3] Kissel, Mary. “The Decline of Print Doesn’t Mean the End of Journalism.” The Guardian. Guardian News and Media, 29 Oct. 2013. Web. 18 Nov. 2016.
[4] Lomas, Natasha. “Blendle Clocks up 1M Signups for Its Pay-per-article Journalism platform.” TechCrunch. N.p., 11 Aug. 2016. Web. 18 Nov. 2016.
[5] McFarlane, Greg. “Technology And The Death Of Print Media.” Investopedia. Investopedia, 08 Jan. 2012. Web. 18 Nov. 2016.
[6] Olmstead, Kenneth. “Newspapers: Stabilizing, but Still Threatened.” The State of the News Media 2013. Pew Research Center, 17 Mar. 2013. Web. 18 Nov. 2016.
[7] O’Reilly, Lara. “Some of the Biggest News Sites in the US Are Going to Start Letting Readers Pay-per-article.” Business Insider. Business Insider, Inc, 23 Mar. 2016. Web. 18 Nov. 2016.
[8] Perry, Mark. “Newspaper Revenues Fall to 60-year Low.” CARPE DIEM. Blogspot, 26 Feb. 2012. Web. 17 Nov. 2016.
[9] Smith, Russ. “The Day the Newspaper Died.” Splice Today. N.p., 15 Dec. 2008. Web. 18 Nov. 2016.
[10] Stefano, Theodore. “Do E-Readers Spell the End of Print Media?” Do E-Readers Spell the End of Print Media? | Business | E-Commerce Times. N.p., 2 Sept. 2010. Web. 18 Nov. 2016.
Well-written, Rob! It’s sad to see print newspapers declining to probably extinction, and like you mention it’s a vicious cycle with dependent stakeholders—advertisers and subscribers—that’s making the industry shrink even faster. At the same time, what an interesting startup idea. It’s basically a complete unbundling of newspapers. You point out the advantage for customers, who only pay for what they want to read, but it’s also advantageous for advertisers, who can more directly target customers.
However, I have a few comments/concerns about the model. First, customers seem more reluctant to pay per use; even if it’s a small amount, they will think twice before clicking on the article and not want to incur a charge (even if it’s irrational). A better business model might be bundling packages of articles (i.e. 5, 10, or 20 articles per month). Second, the total revenues will likely be lower than in the subscription model, and I’m concerned about the quality of the content (if writers aren’t paid enough to write). This incentive structure might also change the topics people write about or how they present opinions, focused more on getting buzz than on quality journalism. I don’t have a solution for the second problem, but it’s something to think about.
I’m hoping that there’s a way to monetize the industry, such that quality content exists and consumers are willing to pay for it.
This is an interesting idea, but I have the same concerns as Sheila regarding the impact this would have on large publications. If consumers can choose articles a la carte they’d have no real reason to pay for an annual subscription. I think this would likely accelerate the decline of these traditional news sources and writers/desks that don’t produce sufficient article purchases would be shut down (I’m imagining some of the less popular sections of the NYT). It’s also interesting that there doesn’t seem to be much pushback from the papers themselves. Cable companies have lobbied hard against unbundling TV packages, knowing that if viewers could choose channels a la carte, the long tail of networks wouldn’t generate enough revenue to continue business. I wonder if large publications will band together at some point to try to limit the unbundling of their content
Thanks Rob. I agree with the concerns listed above – specifically, the risk that implementing this model for each media site can expedite the speed at which consumers switch from subscription to a la carte and therefore lower total revenues. One other consideration is that Blendel’s model could encourage readers to only focus on the articles / topics that they specifically seek out. The risk is that readers are less willing to consider a different perspective or explore a new topic. While the rise of micro-blogging and social media have encouraged this echo-chamber effect, Blendel’s model may further contribute to it.
Thanks for this fascinating post Rob. The dilemma faced by the newspaper industry is a truly daunting one. Blende seems like it offers a very consumer friendly way to get consumers to pay for news content, but I question if their strategy will help with the biggest problem facing the newspaper industry which is the rapid decline of print advertising spend. I’m concerned that allowing consumers to only pay for individual articles would allow advertisers to further squeeze content providers on advertising spend and the industry would continue to struggle. I looked at the NYT and was fascinated to learn that overall subscription revenue is actually up! So the problem that Blende is solving for… falling subscription revenue, may actually not be the key to helping major publishers. The real question is how can news content providers retain the advertising spend that has historically fueled their profitability.