NYTimes meets World of Warcraft… the future of news?

As I mention in my previous post, I’ve been doing some work of late around the future of news, which fortunately has helped me to figure out some of the thesis’ implications for the space. For anyone not familiar, the thesis (in 30 seconds) is that as new communication tools make collaboration easier, efforts to produce services internally become increasingly inefficient. The reason people invest in fixed assets, be they capital production assets, full-time employees, information an individual chooses to memorize rather than Google at the time it’s needed, or plans a person makes with friends in advance rather than coordinating ad hoc via txt once out, is that the transaction costs of accessing the relevant resources on demand are too high. As new communication and service infrastructures though radically reduce the cost of this on demand access, the benefits of fixed upfront investments dissipate. You’re stuck with some particular set of resources, optimal for only some particular set of things, rather than accessing the best, most-tailored solutions the ecosystem has to offer, at exactly the times you need them.

The application to news follows directly. Say you have 500 people in your newsroom. These 500 people are able to procure, analyze, package, and distribute some set of information with some set of competitive advantage. Before, in the broadcast era, this was fine, as the cost of distribution meant only a small group of organizations could rally the resources to do it. There’d be slight variation in the quality and type of products offered (accounting for differences in viewership), but players couldn’t specialize, as the smaller audiences this would cater to couldn’t support the huge cost of the necessary delivery infrastructure. Today by contrast, an independent distribution layer has emerged, the Internet, and anyone can access it. Production and marketing costs falling in parallel, major news publishers now compete not with a few other firms, but with an entirely new mode of production: with everybody... with network production.

On the web, things switch from a 'filter-then-publish' mode to an opposite, 'publish-then-filter' one. Instead of a couple companies trying to assemble full packages of finished content, everybody just throws everything out there. Most of it’s of course crap. But the best can be quite great, even better than supposedly premium content. And more importantly, individual pieces tend often to be better than that premium content, at least for some particular person, at some particular time. When you want it, tech news from the tech guys (or directly from the relevant company). When you want it, fashion news from the fashion guys (or from the model herself). Live video of Sri Lanka during the tsunami from someone who's actually there. Policy analysis from the retired DoD wonk who happens to have worked on the legislation for forty years. And the collection of all of these tailored to your preferences by algorithmic behavioral and social aggregators.

I believe there’s a solution though. The tagline is NYTimes meets World of Warcraft. It’s a solution in fact surprisingly similar to what I think needs to take place on the entertainment side. The idea is that if publishers want to compete with networks of production, they can’t do it alone. They need somehow to produce tons more of each of the services they provide (information discovery, analysis, presentation, and distribution) to have options available that will line up with each individual’s preferences, but somehow not add to cost. How do they do this? They get others to do it for them! They leverage their brands, their loudspeakers, and those unique, highest-quality services only they can provide to create a community of collaborative production, augmenting the value they create with value created by others, including both users and fellow suppliers. They become a network of production themselves. A closest approximation today I’d think would be something like what HuffPo drives toward. Or something -- differently monetized, and in the news rather than entertainment space -- but like this example of Jimmy Fallon crowdsourcing development of show material via Twitter : http://www.youtube.com/watch?v=nouZPPtDibE

By shifting from a reporting outlet to a reporting community, a publisher is able to tap the vast resources embedded in its user base. With something like CNN’s iReporter UGC platform, the company creates a coverage mesh far more extensive then it could achieve on its own – when a disaster strikes anywhere in the world, it now effectively has a team on the ground already. Community contributions aren’t limited though to bottom-end UGC. Huffpo taps its broad network of domain experts to produce professional, in-depth analysis for free. Techcrunch uses its community to help with investigation, relying on its passionate user base of industry insiders to contribute leads and even help flesh out stories. In its form of so called process journalism, the blog releases stories early, is transparent about uncertainty, and then lets readers help source and draw out details. In so doing, it’s not able to produce truly differentiated scoops, but finds a way to compete with the rapid ‘shoot first, ask questions later’ (publish-then-filter) cycle of independent publishers and network production generally.

Other benefits come with the community approach as well. In the case of Techcrunch and other niche news communities (Style, Politico…), audiences are more targeted and therefore can be marketed to more efficiently – billboards in Silicon Valley, conference sponsorship, etc. And with any community production effort, publishers capture the benefit of viral social marketing. Perhaps more importantly though, the community approach opens up new avenues for revenue generation. Advertisers will pay premiums to reach audiences they believe are deeply engaged – through simple display media, and even more through the unique forms of deep brand engagement user participation makes possible (‘best news photo submission contest, sponsored by Nikon’). Creating participation meanwhile lets publishers move beyond advertising alone, allowing them to segment and more fully monetize their audience with offerings to more passionate community members like paid content, virtual goods, merchandise, and conferences.

Graphic adapted from this excellent post by Kim-Mai Cutler.

Such distributed production should also of course involve collaboration beyond a community’s walls. Inbound, this means pulling in the best content the web has to offer, a strategy Huffpo and other aggregators have successfully demonstrated. Outbound, it means opening your differentiated assets and tools to external value creation (thesis part II). Embeddable players are a perfect example here – share and monetize the video, let other people build and monetize value around it. But news organizations can go further, releasing content in more remixable formats, perhaps via API. For differentiated material (including archive content), publishers can license access or pair content with robust ad network services. They could build tools and release in-house ones to support external creation – again, with access either licensed or supported vertically via ad sales. And completing the cycle, all this external creation can then be filtered back into the community a publisher managers.

Critically, a shift to community production provides not only these immediate production, marketing, and monetization benefits, also it addresses media's long-term structural problem. In the Internet age, media must enter a new, third phase of business model. Content is a funny creature in that it’s largely non-rivalrous, and through its history, varying degrees of non-excludable. Its monetization then has always been about finding natural points of control, sites where people have to come to a publisher if they want the services that company provides. In the broadcast era, distribution technology meant there was no way to ask this of consumers; to put out their product, signal, it had to be to everyone, so no one would come ask permission to use it. Who though would come us ask for a publisher’s services? Advertisers – to whom they could sell their aggregations of audience. In the cable era, media companies found a way to establish a retail model. By running a pipe to people’s homes (or having their partners, the MSOs, do it), they found a way to control distribution, such that if people wanted access to services, they’d have to come ask and pay for the privilege, just as they do with every other retail product they buy in stores.

With the Internet though, the retail model breaks down, as distribution can no longer be controlled. What's needed then is to create some new service people will have to come ask, and pay for, to use. A big part of the answer I believe is community, a service publishers can provide rather than simply an asset. This is critical in news, given the short shelf life of content, it's easy replicability, and the wide range of individuals who'll provide it for free, all of which make it a bad candidate for withheld-access monetization strategies. Here, the MMOG analogy is particularly helpful – anyone can pirate a copy of World of Warcraft’s base software and have a local copy of the environment it creates. But what good is that? You’d have gained the ability only to walk around the game’s landscapes by yourself. To enjoy the product, you need to participate in the community Blizzard orchestrates, and to do that, you have to ask the company's permission to enter its servers.

A shakeout in the news industry was of course inevitable. As Shirky describes, now that everybody can speak to everybody, many of the services a publisher provides, which used to protected by exclusive distribution capabilities, are now exposed to competition, or worse, rendered unnecessary entirely. No longer can publishers control revenue from businesses they don’t specialize or innovate in, like classifieds. No longer are they needed in every geography simply as distribution hubs (news originators can simply distribute directly). And no longer can they claim an exclusive channel to audiences for advertisers. On top of all of this, with delivery now unified across formats, professional outlets previously separated by medium (newspapers, magazines, broadcasters, etc) all now compete against one another directly.

For sure, there’s still a place for those services only integrated news organizations can provide. There remains a market, if a smaller one, for the sort of lean back consumption only traditional, ‘filter then publish’ credentialing can provide – the twin quality-of-service guarantees of coverage breadth and reliability. There will always be a place for differentiated components, in investigative reporting, analysis, production, aggregation, or anywhere else. When you can assemble a collectively strong enough bundle of these, you can even sell it to consumers directly… the Economist and WSJ note are both thriving today even behind paywalls, with readers and advertisers alike showing perfect willingness to pay for a product they believe provides differentiated value. And of course, I believe there will certainly be a place for the sort of news ‘orchestration’ described in this post – a difficult, intricate task that almost certainly requires the precision and coordination of an integrated entity.

But of equal certainty, the type, mix, and perhaps quantity of news organizations that exist tomorrow will look profoundly different than those today. Everyone in the news world I think basically gets that journalism is changing and that it’s headed in the direction of access and participation. But I don’t think even the people who are doing these things well – the HuffPos of the world, the Flipboards – truly understand the mechanics driving their success… the why. I think if we can do this, if we can recognize the core mechanics of production in a connected age, it could make for the basis of a truly sustainable vision, a real strategy to help reinvent news.