Each year, this report also identifies key trends. In addition to the growing significance of third-party players in shaping the future of news, six stand out entering 2011:
The news industry is turning to executives from outside. The trend has a scattered history. The complex revenue equation of news — that it was better to serve the audience even to the irritation of advertisers that paid most of the bills — tended to trip up outsiders. It spelled the end, for instance, of Mark Willes at Times Mirror when he let advertisers dictate content. With the old revenue model broken, more companies are again looking to outsiders for leadership. One reason is new owners. Seven of the top 25 newspapers in America are now owned by hedge funds, which had virtually no role a few years ago. The age of publicly traded newspaper companies is winding down. And some of the new executives are blunt in their assessments. John Paton, the new head of Journal Register newspapers told a trade group in December: “We have had nearly 15 years to figure out the web and, as an industry, we newspaper people are no good at it.” A question is how much time these private equity owners will give struggling news operations to turn around. One of these publishers told PEJ privately that he believed he had two years.
Less progress has been made charging for news than predicted, but there are some signs of willingness to pay. The leading study on the subject finds that so far only about three dozen newspapers have moved to some kind of paid content on their websites. Of those, only 1% of users opted to pay. And some papers that moved large portions of content to subscription gave up the effort. A new survey released for this report suggests that under certain circumstances the prospects for charging for content could improve. If their local newspaper would otherwise perish, 23% of Americans said they would pay $5 a month for an online version. To date, however, even among early adopters only 10% of those who have downloaded local news apps paid for them (this doesn’t include apps for non-local news or other content). At the moment, the only news producers successfully charging for most of their content online are those selling financial information to elite audiences — the Financial Times is one, the Wall Street Journal is another, Bloomberg is a third — which means they are not a model that will likely work for general interest news.
If anything, the metrics of online news have become more confused, not less. Many believe that the economics of the web, and particularly online news, cannot really progress until the industry settles on how to measure audience. There is no consensus on what is the most useful measure of online traffic. Different rating agencies do not even agree on how to define a “unique visitor.” Does that denote different people or does the same person visiting a site from different computers get counted more than once? The numbers from one top rating agency, comScore, are in some cases double and even triple those of another, Nielsen. More audience research data exist about each user than ever before. Yet in addition to confusion about what it means, it is almost impossible get a full sense of consumer behavior — across sites, platforms, and devices. That leaves potential advertisers at a loss about how to connect the dots. In March 2011, three advertising trade groups, supported by other media associations, announced an initiative to improve and standardize confusing digital media metrics called Making Measurement Make Sense, but the task will not be easy.
Local news remains the vast untapped territory. Most traditional American media —and much of U.S. ad revenue – are local. The dynamics of that market online are still largely undefined. The potential, though, is clear. Already 40% of all online ad spending is local, up from 30% just a year earlier. But the market at the local level is different than nationally and requires different strategies, both in content creation and economics. Unlike national, at the local level, display advertising — the kind that news organizations rely on — is bigger than search, market researchers estimate. And the greatest local growth area last year was in highly targeted display ads that many innovators see as key to the future. Even Google, the king of search, sees display as “our next big business,” as Eric Schmidt, its CEO, told the New York Times in September.
The nature of local news content is also in many ways undefined. While local has been the area of greatest ferment for nonprofit startups, no one has yet cracked the code for how to produce local news effectively at a sustainable level. The first major concept in more traditional venues, the push toward so-called “hyperlocalism,” proved ill-conceived, expensive and insufficiently supported by ads. Yahoo’s four-year old local news and advertising consortium has shown some success for certain participants but less for others. There are some prominent local news aggregators such as Topix and Examiner.com, and now AOL has entered the field with local reporting through Patch. Whether national networks will overtake small local startups or local app networks will mix news with a variety of other local information, the terrain here remains in flux.
The new conventional wisdom is that the economic model for news will be made up of many smaller and more complex revenue sources than before. The old news economic model was fairly simple. Broadcast television depended on advertising. Newspapers on circulation revenue and a few basic advertising categories. Cable was split half from advertising and half from cable subscription fees. Online, most believe there will be many different kinds of revenue. This is because no one revenue source looks large enough and because money is divided among so many players. In the biggest new revenue experiment of 2010, the discount sales coupon business led by Groupon, revenue can be split three ways when newspapers are involved. On the iPad, Apple gets 30% of the subscription revenue and owns the audience data. On the Android system, Google takes 10%. News companies are trying to push back. One new effort involves online publishers starting their own ad exchanges, rather than having middlemen to do it for them. NBC, CBS and Forbes are among those launching their own, tired of sharing revenue and having third parties take their audience data.
The bailout of the auto industry helped with the media’s modest recovery in 2010. One overlooked dimension in the year past: a key source of renewed revenue in news in 2010 was the recovery in the auto industry, aided by the decision to lend federal money to save U.S. carmakers. Auto advertising jumped 77% in local television, 22% in radio and 17% in magazines. The other benefactor of the news industry, say experts, was the U.S. Supreme Court: Its Citizens United decision allowing corporations and unions to buy political ads for candidates helped boost political advertising spent on local television to an estimated $2.2 billion, a new high for a midterm campaign year.
Keep reading to see the report’s key findings.