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One of the points I make in a Newspaper Association of America article I just wrote is that print media doesn’t grasp culture of openness on the internet. Watch the video below for more:

What do you think? I think it brings up a lot of underlying issues between the old guard and the new folks.

An interesting article fell on top of my desk today. The WSJ reports:

Many [copyright] warnings “materially misrepresent U.S. copyright law, particularly the fundamental built-in First Amendment accommodations which serve to safeguard the public interest,” the complaint alleges. CCIA President Ed Black said the warnings create a “chilling effect,” dissuading consumers from using portions of the content in ways that are lawful.

The conflict illustrates the shifting concept of fair use in the digital age. “Fair use” of intellectual property revolves around the question of how much, if any, of movies, books, music and other creations can be used without permission of the owners. As Internet platforms have made it easier to redistribute chunks of content without asking for approval, copyright owners have become more protective about enforcing their rights.

So, Google, Microsoft and others are banding together to help consumers realize that they can reproduce a certain portion of copyrighted work. I think it’s pretty interesting that CCIA cares so much about warning labels. Warning labels mean very little in a world of easy access to copyrighted content. Are consumers really intimidated by something like this? I highly doubt it.

Update: And illegal music downloading is at an all time high… yes those labels really help.

We will be in Seattle for almost a week in August for the Gnomedex conference. This will be a great event in the Emerald City to bring together tech/new-media companies. If you are attending and are interested in discussing funding/strategic partnerships/M&A please let us know! We are currently filling up our calendar in Seattle for that week. See you in Seattle!

Om Malik wrote an interested article about Ning, its high valuation and the commoditization of the social network.  The most interesting part of the article explained:

There have been much smarter people than me who figured this out a long before I did. One of them, David RD Gratton recently channeling Thomas Vanderwal, recently wrote “Beyond communities of Interest, communities don’t exist.”

Much like content, the real value of a network is the people in it

Technology enables an “interest community” to engage, share, interact, etc., but without an existing expression of interest, the technology is value-less.  Technology makes community interaction more efficient and more powerful.  Also, more importantly, technology makes that network measurable.  Billions of social networks are hidden, and technology uncovers them and shows their value to the world.

It’s absurd how much interaction occurs on a daily basis

If FaceBook, LinkedIN or MySpace could capture ALL of my daily interaction with friends, business partners and family, my interaction on the digital side would be enormous.  Social networking sites merely uncover (and facilitate) existing social needs/interaction.

Content: Digital Media as Interaction: Social Networks

Is this a good metaphor?  I don’t know, but in the same way that digital tools have enabled a more robust media experience, social networks have enabled a more robust social experience.  The winners will differentiate themselves by focusing on specific communities because differentiating on the technology side will become increasingly difficult.

A local Circuit City employee introduced me to TV-Links.co.uk . I don’t understand how this site is legal, but I did notice a significant decline in the number of watchable videos over the last several weeks.

The most interesting thing about TV-Links was that it linked to Stage6.com which is a website devoted to showcasing the DIVX In-Browser player.   It is very impressive.  While Joost and Veoh want to remove bandwidth issues associated with video, their technology isn’t nearly as usable or user-friendly as the DIVX player.

DIVX In-Browser Player delivers a more enjoyable user experience with easier installation, quicker downloads and fullscreen HD quality 

Need you ask for more?  You could ask for legal content. But it isn’t too long before another company (I’d put my bet on an existing media company) decides to build a web-based platform with DIVX running the user experience.  I’d put my money in that direction.

Good read:  33 Ways to Watch Free TV Online - Although they must have missed the DIVX HD fullscreen content when they said “…not if you have one of those 47” plasma ones, but…you know what we mean.”

I wasn’t too surprised to read the WSJ article that discussed the potential GE and Microsoft bid for Dow Jones.  Well, I’m a little surprised that after the rumours that GE was considering spinning of NBC that they would consider a major acquisition.   I have commented on the need for technology companies to own content companies many times in the past.  My articles include:

• March 5th, 2007:  Tech firms must own content
• May 9th, 2007:  When will technology companies buy media companies?

The “when” is still being decided, but this rumour goes to show you that there is increasing interest in the value of content when combined with a technology focused company.  Would this deal make sense for Yahoo?

I’m beginning to wonder if Google has secretly admitted licensing newspaper (and other types of media) content makes sense.

If technology companies aren’t content owners, they must license content to avoid copyright infringment risk.  Duncan Riley from TechCrunch misses the point and talks about the need to “run ads” on Google news.   There is certainly fear of further Viacom-esque lawsuits, and those dreaded “content licensing consortiums.”  But, it’s about advertising dollars, although not in the way Riley explained.

They key here is that Google needs to be friendly because newspapers have a dominate share of the advertising market. 

Google can’t piss off newspaper companies with Google news (or any other type of product) and expect newspapers to come with open arms and accept Google’s ad placement technology.  I expect Google will admit that content has value (i.e. license content from many different partners) because then it will be easier for them to create advertising partnerships with those content providers.

The Lightspeed article about the ways to build a $50m online business is getting some good press, mainly from the NYT, but from other sites as well. These articles raise an interesting point, mainly why is the value for online ads only $1 per thousand page views?

Traditional media has better demographics

I’d like to take the opportunity to point out that traditional media has established demographics for advertisers. Go look at the Washington Post Marketing Book and examine the demographic details they provide to users. Large sites with user generated information can compete, but how can other sites compete with this type of knowledge?

Traditional media has valuable content

In general, online sites do not have the same quality content as traditional media players. Sure, they can aggregate or steal content, but advertisers know that there is a lot of value from being associated with quality content. Online sites should be asking: how do I create valuable content to maximize my traffic in a given demographic space?

To create a $50m online business, companies must maximize mass appeal and niche

I’ve argued that New Media means rapidly increasing customer segments, but in order to maximize value, online sites must play a difficult game, they have to be niche, but also have a majority market share. Let’s say there are 100 sites devoted to New Media news. Initially, these sites are very fragmented because they are owned by 100 people. Today ads on these sites are worth only $1 per thousand page views because the space is fragmented and advertisers don’t know anything about demographics. I believe this best explains the low value per page view.

Creating “niche market monopolies” will maximize ad revenue

In order to increase the value of ads, online companies need to create a monopoly on a niche market. If I could buy 60 of these sites and control 95% of the traffic to New Media news, I would no longer want to use Google to place ads on my site. Instead, I would market my sites as the “exclusive distributor” of New Media news ads on the internet. Suddenly, advertisers will realize they can either buy cheap ads on Google (for the remaining 5% of traffic), or they can go with me, because I am the majority supplier of ads for New Media news on the internet. This should dramatically increase value per page views because there are less options (less supply) for the same demand in a given demographic/target subject.

Does this idea make sense? Please comment.

Update:  Good article from Nicholas Carr exemplifying this trend.

I’ve been following startup/VC news for a while now and I’m beginning to wonder about the viability of these business plans. Market verticals need better solutions. Every day it seems like a new RSS feed alerts me to a social networking/new media site devoted to the _______ vertical. Ironically, TechCrunch talks about Cut/Paste innovation as if it isn’t happening in many places.

My theory is that cut/paste innovation is crowding the social media; but being “guised” as different verticals

Examples include Fishing Doctors and Sailors

Your user community will no longer come to you

MySpace and Facebook were early market concepts that have broad appeal. Looking at increasingly smaller fragments of markets is not sustainable from a business perspective; your market is just too small. You also need a substantial product that has advertising value. You need critical mass.

The Technology Expertise is a Commodity

If you don’t take my word for it, read this. Janko explains:

We’ve seen tons of startups lately that essentially aren’t anything but glorified mashups. Social network aggregators, video and web annotation tools, media conversion platforms: They’re all based on remixing data feeds. Some of these might actually be quite useful – but are they really worth business plans, VC money and acquisition talks? Or are they just tools that someone in some remote place of the world could develop in a day out of boredom?

I totally agree with this. If newspaper companies are still having trouble figuring out “how to get to the next level” they should call me. I’ll tell you about everything.

Social media platforms are free and ready for the taking

The opportunity for a startup using these various platforms are not so much in the target vertical, but rather in being the expert for a larger media company with existing resources (and the hunger) to make investments into new, properly aligned spaces.

VCs are so 90s

I admire VCs immensely, but as Business Week points out, they are facing increasing competition from Angels. It’s that cheap to start a New Media company. But, Angels really aren’t that interesting either. Maybe they give startups more favorable terms, but when the technology is so cheap to create and terms are more favorable to the founders, success will increasingly be determined by the “value” of the money.

What the hell is the “value of the money?”

$100 is not worth just $100 dollars to a startup. Take a look at the “selected partners” of Joost. Think about money above and beyond the number of Benjamin’s. Partnerships and networks are more valuable. Maybe there are different return requirements for different VC arrangements, but let’s just say in a competitive market, the return requirements are substantial because of the losses. Everyone is promising you capital and each one saying they have a better network. But times are changing…

Traditional media companies (TMCs) are the New VCs

Well, maybe they aren’t raising capital from institutional investors, but they do make much better investment partners. Here is why:

• Established content businesses with an existing sales force, customer relations, supplier contacts, etc.
• Much lower return requirements
• Shareholder-driven need to aggressively pursue “new media” type strategies
• Opportunity Cost of not having the next YouTube, MySpace, Facebook, etc
• Access to high quality content

Still Don’t Believe Me? List of “Established” Funds by Parent:

NBC, Disney, Bertlesman, Die Zelt, Holtzbrink, and Time Warner all have investment arms for startups.

This list doesn’t even include the non-formally established VC arms. CBS, Fox and many others are all looking to deploy capital into new media investments. I suggest you consider them as valuable partners and investors for taking your startup into the next level.

Where to go from here?

First you should be very picky about whom you go to bed with. Look at their current strategy/property portfolio, and see if you fit in. How will company A deliver your product to market quicker than company B? Not all TMCs are made the same. Some, like TMCs in print media (newspapers, magazines, journals, etc…) have great relationships with their individual communities/towns/cities. Does that kind of TMC make sense for a YouTube type site? Probably not. TMCs in the broadcast space “get” the power of video and have the established video-ad networks to deploy pre/mid/end rolls on the videos. Should a social networking site focused on user generated recipes/cooking videos approach Viacom? I would suggest approaching Scripps Networks, which has the Food Network in its expansive portfolio.

In the context of this post, these suggestions seem logical, but how many of you have done this? How much VC money have you swallowed and how much more would you have benefited from the platform TMCs could have given you?

As much as you think TMCs don’t get it, they really do. They have weathered and survived storms from “category killers” such as radio, TV, and now the internet, but they are here to stay and grow. Pick your mates wisely and grow with them. Salmon fight the current to live, but it doesn’t mean you do too.

As I’ve said before, Google is alienating content owners with its views on the value of content. This reuters article contains some very interesting points. The best quote was:

“We’re in a world where we’re a partner with everybody and we’re fighting everybody,” News Corp. Chief Operating Officer Peter Chernin said on the panel.

A relationship with Google is love/hate. Google has now has the critical mass. The traditional media companies sat on the sidelines and watched the internet grow beyond what was expected.  But, they do sit on valuable IP that can and will be protected by the courts.

I think the solution is for the technology companies of the world to admit they need to own content. I’m still waiting for the day one of the media companies gets acquired by a technology company.

Berkshire Hathaway had their annual shareholder meeting on Saturday, May 5, 2007. You can read the PDF of the meeting schedule here. The WSJ highlighted a very interesting point:

Mr. Buffett suggested he isn’t planning to buy more newspapers, which he predicts will increasingly fall into the hands of owners who are willing to pay more for them than their economic value because of the notoriety or political cachet a newspaper can confer on an owner.

Woah! Are newspapers really so dead that people will buy them for personal reasons? I’d wager that newspapers sit on a tremendous amount of value. Berkshire Hathaway doesn’t invest in technology companies and perhaps this is the disconnect.

Embracing technology and enabling a digital sales force will unlock newspaper value

Newspaper companies own the brand, the local advertising market, local market knowledge and have all the information necessary to create a destination site for a given community. Newspaper companies must focus on using technology to leverage these existing strengths. If Buffet saw the potential of technology when applied to newspapers he might think otherwise. What do you think?

*Warren Buffet is obviously a smart person, but I think his perspective is from an traditional view of the “newspaper.” New media enables so much more community interaction. Newspapers just need to be thought of in a different way.

EDIT: Good summary of 2007 Shareholder meeting information.

Looks like NBC just joined ranks with Viacom against YouTube/Google. Who is next?  Anyone care to wager?  I’d put my money on News Corp.

CNet reports:

“Any ruling on YouTube’s motion will have far-reaching ramifications for the owners of video content,” NBC and Viacom said in their filing. “And especially for content owners such as Viacom and NBCU, whose works have been copied, displayed, and performed and disseminated by YouTube and others without their authorization.”

This case will result in a landmark ruling for industry.  Unfortunetly, we are going to wait several years until we hear anything.  In the meantime, I wonder if a technology solution will solve the problems asserted by content companies.

I suggest my readers to go read “A Reality Check for Newspapers” by Jason Fry.  It discusses the love-hate relationships have with Google.  Mainly:

These disputes are about money, of course — the newspaper groups think Google’s making some off their efforts, and they want a piece. But more broadly, Copiepresse objects to the idea that Google and other search engines should set the rules for linking, contending that such standards should be set by copyright laws, not technological standards. That’s a bid to turn back time and declare a do-over on the basics of search engines — a quixotic effort that flies in the face of the reality of how content is consumed today, and one in which Copiepresse has inadvertently lined up against its papers’ own readers.

What do you think of shifting the copyright burden to Google?  Sounds very similar to the Viacom case.  I have an issue with Jason’s conclusion:

It should be said that at times Google and its champions fall prey to thinking that they know what’s best for everybody else. Beyond the fact that no one likes being told what’s good for them, there’s something undeniably coercive about Google and other Web technologies. But what significant technological shift hasn’t been coercive? At its heart, the Web is driven by users, not publishers. Whatever pain that causes content creators, opposing that fundamental idea became a revanchist fantasy long ago.

Jason, sure, the web is driven by consumer choice, but as I’ve said before, “I want free music, I want free clothes, I want a free Ferrari F430, and I want a free Gulfstream 550. Do I get all these things? NO.“  Consumers want things to be free, but Google is playing with fire with all the content companies.  Content is just an easy thing to distribute freely despite it’s production cost.  If Google could send you a brand new Ferrari without paying for it, I’m sure you would take it.  Newspaper articles aren’t really that different (except the Ferrari is infinitely sexier).

What is the appropriate treatment for newspaper content?

I don’t have an answer, but if people could just steal technology and make their own technology solution would that be any different?  Companies need to respect IP in any form.

News Corp to Buy Dow Jones? From WSJ:

Dow Jones says it has received unsolicited takeover proposal from News Corp. for $60 a share. Full story to follow shortly.

Google responded to the Viacom Suit today. I have already written about the disregard for copyright and how Google sees no value in content. My wise, attorney father posted a comment regarding the Viacom/YouTube suit. He explains:

The resolution of this suit will likely be a voluntary change in YouTube’s upload practices that will engage it in more vigilant policing of uploaded content. In particular, its policy of awaiting copyright owners’ demands before removing pirated material will predictably evolve into a more proactive undertaking to remove infringing material - at least that which is relatively obvious; TV programming, movie trailers, etc. However, it it is not an exact analogue of the Napster case in which Napster executives opined that its users were “…exchanging pirated music.”! YouTube was well aware of the Napster and Grokster fiascos before it, and apparently has given some thought to the potential for this kind of action - its copyright policy is, at least, well written, and if implemented in a more aggressive fashion would likely insulate it from the kind of direct and indirect liability alledged in the Viacom complaint. Its exposure lies in part in the very technology that enables the uploading, and exchange of video content because it also permits it to police the content more vigorously, and hence it will be forced to do so or suffer the fate of Napster and Grokster before it.

Perhaps Google’s new “policing tools” will solve this problem, but who knows. I haven’t found any intelligent commentary, but Google’s response does warrant a few words. It explains:

By seeking to make carriers and hosting providers liable for Internet communications, Viacom’s complaint threatens the way hundreds of millions of people legitimately exchange information, news, entertainment and political and artistic expression.

The funny thing is technology can be used for illegal AND legal things. Maybe the “entitled generation” doesn’t believe this, but I honestly believe copyrighted works should be protected. The companies that create technologies which enable the easy sharing of content should be responsible for monitoring the use of that technology. Additionally, I firmly believe it is unethical to use technology to facilitate the sharing of copyrighted works to build a “destination site” like YouTube.

ZDNet has a good analysis of the rebuttals. Other bloggers are adding small bits of information.

The Audit Bureau of Circulations recently released a report which explains daily newspapers  experienced a 2.1% circulation decline.  I’ve already started the countdown for the next uninformed blogger to scream “newspapers are dead.”  Well, they are not…

A decline of 2.1% is certainly not good, but on the positive side:

However the average weekday decline of 2.1 percent in the latest period was not as steep as the fall of 2.8 percent reported for the six-month period ended in October, or the six months ended in March 2006, when the decline was 2.5 percent.

There is light at the end of the tunnel

If you look at the Top 20 list, you will see that the New York Post, USA Today, WSJ, New York Daily News, and several others experienced circulation growth.  Additionally, if this report discussed smaller town and niche publications, readers would find these types of newspapers are still growing strongly.

Metropolitan Papers Will Continue to Experience the Most Decline in Circulation

Metropolitan papers are certainly in trouble.  They face competition from online and offline sources.  From local competition, to niche subject specialists, to online classifieds, to little value add on national/international issues, the outlook is bleak.  If anyone has any ideas for this segment, we are all ears.

Read my blog post from March 5th. In it I argue that technology companies will need to own content. Jeff Maurone, sent something to my inbox today. Bloomberg reports:

General Electric Co. shares staged their biggest rally in four months after Citigroup Inc. analysts said the company should spin off NBC Universal, GE Money and the real-estate division.

“GE’s size and complexity is working against investor interest in the stock and has contributed to further valuation erosion,” the analysts wrote.

This is the second time this week analysts have suggested GE take such steps. Nicholas Heymann of Prudential Equity Group Inc. in New York said a company such as Google Inc. may be interested in buying NBC Universal as part of its effort to add to its mix of media offerings including YouTube.

We come from a background of M&A transactions in print media. We understand the value of content.

Technology companies need content in order to deliver their products to an existing user-base. Aggragation and user generated content are crowded markets. Growth will come from partnerships with media companies, not stand alone technologies.

I don’t know if Google is the best buyer for NBC, but it wouldn’t surprise me if this happened.

Thoughts?

My business partner and I are really excited about EconSM tomorrow.  The speaker list looks fantastic:

Peter Adderton, Founder and CEO, Amp’d Mobile
Simon Assaad, CEO, Heavy.com
John Battelle, Chairman, Federated Media
Barak Berkowitz, Chairman and CEO, Six Apart
Michael Birch, CEO, Bebo
Marco Boerries, Senior Vice President, Connected Life, Yahoo
Ilene Chaiken, Executive Producer, The L Word/CEO, OurChart.com
Alan Citron, GM, TMZ.com
Shawn Conahan, Founder, Chairman, and CEO, Intercasting Corp
Carson Daly, host, Last Call With Carson Daly
Josh Deutsch, CEO, Downtown Records
Esther Dyson, EDventure
David Eun, VP, Content Partnerships, Google
Shawn Gold, SVP, Marketing, MySpace
Jason Hirschhorn, President, Entertainment Group, Sling Media
Courtney Holt, EVP, Digital Music and Media, MTV Networks Music, Logo and Films Group
George Kliavkoff, Chief Digital Officer, NBC Universal
Tariq Krim, Founder and CEO, Netvibes
Mike Lang, EVP, Business Development and Strategy, Fox Networks
Hadi Partovi, President and COO, iLike
Cyriac Roeding, EVP, CBS Mobile, CBS Corporation
Richard Rosenblatt, Chairman and CEO, Demand Media
Herb Scannell, CEO, Next New Networks
Vivian Schiller, SVP and GM, NYTimes.com
Larry Shapiro, Executive Vice President, Walt Disney Internet Group
Tina Sharkey, Chairman, BabyCenter
Rich Skrenta, Founder and CEO, Topix.net
Quincy Smith, President, CBS Interactive
Tad Smith, CEO, Reed Business Information
Ken Stern, CEO, NPR
Kara Swisher, All Things D/Wall Street Journal
Rishad Tobaccowala, CEO, Denuo/CIO, Publicis Media Group

I look forward to meeting you all there.

I read an interesting article over at OnlineSpin from Joe Marchese. He raises some interesting points, mainly:

Pretty much everyone will agree that we are not selling eyeballs anymore. Even the page view seems to be on its last legs. Yet 2.0 businesses and valuations continue to be built with a “If you build it, they will come” mentality. “It” being traffic and/or user base, and “they” being advertisers and their checkbooks. But solving the issue of advertising in Web 2.0, or any social media, has to be more than an afterthought, because like the Web 2.0 products and services themselves, advertising solutions are going to require education, experimentation and iteration to deploy. This means, if you have created just the right balance and eco-system you are looking for in your Web 2.0 community without any advertising, and only later attempt to introduce any sort of significant revenue-generating advertising, you’ve greatly increased your risk.

Joe’s conclusion is that collaboration is key. I’m pretty sure he is referring to collaboration between advertisers and Web 2.0 companies, but I think the secret sauce is in partnerships with large media companies. Over at DeParis Redinger LLC, we have seen an immense amount of interest in creating strategic partnerships with big media. These partnerships aren’t just for capital.

The number one opportunity is collaborating with big media

The truth is, everyone wants to leverage the content, sales staff, extensive property list, etc of the traditional media company. Maybe Joe is pointing to an issue I brought up a while ago, that technology is increasingly becoming a commodity. Internet technologies will always be innovative and unique, but specifically, social networking, user generated content, etc is a very crowded market and I see little differentiation in product offerings besides the user base.

Everyone should think about getting in bed with each other

It’s about time for Web 2.0 companies to admit they are in the content business and big media companies to admit they are in the technology business. What do you think?

Victor Keegan, over at The Guardian, writes an interesting article titled “To the average Joe, Blogs just aren’t cutting it.” He had used the recent Sifry “State of the Web” report as a starting point for this article. My favorite excerpt was:

If there is lesson here it is that blogging, for all its undoubted success in politics and the arts, hasn’t taken off in a way that many people, myself included, thought it would.

Keegan makes a good point: not everyone can write a blog. It’s a lot easier to communicate with people via online social networks and the like. I’ve found out that writing a quality blog takes time, networking, research and good old fashion analysis. I’m certainly not one of the most popular blogs on the internet, but I do use the blog to summarize my findings and thoughts about the topics I cover.

Blogging takes time, time and more time

Considering the amount of time I spend writing on the blog, it is absolutely a losing business proposition. Pramit Singh asks “Do we really need blogs?” Absolutely. While blogging is not everyone’s outlet to internet publication, it does make sense for some people. I use this blog to formulate thoughts and to publish my opinions that are very relevant to a select group of people. My clients enjoy reading my blog and despite the fact it probably takes 10 to 15% of my time (and makes no money), I still do it.

Blogging takes professionalism and diligence

Blogging isn’t just about posting your interests. Like any journalistic pursuit, it is about adding value to a given set of facts. Being professional and diligent about adding value to these facts takes time and most people don’t care to spend the time.

Adding value is different than self-expression. That’s why everyone can’t and won’t blog.

I read a great RSS linked article this morning from PaidContent. PaidContent’s analysis isn’t correct about US papers, but as I have said before, newspapers have value online AND the newspaper revenue model should focus on a knowledge community.

I have talked with many New Media directors at large US newspaper companies and, believe me, these folks absolutely see online as a huge opportunity. The trick is better monetizing online sites.

The AP article highlights several key points, including:

• Newspapers must focus on stronger headlines and better tailor the initial 200 words for search engines
• Newspapers are increasingly facing the value of online video content
• Online revenue should cover the loss from the decline in print

I suggest you go read the article.

The LA Times reported:

‘If all the newspapers in America did not allow Google to steal their content for nothing, what would Google do?’ [Same Zell] muses.

Not surprisingly, the blogging community went up in arms (1, 2, 3) with a resounding “Google is not stealing content” response. I think the responses represent the attitude problem that permeates the New Media world. I wasn’t at the Zell presentation, but I would wager that Zell is referring to the possibility of content licensing consortiums (CLCs) for the newspaper industry.

Reading through some of these responses, I found another great snippet of ill-informed entitlement:

Google moral of the story? Lawsuits ARE the way to pull Google’s very large financial purse strings!

Google has done a fantastic job building their search and advertising product off of freely supplied index-able web data; but online newspaper/magazine, video & audio content is protected by copyright. If Google settled with the AFP (and AP) aren’t they admitting to stealing content and the need to license that content from these associations? The answer is YES and the key is:

With the other major Internet players like AOL, Yahoo or MSN, [The AFP] have been licensing our content to them for years and years

Additionally, the argument that “Google does not make money off of Google News” is not correct. Sure, Google doesn’t place ads on the Google News page, but it is supplying a free service which creates a portfolio of services that keep users coming back to the Google platform.

Google News Provides a Value-Add for Newspapers, but it Walks a Fine Line

Google’s settlement with the AP and the AFP reveals that it would rather pay for content than face a full lawsuit. Zell is onto the CLC argument and if I were Google, I would fear the power of a $59 billion industry. I agree that Google improves newspaper article search-ability, but it needs to admit content has value so everyone can work together.

It is in Google’s best interest to work with the newspaper industry, because pretty soon a lot of large competitors and content providers will band together to better enforce copyright protection and licensing standards.

Amid the glitz of on-line media pundits who proclaim that their way is the new superhighway and the only route to the promise land, let me inject some practical rules of day to day business, especially on the local level.

Rule One: The small, local business owner is stressed. She has to run her business, serve her customers, make her payroll and hopefully generate a profit.

Rule Two: How much extra time does a local business person have to work on their marketing plan, to go on line and sort through what might or might not work for them? Answer: NOT MUCH!

Rule Three: Local businesses have paid their bills, created growth and profits and reared and educated their children, by relying on local media outlets to deliver their information. They can’t risk jumping ship unless they are certain the other boat will float.

Rule Four: Local businesses want results and service. When it breaks they want it fixed by a person they can talk to, that they can touch. In other words, local businesses need and want local services.

Rule Five: Local advertising, local readership and audience, is traditional media’s to lose. If management realizes that they are going through a transition and provide the needed leadership, they will grow and prosper.

Google understands what they are up against and they know that poor management and lack of leadership from Traditional Media will cause more harm that anything New Media can create.

I’m not surprised to read that Cable TV does not want the auction model to supply advertising to their networks.

The NYT Reports:

Cable networks like Turner Networks, Discovery, Lifetime and ESPN have decided to boycott an online exchange designed by eBay to sell advertising time, the Cabletelevision Advertising Bureau, a trade group in New York, said yesterday.

Google and other technology companies will find an immense amount of difficulty breaking into Cable, Satellite, Newspaper and Radio Networks. These types of media distribution companies have no intention of letting a technology company control ad sales. Why on earth would these companies let Google (or anyone else) control their profit centers?

I’ve written about this several times. Here are my other relevant posts:

Google Has NO Competitive Advantage in Print, Radio or Television

Google’s targeting ability must be worth more than its commission (EchoStar Deal)

This is a major blow to all online auction advertisers. Any comments?

So, I read the VidMeter Report that everyone is using to claim that the YouTube/Viacom lawsuit is baloney (see 1, 2, 3,4). This is some of the worst misappropriation of non-scientific findings I have seen in a while.

VidMeter Report is the Real Baloney

There are so many things wrong with the methodology; I can’t even believe people actually use this to justify their opinions. Here is what’s wrong with the report:

• Non-Scientific Approach: VidMeter only used “top videos” from YouTube views, instead of a random sample or population. Additionally, it is not clear how time is incorporated into this study.
• Copyrighted Content Not Actually Measured: E.g. VidMeter lists “hips don’t lie” as the second largest copyrighted piece of content on YouTube servers. Anyone with half a brain would go search “hips don’t lie” on YouTube and see the first hit is a video with 1.7 million views. VidMeter is only reporting 94 million views of copyrighted content (page 4). So, with one small example, VidMeter has missed 2% of copyrighted video views and underreported its “Percentage of All Views” by 0.06% (there are some time issues that aren’t clear). The point is: if you look you will easily find a lot more copyrighted content that was excluded from this study.

Blogger Interpretation is Dead Wrong

The methodology was flawed, but the conclusion surprisingly didn’t overanalyze the data. The report concludes:

we have concluded that unauthorized copyright videos make up a relatively small portion of YouTube’s most popular videos and an even smaller portion of views to YouTube’s most popular videos.

My favorite misappropriation was found on Internet Outsider:

The Vidmeter analysis supports the following theses: Traditional media videos make up only a small percentage of YouTube views…

I find this comment absurd. VidMeter only measured top videos, it did not look at a random sample or an entire population. Additionally, VidMeter had no way of measuring non-removed content as copyrighted or non-copyrighted. In the future, I hope the blogging community does some more analysis before they jump to conclusions that are founded on flawed data.

Finally, I’d like to say that this doesn’t change the underlying principals of the Viacom/YouTube suit I’ve mentioned earlier.

Update1:  Viacom has a small response - basically, Google doesn’t have any clue what is/isn’t copyrighted content.

Harper’s Magazine just announced it has made available “over a quarter-million scans from 157 years, thousands of interlinked topic pages, and an array of unique web-only content. Full access comes with your subscription to the print magazine—$16.97 a year”

I’ve argued the online newspaper model means using online social networks and wikis to create a community around content. Harper’s, do you plan to do this or is the $17 the end all? Topic pages are a good start, but let your users control the content.

Anyone have insightful commentary?

Apple just announced they would charge users $1.29 for open DRM tracks on iTunes.  Bloggers are going crazy about this topic.  The bottom-line is:

 Big Media believes content is worth 30% more without DRM.

Let’s look at some facts:

1. DRM doesn’t work.  I’ve never found a DRM solution that I couldn’t remove easily via a Google-searched application.
2. Consumers hate DRM.

Is Apple really “solving consumer problems?”  Essentially, Apple is getting the consumer to cover the cost of removing DRM (when it never worked in the first place).

I read a good article featured on Slashdot about Mark Cuban and his view on YouTube/Copywrite issues.  I have argued that “the entitlement attitude represents an ill-respect for intellectual property.”

This attitude has to change.  Ars Technica explains:

Cuban argued forcefully that YouTube, like Napster before it, is training up an entire generation to think that “anything goes” in the realm of copyright, and that Google’s recent purchase of the company only gives their actions more legitimacy.

And, just like Napster, this is a copywrite issue.  As much as consumers want to pay nothing for content, they won’t get it.  Intellectual property, in any shape or form, has value and those who disregard it will inevitably lose in the courts.

I advise my readers to go check out a great interview at NewTeeVee with Michael Eisner.

The key talking points from Mr. Eisner:

• In regard to the Viacom lawsuit: “I think that respect for people’s intellectual products is important … it’s the basis of why American intellectual product leads the world, and it sets the standard that people can earn a living from things that come out of their mind. And I think that momentary technological advances should not undermine that concept”
• In regard to Web Content: “I don’t look at it as web content. It is being distributed in a different mode.”

The web is a lot more than a distribution method, but readers should take note: this is how big media thinks, so if your technology solution doesn’t protect IP, then you’d better rethink your strategy. I wrote about this here.

It seems the tide is turning out there in digital media land, with the clearer thinkers understanding that newspapers will certainly survive. The reality is that newspapers gather information, check it for accuracy, and package it in a fashion that is convenient and helpful for the consumer. In the past newspapers have delivered this “content” physically on an ink on paper vehicle. Now they will deliver it digitally as well. This gathering, checking and packaging process has tremendous value to the consumer.

And the reason newspapers will survive - and prosper - in the digital age is becoming more and more apparent. It is because there is too much information available on the web.

Consider this for a minute… you can search up anything you want on the web and find thousands of websites and blogs with millions of bits of information and “facts.” What you don’t know is whether the information is actually correct, or if it is being posted by a twelve year old kid in his bedroom, or a political hack promoting his special cause.

Newspapers cut through the information overload and present the consumer with correct and timely information in a convenient package. What newspapers aren’t doing yet - at least very well - is presenting the package in a digital format. But it’s coming.

I have been talking about the online newspaper revenue model recently. The online newspaper revenue model must monetize social aspects of a site, but additionally reduce costs by enabling citizens to increasingly control, manage and edit news. Sometimes the “guest editor” can be a problem, but there is definitely interest in including citizens.  Today I’d like to highlight several interesting sites relating to these concepts:

• Knight Citizen News Network - Helps citizens and journalists manage local news. The coolest part of the site is the geotagged community blogger tool.
• Pegasus News - Mike Orren (President and Co-Founder of Pegasus) and I exchanged emails. He explained “we are behaviorally driving content and advertising at the neighborhood level.” Their staff generates the majority of news, but also welcomes user input.
• Case Studies about Growing Online Audience at the NAA - The two case studies were Spotted and Spokeman Review. Go read about them.
• Congoo - Customized Online Newspaper
• SimplyHeadlines - Entirely customizable email news. Press here.

This list will continue to expand. Please comment or make suggestions about whom I am missing.

I wrote about how newspapers have an incredible amount of value online. Technology companies largely ignore this. Many a self-proclaimed Web 2.0 evangelist have declared the “death of newspapers.” This post summarizes my initial thoughts on the online newspaper revenue model. I decided to start because Mark Glaser over at MediaShift wrote a recent article entitled “How the Online Newspaper can Become a Community Hub.” I agree with his key points which are focused around incorporating the community in the news creation process and structuring the online site around niche areas.

Community and interactivity are key for local newspapers as they move online

The New Media viewpoint is that local news agencies are no longer gatekeepers of information and that the user is now in control. While I don’t agree that the user is fully in control, newspapers must realize that incorporating an actively participating community is key for online success. The internet benefits content creators because it lets users interact with content. Interacting with content means more personalization and more consumption time. These are the types of things that drive online revenues, assuming the right advertising strategy.

Online Newspapers should create a social network focused on their community

Online social networking features are the tools that will enable community members to interact with news. It won’t be easy at first. The majority of newspaper readers probably haven’t done much more than submit letters to the editor. Newspapers should give readers an online platform to interact, rank and participate in commentary and article submission. The cost of managing comments might be high at first, but as users become more familiar with online social network features, participation becomes more transparent and technology gets better, the community will bear the cost.

Online Newspapers should create a wiki business model

Local newspapers sit on huge repositories of information. Everything from local sports information, to political history, to development history has, at some point, been in a newspaper article. Additionally, local communities look to newspapers as primary news sources for local information. Taking the social network model to the online newspaper means creating wikis that allow users to maintain information about niche community topics that are relevant for them. Think: County High School Soccer team record and history repository; or County Governor Campaign History. Enable users to pick and choose the topics that are most important to them and empower them with information.

Because social networks and wikis create loyal and active users, this business model will drive participation and interaction online-key components for monetization success.

Obviously the advertising model needs to get much more creative than in the past. This will be the focus of my next post. Please comment.

Update 1: “Be the Platform“

First, there was the troubling news about the SF Chronicle. Then Scoble made a ridiculous, uninformed hyperbole claiming “newspapers are dead.” I’ve already written about the inability of “newspapers are dead” (NAD) crowd to intelligently analyze the newspaper industry. Some people are looking at ways to save newspapers. The newspaper industry is facing a transition, not its death.

Let’s look at some FACTS about the industry

Here are the facts (ref, ref2, ref3, ref4):

• Newspapers are a $59 billion industry in North America
• In the US, advertising growth is flat, with online growth (up 35% Y/Y) covering the loss (down 2%) in revenue from print
• Baby boomers have spending power of $2 trillion and 52% read a newspaper on a daily basis
• In 2005, US dailies had a 53 million Weekday circulation and a 55 million Sunday circulation, representing a change from 1960 of -9.4% and +15.9%, respectively
• Newspapers control 19% of the total advertising market in the US
• Larger dailies sell for 10 to 14X EBITDA and we have seen most transactions occur at the high end of this range

Newspapers are NOT dead and will adapt

Sure, print subscription is in slow decline, but niche properties and constantly changing demographics will always provide support. Local newspapers will always be an authority on the news for their given geography. Newspaper reporting contributes to the vast majority of news. Online is another medium and distribution method. It will not kill off newspapers. Newspapers survived Radio, Television and they will survive the Internet. They will adapt with the internet and demonstrate the value of their demographics and advertising relationships.

Newspapers have an incredible amount of value

I’m very glad no one in the NAD crowd is an executive or has enough money to buy newspapers. They would waste our time as advisors. We know for a fact that newspapers are valuable because we’ve sold newspapers to every major company in the industry. When private equity folks call us and tell us they are looking for newspapers at 3 to 5X EBITDA range, we have to laugh and have to tell them the truth.

People who analyze the industry with tunnel-vision and broad sweeping generalizations scream uninformed and demonstrate an inability to correctly understand an industry that HAS value.

I’ve argued for the value of content in newspapers. I’ve argued newspapers need to band together to create proprietary technology solutions. This announcement reinforces my thinking.

NBC/News Corp YouTube-Killer Eliminates Unwanted Technology

The NYT highlights, “this was about getting it right.” The venture eliminates non-authorized distribution partners, mainly YouTube and others who take the majority share of revenue from video distribution. The new technology will only give technology partners 10% of the revenue and also distribute content to 96% of internet users. These facts reveal that unwanted technology is the technology that freely distributes content. Goodbye free distribution, hello rights managed solution.

The Venture Demonstrates the Value of Content

According to the NYT article, Google “is considering licensing the new venture’s fare just as other big Internet players have.” Content providers will squeeze out technology solutions that don’t protect IP.

NBC and News Corp have a very large execution risk. The idea is solid, but will they be able to deliver this product to market so that consumers use it?

Update 1: Murdoch did KO Google.

Update 2: Looks like CBS structured a 90/10 (in their favor) revenue sharing deal with various distribution partners.  *YouTube participation still to be determined.

David Lazarus received a lot of harsh criticism (1, 2, 3, 4) from his recent article in the SF Gate. Here is my take.

Free model has already existed for print publications

A newspaper cost structure is ~20% distribution and ~15% printing, and consumers pay subscription fees to cover the cost of distribution and printing. Online distribution should dramatically reduce 35% of newspaper cost so therefore it can be freely given away online. The “free weekly” model has been around for years.

Let’s put newspaper content in perspective

The same logic would work for gasoline… Imagine if I said consumers don’t pay for gasoline, they pay for its distribution. It costs ~20% to refine crude and ~10% to distribute gasoline. If everyone could get a gasoline pipeline to their car, would you still say consumers don’t pay for gasoline? Gasoline makes my car work. News content makes my head work. Now, if someone else came along and siphoned off that gasoline and gave it to me for free (but made me watch advertisements) would that be fair? Does that mean that “I don’t pay for gasoline?”

Attribution of revenue and cost structure is arbitrary; the real problem is the attitude

It doesn’t matter how you attribute parts of the cost structure to parts of the revenue structure. The issue isn’t with distribution costs, the issue is that news creators are bearing the weight of the cost structure (distribution AND people AND management etc) and others are benefitting from that content. People may be forced to pay for content as long as they think that content should be completely free and open for the entire world to redistribute and monetize.

It is an “entitlement attitude” problem and will force newspapers into the RIAA and MPAA mindset unless the attitude changes. I’m not arguing for a subscription model online, but I think the attitude will create unwanted actions from the newspaper industry.

Making Money from Other’s Work is Unethical, Wrong and Demonstrates an Ill-Respect for Intellectal Property

David Lazarus points out an interesting attitude he observed in response to a recent article (my comments here). The attitude he observed was a

sense of entitlement many of these people exhibited when it came to benefiting from other people’s work, and the dismissive attitude shown toward the importance of reporting-based journalism

Please go read his article for specific examples. I am not surprised by this attitude after my recent attendance at OMMA. I talked with several people, Google Execs, Online Publishers, Technology Solution Providers, Advertisers, etc and always brought up the issues I have addressed on this blog. Unfortunately, too many people believe that content will be free and 3rd parties can make money off of this content.

“What Consumers Want is Best” Is NOT Realistic

This argument permeates the web: I’m a consumer. I want free music, I want free clothes, I want a free Ferrari F430, and I want a free Gulfstream 550. Do I get all these things? NO. Capitalism works because of supply and demand for products. Sometimes advertising can pay for products, but in the long run, if the people bearing the cost of production do not make adequate returns they will change their business models so they produce required returns (be it through licensing fees or through new advertising models).

Technology Companies will Be Forced to Admit that Content Has Value… Even if It’s the Hard Way

There are many examples of content creators admitting that they aren’t seeing adequate returns when their content is freely distributed:

• Viacom sues Google (here)
• NBC combining with News Corp to Compete with YouTube and Control Distribution (here, here)
• News Content Licensing Consortiums (CLCs)
• Web Streaming Companies might need to improve ad model to pay for licensing fees

If the Manufacturing Industry Followed the Same Business Model, Would that be OK?

Let’s pretend this is the manufacturing industry. If a Chinese company steals IP for a manufactured product, then gives away that product for free (but makes money because they can put advertising in that product), is this legal? Obviously not, they are stealing IP, and are illegally dumping product in the US market. Ethics aside, I fail to see how this example is significantly different from the online companies who produce no content, distribute it and make money off of ads. Please enlighten me.

I’m heading to LAX on Sunday for the OMMA Expo. I’ve discussed the lack of profitability for online when compared to print publications. I’m excited to learn about the latest and greatest trends maximizing ROI for advertisers online both in print and online. My readers should expect a meaningful summary when I return.

Until then, here are some of the key trends in the online advertising space:

• Newspapers are undervalued online.
• The fight between aggregators, video sharers, search engines and content creators for online ad dollars.
• New metrics! Page views are out.

If anyone is going to OMMA, shoot me an email at kyle < at > themediaage.com. I’m there for business development and look forward to networking with interesting folks.

Traditional print media is struggling to make the jump into new/technology media — as is clear to everyone including old media newspaper guys (like me) and the new media guys. Part of the problem is the speed at which technology is changing, and just learning the terminology makes it tough to stay on top of.

The advertising-driven websites make the most sense to traditional media because that’s the model we already embrace. Free distribution niche publications of the ink-on-paper variety are very similar to target websites or blogs as both use a focused topic (cars, knitting, politics, whatever) to allow targeted advertising.

My question is whether local newspapers - whose niche franchise is the news in a small geographic area - can lever this into a larger advertising revenue base. And if they can, how do they go about it?

I know the people who built the New York Times Reader. They did a good job.

The NYT just announced they would charge for its use. I’d be surprised if the NYT made money with a $15/month subscription, but maybe, just maybe there are enough baby boomers out there who need access to the NYT crossword, wherever they are in the world. The Reader is a fantastic example of readability and offline mobility for an online publication.

The real value of the Reader is much greater than people realize

If I’m able to create custom pages, based on my interests and print them out for myself, the Reader gives me what I want as a New Media consumer. For example, I can eliminate articles on gardening and focus on sports, or technology or something I find more valuable. Additionally, if I were the NYT I could start pulling the best blog articles from other sites and incorporating them in relevant categories for my users. I could also incorporate social bookmarking rankings to automate some of that relevance. All of a sudden, the NYT Reader becomes a very useful way to deliver relevant content and outsource non-core strengths. The NYT just needs to make sure that it isn’t reliant on a technology company to deliver this value proposition.  All the more reason for the NYT to become a technology company itself.

The Reader’s users can print and distribute their own custom papers!

The real value in this model is that it eliminates the distribution and printing costs for the publisher. I just don’t understand why the NYT is trying to charge for something that should save them a lot of money if it is widely adopted in the long run. Can anyone explain this to me?

David Lazarus, in a recent San Francisco Chronicle article, has picked up on the content licensing consortiums (CLCs) argument that I addressed in a recent posted. The basic argument is that newspapers need to figure out how to license or charge others for using their content. Newspapers are admitting failure by saying they aren’t competitive with online. But are they really “not competitive?”

Newspaper advertising growth is flat

In a recent press release by the Newspaper Association of America, newspapers have increased Y/Y online advertising 35%, but let’s digest this number. Overall, total newspaper advertising revenue is slightly negative (non-inflation adjusted). Essentially, the industry is flat, with online growth (which is in-line with the overall online market) covering the loss in revenue from print, which was down 1.7%. Flat ad growth doesn’t mean newspapers are ready to throw in the towel

Newspapers are sitting on valuable local online news readers, but not doing enough about it

Let’s look at some more interesting data. If news websites enable anywhere from a 2 to 4% improvement in a local market reach, then that’s an additional 10,000 readers for a paper with a print reach of 500,000. At least 25% of those online readers, or 140,000 people are high powered internet users (See: Online News) who frequently get their local news online. Newspapers must realize they are sitting on a lot of potential. Monetizing a community of 140,000 local readers online has a lot of potential. Not only is there a local market for advertisement target, there is also the ability to target unique user interests.

Newspapers must better engage local online readers to maximize ad targeting potential

The value of the local advertising market is huge. Google wants a piece of the pie. Newspapers must embrace web technologies and maximize the value of local advertising online by creating community features around their valuable geographic segment. Will newspapers realize this? What technology partnerships will make this possible?

The New York Times reported:

NBC’s corporate counsel, Richard Cotton, sent a six-page letter to Google last week, noting pointedly that YouTube was continuing to carry unauthorized clips from the network, some executives who have seen