Here’s something interesting from ConvergeSouth that didn’t take place in a session. Leonard Witt, a friend and Distinguished Chair in Communication at Kennesaw State University, has posted an interview with Jason Calacanis. Calcanis founded Weblogs, Inc. (which he sold to AOL for $30 million) and is currently CEO of Mahalo. The interview is one of six that Witt will post soon about the future of journalism.
There are several noteworthy tidbits in the interview, but what I found most interesting was this statement:
If you’re going to make an online business work, it’s pretty hard to make it work if you’re getting less than 100,000 people to read it. Some of these local publications, maybe they get a couple of thousand people reading it a day, it’s hard to make a business out of that.
So, if you believe Calacanis, goodbye Neighbor Newspapers, Creative Loafing, The Sunday Paper, the Rockdale Citizen, the Gwinnett Daily Post, a couple of television and radio stations in every market, etc. etc. etc. Hello faceless conglomerate and a big fat vacuum of local information that would need to be filled by something practically for free since there’s apparently no business model.
I think that will be true for the outlets that don’t get very creative finding ways to make money outside the standard models. Let me throw a hypothetical out, and you tell me what you think.
UPS started out as a package delivery company. As they grew, their logistics systems and the required expertise to run those systems grew in size and complexity to the point that they had more advanced knowledge of supply chains than possibly any company in the world short of Wal*Mart. Somebody over there realized they could sell this knowledge to other companies as a consulting service. The unassumingly-titled UPS Consulting Services is born. For $500 per hour, UPS comes in and evaluates your supply chain, finds what’s wrong, and tells you how to fix it.
While I’m sure UPS Consulting Services is only a small part of UPS’ business, I’d bet it’s a very profitable part. It seems there’s little or no overhead other than paying the consultant who evaluates the client’s company. Even if the consultant is drawing $250,000 per year, UPS would see more than $750,000 profit from each consultant working a 40-hour week over the course of a year.
Here’s the hypothetical: would there be a way for media companies, particularly small local media companies, to package their skills as a service independent from the news-gathering process?
The difference between UPS and many media companies may be the scarcity of available expertise. If you go outside UPS, there really aren’t very many companies with that level of knowledge about supply chains in the real world. Even less are offering that knowledge as a consulting service. That scarcity is what allows UPS to charge what they do.
Most of the potential services that a media company could offer that come to mind are media conceptualizing or production services, an arena that already has plenty of competition. So they’d have to offer something extraordinary on top of those services.
Take the founders of Rocketboom, for example. They have an audience of around 1,000,000, and yet still struggle with revenue from advertising alone. How do they make real money? One way is they produce internal videos for corporations like Nokia.
What they have that’s scarce is the ability to communicate with an Internet-savvy audience. That’s probably not a good model for a long-term business, but it’s working for them in the short term.
What do small local media companies have that’s scarce enough and in demand enough to charge a premium for? Anything? Bueller?
While I think Mr. Calacanis has a valid point, I don’t think we’re going to see the demise of community newspapers such as our former employer (NNI), The Rockdale Citizen and others in the near future.
First, people that live in those communities want local news and the major media outlets, such as the AJC, WSB-TV, etc. rarely focus on Conyers and Rockdale County unless something truly extraordinary occurs (i.e. the school shooting at Heritage High School back in 1999).
But these folks still want to read/hear about Rockdale County’s football team, Salem’s baseball team, Heritage’s soccer team or who the new school superintendent will be or what sort of renovations are being done at the Georgia International Horse Park.
These local papers are often the only media outlets that provide consistent coverage of these communities. Plus, may of these papers (including the one we once worked for) still attract advertisers and as a result rake in money.
The Neighbor Newspapers are the cash cow that keeps Times-Journal Inc., afloat (coupled with the fact that the MDJ and Cherokee Tribune have the legal ads for Cobb and Cherokee Counties). I’d guess at least 40 percent of the space in the Neighbor papers are ads. Additionally, they have basically a small staff working in a bare bones type office for little money, thus allowing the companies to minimize overhead costs.
True, on the whole all this revenue might still only allow Times-Journal to break even each year or at best record a 2 percent profit. But when the owner is a man worth tens of millions of dollars (perhaps even hundreds of millions), all they have to do is break even each year.
Yes, these companies might need to fold the papers at some point, but my guess is we’re still at least 10 years away, maybe even 20. Bottom line is the physical newspaper won’t completely die out until everyone in their 40s-70s grew up with the Internet.
FYI, UPS actually bought a consulting service and re-labeled it UPS Consulting Services. While some people did come from Brown over to SCS, the structure and leadership of the department came from outside. Not that it matters…
Used to work for another UPS subsidiary.