NEWS HAS NEVER BEEN A COMMERCIALLY VIABLE PRODUCT

Industry, scholarly and policy discussions about the future of the news industry in North America and Europe continue to focus on how news enterprises can sustain themselves in the 21st century. Publishers keep asserting that things will be fine if they can erect pay walls and charge for news online and they argue that governments should provide legal protections for online news so they can make news a viable digital business product.

Their approach is wrong and ignores the fundamental reality that news has never been a commercially viable product because most of the public has been, and remains, unwilling to pay for news. Consequently, news has always been funded with income based on its value for other things.

Historically, the first collection and dissemination of news was funded in ancient times by emperors and kings, who used governors and officials throughout their realms to collect news and information and send it to the seat of power. Emissaries, consuls, and ambassadors collected foreign news and information in places important for trade or seen as potential threats to the realms. In this Imperial Finance Model, news and information were collected and shared with officials throughout the realms to assist in governance activities. This revenue model was based on official financial support because it served the interests of the state.

In the Middle Ages, a Commercial Elite Finance model developed in which wealthy merchants hired correspondents in cities and states with which they traded to collect information about political and economic developments relevant to their trade. Linen, porcelain, sherry, and spice merchants used the news for commercial advantage and held it in confidence rather than sharing it with others.

In the 18th and 19th centuries a broader Social Elite Finance Model developed to support newspapers that served the needs of the aristocracy and widening merchant class. Even with high cover prices, this model news was not viable and newspapers were subsidized by commercial printing activities and income from other commercial activities, governments and political parties, and merchant associations.

The Mass Media Finance Model appeared in the late 19th and 20th century, made possible by the industrial revolution, urbanization, wage earning, and sale of finished goods. In this model news was provided for the masses at a small fee, but subsidized by advertising sales. Because most of the public was uninterested in day-to-day events and “hard” news, the bulk of newspaper content was devoted to sports, entertainment, lifestyle, and features that increased the willingness of the public to spend pennies for the product.

This mass media financing model remain the predominant model for financing news gathering and distribution, but its effectiveness is diminishing because the “mass” audience is becoming a “niche” audience in Western nations as those less interested in hard news continue abandoning newspapers for television, magazines, and the Internet. This is creating a great deal of uncertainty how society will subsidize and pay for journalism in the twenty-first century.

Focusing on news as a commercial product appears futile and commercial news providers would do well to put their efforts in creating other commercial activities that can subsidize news provision, such as events, education and training, bookstores, travel agencies, and a variety of merchandising activities. Many publishers subsidized news activities with these types of activities a century ago and some continue to do so. It is likely that news providers will rely on a far wider range of revenue streams in the future than merely on the consumer and advertising streams upon which they depend today.

Seizing the White Space (2010)

The book, Seizing the White Space: Business Model Innovation for Growth and Renewalby Mark W. Johnson, is a rather quick read and primarily for people who have not read Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengersby Alex Osterwalder, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevantby W. Chan Kim and Renée Mauborgne, and Clayton M. Christensen's The Innovator's Dilemma.

For people who have followed the development of the business model concept, and read case studies such as Southwest Airlines, Hilti, Xerox, Kodak, DEC, FedEx, and Tata, this book is a bit of a disappointment. I looked forward to reading this book and wanted it to be a 5 star experience, but after reading it I have more questions about the author and the writing of the book, than about any new content or ideas.

The book in three bullet points:

• It presents the concept "White Space" defined as an area where new or existing customers are served in fundamentally different ways and there is a poor fit with the current (incumbent) organization; "The range of potential activities not defined or addressed by the company's current business model".
• It provides a business model framework, "The four box business model", comprising a customer value proposition, a profit formula and key resources and processes, very similar to the model presented in the 2008 HBR article Reinventing Your Business Modelby Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann, with the focus point on the customers' job-to-be-done .
• It briefly explores the circumstances when a new business model might be needed, being when you must change your current profit formula (overhead cost structure, resource velocity or both), develop many new kinds of key resources and processes, and/or create fundamentally different core metrics, rules and norms to run your business.

A brief summary of the different chapters:

1. The White Space and Business Model Innovation

Introductory discussion on core vs. non-core business, defining the white space that lies far outside an organization's usual way of working, where assumptions are high and knowledge is low. In contrast to the Blue Ocean concept, described in the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, (not mentioned in Seizing the White Space), the white space focus on what a specific organization can do, whereas blue ocean is about doing things differently than competition to be in uncontested markets. In the first chapter Mark includes a nice table on companies founded in the last quarter century that have entered the Fortune 500 in the last decade.

The book contains some questionable statements without references or discussion and chapter one is no exception: "Most successful innovative business models are forged by start-ups" (p. 18) - I would like to see the reference and discussion (and definition of "successful", "innovative" and "start-up") as most examples and discussions covered in this book are not on start-ups.

2. The Four-Box Business Model Framework

The chapter starts off with the discussion about the lack of a shared vocabulary, "No one to my knowledge squarely focuses on the elements in the business system that are central to value's creation and delivery and the way those elements work together to ensure or impede the overall success of the enterprise" (p. 23) I laughed out loud when I read the references related to the statement above, all from the same page: Peter Drucker (Harvard Business Review), Joan Magretta (Harvard Business School, former strategy editor Harvard Business Review), Henry William Chesbrough x2 (Harvard Business School Press). I would argue that the MAIN reason why there is a lack of shared vocabulary regarding business models is due to academics/consultants that ignore the work of other academics/consultants working in other schools/companies than their own.

The first element of Mark's Four-Box Framework is the Customer Value Proposition (CVP), an offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price. In some versions of the model, such as Figure 9, 19, 20 and 24, there is no explicit customer mentioned in the CVP. In other versions, such as Figure 21 and in the model presented in the 2008 HBR article "Reinventing you business model", a target customer is included. The second element is the Profit Formula that defines how the company will create value for itself and its shareholders. It specifies the revenue model, the cost structure, target unit margin and how quickly resources need to be used to support target volume. The third element is Key Resources, the people, technology, products, equipment, information, channels, partnerships, funding, and brand required to deliver the value proposition to the customer. The fourth and final element is Key Processes such as design, development, sourcing, manufacturing, marketing, hiring and training by which a company delivers on the customer value proposition. Readers familiar with popular concepts such as Osterwalder's business model canvas recognize most terms and ideas.

3. The White Space Within: Transforming Existing Markets

Chapter three discuss business model innovation opportunities within existing markets by delivering new customers value propositions, something Mark argues often relate to predictable shifts in what customers are willing to pay a premium price for (at least the primary basis of competition). He presents an argument based on one example on how companies compete and differentiate with different forms of innovation according to the figure below. The references used for the "predictable shifts" are to colleague Christensen's The Innovator's Dilemma, and Geoffrey A. More's Crossing the Chasm, a book about selling disruptive products to mainstream customers. I would love to read more about these shifts, the research behind it, and how for example design and the use of brands affects the shifts in the basis of competition?

The chapter contains a nice case study on Dow Corning and Xiameter (mostly covered in HBR article from 2009), and the more classical case studies on Hilti, FedEx and IKEA.

4. The White Space Beyond: Creating New Markets

Seizing the white space beyond means developing new business models to serve entirely new customers and create new markets, often where large groups of potential customers are shut out of a market because existing offerings are too expensive, complicated or that the potential customers lack access. In the chapter Mark provides a table of archetypal business models and a nice case study on Hindustran Unilever and the Shakti Initiative together with some shorter versions covering MinuteClinic and SAP.

Obvious concepts to discuss in relation creating new markets are the tools, frameworks and methodologies presented in Blue Ocean Strategyby W. Chan Kim and Renée Mauborgne. Even though the Blue Ocean Strategy concepts are trademark protected, registered by ITM Research (INSEAD), other authors have been able to refer to the concepts and tools presented in the book.

5. The White Space Between: Dealing with Industry Discontinuity

Chapter five focus on the uncharted territory between what was and what is to be, after game changing events such as the commercialization of Internet technology or the push to address greenhouse gas emissions. Mark presents ideas in relation to unpredictable or radical shifts in market demand, in technology and in government policy targeted at the business environment. Examples are in the defense industry (transformative market shifts), Encyclopaedia Britannica (technology driven shifts), and Better Place (shifts in government policy and regulation). The chapter also contains a nice table including the industries and infrastructure of each technological revolution, from Carlota Perez' Technological Revolutions and Financial Capital.

6. Designing a New Business Model

In the chapter Mark discusses the business model innovation process from identifying a job-to-be-done to creating the customer value proposition, and compares the new business model that would be required with the existing model. When searching for unfilled jobs-to-be-done Mark puts emphasis on not only functional aspects of a job but also its social and emotional aspects, together with a short reflection on that Web 2.0 tools give businesses the ability to deeply understand their customers through increased interaction, with Threadless as an example. He introduces a way to use levers to contrast offerings, and mentions the reverse income statement to working up the projections for a business with a new profit formula. This chapter also contains an original and interesting case study from a project undertaken by Innosight with the customer name changed for purposes of confidentiality and a table with business model analogies.

7. Implementing the Model

For the implementation of a new business model, Mark describes three stages: incubation (1-3 years), acceleration (2-5 years), and transition (1-3 years). Incubation is the process of testing (early, cheaply and often) to identify and verify the assumptions most critical to success. Once the new model is proven viable, the Acceleration stage focus on setting up processes, together with rules, norms and metrics, to make the business model profitable. The final stage addresses the question if the new business can be integrated into the core or if it must remain a separate unit in order to thrive. Mark also discusses acquisitions and some successful and less successful examples.

8. Overcoming Incumbent Challenges

In the final chapter Mark describes three dangers incumbent face when implementing new business models: 1) Failure the allocate resources, 2) The Urge to cram new opportunities into the existing business model, and 3) Impatience for growth. He also briefly addresses the problem of the existing rules, norms, and metrics used by the company something that would be very interesting to dig deeper into.

My main questions after reading this book:

Why do Mark ignore existing body of knowledge and obvious references when defining the White space and his business model framework, and instead almost exclusively refer to his own or colleagues' work? Why does he focus so much on old examples, already covered in other books and articles, without using his frameworks to provide more depth into the cases? Why not look at modern examples of companies pushing its core business into new areas? Why are several included figures not referenced in the text, nor referenced for source?

A quick comparison with some other popular books on business models:

• Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur is the obvious book to compare with. It also aims to introduce a standard language, a business model framework, and ideas on how to develop, test and implement new business models. In contrast to Seizing the White Space, Business Model Generation uses many sources and refers to popular management concepts, including Blue Ocean Strategy when looking at new market opportunities. Osterwalder focus much more on the customer and customer segments, and have that as a very explicit element of the business model framework. For me, Business Model Generation is a more original and content rich book. See my review here
• Getting to Plan B: Breaking Through to a Better Business Modelby John Mullins and Randy Komisar focus more on the financials and the start-up situation. It defines the business model slightly different from the two books above but shares the idea to experiment and adjust the business model as you learn new things. See my review here
• The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profitsby Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read. See my review here
• Open Business Models: How to Thrive in the New Innovation Landscapeby Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

All in all, Seizing the White Space is a good book, containing many valuable lessons. It will not WOW you, and it presents surprisingly few new case studies. One of the most important (implicit) lessons from the book is that business models need to be consciously designed and that companies must always stay on their toes looking for new opportunities around their core business, but also in the white space.

If you find this book review/summary helpful, please go to the Amazon book review page and rate my identical review "Helpful" Thanks!

THE BATTLE TO CONTROL ONLINE PRICES

The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music.

In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.

Producers, of course, want higher prices because they produce higher revenue and better profits.

The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.

Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.

What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.

Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.

Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.

Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.

THE BIGGEST MISTAKE OF JOURNALISM PROFESSIONALISM

Efforts to professionalize journalism began early in the twentieth century as a response to the hyper commercialization of newspapers and the “anything goes” approach to news that emerged in the late nineteenth century as a means of increasing street sales through sensationalism, twisting the truth, and outright lies.

The impetus for journalistic professionalism originated among publishers who wish to counter the trend and it gained support of journalists who saw it as a means of improving their working conditions and social standing. Journalism training and higher education programs, professional societies for journalists and editors, and codes of ethics and conduct emerged as part of professionalism. These promoted the core values of accuracy, fairness, completeness, and the pursuit of truth.

These efforts improved industry practices, pushed out the worst journalists and publishers, and creating some trust in the content of news. They also created environments in which advertisers were willing to promote their wares in newspapers and made news organizations more financially sustainable.

This is where journalistic professionalism took a wrong turn, however.

It did so in two ways. First, professional journalists were taught and accepted the idea that they should worry about the journalism and leave the business to itself. Second, journalists, along with other employees, decided to seek improvement to their compensation and working conditions through unionization—thus becoming adversaries of management rather than partners in the management of news organizations.

Both developments clearly improved journalism and lives of journalists; however, they also separated journalists from business decisions and removed them from any responsibility for the organization’s actions and sustainability.

Although some protests over editorial interference, owner avarice, and the corporatization of the news industry were heard in the 20th century, few efforts to alter the situation developed because the enterprises were willing to share a sufficient portion of the riches generated with journalists and because companies employed more journalists, improved newsrooms, built networks of bureaus, and provided resources to undertake interesting reporting activities.

That has all changed. The reporting resources are gone, the networks of bureaus are being dismantled, many enterprises can’t afford their own facilities, and journalists are being widely laid off. All of this is being done with little input and influence from journalists and editors precisely because they spent nearly a century denying responsibility and involvement in business decisions.

Today, many journalists are arguing for the creation of new types of news organizations—primarily not-for-profit enterprises—and they are repeating the same mistake. Most are suggesting, or already setting up, organizations in which journalists still have little say on strategy and business matters. Many are content merely with the idea that the new enterprises won’t be profit driven. That, however, is not enough.

Journalists need to be equally responsible in ensuring they produce news and information that has value. They need to be responsible for ensuring their new organizations create the revenues and organizational strength needed to carry out high quality journalism. They need to ensure that organizational decisions make the organizations and the journalism offered viable.

If journalists continue to deny responsibility for the operation and survival of their news enterprises, it will be impossible to create sustainable news organizations for the future.

THE WIDENING RANGE OF REVENUE SOURCES IN NEWS ENTERPRISES

It is obvious that both the offline and online news providers are in the midst of substantial transformation and that the traditional means of funding operations are no longer as viable as in the past. This is disturbing to the industry because it has enjoyed several decades of unusual financially wealth and few in the organizations know how to find and generate new sources of revenue.

The financial uncertainty facing the industry is not unusual, however. We tend to forget that news has historically been unable to pay for itself and was subsidized by other activities. In the past newspapers and other news organizations engaged in a far larger range of commercial activities than then they do today and publishers had to be highly entrepreneurial and seek income from a wide variety of sources in order to survive.

The initial gathering and distribution of news was paid for by emperors, monarchs, and other rulers who needed information for state purposes. Later, wealthy international merchants hired correspondents to gather and relay news that might affect their businesses. When news became a commercial product, newspaper publishers subsidized the operations with profits from printing books, magazines, pamphlets, and advertising sheets, income for editors from shipping and postal employment, profits from operating book shops and travel agencies, and subsidies from communities and political and social organizations.

Today, however, news organizations are struggling to maintain themselves and develop digital operations by primarily focusing on the two revenue streams they have known in recent decades: subscriptions and advertising. Many people are being disappointed because those are failing to provide sufficient financial resources to sustain their operations.

The need to seek income from multiple sources is clear, but runs somewhat counter to the values of twentieth-century professional journalism, which denigrates commercial activity and thus engenders organizational resistance to new business initiatives. Continuing staff reductions and other budgetary cutbacks are eroding some internal opposition, but are rightfully leading to questions about how far one goes down the commercial road before news gives up its independence.

In both the online and offline news worlds, a wide variety of revenue generating activities are appearing—some based on traditional subscriber/single copy sales and advertising sales—but many others moving into new areas of monetization.

Many news organizations are increasing the range of advertising services provided to sell and create ads for their own media products, but also to provide clients services that can be used in competing products as well. New types of advertising offerings are being created to link across platforms, sponsorships of online and mobile news headlines are developing, video advertising is being offered online, and special “deals of the day” advertising spots are being offered.

Some organizations are increasing their product lines producing paid premium products and niche content for professional groups and persons with special interests; some are providing business service listings for a fee; others are creating a variety of non-news products; still others are operating additional business units creating paid events, running cafés, book and magazine shops, and providing training and education activities.

Sales of other products and services are being increasingly embraced through e-commerce (linking published reviews films, performances, and recordings to sites where customers can buy tickets, DVDs, CDs, etc.), creating and selling lists and databases of local businesses and consumers, producing special reports and books, selling photographs and photography services, and even selling items such as computers and appliances.

A growing number of news organizations are seekings subsidies though reader memberships and donations and grants from community and national foundations.

These are healthy developments because they increase the opportunities to create revenue that can fund news activities. Obviously, the abilities and willingness of different news enterprises to engage in the range activities vary widely, but the fact that they are appearing show that news organizations are beginning to adjust to the new environment and becoming more entrepreneurial than they have been for many decades.

What is needed now is not knee-jerk opposition to these efforts from news personnel, but thoughtful development of realistic principles and processes to minimize any negative effects of these new initiatives on news content so that trust and credibility are not diminished.

IMPLICATIONS OF CHANGING DEFINITIONS OF MEDIA MARKETS

An important contemporary development is the shift of media market definitions from traditional platform-based definitions to functional definitions. This is occurring because media product platform definitions are losing their specificity and uniqueness due to digitalization and cross-platform distribution developments.

Newspapers are becoming news providers, delivering news and information via print, online, mobile, and other platforms; broadcasters are moving off the radio spectrum, exploiting not only other streaming and video-on-demand opportunities, but also text-based communication on web and mobile platforms.

Although functional definitions clarify what companies actually do, they obscure wide differences in audiences, business relations, and revenue sources on the different platforms and give some the mistaken impression that a functionally defined operation can be successful operating the same way across the different platform environments. The functional definition is also confusing some policy makers and regulators concerned with effects of cross-media activity, consolidation, and concentration who do not carefully sort out the different elements of product and geographic market definitions among the platforms.

From the business standpoint, the fundamental problem of the functional definitions is that it leads many content providers to believe they can simply repurpose existing content across platforms. They are happy to do so because the marginal cost is near zero, but they ignore the facts that it also commoditizes the content, that the content losses uniqueness, and that similar presentation may not be appropriate on other platforms. Consequently, the repurposed content can produce only a small marginal increase in revenue.

To ultimately be successful in functional markets, companies need to offer a good deal of new content and launch new products on the new platforms rather than merely reusing what is already there in the traditional ways. Leading cable channels, for example, early in their development relied on motion pictures and syndicated programs previously shown on network television, but soon realized that they needed original programming to attract better audiences and gain additional revenue. Financial newspapers have begun to get it right on the Internet, offering more content and tools than in their print editions and establishing specialized niche products for different types of industry and business readers.

We are all watching to see who among general content providers manages to get their functional approach to markets right using the Internet, Mobile, e-Readers, and other platforms.

MEDIA, INNOVATION, AND THE STATE

There is a growing chorus for governments to help established media transform themselves in the digital age. From the U.S. to the Netherlands, from the U.K. to France, governments are being asked to help both print and broadcast media innovate their products and services to help make them sustainable.

State support for innovation is not a new concept. Support of cooperate research initiatives involving the state, higher education institutions, and industries has been part of national science and industrial policies for many decades. There has been significant state support for innovation of agriculture/food products, electronics, advanced military equipment, information technology, and biomedical technology and products.

State support tends to work best in developing new technologies and industries and tends to focus support on advanced basic scholarly research through science and research funding organizations, creation and support for research parks and industrial development zones for applied research, and incentives and subsidies for commercial research and development.

Many governments also support efforts to transform established industries. These are typically designed to promote productivity and competitiveness as a means of preserving employment and the tax base. In the past there has been some support for technology transfer from electronics and information technology to existing industries and for retraining, facilities reconstruction, and entering new markets.

Trying to apply those kinds of research and transformation policies in media is challenging, however, because much of media activities tend to be non-industrial and are dependent on relatively rigid organizational structures and processes that are difficult to change. These factors are complicated by the facts that media engage in negligible research and development activities, have limited experience with product change and new product development, and tend to have limited links to higher education institutions.

It is clear that a growing number of managers in media industries understand the need for innovation because of the declining sustainability of current operations and because Internet, mobile, e-reader, and on-demand technologies are providing new opportunities. The real innovation challenges in established media, however, are not perceiving the need for change or being able to get needed technology, but organizational structures, processes, culture, and ways of thinking that limit willingness and ability to innovate. This is compounded because many managers are confused by the opportunities and don’t know what to do or how pursue innovation.

Today, the innovation challenge facing media—especially newspapers--is not mere modernization, but fundamentally reestablishing their media functions and forms. What is needed is a complete rethinking of what content is offered, where, when and how it is provided, what new products and services should be provided and what existing ones dropped, how content will differ and be superior to that of other providers, how to establish new and better relationships with consumers, how the activities are organized and what processes will be employed, what relationships need to be established with partners and intermediaries, and ultimately how the activities are funded.

The state’s ability to influence media innovation of this type is highly constrained. Governments worldwide have proven themselves ineffectual in running business enterprises and they have limited abilities to affect organizational structures, processes, culture, and thinking in existing firms. What governments can do, however, is to fund research that identifies threats, opportunities and best practices, provide education and training to promote innovation and help implement change, offer incentives or subsidies to cover transformation costs and support new initiatives, and help coordinate activities across industries.

These kinds of support will be helpful, but they will not be a panacea because the greatest impetus for and implementation of change and innovation must come from within companies. The support will only be helpful if companies are actually willing to innovate and change to support that innovation. The extent they are willing to do so remains to be seen.

Business Model Generation (2009)

The book, written by Alexander Osterwalder and Yves Pigneur, co-created by 470 practioners, is a fascinating book for several reasons and I highly recommend people interested in learning about business models to buy it. It is a compilation of 10 years of work on a simple idea; on how to capture the essence of how an organization creates and captures value. It is a book that I believe many will read and keep handy for reference.

The book in three bullet points:

• It presents a business model framework, based on nine building blocks, that is widely used by practioners today and it summarizes many popular management theories using the same framework.
• It uses visual thinking and design in a way that is novel in business literature, and provides several workshop ideas for companies that want to get their hands dirty applying the tools presented
• It provides many interesting examples of companies that have successfully innovated their business model

The business model canvas

At the core of the book is the business model canvas, developed by Alex during his PhD work, and it's included in one form or another, on almost every page of the book. It is a graphical representation of the 9 business model components that Alex argues describe the rationale of how an organization creates, delivers, and captures value. It has created a shared language for describing, visualizing, assessing, and changing business models, and is widely used by business model innovation practioners.

The structure of the book

The book is divided into five main sections that can be read on their own:

1. The business model canvas including definition and the nine building blocks: Customer Segments, Value Propositions, Channels, Customers Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships and Cost Structure.
2. Popular business model patterns including concepts from popular management literature such as Unbundling Business Models, The Long Tail, Multi-Sided Platforms, FREE as a Business Model and Open Business Models.
3. Business model design, using concepts such as customer insights, ideation, visual thinking, prototyping, storytelling and scenarios.
4. Strategy, including the business model environment, evaluating business models, business model perspective on blue ocean strategy and managing multiple business models.
5. Business model design process, including a 5 step process: mobilize, understand, design, implement and manage.

One book to rule them all

Alex and Yves covers a lot of management concepts in the book and use the business model canvas to illustrate key ideas from publications such as Unbundling the Corporation by John Hagel and Marc Singer (1999), The Long Tail by Chris Anderson (2006), Free: The Future of a Radical Price by Chris Anderson (2008), Co-Opetition by Adam Brandenburger and Barry Nalebuff (1996), Blue Ocean Strategy by Cahn Kim and Mauborgne, and Open Business Models by Henry Chesbrough (2006). The focus is very much to make complex things simple and understandable which is great for most readers!

Visual thinking

Another strong focus of the book is the visual thinking, the analogies to architecture and design, using concepts such as ideation, prototyping and storytelling. The best way, according to the writers, is to print out the canvas on a large surface, put it on a wall and let people jointly sketch or use post-it notes to discuss and analyze business models. Alex has for several years worked together with designers and the design of the book is very different from traditional management literature and share more similarities with books such as The Back of the Napkin: Solving Problems and Selling Ideas with Pictures by Dan Roam. Alan Smith of The Movement, has really done a wonderful job designing the book.

Many interesting examples

The book contains many interesting examples from companies such as Lulu.com Lego, Google, Nintendo Wii, Apple, Metro, Flickr, Red Hat, Skype, Rega, Gillette, Procter & Gamble, GSK and Innocentive. It uses the business model canvas to explain the rationale of each company's business model and sometimes including the differences with traditional companies within the same industry.

Hands-on tools

Besides the business model canvas the book comprises several hands-on tools such as The Empathy Map developed by XPLANE, "What If" questions, The Silly Cow Exercise, Techniques to develop stories, and questions to perform a detailed SWOT analysis of each business model component. It has a very practical focus and it is easy for companies to pick up the book and do some workshops on their own.

In relation to other books

The Business Model Generation gives a fresh perspective on business models and it provides an introduction to many concepts, of which the reader can dig further into in other books. A quick comparison with some other popular books on business models:

• Getting to Plan B: Breaking Through to a Better Business Model by John Mullins and Randy Komisar, focus more on entrepreneurship and start-ups and on learning from experimentation and adjusting the business model, also with more focus on financials. A good complementary book to Business Model Generation. See my review/summary here

• The Design of Business: Why Design Thinking is the Next Competitive Advantage by Roger Martin, explores design thinking, and advocates using intuition combined with analytical thinking to innovate business models. It is a great complementary to Business Model Generation. See my review/summary here
  

• The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. See my review here

• The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read and perhaps complementary to The Business Model Generation that focus less on profitability. See my review here

• Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

All in all, The Business Model Generation is a great book and everyone interested in the subject should have a copy of it. Download the preview and buy it.

Full disclosure: I was one of the 470 practitioners contributing to the book.

If you find this book review helpful, please go to the Amazon book review page and rate my identical review "Helpful". Thanks!

JOURNALISM AS CHARITY AND ENTREPRENEURSHIP

Many journalists pursuing new online initiatives are learning that good intentions are not enough for providing news.

The latest group to do so is former Rocky Mountain News reporters who started rockymountainindependent.com this past summer using a membership payment and advertising model. The effort collapsed Oct. 4 with them telling readers, “We put everything into producing content and supporting our independent partners, but we can no longer afford to produce enough content to justify the membership.”

There problem is hardly unique. The conundrum facing many journalists is whether to pursue the noble work of journalism as unpaid charitable work or to become engaged as journalistic entrepreneurs with a serious attitude toward its business issues—something many despised in their former employers.

If journalists want pay for their work, if they want to provide for their families, and if they want to pay mortgages, they need to spend more time figuring out how to provide value that will extract payments from readers and advertisers. To do that they have to construct organizational structures and activities that support the journalism; they will have to ensure that startups have sufficient capital; and they will have to engage staffs in marketing and advertising activities, not merely news provision.

One of the most difficult issue for these new journalism providers—as well as existing print and broadcast providers—is that journalists tend to overestimate the value of news for the public. What the public actually wants is less, not more, news.

It is not that the public doesn’t want to be informed, however. It is just that journalists spend so much time, space, and effort conveying commodity news that provides little new and helpful information for readers and cannot generate sufficient financial support. By commodity news I mean the simplistic who, what, and where stories about what happened yesterday. Those kinds of stories are readily available from many sources and provides readers little for which they will pay.

Instead, in a world of ubiquitous commodity journalism, successful journalists need to be spending time exploring the how and why of events and issues and helping readers understand and cope with what is expected next. Effective journalism in the new environment needs to focus more on today and tomorrow than on yesterday.

Success in the contemporary journalism environment it is not merely about providing news, but about providing helpful and advisory news explanation based on solid values and identity to which readers can relate. It must be part of entrepreneurial journalism or new ventures will fail.

To get there, however, journalists starting up new enterprises will need to develop resources and entrepreneurial motivation to sustain their efforts more than a few months. Most new commercial and noncommercial enterprises require 18 to 36 months of operation before they develop a loyal audience and achieve a stable financial situation. Unless journalists are willing to work for free during that time, they will have to raise capital to survive; and if they want their new organizations to thrive and develop they will have to provide a different kind of news than most are used to creating. It will need to be unique and better than what is already available.

4 STRATEGIC PRINCIPLES FOR EVERY DIGITAL PUBLISHER

As publishers move more and more content to the Internet, mobile services, and e-readers, these digital activities change the structures and processes of underlying business operations. Many publishers, however, pay insufficient attention to the implications of these changes and thus miss out on many benefits possible with digital operations.

This occurs because publishers become focused on issues of content delivery and uncritically accept the fundamental elements of the processes involving platforms and intermediaries. In order to gain the fullest future benefits from the digital environment, however, publishers needs to strategically consider and direct activities involving the users, advertisers, prices, and purposes of their new platforms.

In creating business arrangements with platform and service providers and intermediaries, 4 fundamental strategic principles should guide your actions:

1. Control your customer lists. The most important thing you do as a publisher is to create relationships with and experiences for your customers. It is crucial to ensure that your content distribution and retail systems do not separate you from those who read, view, or listen to your content. If you do not operate your distribution or pay systems, or don’t have strong influence over their operations, this important part of the customer experience falls outside your control and— worse—you never establish direct relationships with customers that allow you to get to know them better, to create stronger bonds, to use them to improve your products, or to up-sell services. If you must use intermediaries, ensure that you have full access and rights to use e-mail, mobile, and other addresses for all your content customers and that you have some influence over the look, feel, and content of the contacts that your service providers have with your customers.

2. Control advertising in your digital space. Users see advertising placed on your website, your mobile messages, and your e-reader content as part of your product and it affects the experience you deliver to them. It is not enough to control the size and placement of ads; you also need to control the dynamic functionality, types, and content of ads. The experience your product delivers is of little interest to outside providers of digitally delivered advertising, but it must be to you. You should control your own advertising inventory and maintain approval rights and—as with audiences—you should have the ability to make direct contact with advertising customers so you can add value by working with them to achieve greater effectiveness and provide better benefits across your content platforms.

3. Control your own pricing. Do not put yourself in the position of merely accepting the ad suppliers’ price and payment for advertising appearing in your digital product. The digital space and audience contact that you provide is the product and service being purchased and some contact is more valuable than others. Know how your value compares to that of competitors and set your prices according. Don’t be a price taker, be a price maker. Digital advertising will not grow to become an important part of your business if you let the most important decision of the revenue model reside in someone who does not care about your business.

4. Drive customers to platforms most beneficial to you. Digital media give you the opportunities to serve customers where and when they want to be served, but you need to use those opportunities to drive them to your financially most important product. Internet sites, e-readers, mobile applications, and social media are highly useful for contact and interaction, but not yet very effective for revenue generation. The best effects typically result from increasing use of your offline product or driving traffic to your most finally effective digital location. Make sure that all the distribution platforms you use are configured for easy movement to other digital platforms that benefit you most, even if they don’t directly benefit your service provider.

Digital publishing can only become successful if you get the business fundamentals correct by controlling the most important commercial aspects of the operation. The value configuration created by customer interfaces and partner networks must be arranged to work in your favor and strategic thinking needs to guide how you organize and direct those activities.

Videos from New Business Models For News Summit 2008

Below is a great collection (3h) of videos from New Business Models For News Summit 2008, held at University of New York’s Journalism School, organized by Jeff Jarvis. The three videos cover very interesting presentations and summaries from group discussions about network models for news and media, new structures for news organizations, new efficiencies and structures for newsrooms, new revenue opportunities and models, and public support of journalism.

Jeff Jarvis' Introduction Slides:

Part I:

Speakers:
Jeff Jarvis, CUNY
Edward Roussel, Telegraph
Dave Morgan, Tacoda
Colin Crawford, IDG
Michael Rosenblum, video training

Part II:

Speakers:
Charlie Sennott, GlobalPost.com
Mark Josephson, Outside.in
Adam Davidson, NPR Planet Money
Samir Arora, Glam
Tom Evslin, ITXC

Part III:

Speakers:
Upendra Shardanand, Daylife
Scott Karp, Publish2
Dave Chase, NextNewsNet
Adam Bly, ScienceBlogs
David Cohn, Spot.us
Jeff Jarvis, CUNY
Scott Meyer, Warburg Pincus
Benjamin Wagner, MTV
Jan Shaffer, J-Lab
John Hassell, Star-Ledger


Related posts:

• Outlook for Newspaper publishing: Moving into multiple business models

Related videos:

• Did you know 4.0 - The changing media landscape
• Eric Schmidt on news, newspapers and real time content
• Interview with Steve Rubel on business models for newspapers and online communities
• Journalism and business models discussed by panel at the International Center for Journalists' annual Board Dinner
• Nick Bilton on new technology that will enable interesting business models for news
• TimesOpen: Tim O'Reilly Keynote Video

Music 2.0 Business Models from Future of Music Coalition

Below is a great collection of business models including information on revenue models and how much musicians, labels and songwriters are compensated. It has been put together by Future of Music Coalition, a nonprofit organization that works to ensure a diverse musical culture.

There are many great examples in the presentation and attached pdf files from services such as: CD Baby, TuneCore, ReverbNation, Nimbit, The Orchard, iTunes Music Store, Amazon Music Store, Amie Street, Rhapsody or Napster, eMusic, Magnatune, ArtistShare, Kickstarter, Sellaband, Rumblefish/Pump Audio, Pandora, Last FM, MySpace Music, KEXP, Sirius XM Satellite Radio and MusicChoice. Also, examples from artists such as Issa/Jane Siberry, Radiohead, Nine Inch Nails and Jill Sobule.

Download pdf documents:

Examples of new business models in music

Music distribution channels such as Amazon's Createspace.

Video presentations:

Related posts:

• A Music Technology and Format Timeline

Related videos:

• Making $1.6 Million in a week for music given away for free
• Interview with Trent Reznor on business models in the music industry
• Ning, Pandora, YouSendit, Pinger & Ngcomo in an extensive panel discussion about different Business Models

USC Marshall Webinars on Business Models

These webinars are excerpted from USC and RUIs New Media Management certificate. Terrible sound quality but some interesting examples and Q&A sessions.

Media and Entertainment: Ad-Based Business Models

Media and Entertainment: Subscription-Based Business Models

Media and Entertainment: Purchase-Based Business Models

Media and Entertainment: Monetizing Social Media

See also:

More than 30 videos on Business Models

THE TRANSACTION COST PROBLEM OF NEWSPAPER MICROPAYMENTS

The desire to monetize online news is leading some to enthusiastically promote micropayment systems. A number of the leading newspaper sites are leaning toward a cooperative payment system that will allow readers to use a single account to access material at the leading papers. Such a system will not be technically difficult to implement, but getting the price right will be a significant challenge because of transaction costs and significant differences in the economic value of articles.

To create the best industry wide effects, a micropayment payment system would need to include as many papers as possible (see "The Challenges of Online News Micropayments and Subscriptions" http://themediabusiness.blogspot.com/2009/05/challenges-of-online-news-micropayments.html). The fact that a consortium is currently being sought only among the major players illustrates, however, that such a system would be cost inefficient because content from smaller papers would attract fewer transactions and be more expensive to service.

A widely inclusive system would encounter the problems of small payouts that have plagued collecting rights societies for authors, composers, and performers. Those systems have found that the costs of managing transactions, accounting and auditing, and conveying funds to rights holders incur higher expenses than the payments due many rights holders and that such a system is possible only when the rights holders and content that generate the most transactions subsidize those that generate the least.

This occurs because each right must have a separate account, uses of all rights must be monitored and recorded, funds must be collected, expenses for accounting, auditing and other administrative costs paid, and funds must be transferred to recipients. These activities incur significant transaction costs.

Even a cooperative system limited to newspapers that attract the largest number of customers will encounter transaction cost challenges.

In single content sales systems, for example, the cost of making transactions takes up the bulk of the price. In the sale of mobile telephone ringtones, for example, the composer, arranger, and performer get only about 20% of the price. For digital song downloads everyone associated with the content--songwriter, arranger performers, and record company--receive less than half. This occurs because merchant and financial transaction costs are very high. The cost for using a credit card adds 5 to 7 percent to merchant costs and the expense for bank processing of each transaction is a minimum of about 25 cents. Even electronic fund transfers between bank accounts incurs about 30 cents in transaction costs.

These realities will affect the structure and pricing of newspaper article micropayment purchases. The most efficient system for users and firms will require the use of prepaid customer accounts to reduce the number of bank system transactions. This will allow users to transfer funds to their accounts and then purchase articles at pennies a piece. Funds collected would be then periodically transferred to papers. Such a system could also include the option for occasional users to make credit cards purchases of articles, but the price would have to be $2 to $10 per article to make it worth the effort.

The biggest pricing challenge, however, is that some articles will be more valuable than others and will be most sought after by consumers. This means newspapers will have to figure out BEFOREHAND which stories fall into those categories and they will have to decide what prices to charge for them. Papers will have to hire personnel to try to figure out before publication which are the most economically valuable stories--something that will be extremely hard to do--or they will have to set prices based on the costs invested in creating each story (something current newspaper accounting systems do not support). In either case, increased costs will result. The only other reasonable option is to set prices per article based on the overall average cost of producing an article or a column inch of editorial copy. This, of course, over and under prices content simultaneously.

Moving to a micropayment system is not merely a matter of starting to charge for content online, but involves changing the fundamental business model of papers. Newspapers have historically bundled all content into one product available at a single price. In retailing, bundling has always worked best for getting consumers to buy more of the product at a lower price than if bought individually. With this tactic the producer gains profit because the costs of distribution and sales are collectively lower. A second tactic involves bundling products of unequal or uneven value that are sold together to achieve a joint price that is higher than would have been obtained individually.

Newspapers have historically benefited from such bundling by filling pages with relatively inexpensive news agency and syndicated content and by including huge amounts of information culled from public sources that did not require significant investment of resources or added value. Unbundling and selling individual articles with a micropayment system will produce little consumer willingness to pay for this type of content--a significant problem because it is the bulk of editorial content in most newspapers today. Unbundling will also increase transaction costs, thus reducing profitability. This will force higher prices on consumers that will affect demand.

Disaggregating the newspaper and making more money off some individual articles will also create pressure for additional payments from journalists who write the most valuable articles. This will also increase costs of the micropayment system.

Making money from online journalism is, thus, not just a matter of saying "Let's all start charging." It will require fundamental rethinking of the value chain, what content is offered, and how it is produced. It will also require significant thought about what's in it for consumers--something that is glaringly missing from current discussions of starting online payments. The consumer challenge is especially salient because most online news readers do not currently buy newspapers. If they are not willing to pay for news in print, why will they suddenly be willing to pay for that same news online? If papers can't figure that out, no decision to implement micropayments will end happily.

IMVU, Tripit, Photobucket, Commission Junction, and ShoeMoney Media in a very interesting panel about online Revenue Models

A very interesting panel moderated by Joyce Chung, Managing Director, Garage Technology Ventures

Participants:

Will Harvey, Co-Founder IMVU

Scott Hintz, Co-Founder, Tripit

Alice Lankester, Former VP Marketing, Photobucket

Kerri Pollard, General Manager, Commission Junction

Jeremy Schoemaker, Founder, ShoeMoney Media.

More videos:

• Ning, Pandora, YouSendit, Pinger & Ngcomo in an extensive panel discussion about different Business Models
• Chris Anderson on Freemium: The First Business Model of the 21st Century
• Chris Anderson & Guy Kawasaki debate The Freemium Business Model

JOURNALISM STARTUPS ARE HELPFUL, BUT NO PANACEA FOR NEWS PROBLEMS

One of the most exciting developments in journalism is the widespread appearance of online news startups. These are taking a variety of not-for-profit and commercial forms and are typically designed to provide reporting of under-covered communities and neighborhoods or to cover topics or employ journalistic techniques that have been reduced in traditional media because of their expense.

These initiatives should be lauded and supported. However, we have to be careful that the optimism and idealism surrounding these efforts not be imbued with naïveté and unbridled expectation. All these initiatives face significant challenges that require pragmatism in their organization and sober reflection about their potential to solve the fundamental problems in the news industry today.

We need to recognize that these online initiatives are not without precedent. We can learn a great deal about their potential from other community- and public affairs-oriented media endeavors. Community radio, local public service radio and television, public access television, and not-for-profit news and public affairs magazines have existed for decades and provide some evidence about the potential of the startups. Most rely heavily on the same types of foundation, community support, and membership financial models that startups are employing and this gives them a head start in the competition of those resources.

Despite sharing fundamental objectives and goals, these existing news and public affairs enterprises exhibit wide differences in the services they provide and their effectiveness in offering them. Many suffer from precarious financial conditions.

For the most part, such initiatives are highly dependent upon volunteer labor, individuals with the best of intentions who contribute time and effort. Those who manage the operations must expend a great deal of effort to train, coordinate, motivate and support these volunteers. This incurs cost and takes time from other activities.

Most of the organizations operate with highly limited staffs of regularly employed personnel and this is especially true in news operations. Professional journalists working in these organizations tend to be poorly paid; few have health and retirement benefits; most do not have libel insurance that protects aggressive and investigative reporting; few have access to resources to invest time and money in significant journalistic research. The consequence of these challenges is that there tends to be high turnover because the operations typically rely on young journalists who use the organizations to gain professional experience and then move on to better funded or commercial firms.

The community and public affairs operations also exhibit widely disparate size and quality in their journalistic activities. Even most affiliates of National Public Radio—which is generally considered the most successful of non-commercial news operations—tend to have small and relatively undistinguished news operations. Most rely upon the exceptional content of the national organization, large metropolitan affiliates, and the best of the content collectively produced by other local affiliates. Affiliates with larger news staffs and quality tend to be limited to those linked to university journalism programs or in the best-funded metropolitan operations.

The challenges faced in these organizations should not deter the establishment of new online initiatives or keep the rest of us from supporting them. We need to be realistic about their potential, however. In the foreseeable future these startups will tend to supplement rather than to replace traditional news organizations. They may be part of the solution to the problem of news provision, but they alone are not the remedy.

OMG! NEWSPAPERS MAY NOT BE DEAD!

Success in businesses is not the result of highly mysterious factors.

To be successful an enterprise must offer a product or service that people want; it must provide it with better quality and service than other providers—or at a lower price than competitors; it must change with the times and demand; and it must never forget to focus on customer needs rather than its own. And a limited number of competitors helps. Duh.

Many journalists have trouble understanding these principles, however, and we were treated to 2 classic stories in which journalists breathlessly announced this discovery over the weekend.

The New York Times told us about the “resurgent” Seattle Times. The Times is starting to reap the fruits of monopoly caused by the demise of the print edition of the Post-Intelligencer and the stabilizing economy. It has picked up most of the print readers from the P-I, raised its circulation prices, and been able to keep the higher ad rates that were charged when ads were put in both papers. http://www.nytimes.com/2009/08/10/business/media/10seattle.html

The Associated Press told us “Small is beautiful” and that local papers do not feel competition for big players like CNN, metropolitan television, and Craigslist because they focus on local news and advertising not available elsewhere. “Less competition means the print editions and Web sites of smaller newspapers remain the focal points for finding out what's happening in their coverage areas.” http://tech.yahoo.com/news/ap/20090809/ap_on_hi_te/us_small_newspapers_1

Journalists are also starting to discover that the industry might not be as dead as they have been portraying it to be. A number of stories have reported that the drop in advertising due to the recession appears to be near bottom, that profits and share prices are rising, and there is no wholesale rush to the web by print newspaper readers.

These “surprises” are developing, I believe, because journalists have never covered their own industry with the same interest and vigor that they have covered other industries. This is partly true because they have adamantly and publicly expressed distain for the business side of the news industry and because they tend to accept and endlessly repeat the views of publishers without critical fact checking or seeking better understanding of the business dynamics of news. Whatever happened to the old journalism adage "If your mother says she loves you, check it out!"

Perhaps they will learn.

ONLINE AGGREGATORS AND NEWSPAPER STRATEGY

Google, MSN, and Yahoo and other aggregators are cited by newspaper executives are harming newspapers. But what have they actually done? It is important to have a realistic understanding of their effects if one is to fashion strategies for the future of newspapers and news organizations.

Aggregators carry news stories from major news services and thus make international and national public affairs, entertainment and sports news widely available. The headline news on the aggregators’ home pages is becoming the primary news provider for those less interested in news and the online sections are well-used by news consumers who want more news or more timely news than appears in their daily newspaper.

Aggregators and others sites carrying content from news services are now contributing about 20 percent of the revenue of Associated Press, for example, taking some financial pressure off newspapers to fund the cooperative on their own. Other news services are also gaining income from online operators, thus helping them keep prices lower for newspapers as well.

So how do aggregators news harm newspapers? They harms papers to the extent that some less committed newspaper readers are willing to substitute their local paper with a news sources that don’t cover their cities. Some are willing to do so and this is taking some subscribers and single copy purchasers away from newspapers. U.S. newspapers have lost approximately 6 million circulation since 2000, but about half of that was circulation of the 70 competing newspapers or second editions papers that have been closed since the millennium. So one can thus say that at least 3 million people have decided to use other news sources.

Aggregators are also accused of STEALING value through their search functions and links to newspaper sites. Certainly the aggregators are CREATING value with the technique but are they taking value in violation of copyright or norms of content use? The answer is “no” because they do not represent the material as their own and direct those searching to the newspapers own sites, where they are exposed to advertising sold by the online newspapers.

Newspapers are now getting between 7-10 readers online for every reader they have in print. This plays an important role in making their sites attractive to advertisers, a development that generated the $3.2 billion in online advertising revenue that newspapers received in 2008.

Newspapers, of course, could stop the aggregators from linking to their content by putting it behind walls and charging for its use. If they did so, the aggregators could not link to it legally or technically without users encountering a pay or registration wall. So why haven’t newspapers done this until now? Frankly, because they get more readers and more advertising income by offering the material free.

Publishers are increasingly arguing that they should turn newspaper sites into paying sites and they have been holding joint discussion about how that might happen and whether it would be beneficial to do so simultaneously. This has raised some antitrust concern, but it raises real and significant questions of what such a strategy would accomplish.

In my estimation it is not as easy answer to the challenges newspapers face and has some elements that put its effectiveness in doubt. This is primarily because it is uncertain what existing readers will do. Will they subscribe to print AND online? Will they stay with print only? Or will they drop print?

The first option would be financially beneficial, but is likely to attract a limited number of readers unless the joint pricing is so attractive that it produces little new income for the newspaper firm. If that is the case the benefit of the strategy is reduced. The latter option would be very damaging to papers because print advertising creates more value than online advertising and prices for print ads would decline more than would be gained online.

It also needs to be recognized that people who do not currently buying newspapers are unlikely to buy subscriptions to online news sites. Thus, creating a paid model will likely reduce the boosted audience that free online news currently provides. This would have a negative effect on online audience and the increasing revenue that is being obtained from online advertising.

But what of heavy news users? As I have written in other entries in this blog, heavy users tend to be promiscuous and move between many online news sites. A commonly used system for micropayments would be necessary or these heavy users will reduce their use of multiple sites if each requires separate payment registration. Even with such a system in place, it is unlikely that more than 5-10 percent of the newspaper purchasing population would regularly use such a system.

Moving to a paid online model will not be as easy as agreeing that everyone should switch to paid on January 1 next year. It will require considerable strategic thinking and providing new types of value for consumers if it is to be successful. Even then, the benefits for newspapers will vary significantly depending upon the size, location, and competitive situation of individual newspapers.