The Rise of Private News

A niche model can make a lot of money. What are the costs?

Anyone who has spent time in a newsroom lately is familiar with the conversation—generally conducted in the “hushed tone you use for someone who’s just been through rehab or divorce,” as Bill Keller once put it—about the future of the news business. We’ve all figured out that Craigslist, Google, and other digital predators have decimated the print-advertising model, and that no matter how brilliant our Web sites, the shiny digital-advertising dime doesn’t replace that old print dollar. This leaves us looking to subscription payments, particularly online, where readership remains strong. But charging for digital content reduces traffic, which might jeopardize that meager yet growing digital advertising revenue (though some hope that charging more to a smaller, but more devoted, subscription-paying audience can make up for that loss).

So for much of the media, finding the right income-stream balance—between advertising and subscriptions—has become an existential question. The discussion about the tradeoffs is sure to accelerate next year, when The New York Times plans to put some of its online content behind a paywall. Meanwhile new technology—the iPad and beyond—will inspire creative riffs on the subject, as CJR’s cover story makes clear.

But there is another wrinkle to consider. Some of the companies faring best in the news business today have built an entirely different model, what we might call private news, and are working on an entirely different balancing act. Their challenge is to determine the right mix of focused, professional content—sold to a relatively small client base, usually bundled with data, for extremely high rates—with consumer content, which brings in less money but reaches a bigger audience.

The big question for these organizations is the inverse of the one troubling the mass news outlets in a digital world: their concern isn’t to find a model that allows their influential newsrooms to keep humming along; it is to achieve public influence commensurate with the size and ambition of the newsrooms their already-profitable business model has built. This is a balancing act I have come to know from the inside, and it comes with both promise and peril.

While the model has been around for some time at such entities as the CQ-Roll Call Group, which offers a mix of public and private content, it has been edging a little further into the spotlight lately. In 2009, The Wall Street Journal introduced The Wall Street Journal Professional Edition, which for extra money offers search and organizing capabilities of both Journal articles and other material that is not available free on the Web. And in CJR’s July/August 2009 issue, Michael Shapiro argued in “Open for Business” that many daily newspapers could identify specific subjects for which readers would pay, and thus support their free general news. Think the Detroit Free Press on automobiles.

The biggest examples of this phenomenon are Bloomberg and Thomson Reuters (where I work). The cash-generating power of Bloomberg’s model is obvious to any visitor to the company’s gleaming Upper East Side headquarters. The centrality of Bloomberg’s eponymous terminals to that enterprise is equally apparent—look up anywhere in the building and chances are you’ll see a screen tracking terminal installations. Some 290,000 Bloomberg clients pay some $20,000 per year for these boxes full of private news and data.

Most of Bloomberg’s journalistic firepower is poured into those boxes. Over the past twelve months, however, the news operation has made a push into the consumer space: acquiring, rebranding, and redesigning what is now Bloomberg Businessweek; revamping Bloomberg TV; and previewing, in beta, a jazzier version of the free Bloomberg Web site.

Feeding the terminals remains the heart of the business plan. Matt Winkler, the founding editor of Bloomberg News, said that Bloomberg’s moves into the consumer space all “increase the awareness of the value of Bloomberg.” That awareness, in turn, strengthens the company’s core terminal business in two ways. It helps Bloomberg reporters get better access to sources, he says, because as sources become more likely to talk to Bloomberg “the Bloomberg terminal becomes more valuable.” Winkler cites a February interview with President Obama—conducted by Bloomberg News veterans Albert Hunt, Julianna Goldman, and Michael Tackett, as well as recently hired Bloomberg Businessweek editor Josh Tyrangiel, and unrolled across the company’s public Web sites and Bloomberg Businessweek—as an example of the access the company’s consumer presence hopes to deliver.

Second, the exposure helps sell terminals. Winkler’s current favorite illustration is a retired broker named Michael Robbins, who had let his terminal subscription lapse. Robbins so enjoyed a March review—on the free Web site—of the Metropolitan Opera’s production of Ambroise Thomas’s Hamlet, written by arts and leisure editor Manuela Hoelterhoff, that he told me it “was a major catalyst” in his decision to ask his former partners, for whom he is consulting, to renew his subscription.

The Thomson Reuters’ model is similar—in fact, the company has been striking a balance between professional and consumer news since its inception nearly a century and a half ago. “At 100,000 feet, the two companies are doing exactly the same thing,” said Devin Wenig, ceo of the Thomson Reuters markets division (and my boss’s boss). “We have a core news engine that exists for one purpose, and that is to help our clients make money.” News supports all of the market division’s business, but just $365 million of the unit’s $7.5 billion in revenue in 2009 came directly from its traditional media and consumer operations (mostly from syndication and its public Web site).

But like Winkler, Wenig thinks a strong consumer presence has helped that core professional business by winning over sources: “It helps us to get access to people that matter.” More consumer visibility appeals to reporters, too. “It helps us hire good people,” Wenig said, citing Jim Impoco, a former New York Times editor who leads enterprise reporting for Reuters in New York.

Edging into the consumer market is appealing for these two private-content firms for one other reason: since they already have the manpower, it is cheap, particularly relative to the cost of business for the legacy players. “If you look at the mastheads of Bloomberg Businessweek and Bloomberg Markets, there aren’t a lot of people there,” Winkler notes. But since the magazines are an extension of Bloomberg News, “the reporters in our 148 bureaus around the world” can contribute.

Wenig agreed: “The marginal cost of putting our content into a consumer environment is almost zero. I wouldn’t be running a 2,800-person news organization just to build a consumer product, but that is the organization I have.”

For mass news organizations, the big question is how much news they can pull back behind an online veil. Reuters and Bloomberg grapple with the opposite issue—how much ankle they can expose to a mass audience without reducing the value of the information they offer to their high-paying, private client base. “There are constant discussions about it,” Winkler said. “You have to give people just enough so they appreciate what you’ve done, but not so much that it could in any way replicate a Bloomberg. You put enough scoops in front of people to say, ‘That’s a great Web site.’ But you don’t give them every scoop. The time delays are a part of it.”

Moving into the consumer space—particularly at a time when legacy consumer media companies are fighting for their financial survival—is a natural step for cash-rich professional, electronic information firms, particularly in the business sector where information can translate into a business advantage. Meanwhile, some legacy print-based news organizations are trying to move in the opposite direction, into the private-news space. One of them is the Financial Times (disclosure: where I worked for fifteen years). Increasingly, the FT newspaper and Web site are the public, consumer face of a company whose highest margin enterprises are affiliated businesses that sell exclusive information to a niche, professional audience.

John Ridding, CEO of the FT and (and my former boss’s boss), faces constraints on the price he can charge for his newspaper, but far fewer limits on the price of professional information. Ridding argues that the FT and can be profitable on their own, “but these niches, drawing on the value of the brand and their infrastructure, can be extremely profitable. If you go from the newsstand to Medley [a high-end professional analysis service] there is quite a difference in price!

“What you have is the reach and the global audience of the FT brand that supports and drives these niche publications,” he said. “They can be organic, like China Confidential [an electronic newsletter edited by a former FT Beijing bureau chief], or they can be acquisitions like Medley or Money Media [an aggregation and reporting service aimed at money managers].” The FT’s shift was underscored in May when an executive from Pearson, the FT’s owner, told a media conference that within five years the FT is likely to have largely abandoned its flagship consumer product, the print edition of the newspaper—although a Pearson spokesperson said afterwards that was not true.

Straddling the consumer/professional divide can be a stretch. “A lot of the things a consumer news organization is good at, we’re not,” Wenig said. “We are building those muscles.” Building this model from the opposite starting point, the FT’s Ridding describes the change from his perspective as one of psychology as well as skills: “This is quite a mindset change for newspapers and for newsrooms. It is a challenge to the very deeply rooted instinct of journalists to want to reach as many people as possible. It may be easier if you are a more specialist publication to begin with. Journalists have to focus more on the quality and depth of their relationship with their readers, rather than pure reach.”

The private/public balancing act has echoes in other areas of journalism. One cousin is an older model, the columnist/speaker. Consider Charlie Cook, the political analyst.

Here’s how Cook described his business model: “It is like a stool with four legs. One leg that is twenty-six years old is the Cook Political Report. It has two editors and doesn’t cover its costs. It is the research and development part that differentiates me from a lot of windbags in Washington. The second leg is a contract with National Journal Group to write weekly columns for National Journal magazine and CongressDailyAM. The third leg is a small contract with NBC. The fourth leg is the speaking circuit, and that is very, very lucrative.”

Speaking at conferences—a high-cost service delivered to a small and exclusive group of clients—is Cook’s equivalent of the private-news businesses of Bloomberg, Thomson Reuters, and the FT. His other work, including TV appearances, is the equivalent of the consumer platforms that attract sources and burnish the brands of the big business news organizations. The analogy isn’t perfect—the Cook Political Report is a niche business, albeit a loss-making one—but the basic principle is the same. Cook uses his consumer exposure to market the time-honored money-making side of his operation: speeches. And meanwhile, “There is a subsidy taking place,” Cook said. “The speaking subsidizes the journalistic enterprise.”

Chris Anderson, the editor of Wired magazine, likes the private/public hybrid idea so much he used it to help build the thesis of his recent book, Free: The Future of a Radical Price. Anderson helped spread the term “freemium”—first popularized by New York venture capitalist Fred Wilson—to describe the mix of free and premium (i.e., very expensive) content that he believes is the dominant business model of the Internet age. He practices what he preaches, giving away electronic copies of his book to help build a personal brand he cashes in on by giving speeches.

In-person appearances are a profitable part of the private offerings of bigger news organizations, too. The FT’s Ridding says there is “a lot of interest and value in physical engagement. It is a very high margin business.” David Bradley, owner of the Atlantic Media Group, with which Cook is affiliated, told the same story: “The live component is what the really high-end clients are interested in.”

The quiet rise of companies and individuals pursuing the professional/consumer hybrid should be a source of comfort—but also of some new concerns.

The upside is obvious. The private/public model is financing a lot of expensive-to-produce journalism. Its reach and ambitions are expanding as organizations trying to rework the advertising/subscription model are shrinking. It seeks better-trained journalists at a time when we are bemoaning the disappearance of good-paying journalism jobs.

One possible concern: as any freelancer can tell you, news organizations with an attractive consumer platform have realized they can free-ride on their contributors’ desire to build a consumer presence. Bradley explained: “The HuffPost is the leader, but all of us as followers are on to the same idea that contributors are looking to build their personal brands.” That imperative—which Tina Brown, founding editor of The Daily Beast, has described as the “gig” economy—lets companies like The Huffington Post buy freelance content for little or nothing; they are effectively renting space on their consumer platform to writers who hope to monetize that exposure. This deal only works for freelancers who have the profile and entrepreneurial energy to cash in on their personal brands in other ways.

But there is a larger principle at stake with the private/public hybrid, the question of who is journalism for? “All of us have an obligation: What are we doing to make the world a better place—better informed, for instance?” Winkler said. “The Web site goes a long way towards our commitment to the public interest.”

Still, the professional/consumer model only works if a moneyed elite is willing to pay for privileged access to information, whether that is a faster Reuters news flash or richer data on a Bloomberg terminal or a personal audience with a wise-cracking Charlie Cook. Wenig concedes that much of what his clients prize has little impact on the health of the demos: “The price of uranium matters a lot to a uranium trader, but it is not of much interest to a wider public.”

Wenig believes that “there has always been an information divide. There has always been a social and capital structure to information.” He’s not sure how the Internet-driven transformation of the media business will influence that divide, but “I can see an argument that says… maybe the Internet is widening it.”

Conventional wisdom says the Internet is making information more widely available, but that it also may be reducing the quality of that information and the number of people—journalists—paid to produce it. But if the professional/consumer model moves further into the news business, perhaps something close to the opposite will be true: more high-quality information will exist, and it will be produced by more well-trained and well-compensated journalists. But their work will be available—first and in the greatest detail—to the small group of people able to pay a lot of money for it.

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Chrystia Freeland , the former U.S. managing editor for the Financial Times, is global editor-at-large for Thomson Reuters.