Q&A: Bill Grueskin and Lucas Graves on the Changing Business of News

“Philanthropic or government support can’t fund journalism in the way that we’re used to.”

This week, CJR released a new report by the Columbia University Graduate School of Journalism and the Tow Center for Digital Journalism, entitled “The Story So Far: What we know about the business of journalism.” On the occasion of the publication of the report, assistant editor Lauren Kirchner spoke with two of the authors of the report, Bill Grueskin and Lucas Graves, in a CJR podcast, which you can listen to here. They spoke about the motivations behind the report, some of the more interesting findings of their research, and their hopes for how journalists and news organizations can use its findings to try to shore up the industry. Below is a transcript of that conversation.

What was the genesis of this report? What made you want to start this research project, and what questions did you hope to answer with it?

Bill Grueskin: Well, it actually came about a little over a year ago, when Nick Lemann, the dean of the journalism school, was very interested in doing a follow-up to a report that Columbia did back in late ’09—that one was done by Len Downie, a former editor of The Washington Post, and Michael Schudson, a professor here at the journalism school. It was entitled “The Reconstruction of American Journalism” and it was a deep look at a number of the problems that the journalism industry was facing, and was followed at the end with a number of recommendations, many of which were based in policies that could be enacted to help journalism get over the straits that it finds itself in. Most controversially, they recommended a federal fund for news that would be funded by FCC fees. They were also recommending the relaxation of anti-trust regulations, getting universities more involved in doing journalism, and that kind of thing.

Nick Lemann and I were talking, and he and I were very interested in kind of going to the next step, which is, What is the commercial market for journalism—especially digital journalism—in this day and age? As you know, there’s been a lot of disruption in this business. So he asked me to get a team together of people who could look into this question and come back with some analysis of what’s going on, and also some recommendations of where the industry might go from here. So at that point I recruited Ava Seave, who is an adjunct at both the Journalism and Business schools, has an MBA from Harvard, and also Lucas Graves, who’s with us today, a Ph.D. student here at Columbia who did a report a few months ago on the faulty metrics and data that online news sites deal with.

Can you describe your process a little bit—how you chose the news organizations that you did to feature in the report and what the research process was like overall?

Lucas Graves: Well, most of the research consisted of interviews that we did. We were just trying to figure out how many we did in all—I’d say that it’s probably north of a hundred.

BG: Yeah, I’m sure that we talked to at least thirty-five organizations—you know, big companies, small ones, traditional ones, new ones….

LG: So that included a lot of telephone interviews, but also a lot of on-site interviews. For most of the fall and part of the spring, Bill was flying around the country—to Detroit, to California, to Florida—visiting newspapers at their headquarters and getting a sort of inside view of their digital strategies.

BG: One of the things we were looking for was: What are the companies—newspapers, but also broadcast outlets, new digital-only outlets—what are the companies that are doing something that we thought was really interesting, and that would be revealing to people who have read and heard a lot about this situation? So I went to the Detroit newspapers, for example, because they drastically cut back their home delivery to four days a week, and I was interested on the level of, What does that mean when you cut back your cost structure in that way, what does that mean for your digital growth? We were interested in an outfit in Denver called Examiner.com, which is a site that’s only been around for three years, but that has already built an audience of well over twenty million unique users a month: How did they achieve that rapid growth, and what is the economic model?

And I noticed that you focused on just for-profit organizations, correct?

BG: Yeah. That was actually pretty important. There are one or two nonprofits that show up at various times, but we really wanted to define the question in such a way that would really help to answer the issue that I think people are really curious about, which is, Can the market support digitally-based journalism? There’s no doubt that ProPublica or the Voice of San Diego or MinnPost, organizations that get some or all of their funding from the philanthropic means, or even organizations like NPR that get some government funding, they do outstanding journalism, and they’re really leading the way in many ways on the digital front. But we were really interested in both the traditional sources of revenue—advertising and circulation—as well as new sources of revenue: What are media companies finding, and what does that say about what’s going on in the news business overall?

Lucas, I’m curious, were there any surprises, any conclusions that you came to at the end of this process that you didn’t expect at the beginning?

LG: I think we were a little bit surprised—I was certainly surprised—by what we found looking at some of the smallest organizations that we spoke to. In some ways, very counter-intuitively, their prospects are among the brightest, because they don’t have, they’re not freighted with a lot of the built-in costs of the legacy infrastructure—the large newsrooms, the physical printing and distribution apparatus—that a lot of the largest news organizations in the country have to carry into the digital age. And so a lot of these small, very lean organizations have been able to take very unexpected approaches to making journalism viable commercially.

One thing that—I’m not sure if this is a little too technical—but one thing that really surprised us is that they basically ignore completely the ad sales model that most online news sites use, which is, instead of using individual impressions and selling ads against those impressions, they operate much more like traditional newspapers or weeklies in small towns, where they just sell by the month. So they’re not counting up page hits, they’re not counting up click-throughs. They completely ignore all that, and just sell on this much older model.

In your conclusion section, you wrote that media companies should rethink their relationships with advertisers. Are those the kinds of things that you’re talking about?

BG: Right. Well what we also said, that we firmly believe in here at the journalism school is that this is not a way of saying that advertisers ought to be able to dictate coverage by journalism organizations. We believe that that’s a critical element to the credibility of reporters and editors everywhere. But we found that advertisers are much more aware of the many, many options available to them to reach consumers. If you start from the standpoint that advertising has historically generated the huge amount of revenue for most news organizations, what news organizations are facing, although a lot of them have not really dealt with the consequences of this, is that advertisers can reach out to consumers in ways that don’t require a media company.

One of the most interesting quotes that we got was from the vice president of The McClatchy Company, which is the third largest newspaper company in the country—his name is Chris Hendricks, and he said, basically, the idea of selling advertising adjacent to content, and expecting that’s going to make your media company work, is pretty much over. Or if it’s not over, it’s at least waning. Yet most media companies still operate that way—We’re going to produce a bunch of stories, we’re going to go to a bunch of advertisers, the advertisers will stick their ads next to the stories, and we’ll have twenty-five percent profit margins. Those days are really over; or if they’re not over, they’re certainly ebbing. And so, if you think that advertisers have a lot of different ways, whether it’s social media or direct outreach to their consumers, how can media companies become a part of that, rather than relying purely on the model that was so lucrative for so long?

Another chapter of your report focuses on aggregation, which can also sometimes be a touchy topic in this industry we’re in. What conclusions did you come to about aggregation?

LG: Watch out for Bill Keller.

BG: [Laughs]

LG: In all seriousness, it’s not surprising that traditional media companies that put so much effort and so many resources into producing really valuable news coverage are chagrined when they see that appearing and generating ad revenue at someone else’s media outfit, whether that’s The Huffington Post or even just a small blog. But at the same time, one of the things that we wanted to point out is that aggregation has always been around in some form or another. It’s something that every news provider does to some extent, even The New York Times. News companies exist in a pretty complex ecosystem, they’re always picking up cues from one another, and it’s certainly part of the landscape now, and they have to contend with it to some extent. Even when they want to build their own audiences, intelligent and savvy news providers are going to have to use aggregation intelligently to bring readers and viewers to their own sites—even as, of course, they police the most egregious examples of aggregation, where they see themselves losing revenue.

BG: There are certainly examples out there of websites that are just outright stealing content, and we feel that the full brunt of the law ought to be brought forth on those people. But one of the examples we used in the report was a story that New York magazine broke on their website—it was a wonderful little piece by Gabe Sherman, who’s a great media reporter. He looked at how Roger Ailes had told Sarah Palin not to do her famous “blood libel” video after the shooting of Congresswoman Giffords. And it was just a great scoop, it was only about five hundred words. He spent a couple days doing the reporting on that, another day on the editing and vetting, they published it one night, and it got a lot of buzz. The next day, The Huffington Post picked up a very short version of that, and if you look at the number of comments, New York magazine got about a hundred and thirty comments, and Huffington Post got over two thousand.

So you could say, “Wow, that’s really unfair.” But actually, when you look more deeply into it, New York magazine was fine with Huffington Post picking it up, because they got a ton more traffic that they never would’ve gotten otherwise. It was also linked to by Andrew Sullivan, by HotAir.com. So the simple fact is, media companies are not going to be able to put this toothpaste back into the old tube here. The way copyright laws are written, other news companies can and will aggregate. So the idea is to kind of figure out how to make the most out of it.

So looking broadly now, what do you hope will come out of this report? Who would you like to read it? What changes would you like them to take away from it?

BG: Well, we wrote it, in a way, for really several different audiences. One is journalists. I think a lot of journalists are kind of scratching their heads and looking at things that just don’t seem to make much sense. Why does The New York Times website, which gets close to thirty million unique users, generate so much less revenue than the print newspaper, which has nine hundred thousand weekday subscribers? It just doesn’t make sense. And so we wanted to kind of explain some things in ways that we hope that journalists who may not read Romenesko every two minutes of their life could understand. We also wanted to kind of bring in some basic business principles of how fundamentally the digital platform has disrupted the economics that supported journalism for so long. That’s why our first chapter cites about fifteen or sixteen principles that we thought people ought to understand.

And what we hope is that people will read it, both on the journalism side and on the business side, and get a better sense of where the other side is coming from, but also adopt a more innovative and aggressive attitude towards finding solutions in the commercial market. Because we don’t think that the philanthropic or government support is ever going to be able to support journalism in the way that we are used to—there’s going to have to be a commercial market for it. And anything we can do to help contribute to that understanding, we think is helpful.

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Lauren Kirchner is a freelance writer covering digital security for CJR. Find her on Twitter at @lkirchner