A few reasons NewsLabs is a worthwhile idea

There’s a news start-up called NewsLabs (born at YCombinator) that was among a bunch of start-ups introduced at Demo (or perhaps it was another start-up launch conference). Media Memo are talking about NewsLabs and it’s worth taking a closer look.

Reasons that NewsLabs is a worthwhile idea

The Collective Idea

It’s akin to a blog network where each blog is an individual journalist’s work and brand. The real power is the collective aspect -

  1. Successful News Journalist A can send his readers to successful journalist B or even to upcoming Journalist C. 
  2. There are economies of scale – hosting, coding, marketing, design, and most other costs.
  3. Specialization and lessons can be shared.  

There is an incredible amount of power in bringing together a few hundred very good journalists and linking them to each other.

Journalists can focus on their core competency and build their brands

The collective idea and the support of NewsLabs means that journalists can focus on creating great content -

 The idea is that the writer writes and NewsLabs does everything else: Ad sales, “community management,” promoting the work on Google, Facebook, Twitter et al, and so forth.

Being able to focus on their core competency and the opportunity to build out their own brand gives journalists a lot of freedom and motivation to create quality content.

On their end NewsLabs have to figure out some way to become more than just a producer of journalistic brands that newspapers snap up or that leave for their own sites.

The Community Idea

If NewsLabs takes this in the direction of KK’s 1000 True Fans and let’s the journalist’s true fans financially support the Journalist this could be all the revenue they need.

The other aspects are not very efficient - it sounds great to build social networks and forums and let people socialize but people don’t spend money on either.

They said in an interview that they have 40 journalists registered and another 100 interested.

Taking Journalists with proven experience and Focus on Quality

It’s good to see that the first three journalists they have are all very experienced. They also seem to be focused on quality journalism and quality content and not just mirroring the content factories.

Founders have technical skills

Both the CEO and CTO have solid technical skills. It’s essential because otherwise news companies just get fleeced at all levels by technically adept companies.

Quick summary

There are three very good ideas here – Journalists as Brands, Brands organized into a Collective, Focus on Quality.

Some of the obvious candidates to be added are – Selling Content and not something else, 1000 true fans, Customers of Good Intent, Choosing Good Channels, Setting themselves apart.

It’s a model that could not only work but also scale up remarkably well.

Unfortunately, there are currently a lot of flaws in NewsLabs’ model. Mostly to do with the fact that NewsLabs are still too tied up with models that worked in the past and models that never worked.

Reasons that NewsLabs might fail

They want to make money off of things other than content

Their focus is on making money off of things like Job Boards, Advertising, and making money off of the Brand.

This is a really flawed idea we’ll discuss later – Why give away what people come to you for and what they are willing to pay for?

At some level it’s depressing that even News Start-ups don’t think their content is worth enough to ask customers to pay for it.

To make things worse want to sell their content to news sites – which is madness. That content is their identity and differentiator.

Infinite competition and lack of differentiation

Media Memo point this out -

My concern is that the help NewsLabs says it can offer doesn’t solve the real problem:

            The economics of Web publishing are brutal, and in most cases they only work on a Google (GOOG) or Yahoo (YHOO)-size scale.

Media Memo are right – The Web is brutal and there is a lot of competition.

It’s basically two points – move away from the web, don’t position yourself as news content. Let’s start with the latter.

Having News in the name and being ‘news’ oriented

The biggest mistake any content company could make is position their content as zero-value news.

Breaking News is better than News. Editorials and Op-eds are better than news. Analysis and Reports are better than News.

Anything is better than news which has been devalued to zero.

Lack of adequate funding and they’re taking too little

It’s a start-up and it’s going up against giants. They’re taking only 20% of revenues when the revenue is amorphous things like advertising and branding related things and job boards.

How are they going to survive?

They should go find a billionaire who’s willing to give them $10 or $20 million to test out their idea over 5 years. Not VCs and other profit-driven entities who just want to make money and don’t care about what, if any, impact the survival of journalism has on democracy (or whatever reasons journalists have for being overworked and underpaid).

Plus journalists are desperate – Take another 30% and put that into building great infrastructure which helps both the company and the journalists.  

It’s focused on hiring journalists

Along with the good (experience, skills, committment) they get the bad – All Journalists are trapped in the failing business model of newspapers.

All those beliefs are going to be impediments as they try to work with new models. Even journalists that have worked for 3 to 5 years will have lots of trouble letting go of what they know. The ones who’ve worked for 20 years are going to really, really struggle.

The perception (and perhaps the reality) that laid-off Journalists are being targeted

If it’s about branding and quality they need to hire the very best.

The whole giving away content and making money off of something else mistake

Let’s consider a few of the models that have worked for newspapers and news sites -

  1. Selling content.  
  2. Giving away content and selling ads in print. 
  3. Giving away content and selling ads online. 
  4. Selling content and ads and classifieds.
  5. Giving away content and selling Classifieds.
  6. Selling breaking news and breaking financial news.
  7. Selling exclusive analysis and in-depth reports. 

There were always one of two key things – selling content or having a captive audience that had no option other than to consume what was attached to the content (classifieds, advertising). With the Internet the second is gone. That only leaves content.

There are three big mistakes news sites make when they try to make money online -

  1. Assume they can trust another company or even users to pay for what content is worth.  
  2. Assume that they can no longer sell content. 
  3. Assume that users MUST or WILL do something in return for the free content they get.

Users are coming to the site for content. The entire Internet is built on content. Quality content is what drives everything - even low quality content is propped up by quality content.

Newspapers have to start looking at sites that actually make money off of content and the ways that money is made from content. Very, very few of those models involve giving away content for free.

If you can’t sell your main product you need to find another line of work

Newspapers and news sites and journalists need to face the grim truth – If their news content isn’t good enough to get users to pay for it then they need to quit.

It’s very simple -

  1. Create great quality content and sell it.  
  2. If you can’t get people to pay for your content – Quit and do something else. 

Quality content costs money to make and sooner or later people are going to realize that and start paying for it. By choosing a ‘content has no value, let’s trick users into something else’ model news organizations are killing themselves and the value of content.

It’s best for everyone if all the ‘give away content’ companies die out so we can move to a ‘pay for quality content’ model sooner.

eReaders and Formless Content

Craig Mod has written a magnificent post – Books in the Age of the iPad. Please do read it.

Perhaps the highlight are these parts -

Let’s divide content into two broad groups.

  • Content without well-defined form (Formless Content (Fig. 1))
  • Content with well-defined form (Definite Content (Fig. 2))

Formless Content can be reflowed into different formats and not lose any intrinsic meaning. It’s content divorced from layout. Most novels and works of non-fiction are Formless.

 I only see one obvious ruleset:

  • Formless Content goes digital.
  • Definite Content gets divided between the iPad and printing.

This is a marvellous way to divide Content.

By explicitly stating that Formless Content is unaware of its container, and that most novels and works of non-fiction are Formless, Craig Mod has put forward the case for eReaders.

The only thing linking us to formless content contained in physical books is our attachment to the experience of reading the physical book.

eReaders are perfect for Formless Content

The Kindle and the current crop of eReaders are perfect for formless content -

  1. The screen almost matches the comfort of print on paper.
  2. The ability to change fonts and line spacing and column width makes them almost better than books. 
  3. You get the speech to text function (for books where Publishers haven’t disabled it and for your own documents).
  4. The battery life lasts for weeks.
  5. You can read the screen in sunlight.
  6. They are light – lighter than hardcovers.
  7. The screen size is close to ideal - a good mix of readability and portability.
  8. You can read and hold them with one hand.
  9. You can search through books and search the Internet (well, on the Kindle you can).
  10. You can add notes and highlights (although it’s still basic).

There are still improvements to be made – better note taking, page numbers, and so forth. However, the gap between eReaders and physical books is small enough for eReaders to be very good substitutes.

Then you throw in the advantages – 24/7 store, wireless downloads, store loads of books – and eReaders edge ahead.

75% or more of book sales are going to be eBooks in 5 to 10 years

The majority, perhaps the vast majority, of books are formless content. The nostalgia we have for physical books is easily satisfied by having a few physical books. eReaders are already beginning to edge physical books and keep improving.

With time the advantage eReaders and eBooks will have over physical books – in terms of price and convenience – will cause physical book sales to become secondary to eBook sales.

There will only be a few reasons left to choose physical books -

  1. When you need definite content – content that has a form linked to the physical book. 
  2. When you want to relive your fondness for physical books.
  3. When you want decorations for your room or house.
  4. When you want to signal what you are reading to others for status or courting.

Add those together (and whatever reasons you come up with) and you still can’t justify buying a majority of physical books.

Look at what’s happening – Publishers already see that eBooks are going to eat into physical book sales and are trying to kill eBooks.

iPad eBooks and Hardcovers will become luxury items

When you see Publishers get excited about everything they can do with the iPad or talk about the beauty of the physical book they’re basically expressing the same thing -

  1. An ability to create definite content.
  2. The ability to make things pretty and special and high-end.
  3. The opportunity to make more money.

If you take most books they don’t need anything beyond the words. They don’t need high-end aged paper and they definitely don’t need video snippets and voice overs.

If you take most readers they don’t care about anything other than the words. They don’t care that for $10 extra they can get leather covers or that for $5 extra they can play a game based on the book’s characters.

Publishers like to paint an image of everyone reading high-end hardcovers and $20 iPad eBooks because they want to make more money. Readers aren’t buying it – they just want to read and want good value for money.

A book is built of words – everything else is external.

The battle between simplicity and profit

Plain text books on eReaders and paperbacks are enough for most people – The words are in there and there’s a simplicity and the focus is on what the author has written.

Profit dictates that Publishers drum up random reasons for charging more – that they pretend that including a leather cover or an iPad game makes the book better. It doesn’t – it creates an illusion that we are getting more value but we aren’t. There are obviously some books that need definite content and need a physical hardcover – However, not every book does. In fact, most books don’t.

The simplicity of books that are pure text and priced well is always competing with the profit motive to make books complicated and dress them up and price them ridiculously high.

We all know who’s winning out so far. We all suspect that simplicity and low prices are going to win out in the end. We just don’t know how much bloodshed there’s going to be in the interim.

Content as Product Vs Content as a Hook

Reviewing the Gary V. Vook led to a key realization -

  • For some people like Gary V and for some companies - content is a hook. It’s just a way to get people in and sell them other stuff.
  • For other people like authors and bloggers content is a product in itself.

What happens when Content is Your Product?

A few things actually -

  1. You have to keep its value intact. 
  2. You have to compete with people who are using content as a hook i.e. giving it away for free. 
  3. You have to safeguard it from people who’ll try to steal it i.e. for their own site. 
  4. You have to be aware of people who’ll try to fool you into giving away the farm.

The companies that have content as their main product include newspapers, book-sellers, authors, musicians, and so forth.

What happens when Content is what you use to lure customers?

You take a very different approach -

  1. First, you try to get people to provide content for free. This is the grand ‘user generated content’ concept.  
  2. Next, you try to steal it – content should be free and all that good stuff.
  3. If those don’t work, you try to devalue it to the point that it’s very, very cheap.
  4. If all those fail you hire writers to mass produce sub-quality content.

A company that just uses content as a lure will always focus their expertise on the product they are selling.

That means that neither their effort nor their expertise lies in content and it suits them to devalue it.

The users disrupt the balance between Content Creators and Product Sellers

Normally the pressure applied by companies trying to get free content will be balanced by the pushback from content creators. Quality content obviously costs a lot and content creators can’t just give it away.

However, the balance gets completely disrupted when customers come into play.

Here’s why -

Customers, if given the option to consume content for free, and a rationalization that justifies free content, would take it.  

In plain English – If  you told a customer ebooks are cheap to produce they would be OK paying just $1 (or nothing) for them.

Think about what benefits Content as a Hook companies

These are companies, not Mother Teresa. Here’s what they’ll try –  

  • To devalue content so that they have lots of cheap content to lure customers - customers to whom they sell other things.
  • To push the notion that the real value is in what they provide and that content is meaningless.
  • To push the notion that content is worthless.

They will also ally with customers. That’s the angle that’s hard to beat.

Customers buy ‘Content is Worthless’ because it lets them Be the Good Guys

No one wants to say -

I don’t pay for music or books – I’m cheap, don’t care about content creators, etc.

When a company that wants to devalue content pushes the notion that content has very little value OR that information should be free, it suits customers to believe it.

They can then be the good guys -

Information should be free. Books cost next to nothing anyways. Musicians make money from concerts anyways. I’m the good guy and content companies are evil.

This is the rather amusing aspect of human nature – Even when we do something wrong, we want to be able to lie to ourselves and interpret it as good.

This need for congruence i.e. most people cannot do evil and admit it – is the only hope for content creators.

How Content Creators can let customers do Good.

People always find a way to rationalize what they want and their self-interest – UNLESS there are hard facts and norms that force them to accept the truth and be Good.

Here are a few things - most of these need to be done.

  1. Create an eco-system where paying for content is the norm. iTunes and Kindle Store are a big hope.  
  2. Put a human face on content companies i.e. show struggling writers and have them talk, and not lawyers for big six publishers. 
  3. Ensure that people can’t lie to themselves i.e. state the facts clearly and increase awareness of actual costs.
  4. Put some hard bottom-line on book prices and do not sell below it (and do not let ANYONE sell below it).
  5. Go with the UK thing i.e. piraters lose their Internet Connection. Frame it as good people + good companies Vs evil people.

Instead of a Story of

Evil, greedy companies trying to fleece customers.

Paint a more accurate story -

Companies paying their employees and their artists. Evil piraters increasing costs for everyone.

Customers getting quality content at reasonable prices.

This post is a great example of laying out costs. Every single author and every single Publisher needs to be doing this.

Most importantly -

  1. Do what Apple did and focus on people who want quality and will pay well for it.
  2. Differentiate content that costs a lot to make.
  3. Go after the kingpins of piracy and ‘free’.

What’s Content Creators’ Trump Card?

They’re still the only ones set-up to create high quality content.

You might be able to replace one of Stephen King and J. K. Rowling and John Grisham from a random system that doesn’t rewards authors.

However, you can’t replace all of them.

You might be able to get a few bloggers that are very honest and report at a very high level.

However, you can’t replicate the amount of quality content newspapers create.

Does that mean there is Hope?

Yes.

Consider this article snippet from the Economist -

First, two of the biggest impacts in history happened within 300,000 years of each other—a geological eyeblink.

Second, they coincided with one of the largest periods of vulcanicity in the past billion years.

Third, one of them just happened to strike where these volcanoes were active.

Or, to put it another way, what really killed the dinosaurs was a string of the most atrocious bad luck.

Publishing and Authors might be on the brink of extinction.

However, there is still one more stroke of atrocious luck needed.

There are only two things that could provide the killer blow -

  1. Content Creators start devaluing their work. OR
  2. Another source of quality content emerges.

2. is not going to happen – What profitable company in their right mind would go into content creation?

Which leaves just one thing to prevent i.e. erosion of the value of quality content.

If something costs us $8 to make and we feel an additional $2 is reasonable reward, then we should sell only for $10. 

If we go down to $3 – then, no matter what the promises, we’ll never be able to go back to $10.

Your work is not meaningless or cheap or free.

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