| CHAPTER 1 | |
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The Business of News |
Why start a book like this with a chapter on the business of news? Because more and more, it’s clear that today’s aspiring journalists will enter a workplace far more unsettled than in the past. That’s not necessarily a bad thing, but it’s increasingly critical for prospective newspeople to understand the business context within which news happens.
The point is that news doesn’t just rain down from the sky, and its continued existence—to say nothing of continued employment—depends heavily on companies making money by virtue of delivering news and information.
What about public radio and public television? First of all, public television really isn’t much of a player in local news. Yes, national and international news exists Monday through Friday on PBS, but you can find daily local newscasts on only a handful (literally, a handful) of public stations. I’ve always thought that that should be a scandalous omission, but clearly most people don’t seem to care.
Probably the best broadcast news in this country, day in and day out, is on National Public Radio. But NPR is a business, too, and if it doesn’t take in the millions of dollars it consumes to cover news, then it, too, will be endangered.
The business of news, then, isn’t about profit as such, although it clearly figures in the equation, but it is very definitely about revenue and expenses.
As employment in the newspaper industry plunged, starting in 2007, with a quarter of its newsroom jobs lost over the next three years, plenty of people wrote off broadcast news as well. But the TV news job losses of 2008 and 2009, 5.3 percent combined, were only half a percent higher than the economy overall (there were no net job losses in broadcast news in 2007). Job hiring resumed in 2010, erasing all of the 2009 losses and making a sizable dent in the 2008 downturn as well, and at least short-term employment signs remain positive.
What that means is that TV news continues to make money, and stations continue to invest in news. The average TV station is running a record amount of news (5 hours and 18 minutes per weekday at last count), and each of the last three years has set a new record.
The TV news business is also not limited to TV—or even news. Over 80 percent of the stations that run local news are doing so not just on the air and their own website, but on other venues as well. A majority of TV stations run news on radio, and then there are cable channels, another TV station (both within and outside the market), mobile, another website (in addition to the station’s website), digital channels and more.
The business model itself has changed. TV news still generates most of its income from advertising, and for stations that run local news, about 45 percent of total station revenue comes from news. But more and more revenue now comes from a station’s website, and an increasing amount comes from cable and satellite carriage deals. Even a few years ago, no money changed hands when cable and satellite services carried local stations as part of their lineup. That’s increasingly not the case today. Of course, the networks want a share of that money as well (commonly about half), but cable payments are becoming an important part of today’s TV business model.
SNL Kagan, a financial research firm, estimates that broadcast retransmission fees from cable and satellite companies were just over $1.1 billion in 2010, but the company projects the total take to networks and stations will hit $3.6 billion by 2017. IHS Screen Digest estimates that online advertising on TV websites rose to $719 million in 2010. Still, contrast those numbers with Nielsen’s estimate of the total TV advertising market: $69 billion in 2010. That includes network TV, local TV and cable. For 2010, Nielsen says TV took in 57 percent of all U.S. advertising dollars.
Stations are also expecting to make money on mobile, although the business model there isn’t clear yet.
There may also be some changes in station programming that could significantly affect both revenue and employment. TV stations get their programming from three sources: (1) network, assuming they’re affiliated with a network, such as ABC, CBS, Fox, NBC, CW, and so on; (2) syndicated programming, like the daytime talk shows, some game shows and some off-net, older network shows; (3) local programming, almost all of which is news.
The network programming includes the prime time lineup in the evening as well as most sports and some daytime shows. That’s not likely to change anytime soon, but more and more stations are re-evaluating their syndicated programs. Most stations pay for syndicated shows through a mixture of barter and cash. That means they give up some of their commercial time to the companies supplying the syndicated programs in addition to paying the syndicator for the programming itself. As that programming has become more and more expensive, in both time and cash, stations are starting to look at creating more local shows to replace costly syndicated ones. That’s part of what’s behind the steady increase in the amount of local news that stations produce, but stations are also starting to look into other local information/entertainment programs.
In addition, one station in every market is wrestling with the end of Oprah. Nationwide, Oprah was the top lead-in for early evening news, and her departure in 2011 is a potential game-changer. Many stations have already announced that they’re going to start running news earlier in the afternoon, and I expect more and more stations to look at creating more non-hard news local programming as well.
Watch for some of these new local news/information/entertainment hybrids to start sometime between 2012 and 2015. Most likely, most of those programs will also be produced by the news department—as much because there’s no one else at most stations to do it.
RATINGS
There are some who argue that ratings is a dirty word, synonymous with the worst pandering to the lowest common denominator. But ratings are just numbers, and anyone in the business who says that they don’t pay attention to ratings—or care how many people watch or listen to the news—is a fool or a liar. The business is about informing, perhaps enlightening, and definitely engaging the audience. If no one is out there listening or watching, then newscasters are just talking to themselves.
There are two critical terms to define in order to understand ratings: rating and share. Both are percentages. In television, rating is the percentage of homes watching a TV program of all the homes that have a television set (that’s somewhere between 97 and 99 percent of all homes). In radio, it’s the percentage of people listening to a particular station of all the people who have radios. In essence, it’s a competitive measure of how a TV program or radio station is doing against all the choices in life: eating, sleeping, working, watching another station, and so on.
For example, in TV, a rating of 15.4 means that 15.4 percent of all the homes that could watch that program had that program on. If we’re looking at a local station, it’s 15.4 percent of the station’s local market. If we’re talking about a network program, then it’s 15.4 percent of the country. What’s going on with people in the rest of the 84.6 percent of the homes? Some are watching other channels; some are listening to radio instead; some are reading; some are sleeping; some aren’t home and so on.
The other term is share. It’s also a percentage, but it’s a competitive measure against competitive media. A TV program that has a 15.4 rating, for example, might well have about a 26.1 share. That would mean that, of the homes that have TV on, 26.1 percent are watching that particular program.
In radio, it’s the percentage of people listening to a particular station as opposed to the percentage listening to other stations.
So if you know exactly what people are watching or listening to, the share will always add up to 100 percent. Ratings, in contrast, will never add up to 100 percent simply because there will never be a time when everyone (or every home) is watching TV or listening to radio at the same time.
THE SCOPE OF MEDIA USE
Part of the difficulty of peering into the future of news is that there’s a lot we don’t really know. Let’s start with what we do know. Media use is the number one life activity for the average American adult. Even more than sleeping. Way more than work. After all, we don’t work seven days a week, but we do consume media every day. We spend more than two-thirds of the waking day (69 percent) using one or more media. Amazingly, over 40 percent of the time that we spend with media, we’re doing nothing else. Not working. Not eating. Not traveling somewhere. Just consuming media.
Television remains the 800-pound media gorilla. The use of TV towers over any other medium. And it’s growing. That’s not just what we found in our extensive Middletown Media Studies’ observational research; it’s what Nielsen continues to find in its studies of TV and online usage. Nielsen numbers released in 2011 put TV viewing at an all-time high. Higher even than 2010, which broke the record of 2009, which broke the record of … you get the idea. The most recent Nielsen numbers, for the fourth quarter of 2010, put total average TV viewing at 34 hours and 39 minutes per week … up 2 minutes from the previous record. That’s five and a half hours a day. Generally, the older the viewer, the more he or she watches. Teens were the lowest—at about 4 hours per day. In contrast, the highest credible estimate for online use is 2 hours per day; most estimates are closer to an hour or an hour and a half.
MEDIA USE IS MORE COMPLEX THAN IT USED TO BE
A few short decades ago, media was a lot simpler. There were morning and afternoon papers, four television stations, a bunch of radio stations and magazines, and that was about it. Today, we have fewer newspapers but more of everything else. And more choices beyond that, most notably the Internet. Same number of hours in the day, but a staggering fragmentation of options, most shouting, “watch me,” “listen to me,” “read me.”
And we do. And since we still only have 24 hours in a day, we seem to cope by piling on. The assumption had generally been that as new media came along, it displaced older media. Not today. Perhaps led by the computer, which taught us how to multitask, we are more and more using two or more media at the same time. Not just young people, but almost everyone. In our last study, over 30 percent of media use involved two or more media at the same time. Much of that involved two or more different uses of a computer (e.g., email and software), but much of it either involved the computer and another medium (most often TV) or two or more other media.
IT’S HARD TO MEASURE MEDIA USE
There are a lot of reasons why it’s so hard today to measure media use. The use of two or more media at the same time is part of the problem. You can observe that complexity (as we did), but it’s nearly impossible to ask someone about it. We looked at 17 media in our research. If we asked people about each pair, it would take 136 questions. And that wouldn’t get at three or more media at the same time, and, yes, people do that, too.
Part of the problem relates to the staggering number of media choices. It’s hard enough to keep all the choices straight, much less remember which ones you used and for how long. How accurately could you reconstruct your media life, even from yesterday, much less a broader question like whether you’re using a given medium more or less than you used to or more or less than another. Unfortunately, much of what we hear about media use comes from phone surveys asking those impossible questions. It’s interesting data, and it may help us see developing trends, but, as we proved in our observational studies, it’s strikingly inaccurate.
The biggest problem in these self-reported surveys is that we’re simply not very good at estimating how we use our time. Another part of the problem relates to media bias. The fact is, we’ve been conditioned to understand that some media use is generally “good,” and some media is generally “bad.” We know the answers, and it undoubtedly biases our responses.
In the first Middletown Media Studies, when we compared phone survey, diary and observation, we observed that people used 130 percent more media than they said they did, but the discrepancies weren’t consistent from one medium to the next. People weren’t far off on their estimation of how much time they spent with print media, but they underestimated their TV use by 160 percent.
In Middletown Media Studies II, we called people after we observed them and asked whether, on the day they were observed (which, in most cases, had been the day before), they read the newspaper, listened to the radio, used the computer, went online, watched TV … and, if so, how much? We had just observed them, but even so, they substantially overestimated their use of newspapers and the computer, but underestimated their TV use by almost 50 percent. It’s not that survey research doesn’t work, it’s that there are serious limitations to asking people about behavior, especially when some of that behavior is considered “good” and some is considered “bad.” That’s why a lot of phone surveys have people saying they watch less and less TV, even while Nielsen’s far better set-top boxes are recording the most TV viewing ever.
The situation is further complicated by a lack of standards for judging Internet use. Internet use was initially measured by “hits” until advertisers (who are the real reason audience is measured at all) understood that the numbers were largely meaningless and easy to manipulate. We moved to page views, which is still in use. Some argue that time spent online is a better measure, although, from an advertising standpoint, it tends to undervalue the brief but frequent time spent with search.
Cross-checks on Internet usage have found major discrepancies between the numbers reported by websites themselves and the numbers that outside, independent companies were able to measure.
Let’s try to look at the big picture: total time spent online. In the most recent annual figures, comScore Media Metrix, in figures for 2010 released in 2011, put average adult time online at 1.07 hours per day. JupiterResearch, in an undated 2011 report, put the number at 2 hours per day. The Nielsen Three Screen Report for 2010 estimates average adult time online at 40.8 minutes per day. The Bureau of Labor Statistics American Time Use Survey (2009) put time online at under a half hour for leisure per day. eMarketer meta-analysis in 2010 put Internet use at 2.5 hours per day. A meta-analysis isn’t original work, but looks at the various studies out there and combines the results. Frankly, since I couldn’t find any studies that showed a number as high as 2.5 hours per day, I’m not sure how they came up with that figure.
Why are there such differences in some of the estimates? There are a variety of reasons, but one of the biggest problems is that many of the surveys are conducted online. That’s a huge problem if you want accurate numbers. The latest Monitor-Pew studies found that 21 percent of Americans do not use the Internet. At all. Some of that’s economic; some a fear or distaste for technology; some people simply aren’t interested. The same survey—and others—found that a third of Americans do not have broadband at home. What that means is that 21 to 33 percent of Americans aren’t included in an online survey. That’s not a problem if you want to learn about typical online behavior, but it’s not all right if you want to learn about typical American behavior. For example, an online-only survey that found that the average user spent 2 hours per day online would actually mean that the average American spent between 80 and 95 minutes per day online when you take into account all the people who aren’t online at all. The lesson here is to read the fine print about research methodology before you simply buy into the numbers.
WHAT WE THINK WE KNOW ABOUT MEDIA USE
Media use is a lot like real estate—it’s all about location. TV is the dominant medium at home; radio is the dominant medium in the car; the computer is the dominant medium at work. Anywhere else, and it’s about mobile. That’s pretty much what you’d expect … if you thought of it in those terms. And you should. We have a tendency to look at media consumption based on overall minutes or hours of use, but media consumption is heavily based on where the consumer is located.
Of course, you can consume news anywhere and via any medium. The most critical variable in whether and how much news someone consumes is age. The older the people, the more likely they are to consume news and the more of it they consume. Education has a role as well, but it’s very much secondary. Gender and ethnicity play almost no role.
In a couple of national surveys, when I asked people where they got most of their news, local TV came out on top—by more than a two to one margin over the second choice. We found the same thing in the Middletown observational studies. But that’s overall. For 18- to 24-year-olds, the Internet beat out TV, and for 25- to 34-year-olds, the Internet and TV were just about even.
WHAT WE DON’T KNOW ABOUT MEDIA USE
We know that newspaper circulation is down, and it has plummeted as a percentage of the total U.S. population, but the picture in TV is less clear.
We know that the typical local television station has seen its audience drop over the last few years—especially at night. That’s certainly important to those stations, but it doesn’t answer the bigger, societal question. Is that audience slipping in the midst of a general decline in TV news viewing? Or is it a decline because the audience has more and more choices for TV news, and so a stagnant audience is spreading out? Or is the audience for TV news growing, but the choices for viewing are growing even faster? We don’t know for sure because it’s so hard to look at it that way.
Part of the problem may come because we read about a decline in TV news viewing in newspapers. That may not be the most unbiased source. Some newspaper reporters seem to want to examine changes in TV news through the lens of their own newspaper experience with cutbacks in news, consumption and employment.
The problems confronting newspapers today are not the same ones facing television news. While fewer and fewer newspapers are being published, and they’ve gotten smaller and smaller, TV has been going in the other direction. As this is written, we are near an all-time high in the number of local TV stations running local news. And those stations run more news than they have ever run before. And in the last few years, we’ve seen a new phenomenon: More and more stations are now running news on more and more other stations—most of which never ran local news before. As this is written, 224 local TV stations in this country receive their news from one of the near record number of stations originating local news.
None of that means that it won’t all turn around, but it hasn’t yet, and it doesn’t appear that things will change in the near future. At the same time, we are also seeing more stations taking over the news on what used to be a competitor in the same market. So far, we’ve seen about a dozen instances like this, mostly in small markets, but the number is certainly rising.
It’s also unclear exactly how the Internet figures into the news mix. We know that news and information websites are used primarily between 8:30 a.m. and 5 p.m. In other words, they’re used at work. Does that make them secondary news outlets? But if people are getting the news online at work, will that mean they cut back on news at home? If so, for all newscasts or just some?
Pew reports that 47 percent of Americans say they get at least some local news and information on a smartphone or tablet. So far, it’s more information than news, but what will that mean for traditional media? The verdict’s simply not in yet.
While news and information websites are capable of amazing depth and breadth, there’s a difference between capability and actual usage. Most people do not spend much time at a given news website. For example, the most recent figures available, comScore numbers from March 2011, in a survey for the Newspaper Association of America, found that all visitors to all newspaper websites in the United States averaged 34.2 minutes per month and 51.7 seconds per page. That’s 1 minute and 8 seconds per day, and if the average readership per page is 51.7 seconds, it means that the average American is only seeing a little more than one online newspaper page per month. A more recent study by the Pew Research Center found that about 85 percent of a newspaper’s website users typically visited the site between one and three times per month. And they didn’t stay long.
The latest figures from Nielsen Online reported that the average time spent at each news website—not newspaper but all news websites—ranged from 7 to 24 minutes per month. That’s 14 to 48 seconds per day. Nielsen notes that those numbers are actually down from the previous year.
In January 2011, The Nielsen Company found that Yahoo! News was the top current events and global news site with 46.3 million unique visitors, averaging just under 15 minutes per month. CNN Digital Network was second with 37 million visitors, averaging 22.6 minutes per month. The top single newspaper site was The New York Times, with 15.5 million visitors averaging 15.25 minutes per month.
SO WHERE ARE WE GOING?
First, let’s focus on the parameters for the debate. It’s really not whether there’s a future for news. Every reasonable measure of how people spend their time—as well as what they say they’re interested in—makes clear that people have a huge and, if anything, growing appetite for news and information.
The debate is—or should be—about what media will supply that news and what form that news consumption will take.
As this is written, the primary employer of new journalists, nationwide, is probably AOL for its hyperlocal news efforts known as Patch.com. But it’s still unclear if that business model will work. Clearly, AOL is making a huge investment in Patch, but that’s a bet on the future of news, not an investment that’s currently turning a profit.
So the bottom line on the future is that we really don’t know who the winners and losers in the news field will be. No one knows. Not for sure. Some of that is because we really can’t see into the future, and some of that is because we’re much too early in another media evolution to know with certainty how it will come out. Besides, news consumption is permanently evolving, so we’re talking about predicting the future that now appears possible—not the future we cannot yet imagine.
As we try to figure out where we’re heading, let’s start with a few more things we know based on what people do and what people say they want.
• There’s a surprisingly consistent view of what news is, and that’s true across all different demographics. Most adults draw clear distinctions between the local TV newscast and the cable talk shows (like Bill O’Reilly and Rachel Maddow) and the entertainment-oriented TV programs (like Entertainment Tonight and Inside Edition). They watch what they want, but they know the difference. Interestingly, young people, 18 to 24 years old, don’t view Jon Stewart and The Daily Show as news any more than people aged 55 to 64 do. A lot more young people know what it is and watch it, but they also know it’s not a news show.
• People want their news right up to the minute. Over 90 percent said it was somewhat or very important. That’s probably at least part of why people respond favorably to live (“breaking”) news reports.
• Almost three-quarters of American adults say it’s very or somewhat important to be able to watch TV news when they want. Undoubtedly, this is at least partly the influence of the Internet and the whole notion of people able to get what they want when they want it.
• People want anchors to deliver TV news. Interestingly, two-thirds of younger adults, 18 to 34, wanted anchors to deliver the news, considerably higher than older adults (35+). That’s relevant because it’s a lot harder to have anchors guide people through the news if it’s all on demand or an assemble-your-own online approach.
• Just over 40 percent of adults said they’d like to assemble their own newscasts, but 46 percent said they wouldn’t. The answer was divided by education; the more educated, the more interested in assembling their own.
• Just over 60 percent of adults said they’d like to interact with TV news. Here the divide was age, with over 70 percent of the 18- to 34-year-olds saying yes. A holdover, perhaps, from video games.
• When asked if they could get exactly the same news, whenever they wanted, in a traditional newspaper, on the television, on the radio, online, or on a handheld electronic device, over 63 percent said TV. Newspaper came in second at almost 18 percent. Online followed at just over 11 percent.
So what does all this mean? You can decide that for yourself, but here are some of my expectations:
• The Internet has clearly led to a greater demand for user control and convenience, but it’s not clear who’s going to supply that or how. I expect TV to remain the medium of choice for both news and entertainment. People love TV, and they want to watch it on the biggest screen available. Take a look at the sales figures for new television sets, and you’ll see what I mean.
• Look for an increasing number of niche markets developing in news and information—like small screen. A rapidly growing number of people get at least some of their daily news from their mobile device (mostly smart-phones). But most of the suppliers are the same media that we’ve been getting news from. In other words, so far, we have seen no new, major players in the news business for mobile; it’s just an extension of existing, established brands, including newspapers, networks, stations and aggregators like Yahoo and Google.
• There’s a lot of loyalty to established, traditional media. That will likely translate into the present established brands dominating the news and information fields in the future, regardless of platform. This will be particularly important as TV and the computer and, perhaps, mobile merge. In the future, we may distinguish between them—if at all—by how many diagonal inches or whether they’re portable.
• Newspaper’s triple problems of aging consumers, rising production costs and shrinking advertising base (especially classified) will lead to radical changes in newspapers in the next 10 years. Some will cut back on the days of publication (Saturday will probably be the first to go); some papers may become boutique subsets of their websites; some won’t make it at all.
• As this is written, more and more newspapers are moving to paywalls for their online information. Some are doing this primarily to try to slow or reverse erosion of paid subscriptions, and some are simply designed to bring in more revenue. Apple (iPad) has a revenue-sharing model for publishers (which publishers are not happy about), but Google is being a lot more generous with publishers for its Android system. Whether these changes will work for newspapers may depend on how we define success. Paywalls should slow subscription erosion, but won’t eliminate it. Many people won’t pay, but, for at least some papers, enough will pay to make it a viable (if scaled back) business model. But that scaled-back survival will also make newspapers more and more niche players, reaching fewer and fewer better-off consumers. No television station that I’m aware of is even considering a paywall. Most are hoping more newspapers establish them because TV stations expect those newspaper paywalls to increase readership at free TV websites.
• The move to digital is slowly leading to dozens, maybe eventually hundreds, of all-news local TV channels as well as more all-weather and mixed specialty channels. This is taking place because the TV switch from analog to digital allows stations to broadcast multiple channels within the allotted digital spectrum. In smaller markets, some of those additional digital channels are showing up as new stations, affiliated with CW or MyNet or others. In larger markets, we’re seeing more and more specialty programming on those extra digital channels.
• What will really lead to change in media won’t be declines in readership or fragmented viewership as much as advertising opportunities and media business models. Right now, traditional media are as threatened by their own business ineptitude as by media competition. They’re being saved—especially TV—by the inability of media companies to make meaningful money from the web and by the web’s disorganization, lack of user measurement standards and viable advertising alternatives to traditional media. The danger for traditional media is that those are not permanent problems.
• Just because it’s new doesn’t mean people will care. People will adopt new technology to the extent that it allows them to do what they now do better, easier or more cheaply. Plenty of new efforts and ideas won’t measure up.
• Progress and change always happen faster when looking back on it than when you’re living it. Wholesale media changes have not happened yet and will not happen overnight. Partly that’s because change doesn’t happen that way. Partly it’s because we’re not dealing with a vast dissatisfied group of consumers desperately searching for wholesale changes. When asked what their choices are for news delivery, they give answers that largely mirror their present use. In other words, they’re generally fairly happy with what they have, and that will affect how quickly change happens—or doesn’t.
In the end, this we know for certain: For the foreseeable future, people will want to see and hear and read news and information, and those who want to provide it must learn how to tell stories in pictures and words. The rest is detail.
SUMMARY
News is a business, and its survival depends on a business model that enables it to take in more money than it costs to produce news. TV still dominates the media jungle—both in time spent overall and in where people get most of their news. And the amount of TV news being produced keeps growing, year after year. Measuring media use is difficult, and that difficulty, coupled with problems in methodology and media bias, sometimes leads us to misleading or inaccurate media use numbers. Still, it’s clear that we’re in a period of significant change.
Young adults get more news from the Internet than TV; more and more people generally are getting news online; and mobile devices are becoming increasingly important delivery systems for both news and information. Although there are a variety of new efforts in news delivery, so far the traditional players are the leading suppliers of news, and it’s clear that news consumption is not shrinking, even though it is fragmenting.
KEY WORDS & PHRASES
profit
revenue
expenses
advertising
cable and satellite carriage
retransmission fees
market area
network, syndicated and local
programming
rating
share
media use and location
hyperlocal
smartphones
paywalls
news aggregators
EXERCISES
A. Make a list of the TV stations, radio stations and newspapers in your market area. Which stations run news, and how much do they run? Do they produce their own news or get it from somewhere else? If somewhere else, where? Make a list of all the online media in your market area that produce local news. Characterize the kind, detail and amount of local news that they run.
B. How have the news media in your market area changed over the last five or 10 years? Who’s running more, and who’s running less? Check on length of newspapers and number of pages; TV newscasts added or dropped; TV stations that have started news departments or terminated them; radio stations that used to run news and now don’t, and ones that now run news but didn’t before. Compare broadcast-based and print-based news websites. Are there new online news and information websites in your area? If so, who’s doing them and how do they compare with websites from traditional media companies? Which local news websites have paywalls and how do those paywalls work?