news business models

I’ve written a bit about newspapers here, and here, mainly discussing how they might change their business models effectively. As is often the case, it looks like it is new entrants that are coming up with the genuinely innovative business models. Two recent pieces have addressed this. The first is an article by Michael Wolff in the latest issue of Vanity Fair which profiles the Politico website. Wolff outlines how has succeeded by maintaining an almost fanatical focus on what they are doing – providing mostly unfiltered stories about what’s going on in Washington D.C.

This ends up being a specific instance of the general model that Umair Haque discusses – which he calls nichepapers:

Nichepapers are the future of news because their economics are superior. All the Nichepapers above are “real” enterprises, with staff, offices, and fixed and variable costs. Nichepapers offer more bang for the buck: greater benefits for far less cost. Readers get more, better, and faster content — while publishers realize lower capital intensity, lower distribution, marketing, and production costs, and less risk. What is different about them is that they are finding new paths to growth, and rediscovering the lost art of profitability by awesomeness.

One of the drivers of this awesomeness, according to Haque is that the nichepapers are intent on creating value, while the existing newspapers are more built around taking advantage of their monopoly on local news (and on access to local readers). I guess it’s another example of just how hard it is for well-established firms to generate new business models in the face of external change. If you’re in a well-established firm, it might pay to be thinking about this issue now, rather than waiting. And the key question is: as the environment around you changes, what are you doing to create genuine value? Answering this question incorrectly is often the cause of failures to adapt.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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5 thoughts on “news business models

  1. I really enjoy your entries on news business models, Tim. It’s a subject of great fascination to everyone who is interested in the eventual long-term effects of the internet.

  2. …I tried to post this earlier but to no avail…sorry if it ends up as a double post…

    Nice post Tim. I really dig the business model posts.

    Reading this stuff about Nichepapers got me thinking about this from an industrial organisation perspective (think Richardson: It’s been a while since I’ve read this literature so I’ll apologize in advance if some of the thoughts are sloppy.

    It seems to me that the big thing that the internet has done has been to reshape coordination cost and entry barriers. Like many firms, newspapers’ traditional raison d’etre was to coordinate the integration of a product. They presided over the assembly of different types of content into the product and then, many of them, coordinated the production and distribution of the physical product. One of the drawbacks of this approach is that you inevitably end up with a rather generic product, but the economies of scale reaped in the process meant that you could provide enough depth and breadth to outweigh any loss of utility a consumer might derive from customisation. However the progress of the internet and other digital technology to date (say digital camera; cheap blog hosting technology; cheap bandwidth) has fundamentally changed the balance here on a number of levels.

    1) Economies of scale are being outweighed by the reduction of entry barriers and increases in technology that have reduced the marginal cost of production. For instance you get people who have already sunk the required asset specific investments needed to become an expert in an area who can now compete with journalists in areas that interest people. Given this investment advantage, these new entrants usually have a competitive advantage in terms of the marginal cost of production and the quality of the product (e.g. for a somewhat humorous example see

    2) Thanks to changes in technology the costs of coordinating production and consumption in this sector have drastically fallen. Consumers have now stepped into the role of product integrator (e.g. see this article by Farhad Manjoo on different ways to organise your consumption) which means the newspaper’s role of product integrator is getting increasingly threatened.

    Does this mean that newspapers are dead? I doubt it. There are still some tasks that are complex enough to enable firms to compete. However, I highly doubt they’ll be the only ones competing in this space. Looks like they’ll have to get used to moving away from the dynamics of duopolistic competition.

    It will be interesting to see how they do this. A couple of simple predictions:

    1) More journalists will require some sort of advanced education or training in their area (i.e. increased specialisation required to respond to the increased division of labour occurring in the market)
    2) More freelancing and insoucing of ‘comment’ articles, which are free.
    3) Increased dependence on citizen reporting ala CNN and
    4) The emergence of newspapers as communities. The trajectory of the Guardian is an example of this:


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