July 30th, 2009

Journalists Are News Companies’ Most Valuable Asset

by

Journalists are news companies’ most valuable assets.

That’s what Mike Arrington asserts, and I think he’s right (disregard the “failing old media” rhetoric):

And earlier today I got a glimpse at what AOL is up to – they are hiring all the journalists being fired and laid off by the newspapers and magazines. And they now have a news room 1,500 journalists and editors strong. Amazingly, failing old media is throwing away their most valuable assets. And AOL is eagerly picking those assets up for a song. Before anyone knows it, AOL may be the most powerful news outlet in the world.

Given that NYT has gone to great lengths to avoid newsroom layoffs, I suspect they know full well how valuable their journalists are.

Mike Arrington is TechCrunch’s most valuable asset, for his personal brand and for the quality of the post he writes.

As Arrington points out, AOL CEO Tim Armstrong has also realized how valuable journalists are, and is aligning AOL’s new strategy with cornering the market for journalist talent.

But is Arrington right that media companies are blithely throwing away their most valuable asset? Why did newspapers make so many newsroom cuts on their path back to profitability? Is it because they don’t recognize the value of their journalists?

I think it’s because they are still wrestling with the declining value of their other major asset: industrial printing and distribution capacity, i.e. printing presses and delivery trucks and all their industrial staff. While some newspapers have made significant cuts to their industrial operation by not delivering or publishing everyday (and a few have taken the extreme step of ending their industrial operation entirely), most have protected this asset because it is not really variable — it’s mostly all or nothing.

But to say that the value of industrial printing and distribution capacity is declining is not to say it has no value — it of course still generates most of newspaper company revenues. But the decline, while exacerbated to a large degree by the recession, is still secular long-term. (And newspaper companies are surely using the breathing room they achieved through cost reduction-driven profitability to figure out their long-term strategies — and they are focused on digital.)

AOL, in contrast, has no industrial assets, so has the latitude to invest in journalists. They also have another huge asset that newspapers enjoyed in their geographic distribution areas that they entirely lack on the web: SCALE

A notable illustration of the shifting value of news company assets that sits between AOL and most newspaper companies is Politico.

Politico rose to prominence by showcasing its high profile journalists on its website.

Politico Blogs

Politico Ben Smith

Unlike most news sites, Politico has real profile pages for its journalists and showcases their bylines on every story (even the lead homepage story):

Politico headline byline

This doesn’t mean, however, that Politico derives no value from industrial printing and distribution. In fact, half of their $15 million in annual revenue comes from a print edition published three days a week when congress is in session, and once week otherwise (via Vanity Fair).

But Politico doesn’t own any printing presses or delivery trucks, i.e. no industrial assets. And the print publication is largely the product of content produced first for the web — and it is very much a “nichepaper,” i.e. it targets the highly valuable audience of Capitol Hill staffers and members of Congress.

The results is that Politico is able to invest in a talented newsroom staff of 100, paying nearly as much as The Washington Post. And Politico is profitable.

But does focusing on journalists as news companies’ most valuable asset mean that news companies should be exclusively in the content production business? That’s a significant shift from the industrial printing and distribution business.

In the digital media world, companies like Google and Apple have taken over, as Columbia J School Dean and former WSJ.com managing editor Bill Grueskin put it, the “profitable front end of the distribution chain,” leaving news companies with the much less profitable back end of the value chain (i.e. content creation).

But what if journalists could also be the key to news companies getting back into the distribution business, in digital media?

The greatest asset of Google, the most successful content distribution business on the web, is its ability to harness the judgment of every person who creates a hyperlink on the web, and to know which links from which sites represent more trusted judgment.

News companies still employ in their newsrooms arguably the greatest collective source of news judgment.

So how can news companies leverage the asset of their journalists’ news judgment?

Hint #1: Collaboration

Hint #2: Scale

News companies are notably trying to figure out how to get into the business of charging for content on the web. As Apple’s iTunes demonstrated, the key to charging for content is in effective and highly convenient packaging.

Could journalists be the key to not only creating the content but also packaging it?

Think about that for a while. More in another post.

  • marcygoldman

    Pieces like this (great journalists being rehired by AOL for their online talent search) is music to this author/writer's ears. Bravo. Content still drives the buggy. As a writer, I don't really care how you read me: on a phone or laptop or Kindle or in a magazine or best (always best ....) a real book with print pages. The main thing is use me, read me, pay me. (and respect copyright)

  • Thank you for the post, mr. Karp. I agree to the answer "yes" on your rhetorical question "Could journalists be the key to not only creating the content but also packaging it?". And as many argues, among them Jeff Jarvis in What would Google do?, if we cannot get paid for the content itself, people are willing to pay for the packaging. Or: People are willing to pay for the time we save for them.

    In my country Norway many of the local communties divided by fjords or high mountains are too small to rely on user aggregated web sites to pick out the relevant news and information. Instead I believe they are willing to pay a journalist to sort out the information relevant to them, like the local newspaper was alone to do before radio, TV and internet. In my opinion, the only way to this properly, is to put journalistic principles to work in the filtration process. The reason a lot of people still want to pay for quality news (newspapers aren't dead yet), is that they are comfortable with the idea of paying journalists for doing the job of gathering, filtering and rewriting information for us. This saves a lot of time for they, as long as they trust the journalists to have them in mind when they write their stories. Thats why I want to add 50% journalistic filtering in the automatic news distribution. I believe this has to be done outside the traditional news rooms, on neutral ground so to speak. I have started the project as.long.as to solve this. Feel free to join.

  • ahoving

    P2 wrote: "News companies are notably trying to figure out how to get into the business of charging for content on the web. As Apple’s iTunes demonstrated, the key to charging for content is in effective and highly convenient packaging. Could journalists be the key to not only creating the content but also packaging it?"

    Sure, but so could readers, via a user-centric revenue tool like PayCheckr.com

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