Does the WSJ’s Online Business Strategy Work for Local News?

April 3rd, 2009; 8:47 am by Ryan Thornburg

Be niche. Have very high standards. And find some subscribers to buy it

Good advice for future journalists from Alan Murray, the editor of the Wall Street Journal’s Web site, who gave the Park Lecture at UNC’s School of Journalism and Mass Communication on Thursday night. His approach to online journalism certainly sounded right to me, but what I didn’t hear was any hard evidence that would help support my gut instinct.

The biggest question I still have: Is there any business model for high quality local public affairs journalism?

Murray nicely laid out an argument for the kind of “do what you do best, and link to the rest” journalism that makes sense on the Web. He wasn’t sanctimonious about do-gooder journalism and gave well-deserved props to Matt Drudge for being a great editor who creates value not by creating content, but by being incredibly in tune with what his audience wants. Nor did Murray take the self-loathing approach that’s increasingly common in the MSM; he said that the Clinton-Lewinsky scandal that Drudge so doggedly promoted was the low point of his career.

The Journal is often cited as being in the fortunate position of being able to get people to pay for its product. It’s a niche product that serves an affluent audience with information its readers use to make money for themselves. So Murray had some ideas for local papers: The Houston Chronicle, he said, should be the go-to source for information about the oil industry, and the San Jose Mercury-News should be all over Silicon Valley.

That all makes pretty good sense to me, and I still have no idea why papers aren’t pursuing those strategies more vigorously. But here’s an important question for which I still don’t have an answer — do those business models scale down?

The Houston Chronicle may be able to make money by assigning three people to cover the oil industry and charging $1,500 a year for a subscription to a Web site featuring their work. They could probably even make good money by selling ads on that content for a free site with a national audience. But would that niche strategy work, too, if the Houston Chronicle’s niche were the Houston Independent School District? Are there as many people who care about Houston’s schools as care about Houston’s oil? Are both groups of readers as valuable to advertisers? And — this is the biggest question — are both groups willing to pay the same amount to subscribe to their niche of interest?

Let’s take a look at Chapel Hill. It has one of the best public school systems in the country and easily the best in the state. Parents are wealthy, highly education and, I’d imagine, have high expectations and high levels of involvement. It serves 11,000 students. According to the Census Bureau, there are 5,386 families in Chapel Hill with kids under 18 — and, presumably, in public or private school. About 5,000 people voted in the 2007 school board elections.

So let’s hire 1 FTE to cover education in Chapel Hill and Carrboro. We’re going to hire someone right out of college and pay her the national average for new journalism grads working at daily newspapers — $28,000. Just so nobody accuses us of being a pajama-wearing blogger, we’ll go ahead and hire a 0.5 FTE to edit the education stories, and we’ll pay the editor half of her $40,000 annual salary.

And, just make everything neat and tidy, let’s publish on the Web only and not charge any of the overhead utilities, legal or equipment costs to this beat. But let’s say you need to pay 16 percent in Social Security taxes and benefits and would like to have a very conservative 5 percent profit margin. So, let’s say the education beat needs to earn you a little under $60,000.

$60,000 divided among 5,000 subscribers is $12.00. How many of those 5,000 potential subscribers would pay the 12 bucks to subscribe to a Web site about the Chapel Hill-Carrboro City Schools? Let’s say we could only get 3,000 subscribers. Would they pay $20 just for that one beat?

Well that’s exactly how much one of my fellow professors said he would pay when we were discussing this scenario after Murray’s speech. But he said he’d pay it only if he received a very selective and relevant report. He’d be willing to pay more money for less content, as long as that content was hyper-relevant, he said.

That leads to some other interesting questions — what would be the public affairs journalism consumption budget for the average Chapel Hillian? How many beats would she buy? About 6,000 people voted in town council elections. Would half of them pay another $20 a year for coverage of town government? Or, could you still do a decent report with a 0.5 FTE for each beat?

Dunno. But this is really the business model we’re talking about when we talk about niche publishing. The newspaper has been disaggregated by the Web. News companies can add little value to their reporting with packaging and no value to their reporting with doorstep delivery. Readers already pay Dell, Microsoft and Verizon for those additional services. This is what we’re talking about when Web metrics allow us to see ROI at the story level.

This model may not save local public affairs reporting, but I doubt it’s going to make it worse. I’m pretty sure there’s nobody covering Chapel Hill schools even half time right now.

(My live tweets of the speech are here. I will post video and the text of his remarks when they are available.)

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