Funding digital journalism: The challenges of consumers and the economic value of news (original) (raw)

The business of journalism is an uncomfortable subject for many journalists and one they prefer to disregard whenever possible. Because the news industry enjoyed a rising tide of funding as advertising expenditures increased decade-by-decade during in the twentieth century, the question of how journalism could be funded did not arise and most journalists ignored business aspects of news provision. The swelling revenue from advertising allowed journalists disregard the fact that the news they produced was also being sold to consumers in a market transaction, but that its price was well below the cost of gathering, preparing, copying, and distributing the news. Considered in revenue terms, the primary business of newspapers publishing in the twentieth century was advertising not news. The movement of news to digital platforms, however, is forcing journalists to pay greater attention to the business of news and to wrestle with issues involving economics of journalism, the commercial value of news, how news audiences behave, what prices consumers will pay, how payment will be structured, and what opportunities exist for non-market funding. This chapter addresses issues involving the funding of digital journalism. To understand that issue, it is important for readers to distinguish between the terms funding model and business model. They are often erroneously used synonymously by many in journalism, but represent distinct concept and issues. The term funding model refers to how an enterprise makes money, but this is only one part of the firm's broader business model that specifies the firm's business logic, value proposition, value configuration, processes and relationships, and customer interactions (Picard, 2011a). Those issues are crucial for making the funding model successful. This chapter will using the term funding to refer to income/revenue received and funding model for the revenue configuration that makes it possible. How digital operation alters the economics of journalism The need for funding is directly linked to the costs of producing and distributing news and how the shift to digital operation affects those costs is important. Digital journalism alters the cost structures that exist when journalism is practised in print (Picard, 2011b). Digital operations do so by ending costs that previously existed for making newspaper copies and delivering them. In physical production (print), profitable operation is pursued by managing variable costs. This requires seeking efficiency in the unit costs of producing copies through economies of scale and reducing transaction costs. The environment provides significant advantages to newspapers with larger numbers of customers. In digital operations, however, serving additional digital copies has little cost effect and competitors tend to operate with relatively similar cost structures regardless of the number of customers. Costs are primarily affected by the scale and scope of content provided rather than scale and scope of copying and distribution costs. In this environment managing fixed costs becomes the challenge. Although digital journalism reduces the cost of production and distribution, it does not equally reduce the costs for gathering and processing news and news organisations have threshold level production