Will Online Revenue Return the NYT to Wall Street Glory?
January 24, 2010
In my opinion, the NYT’s online charging plan may not return the NYT to Wall Street glory? My instincts were confirmed when I read the interesting article by Erick Schonfeld. The story “The New York Times’ Online Meter Will Hardly Move The Needle” works through some assumptions about online revenue for the NYT. The net net for the analysis is that the NYT may not make much headway in traffic or online revenue. I agree. But the addled goose has several observations to make about any online revenue projection. I am not disagreeing Mr. Schonfeld. I want to add some color to the challenge of generating revenue online.
Will the NYT’s plan for online fees create a triumphal moment for the company? Source: http://2.bp.blogspot.com/_gcgZo60Vlvo/RtmLbS2ttmI/AAAAAAAAAPY/nnlQN2aQSG0/s400/Arc_De_Triumph_Flag.jpg
The Need for Big Money
First, the NYT has to generate more money from online than Mr. Schonfeld’s analysis outlines. The reason is that increasing costs in the NYT’s other businesses forces new revenue streams have to outperform expectations. If not, the NYT will continue to suffer revenue pressure. In my model of online pricing, I include such factors as the increase in G&A costs, rising costs for consumables, and increased sales and marketing costs. If online performs at a level consistent with Mr. Schonfeld’s analysis, the NYT will have no choice but find other revenue or just get much smaller. Drastic steps may be need to get the NYT back on the investors’ must-buy list. Will the 2011 target and the revenue from online make this happen? No in my opinion. Cost control will be the killer.
Second, an online product is different from a print product. The audience or customer typically reacts in a way unique to online. The result is that different products and services are needed. In my experience, the domain expertise of print and traditional audio or video programming cannot be quickly or economically repurposed. More that technology is a challenge. The “deep knowing” is different for print and online.The people right for print or traditional media may not be the ones for online. A core competency, it is producing content using a scheduled, serial method. Online and the new audio and video distribution channels require different methods and different “deep knowings”.
Third, the NYT’s online product– like that of the WSJ and the FT for that matter– is going to get some oomph or an “X” factor. Today I reviewed for a client the now defunct or at least non responsive FT Newssift.com (you may get a 404). The FT has not been able to leverage its global brand with its successive “reinventions” of its online service. Newssift.com was to be a new approach using nStein, Endeca, and Lexalytics. I don’t think it worked. The WSJ as well as the FT and NYT present news and information is a way shaped by their print siblings. Putting print online works to a degree but more is needed to make online generate the type of revenue the NYT needs. The NYT, like other newspapers containing more general interest information, my not be be “must have” content for a big chunk of Web users. The problems are the users and the Web medium. Where’s the hot service that makes NYT content the cat’s pajamas.
Here are some items from my notes about traditional publishing and online:
ITEM. Thomson Reuters jumped into for fee online by buying Dialog Information Services. Thomson Reuters jumped out of online by selling at a hefty discount the Dialog for fee online service to a unit of Cambridge Scientific Abstracts. Thomson Reuters is a canny outfit. Net net: online is a tough sector for experts like the Thomson Reuters’ management team which saw problems in traditional publishing a long time ago, tried online and did serious reengineering, and now is moving in new directions such as value added software and services plus information. Will the NYT follow in Thomson Reuters’ footsteps?
ITEM. Newsstands, book stores, and NBC face difficult market hurdles. Without a viable traditional distribution mechanism, the traditional business models don’t work very well. As a result, the traditional producers of content must raise prices, cut staff, and find new products to sell. The result is that both the buyers and the distribution channels for traditional products are constricting. In short, market realities are going to increase the financial pressure on traditional publishers, not reduce it.
ITEM. Individuals who used to work at traditional publishing companies now have to find a way to make money. The result is that there are some skilled journalists who write blogs, create content for outfits like Demand Media, or who go to work for a company and write white papers. The challenge is that as the volume of digital information goes up, algorithms not human editors can make sense of this information. With more humans writing and algorithms making decisions, what’s the money making niche for the traditional publisher?
Why do Google, Microsoft, and Yahoo focus on online advertising, fees, and other charging methods? My hunch is that these three companies focus on getting revenue, not applying traditional publishing business models to their information businesses.
Stephen E Arnold, January 23, 2010
Yep, another freebie. I was on the phone from Europe with a client on another continent. I was paid to talk, but not about traditional publishing. I will report this failure to bill for this write up to the closest US embassy.
IBM Mainframe PR at Odds with Reality
January 23, 2010
I am on record as loving mainframes. However, smart outfits find other ways to crunch petabytes of data quickly without the costs, hassles, and peculiarities of mainframes. Even today, when I hear or read the word “mainframe” I think of disc crashes that could send chunks of metal into cabinet sides, JCL, and moving wires to achieve performance boosts. I know that IBM’s PR group wants me to think Series z, Linux, and more fun than a day at Frye’s in Palo Alto. Won’t happen.
I read “IBM Mainframe Woes Continue with Big Q4 Drop” and said to myself, “The addled goose is not flying blind with regard to mainframes.” The story said:
System z mainframe revenue dropped 27% in the fourth quarter compared to the same period in the prior year. The Q4 results followed declines of 26% in the third quarter, 39% in the second quarter and 19% in the first quarter. IBM doesn’t provide revenue dollar amounts for individual server product lines, but the mainframe suffered the biggest decline within the company’s systems and technology group, which reported fourth quarter revenue of $5.2 billion, 4% lower than the previous year. The systems and technology group also includes storage, x86 servers and Power servers.
Google and even Facebook seem to be happy with their approach to petascale computing, and I don’t think mainframes figure in either company’s plans. Here are the reasons:
- Architecture. Still anchored in the late 1960s.
- Configuration. Really tedious.
- Performance. Expensive when compared to commodity set ups.
And search? You can still buy a STAIRS variant. Wow. IBM is mostly a consulting and services outfit. My hunch is that SAP and Microsoft will be following in IBM’s footsteps. Times are indeed shifting gears.
Stephen E Arnold, January 23, 2010
A freebie. No one has paid me a single penny to write about my affection for mainframes. I will report this to the House of Representatives who may not share my feelings for these gizmos from another era.
Quote to Note: Traditional Media Companies Identify Change as an Issue
January 23, 2010
Last week a friend in the UK sent me a link to a Harvard Business Review comment about leadership and management. The addled goose is not much of a leader nor can he manage the goslings. The gist of this HBR write up is that certain skills are important; for example, pattern recognition.
I read that the outfit operating newspapers in San Jose and Denver was involved in one of those unpleasant financial dust ups. Sigh.
This morning I saw a great quote in today’s edition of the New York Times (January 18, 2010, page B 3). The quote—a headline as well:
It’s Not Jay and Conan Who Changed. We Did.
Right. Now click to the Wall Street Journal’s somewhat difficult to find table of newspapers with various financial challenges. You can find this “Pressure on the Presses” table and graphic that makes it easy to spot a pattern. (Validated at 9 30 am on January 18, 2010.)
Several observations:
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The pattern of demographic change is clear at least to the headline writer at the NYT
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The casual eye can discern the trend in the WSJ’s table “Pressure on the Presses”
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Traditional media has a voice saying to me, “Houston, we have a problem.”
More accurately, the children of the people who work in traditional media are among the reasons certain media are no longer getting traction. Heck, I am part of the problem because I am going to drop two of my four hard copy newspaper subscriptions. The news is old and an increasing number of stories come from third parties who write blogs or outfits set up to produce basic content chaff.
Stephen E Arnold, January 23, 2010
A freebie. I even threw away the bottle of shampoo that came in one of my newspapers the other day. I will report this to Health and Human Services. Clean readers are good readers I assume.
Startling Fact: Size of Cloud Computing Market
January 23, 2010
Tucked into a story about IBM landing Panasonic as a customer for Lotus Notes was a startling fact. “The global cloud computing market is expected to grow at a compounded annual rate of 28 percent from $47 billion in 2008 to $126 billion by 2012, according to IBM based on various market estimates.” You can see this gem in context at “Panasonic Ushers in the Cloud Computing Era with IBM LotusLive”. That’s a heck of a number.
Stephen E Arnold, January 23, 2010
A freebie. I don’t know what federal agency is in charge of numbers without back up. Maybe OMB?
Three Oddities: Online Data Findings
January 22, 2010
I have been involved in a project in a land with many consonants. Before heading to the airport, I was catching up on the goodies in my newsreader. Three items caught my attention, and I was surprised by each of them. Let me run down the list.
First, there is the report “US Internet Speed Is on the Decline”. This is a headline sure to catch attention. The only problem is that in my neck of woods, the local cable company continues to offer faster Internet speeds. The report surprised me because when rural Kentucky has zippy speeds, it raises some questions in my mind about methodology. The idea that the US is lagging in certain technology areas is a mini trend.
Second, the article Report: 44% Of Google News Visitors Scan Headlines, Don’t Click Through reported that Outsell (a consulting firm for publishers) conducted a survey of online news users. The finding that stopped me was that 44 percent of those in the sample of about 2,400 did not click to read the full news story. The number strikes me as high. I flip through a newspaper and read one story every two or three pages. Online I read even fewer. The number seems startling judging from the pick up and comments on the story. In our work, we have found more skimming than reading. I look at more short items and read only the longer items that hit one of my interests. My hunch is that I am not alone.
Third, I was surprised to read “Google Nexus One’s First Week of Sales Were Weak, Report Says.” Google is a secretive outfit. Where did these data originate? Flurry. That’s a research firm about which I know little. Google discloses a great deal. There are SEC filings, patent documents, and technical papers that appear in peer reviewed publications. Google cranks out blog content and generates a staggering amount of documentation for its various APIs and some services. I am not sure what “weak” means and I will wait until info from Google turns up in open source info streams.
These three stories are almost ideal for attracting clicks. Are these stories accurate? Maybe.
Stephen E Arnold, January 23, 2010
A story written for no dough. Trapped in an airport, I will alert the next uniformed professional whom I see of this sad situation.
Mainframe Hot Again: Really?
January 21, 2010
I like mainframes. My first content project was completed on one of these svelte—well, maybe that is not the best way to describe—IBM installations. A mainframe when I started fooling around in air conditioned rooms was an complex of hardware, software, cables, and assorted other components. If you wanted to get your class project or a bit of side work done quickly, you learned to work in the “computer center”. None of that waiting in a queue for a key punch machine (anyone remember those?) or for some 17 year old person with thick glasses like moi to put your cards in the processing queue. Nope. Work in the computer center, make some money, and get your work done without meatware latency.
I have written about mainframe in this Web log. Most of the write ups have been in response to IBM public relations and marketing. Now, I surmise, the IBM marketing machine has sent enough signals so that the sensitive antennae of The Economist editorial staff has reacted.
The article that caught my attention is “The Return of the Mainframe: Back in Fashion.” The sub title is, “The mother of all computers no longer looks that old.” The hook for the story is that the Bank of Namibia is getting its first mainframe. Obviously Namibia is proud to be on the bleeding edge of information technology, right out there with Hitachi (er, no), PSI (er, acquired by IBM), T3 (er, in the migration to distributed computing business), and I suppose you can argue that Dell, HP, and Sun, among others are in the “sort of” mainframe business.
I recall reading the 2005 news item that described the mainframe as “a falling star”. If you are not familiar with what’s inside a mainframe installation, check out the specs for various systems on the Tech News site.
The Economist said that mainframes are now distributed systems. I wonder if that means “like Google”? What the Economist told me was:
High “switching costs” explain in large part why mainframes are still a good business for IBM. It is the only big firm left selling them, at prices that start at $100,000 but often reach the millions. Sales of mainframes are said to have brought in about $3.5 billion a year, on average, in the past decade. Although this is only about 3.5% of the firm’s overall revenue, each dollar spent on hardware pulls in at least as much from sales of software and maintenance contracts. Toni Sacconaghi of Bernstein Research estimates that 40% of IBM’s profits are mainframe-related.
Ah, annuity and replacement revenue! I also like “high switching costs”. That is on the money. The reason the Namibia deal is “news” is that I assume it is one of those “emerging markets” that needs a mainframe. Next time I visit Namibia, maybe I will get a chance to see what the country bought?
In my opinion, the killer passage in the Economist story was this one:
More worrying to IBM is a run-in with Neon, a software company. It sells a program that allows computing tasks that usually run on a mainframe’s regular processors to be shifted to the discounted ones meant to run things like Linux. Predictably, IBM is not happy and is said to have threatened to charge higher licensing fees to customers using Neon’s software. This, in turn, has led Neon to file a lawsuit against IBM. Defeat would make a big dent in IBM’s mainframe revenues. Still, the computer industry seems to be moving IBM’s way. The mainframe may well find a new home in corporate computing clouds, the pools of data-processing capacity many firms are building. Many companies are also increasingly interested in buying simpler, more integrated computer systems, even if this means a higher price. Reacting to this, IBM’s rivals are making bets on mainframe-like products. On January 13th HP and Microsoft announced a pact to come up with tight packages of hardware and software. Brad Day of Forrester Research, another market-research group, puts it thus: “We are on the way back to the future.”
Quite a conclusion because IBM has responded to competitors in the mainframe sector by treating them to some of that Big Blue kindness. PSI was bought by IBM. T3 probably has its own view of how IBM has encouraged its business.
The impact of the story on me was:
- IBM is hustling mainframes because it is good money for services
- The marketing muscle of IBM is obvious to me
- The health of the mainframe “industry” is accomplished by shifting the definition of a mainframe to the more fuzzy distributed computing approach
Will I buy a mainframe? Nope. Here’s why:
- IBM hardware is over engineered and designed to create a demand for an IBM trained specialist to perform even basic fixes. FRU means an expensive tech roll and on site charges.
- A mainframe demands an ecosystem of specialists. When that ecosystem is not in place as it is at ArnoldIT.com, then you get to pay folks like ArnoldIT.com to work on mainframe projects. Linux is some help but in other ways, Linux is not the magic wand or part of the magic wand
- There are easier and cheaper ways to accomplish certain computing tasks
- A huge complex called a mainframe that runs Linux is a bit like putting a submarine’s nuclear power generation unit in my garage to generate electricity for my home. Interesting in a theoretical sort of way but otherwise pretty darned crazy.
I think it is super that an emerging market can afford a mainframe, but there may be other ways to provide the computing horsepower required. I am more impressed with the power of the IBM marketing machine.
Stephen E Arnold, January 18, 2010
No one paid me to point out that IBM has marketing muscle. I will report this to the Economic Development Administration at the Department of Commerce.
Quote to Note: Multicore Chips for Microsoft Devs
January 20, 2010
In “Windows & .NET Watch: Five Predictions for the Next Decade,” Larry O’Brien inked a quote to note. He said:
You cannot develop software for manycore using today’s mainstream concurrency models. I know I sound like a broken record on this, but too many people have stuck their heads in the sand and are willfully ignoring an enormous problem. Writing manycore programs is going to be the hardest technical challenge in your career: harder than understanding object-oriented or functional programming, harder than browser incompatibilities, harder than tracking down memory leaks in a C program.
Azure chip poobahs notwithstanding. Nailed and well stated, Mr. O’Brien.
Stephen E Arnold, January 20, 2010
A freebie. I must report this to the Bureau of Reclamation.
Google and Its Security Woes
January 18, 2010
There are some practical issues that must be addressed when dealing with security. First, the people working on the security problem have to be vetted. This requires time and organization. Organizations in a hurry and not well organized are at greater risk than a plodding, more methodical outfit. Although troubling to some, the security people have to be subject to some type of monitoring as well. The idea is that layers of security methods and procedures are required. Again, this takes expertise and experience. Short cuts can increase risk.
Then when something bad happens, it is a good idea to look for indications that someone close to the matter is involved, intentionally or unintentionally. Some countries use clever methods to socially engineer an opportunity to exploit a weakness in security. I know that the idea of a team implies that everyone is going to run the game plan. Alas, that’s not always accurate.
In my experience, keeping an issue contained is a prudent first step. The idea that quick reaction or chatter helps may be an inaccurate one. Some outputs are necessary, but crazy talk is rarely helpful whether from pundits, poobahs, satraps, or azure chip consultants.
I was surprised to read several widely circulated news stories that provide some additional “information” or “disinformation” about the Google security matter. The work “attack” is attached to this issue, but I don’t know enough to be able to say whether this was an “attack” or one of those cute things that math club members perpetrate as a way to get attention, change grades for the football team, or transfer cafeteria money to a charity like Midnight Auto Supply.
The Great Wall of China was built for a reason. Some of those reasons exist for today’s Chinese governmental entities. Those who build the Great Wall were not concerned with the environmental or financial impact of the Great Wall. Priorities may be different in China than in other geographic areas or nation states. Image source: http://www.globusjourneys.com/Common/Images/Destinations/great-wall.jpg
That’s the problem with lots of information or lots of disinformation. There is uncertainty, what I call a “cloud of unknowing”.
Here’s what’s caught my attention. (Keep in mind that I have no solid opinion on this matter because I only know what flops into my newsreader and that information or disinformation is suspect by definition.)
The Utility of Google Wave
January 18, 2010
Short honk: I have been describing Wave in my Google lectures for a while. I want to recommend “20 Real World Uses for Google Wave”. MacLife has gathered a number of interesting examples and screen shots. If you have been unsure of how to use Wave, this article is the one to read. Excellent.
Stephen E Arnold, January 18, 2010
No one paid me to write this. I think the publication originates in another country. I will report on my return to the IRA the poverty stricken state in which I existed when I praised this article.
Amazon and Traditional Publishers Anger Some eBook Buyers
January 17, 2010
Let me point out that the hype about eBook readers is entertaining. But the existence of eBook readers will not create overnight more people who buy and read lots of books. I use an eBook reader because I don’t have to carry a bunch of books on a long international flight. I read most of the way, so eBook readers allow me to carry one printed book (usually a small one about math) and a Kindle jammed with many different things. The book stores used to love me. Now I don’t bother. I order traditional books online and steer clear of the gift card and book light shops that book stores have become.
The article “Kindle Fans Punish Publisher For Delaying Ebook Releases By Giving Books One-Star Reviews” points out one of those delicious unexpected consequences type anecdotes. Publishers want to put out a new book like I, Sniper in hard copy and then later release an eBook version. This is one of those great ideas the folks who don’t understand the excitement that online often triggers. Annoyed book buyers have been giving books lousy reviews on Amazon.
To me the most interesting comment in the article was:
HarperCollins — one of the leading supporters of these silly “windowed” releases — is discovering that its well-hyped book Game Change is filling up with one-star reviews. Going against what your consumers want is almost never a good idea.
Too bad I will be in Europe Monday. I will have to check and see what the traditional publishers and that fine outfit Amazon will do to get book buyers to lay on their side and pant. Is this a job for the Dog Whisperer? Probably.
Stephen E Arnold, January 17, 2010
A freebie. Because this is about publishing, I must report non payment to the GPO.
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