Newspapers and Fat
October 3, 2009
On a podcast, a commentator pointed out that TechDirt took a tough stance toward traditional publishing. I thought TechDirt was much less critical than the addled goose. Of course, TechDirt has more readers and it is a much more professional operation than this Harrod’s Creek marketing publication.
I read “Perhaps the Real Problem with Newspapers Is All that Extra Overhead” and found the write up in line with my views. For me one of the most interesting points in the article was:
In investigating further, he discovered that the paper only had six reporters — despite a staff of 59 people. And, yes, obviously many of those other roles are important — the editors, the printers, etc. But, at some point you have to question the claim that the “reporting” is so expensive. It certainly looks like there’s an awful lot of overhead and inefficiency built into the system. And that’s why newer news startups are able to succeed — because they don’t have that extra legacy layer of fat to deal with.
Let me offer one observation not included in the TechDirt article.
The premise of most newspapers, magazines, and book publishers is that their business model is sound and, despite economic and demographic changes, will serve the companies well. As long as the perception is that the consumer of information will pay for that information, publishing is likely to face consistent profit pressure. When I commuted from Silver Spring to Crystal City in 1979 I would buy a newspaper. In fact, many people on the Metro had a newspaper. When I rode the Metro last week, a few people had a free newspaper and a couple had a copy of the Washington Post. I had my trusty netbook with current info.
I try to understand why publishers believe that an iTunes for news will have a significant impact on newspapers. Keep in mind I agree with the “fat” argument. And I think my business model point amplifies the magnitude of the challenge publishers face.
Google is working on smart software. Individuals are punching out information, shooting pictures, and capturing videos. With smart software assembling info based on traffic or other signals, won’t the machine generated news be good enough? I think it will be for me. I subscribe to four traditional newspapers, and I find myself spending less and less time with these publications each day. The reason is that the info I need is fresher and more easily available from online sources. In fact, I dropped my subscription to the Financial Times because I found the content increasingly irrelevant to my information needs. Little wonder that the most recent promotion for a full year at the rate of $49 went directly into the trash can. I never considered subscribing.
See. I am more harsh than TechDirt.
Stephen Arnold, October 3, 2009
Wall Street Journal Spamming Again
October 1, 2009
I have to give the Wall Street Journal a big thanks. What a wonderful example of how newspapers who want to charge for their content, sustain their untenable business model, and anger paying customers. If I were teaching, I would profile the witless activities of this company. First, it muffed the online service. Then it created the crazy regional papers making bibliographic citations exciting for folks everywhere. Now it is spamming paying customers again. I have called the company. What a joke that was. I have written email and hard copy letters. Into file 13 for sure. And I have been writing to my two or three readers that WSJ is spamming me, a paying customer, to subscribe to the newspaper. For a case example of ineptitude, may I suggest that we look no further than the WSJ’s “please, subscribe” emails to paying customers. Silly. Indicative of a train with a faulty locomotive. Maybe this is a WSJ contractor? Quite a third party rep in my view. Nice work. Colorful. Clown-like too.
Stephen Arnold, September 30, 2009
Google Books Explained by Japanese News Service
September 30, 2009
I am puzzled by Google Books. To try and grasp the project, I try to look at and read many of the write ups. One of the more interesting explanations appeared in The Mainichi Daily News in the story “Why the Controversy over Google Books and How Does It Work?” The link is to the English version of the write up. The article is in question and answer form, brief, and to the point. The most interesting comment in the article in my opinion was this question and answer:
Q: If Google Books goes into full swing in the future, books wouldn’t sell any more, would they?
A: Google has pledged to only include a commercial service on out of print books. However, “out of print” isn’t clearly defined, and in any case, we should avoid a situation where the demand for free books destroys mankind’s publishing culture.
I quite like the phrase “avoid a situation where the demand for free books destroys mankind’s publishing culture.” The hitch is that many publishers are struggling to stay afloat. Libraries are strapped for cash. Commercial database companies have not rushed to build competitive services. Governments, at least in the US, have not had much of an appetite for scanning, OCRing, and making searchable book content. Short write ups are good, but Google Books is a complicated beastie which I don’t understand despite my best efforts.
Stephen Arnold, September 29, 2009
XML May Get Marginalized
September 29, 2009
I found the write up by Jack Vaughan interesting and thought provoking. XML (a wonderful acronym for Extensible Markup Language), a child of CALS and SGML, two fine parents in my opinion, may have its salad days behind it. You can read “XML on the Wane? Say It Isn’t So, Jack” and make up your own mind. Let’s assume that XML is a bum and no longer the lunch guest of big name executives. What happens? First, the Google methods are what I would call “quasi XML”; that is, XML in but Googley once processed by the firm’s proprietary recipes. My view is that Google gets an advantage because its internal data management methods, disclosed to some extent in its open source technical documents, remains above the fray. Second, if XML goes the way of the dodo, then the outfit with the optimal transformation tools can act like one of those infomercial slicers and dicers—for a fee, of course. Finally, the publishers who have invested in XML face yet another expense. More costs will probably thin the herd. In a quest for more revenue, XML junkies may be forced to boost their prices which will further narrow their customer base. In short, if XML gets the bum’s rush, Google may get a boost and others get a dent in the pocketbook.
Stephen Arnold, September 29, 2009
CNN Dogpaddles for Dollars, Stories Just $199
September 29, 2009
CNN is looking at a freight train speeding down the tracks. CNN is in an auto stalled across the rail crossing. User generated videos, Web logs, and Tweets make it easy for me to check out what is going on without the help of CNN’s talking heads. To generate cash and get some traffic, CNN will license rights to one of its stories for $199. The price is less than the $500 that the $500 charged by iCopyright. You can read the details in “À la Carte Services from CNN Sells Stories for $199” and make your judgment about the offer. You can buy a story at the CNN store. Hurry.
Stephen Arnold, September 29, 2009
Who Are the Five Percent Who Will Pay for News?
September 23, 2009
In the good old days of Dialog Information Services, LexisNexis before the New York Times broke its exclusive deal, and SDC, user behavior was known. Let me give you an example. The successful commercial databases on the Dialog System derived the bulk of their revenue from the Federal government, well-heeled consulting and knowledge-centric service firms, and the Fortune 1000. How much money came from these big spenders? I don’t have the Dialog reports for ABI /INFORM, Business Dateline, and Ziff Communications’ commercial databases any longer. I do recall my fiddling with the green bar reports and pokey 1-2-3 and Excel worksheets, trying to figure out who paid what and what the revenue splits were. In the course of these fun filled excursions into cracking the code on usage reports, I remember my surprise when I realized that online revenue was like an elephant standing on its trunk. I used this metaphor is a couple of journal article because it captured how a thin column of companies supported the bulk of the revenue we received from the dozen vendors distributing out products. The way the revenue share worked in the good old days was that a database producer received a percentage of the revenue generated by a particular database (called a file). If you were a good little database producer, the vendor like Dialog or LexisNexis would give you a percentage above 10 percent. If you were a top revenue producer, the vendors would reluctantly up the percentage paid. One of our databases made it possible to squeeze 50 percent of the total revenue generated from the file from Dialog and LexisNexis. We were in high cotton, but my worrying the green bar reports revealed a big surprise: About 90 percent of our revenue came from about 10 percent of the total number of file users.
This means that our top producing database in 1981 would attract about 10,000 users in a 31 day period. The money were were paid came from about 1,000 of these users. The other 9,000 users spent pennies, maybe a dollar to access our hand crafted, high quality data. The particular file I am referencing was in the 1980 to 1986 period viewed as the premier business information database in the world. No joke. Our controlled vocabulary was used to index documents at the Royal Bank of Canada and used as an instructional guide in library schools in the US and in Europe. (Keep that in mind, taxonomy newcomers.)
I spoke about this “elephant standing on its truck” insight with my colleagues, Loene Trubkin (one of the founders of the old Information Industry Association) and Dennis Auld (one of the original whiz kids behind the ABI / INFORM database). I recall our talking about this distribution. We knew that the “normal” distribution should have been an 80 – 20 distribution, following everyone’s favorite math guy Pareto. The online sector distorted “normal”. Over many discussions, at the Courier Journal and later at Ziff Communications, the 90 – 10 distributions popped up.
I don’t want to dig into the analyses my teams and I ran to verify this number, but I have noticed since I became a consultant, a slow, steady shift in the 90 – 10 distribution. Recent data sets we have analyzed reveal that revenue now comes from a 95 – 5 distribution. What this means is that if one looks at who spends online, the top five percent of the user base accounts for 95 percent of the revenue.
The shift has some interesting implications for those who want to make money online.
First, the loss of a single customer in the top five percent category will have a significant impact on the top line revenues of the online company. The reason is obvious. When a government agency shifts from for fee information to Internet accessible “free” information, the revenue to the online company takes a hit. To get that revenue back, the online vendor has to acquire sufficient new accounts to make up the short fall. With budgets tight, online vendors have to raise their prices. The consequence of this nifty trick is to discourage spenders in the lower 95 percent of the customer base from consuming more for fee online information. The big companies like the Fortune 1000 firms and the top 25 law firms can keep on spending. The result is the “softness” in the top line figures reported by the publicly traded online vendors. These outfits have either crashed and burned financially as Dialog did under the Thomson Corporation’s management or the online segments have been fuzzed and merged into other revenue line items. Pump up or hide the revenue is a time honored method of disguising the vulnerability of the elephant to falling on its rear end.
Second, customers who find the commercial online services too expensive become a hunter of free or low cost information with an appetite that is growing. The commercial online vendors have been mostly unable to cope with the surge of information available from addled geese like me who write a “free” Web log that sometimes contains useful information such as the list of European search system vendors, Web sites pumping out content via RSS, and individuals who generate Twitter messages that can be surprisingly useful to marketers, law enforcement, and analysts like my team at ArnoldIT.com. The efforts of the commercial online vendors are oddly out of sync with what former customers used to do. One example: small law firms go to law libraries and get a law student to look up info, use Dot Gov Web sites for information, or click to Google’s Uncle Sam service. For certain types of legal research, these services are quite useful and what paralyzes the commercial online services is the fact that these services are improving. The commercial online vendors have created a market for lower cost or free online information and boxed themselves into a business model that ensures a long, stately decline into a sea of red ink.
Third, entrepreneurs looking for a way to put food on the table look at the current state of the commercial database industry and see opportunity. One example is the emergence of real time information services. I document the services I find interesting in my monthly column for Bizmedia’s Information World Review, published in the UK. The commercial database vendors know about these services, and some of the tech savvy people at these companies have the expertise to offer somewhat similar services. The new services from commercial database vendors don’t get the traction that the churning ecosystem of the Internet generates. The pace of innovation is too fast for the commercial vendors. After a couple of tries at creating a more hip Web service, the commercial database vendors stand like a deer in my headlights on Wolf Pen Branch Road. Most of the deer get hit by my neighbors. (I brake for animals. My neighbors just roll forward en route to the new Cuban restaurant or the car wash which still uses humans, not machines to bathe Mercedes and Porsches.)
In this context, the fact that Rupert Murdoch’s pay-for-news plan appeals to five percent of those in a survey sample is no surprise to me. I would wager that Mr. Murdoch is not just surprised. He is probably setting lose survey companies to conduct “more accurate” studies, a practice much in favor at IBM, Microsoft, and Oracle. The irony of this five percent is heighted for me because I read about the five-percent study in the UK newspaper The Guardian. You should read the story “Murdoch’s Digital News Cartel Will Not Persuade People to Pay for Content.”
Let me wrap up with three observations:
- Some people will pay for Murdoch content. The problem is that these folks may not be willing to pay enough to keep the enterprise solvent. Other revenue streams will be needed which will lead to the fuzzing and merging of financial information to make it tough to figure out how big a loser this effort really is. A precursor is the handling of the Factiva unit by Dow Jones.
- The 95 percent who won’t pay become a ready made customer base for an entrepreneur who can implement a different business model. I nominate Google to be a player in this ready made market. Others will find a foothold as well. I know one thing. Traditional newspaper companies will have a tough time when these upstarts get their systems in gear.
- The problem is not limited to Mr. Murdoch’s organization. The disruption of the skewed curve is, based on my team’s research, operating across a number of business sectors where analog services are being replaced by digital services.
In short, the 95 – 5 curve is the new Pareto curve. Get used to it.
Stephen Arnold, September 22, 2009
Google and Newspapers: Misclassifying Google Is Risky
September 22, 2009
I enjoy most of the GigaOM information. I found the write up “Google’s Plan to Become The Media Company” thought provoking but off the mark. My view is that classifying Google as a media company is one of those confident assertions that seem accurate but are only partially correct. In fact, the error is akin to classifying a tiger cub as a house pet. Sure, the young cub might learn some manners, but as Roy and Siegfried learned, the tiger often has a different idea about what it is; namely, a wild animal capable of ruining an act and a life. If you don’t remember, Roy and Siegfried, here is a useful reminder of the consequences of an erroneous classification. (Warning: not for the faint of heart.)
Google is an application platform, a point I made in my 2005 monograph, The Google Legacy. That research study is germane today. I amplified my analysis of Google’s technology in two subsequent studies, pointing out that Google’s technical open source information supported my assertion that Google was a disruptive force in such business sectors as enterprise software, financial services, and commercial publishing, among three or four other business sectors. The importance of this point was mocked openly by telecommunications executives when one of the consulting firms for which I work as an advisor trotted me around to review Google’s telephone inventions in 2006. I wonder how many of those executives are laughing now? Google is not just a disruptive force in the telco space, the company is in a position to give Apple a run for its money in the broader mobile device sector. This idea is probably not too amusing for Apple. In fact, Google teamed up with Sony to get some steroids in its distribution and content arm for the coming dust up.
Wild animal or pet? Source: http://www.wamajama.com/wamajama/wp-content/uploads/2008/09/siegfried_roy_tiger_1_r.jpg
Now back to the GigaOM write up.
Here’s the problem. I agree that Google will have even greater disruptive impacts on the media sector. But media is just one business sector that Google will jostle. The author believes that defining Google as a media company sums up that wild and crazy bunch of physicists, mathematicians, computer scientists, and smart folks. That’s a very big mistake. The reason is that a media company draws a ring around Google and says, “Here be the dragon.” Wrong. The circle identifies one of Google’s dragronettes. Seeing Google as a dragonette leads to the misperception of Google as a dragonette breeder. A person involved in online retail could take the media company definition to heart. That person might then overlook what the Google is doing with its financial back office system. Sure, Checkout is visible, but it’s a weak sister compared to eBay’s PayPal or the Amazon machine. Or, is it? Kevin Kelleher, like those telco executives, would not ask the question, “What is Google?” Heck, Google is a media company, maybe a next generation outfit like Hanna Barbera Studios or the Peoria Journal Star.
Get that classification wrong and you may — no, strike that – will be blindsided as Google uses its platform to probe, disrupt, and exploit a broader range of market sectors. In short, those who misclassify run the risk of seeing the tiger up close and personal as Roy and Siegfried did. The results may not be for the squeamish.
Stephen Arnold, September 22, 2009
What If Google Books Goes Away?
September 21, 2009
I had a talk with one of my partners this morning. The article in TechRadar “Google Books Smacked Down by US Government” was the trigger. This Web log post captures the consequences portion of our discussion. I am not sure Google, authors, or any other pundit embroiled in the dust up over Google Books will agree with these points. That’s okay. I am capturing highlights for myself. If you have forgotten this function of this Beyond Search Web log, quit reading or look at the editorial policy for this marketing / diary publication.
Let’s jump into the discussion in media res. The battle is joined and at this time, Google is on the defensive. Keep in mind that Google has been plugging away at this Google Book “project” since 2000 or 2001 when it made a key hire from Caere (now folded into Nuance) to add a turbo charge to the Books project.
Who is David? Who is Goliath?
With nine years of effort under its belt, Google will get a broken snout if the Google Books project stops. Now, let’s assume that the courts stop Google. What might happen?
First, Google could just keep on scanning. Google lawyers will do lawyer-type things. The wheels of justice will grind forward. With enough money and lawyers, Google can buy time. Let’s face it. Publishers could run out of enthusiasm or cash. If the Google keeps on scanning, discourse will deteriorate, but the acquisition of data for the Google knowledge base and for Google repurposing keeps on keeping on.
Second, Google might agree. Shut up shop and go directly to authors with an offer to buy rights to their work. I have four or five publishers right now. I would toss them overboard for a chance to publish my next monograph on the Google system, let Google monetize it any way it sees fit, and give me a percentage of the revenue. Heck, if I get a couple of hundred a month from the Google I am ahead of the game. Note this: none of my publishers are selling very many expensive studies right now. The for fee columns I write produce a pittance as well. One publisher cut my pay by 30 percent as part of a shift to a four day week and a trimmed publishing schedule. Heck, I love my publishers, but I love an outfit that pays money more. I think quite a few authors would find publishing on the Google Press most interesting. If that happens, the Google Books project has a gap, but going forward, Google has the info and the publishers and non participating authors have a different type of competitive problem.
Third, Google cuts a new deal, adjusts the terms, and keeps on scanning books. Google’s management throws enough bird feed to the flock. Google is secure in its knowledge that the future belongs to a trans-national digital information platform stuffed with digital information of various types. No publisher or group of publishers has a comparable platform. Microsoft and Yahoo were in the book game and bailed out. Perhaps their platforms can at some point in the future match Google’s. But my hunch is that the critics of Google’s book project are not looking at the value of the information to Google’s knowledge base, Google’s repurposing technologies, and Google’s next generation dataspace applications. Because these are dark corners, the bright light of protest is illuminating the dust and mice only.
One theme runs through these three possibilities. Google gets information. In this game, the publishers have lost but have not recognized it. Without a better idea and without an alternative to the irreversible erosion of libraries, Google is not the miserable little worm that so many want the company to be. Just my opinion.
Stephen Arnold, September 21, 2009
Google Gives News Corp. an F in Financial Reasoning
September 19, 2009
I have been busy making videos. As a result, I have been taking direction from a film maker and hassling the goslings for a punchy script. In a few weeks, the videos will be available without charge, and you will see me, the goslings, and a surprise nerd floundering as we try to make complicated stuff simple.
As a consequence, I have fallen behind in my reading about the dust up between Google and the publishing industry. I did read with considerable interest a write up in Maximum PC. I used to buy the magazine, but my recollection is that the last issue cost $6, maybe $7. When I worked at Ziff, I used to get PC magazines free. Well, those days are gone, so the publishers have to find new ways to earn money to pay for their Yacht Club memberships. The New York City outpost is across from the Royalton Hotel in what has become an upscale street in the last decade.
Image source: http://riverdaughter.files.wordpress.com/2009/03/report-card-f-011409l.jpg
“Google CEO Spurns Murdoch’s Paid Content Plan” grabbed my attention. I like the word “spurn”, which means to me to reject with disdain; scorn; to treat with contempt; despise; and to kick or trample with the foot. I used the word with the “foot” sense in Ms. Sperling’s English class and earned her disdain. (She did not know the “trample with the foot” meaning, and I did. Snort.) Maximum PC’s story wrote:
He believes that it is highly unlikely that internet users will be willing to pay for accessing general news items on the internet given the nimiety of free news sources on the internet. “In general these models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity. So my guess is for niche and specialist markets … it will be possible to do it but I think it is unlikely that you will be able to do it for all news,”
If true, Google seems to perceive that News Corp.’s financial wizards have earned an F in financial analysis from Google’s Singularity University. Here in Harrod’s Creek, my neighbor would just say, “Ain’t got no clue.” I like the “spurn” word, however. Both Google and my neighbor would agree on one point, I believe. An F in financial analysis. Does News Corp. care? Does Google care? Nope, two ships passing in the night. One is the Titanic. One is a nuclear powered destroyer. Which is which?
Stephen Arnold, September 19, 2009
Google Publishing Paperbacks
September 17, 2009
I read on the Digital Trends Web site a story titled “Google to Reincarnate Digital Books as Paperbacks.” You should read the full story. It provides the spin that most Google watchers expect. The idea is that Google will hook up with an on demand publishing outfit and generate softbounds (paperbacks) of public domain titles.
Sounds good. Seems to be semi-useful.
Based on my research for Google: The Digital Gutenberg, Google is taking another tentative step toward its Hollywood studio approach to information. You can get more detail in my new monograph, available as part of my Google trilogy or as a stand alone report.
I find it interesting that few in the publishing industry understand that Google can go directly to an author, cut a deal, publish, sell, and otherwise make use of * original * content. What will this do to the traditional publishing industry * if * – note the “if” – Google exercises this option? Disruption is too modest a term for the effect. I document the Google effect in my first Google study. Now the publishing industry can experience the thrill of its potential.
Stephen Arnold, September 17, 2009
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