Newspapers and the Burger King mentality. How would you like your news?

It has been a little while since my last post. I have been busy but also have been doing a lot of research trying to make sure my other posts were still with merit. What is amazing to me is how much is going on in the newspaper industry right now and how much of it has to do with sustaining a profitable online news model. The last three years has been an intense one if you are in the news business. So many theories, so many readers’ requests, so little help from our economy. I believe the news business has been spinning mostly in circles not because the executives are slow to adapt to new technologies as many of the new media experts gripe. On the contrary, the news business has been too quick to adapt. Let me use Burger King as an illustration.

In the late 1970’s, Burger King introduced the “Have it your way” campaign. It was a smashing success. It told customers that if they didn’t want onions they don’t have to get onions. You could actually tell the person taking your order the way you wanted your burger as if you were at home preparing it yourself.

There were limits. You couldn’t tell them you wanted a specialty bun or spear pickles. They wanted you to know they would make the burger the way you wanted but still had profitability concerns. They still wanted to make money on their Whopper.

Today in the news business, we are like Burger King without the limits.

How do you want your news? Facebook? ok, email? ok, twitter? ok, without ads? ok, iPad? ok

We haven’t even paused to make sure we can make money doing these things. In fact, the odds are stacked against us. I personally have yet to see a sustainable, profitable online model.

(I will get to some of the reasons on a later post – trust me it is good stuff)

So if Burger King was able to innovate and still tell the customer there are limits when it comes to profitability, why won’t the news industry? Why is it that billions of dollars are being invested in new media ideas without any real hope of sustained profitability?

I believe change is coming. It started last week with the paywall announcement. It may be fun to bash newspapers but the truth is that the profitability is still in the printed product. Soon these newspaper executives will move off the Burger King mentality and perhaps take up Wendy’s popular “Where’s the beef” campaign. But instead of looking where the beef is they will be looking for the over-hyped, under-delivered very difficult to find new media profitability.

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20 Comments

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20 responses to “Newspapers and the Burger King mentality. How would you like your news?

  1. I think it’s dangerous not to meet your readers in the online spaces where they spend their time. The average online user of your newspaper web site probably spends a total of 10 minutes on the site in an entire month. She spends about 360 minutes on Facebook.

    I don’t know precisely how you would meaure the benefit of your newspaper engaging on Facebook, but I do know the cost of not doing so — irrelevancy.

    • Jeff- I’m not saying we ignore new media or facebook. I’m just saying that switching to the new media model because that is how readers want to receive the news doesn’t make it a good idea. You understand that many people think this is the future of news, right? I am just contending that it doesn’t work. I would love to have Hawaiian bread (have you ever had it? It’s really good) on my Whopper. That doesn’t mean the executives at Burger King need to go through hoops to get it to me. And if they were dumb enough to do it, wait till I tell them I won’t pay for it!

  2. News content has been decimated to pieces due to online, and there’s an ongoing metamorphosis for re-constituting new bundles, but this will happen outside of the walls of the traditional vertical newspaper model.
    In my opinion, it will be very hard for most newspapers to be the jumping point for news personalization. That train has already left.
    The consolidation will continue to happen with only a few large survivors (NYTimes, WaPo, et al), and all remaining ones will fight over being the hyperlocal/local bastions.
    Indeed, there has been a disconnect between how users want to consume news, and how newspapers have been publishing news.
    That said, personalization needs vary widely and you need a personalization platform which newspapers don’t have.

    • Personalization and quality content are not guaranteed. Quality content costs too much money. This is my point. If you want quality news you have to give up some personalization. It’s the way of the free market. It’s why paywalls are going up. The news consumer can’t have it their way.

  3. John,

    Allow me to torture your metaphor for a moment:

    I think the flaw in your argument is that no one is offering free hamburgers with unlimited customization down the street from Burger King. If they were, BK would have to give away free hamburgers too and then figure out how to make money from delivering a different kind of value.

    That’s what newspapers need to do. In fact, I believe that it is possible for online-only news media to be profitable. But they can’t be built off the traditional media cost structures.

    You’re right, print will continue to be profitable, especially in smaller markets, for a while longer. But you must think longer-term.

    • Judy- thanks for going at the metaphor. I’ve been a fan of yours for awhile. My point isn’t just the “free” element of the news – it is how it is delivered and whether news organizations’ answer to the crisis is to deliver the news anyway the reader wants. If a hamburger joint did go with a free burger – it better be better than the one Burger King sells for a profit. This is the problem. In many cases the free news is better than the paid news. I know the newspaper industry has a crisis – but I believe it is all about relevant news and distribution – not about printing and distribution costs. If the industry can solve the relevant news side, I believe distribution takes care of itself – as do the profits.

      I have been investing heavily in the new media side and we want to win in this arena too. I just want this blog to answer the new media experts who claim print is dead. I believe print has a better chance to survive in the news business than most experts think.

  4. “We haven’t even paused to make sure we can make money doing these things.”

    I don’t know how YOU do it, but I can assure you that WE pay very close attention to our online operating margins.

    The only way you “make sure” you can make money on the Internet (or anyplace else) is to plan, then work the plan and measure the results. You learn by doing, not by pausing. An untested plan proves nothing. We need to do more of it, not less.

    Several years ago, with the help of a bunch of grant money, the American Press Institute commissioned a project to help the newspaper industry learn to innovate.

    The advice from the Harvard consultants brought in for NewspaperNext was succinct: Be patient for scale, but impatient for profit. Be willing to fail, but fail cheap and learn/revector quickly.

    If you fail to try, you defeat yourself before you begin.

    “In fact, the odds are stacked against us.”

    Why? The odds are no more stacked against us than they are against anyone else, and plenty of people are making tons of money online.

    Business is a tough game. Some win, some lose. If you’re not making money online, maybe it’s not online’s fault.

    “I personally have yet to see a sustainable, profitable online model.”

    Google (among many others) would demonstrate otherwise. They’re running a 35 percent operating margin on $23.6 billion of annual revenue, and they grew 17% last year in the middle of a brutal business recession. I don’t think they’re going away.

    Of course, they’re not an “online newspaper.” But that’s exactly the problem: most newspaper people look at the Internet and see a virtual printing press. That’s not what it is.

    “I believe change is coming. It started last week with the paywall announcement. It may be fun to bash newspapers but the truth is that the profitability is still in the printed product. ”

    According to your bio, you run an ad-supported printed newspaper that’s distributed free. Sounds like the same model as is practiced all over the Internet today, although with a higher carbon footprint and higher capital requirements.

    Print does have some advantages, mostly having to do with serendipitous discovery through placement of a physical object. But in the United States at least, it comes at a cost that pretty much eats up the 10 billion dollars that it brings in every year in circulation revenue.

    Rupert Murdoch has made a lot of noise about paywalls. I’ll believe he’s sincere when he puts a paywall in front of ALL of his content, including Fox News, Marketwatch, Sky News, his 27 free over-the-air TV stations, and his slimy tabloids.

    • I really appreciate this great post. Why does it have to be new media or print? This blog is really about print’s survival. My humble response:

      a. I would love to see these operation margins you talk about. I’m serious here. I don’t believe it. Most of the “profitable” margin sheets I have seen would make the Enron auditors proud. You have to ask the question – if our core product (newspaper, TV,whatever) went away – would we make money AND would we be as relevant without these core products reach and influence? I think the Seatle P-I one year update proves the model is broken. Down to just 20 journalists and still not profitable.

      b. The google example is very weak. My point here is only an aggregator can produce margins because they dont have to create new content. Content is expensive. Plus there can only be one Google. Brilliant model. Brilliant company. Both printed newspapers and Google and online bloggers can co-exist.

      c. You have some great outlooks which have no doubt made you successful. “you learn by doin” “make a plan” “measure the results”,etc I’m with you and this blog is about learning as much as anything else to me.Our model is different and it works. So I’m all for this.

      d. The carbon footprint argument, while politically correct, hasn’t been fleshed out yet. If newspapers go away and the internet wins…what is the footprint left by all these computers and server use look like? I really don’t know – do you?

      e. My model is different (and it works) but I sincerely hope the daily newspaper gets it right.

  5. Having read a number of such “how do we innovate” reports by newspaper teams during the 80s and 90s, one that sticks out is an old 1987 Hambrecht & Quist report penned by analyst Joseph Laird that persuasively argued that companies were no longer in the “news” business – but rather were in the “information vending” business. In that report, he laid out the factors that made companies like Bloomberg, Dow Jones and Reuters into perpetual money machines. The 35% operating margin leaps out as a number that was mentioned in the report – the report noted the importance of having a keen understanding of editorial, circulation and relationship assets in the community.

    IMO newspapers are hampered because web innovation looks more like roulette – letting a thousand flowers bloom, knowing that only a dozen will survive and perhaps one will be a future star in the making. I see what publishers are doing today with the iPad and I am reminded of the type of involvement newspaper publishers had with @Home, when the scope of interaction was based on Roger Black-fueled design smarts, rather than an exploration of how reader relationships would change in an era of always-on media.

    As far as Rupert Murdoch goes – it would not surprise me in the slightest if he were to launch another newspaper with national scope, tied into the WSJ circulation channel.

  6. Some of the biggest obstacles remain the lack of bona fide entrepreneurial experience in the leadership of most U.S. media houses.

    Bona fide meaning benchmarked and sustained.

    Show me a list of newspaper leaders who have start-up experience?

    Show me a list of editors-in-chief under the age of 40 running a newsroom in this country.

    Show me list of editorial types that have started businesses on their own, with their own money, and are still operating five years later.

    If I were the board, this is the list I would want to see first when looking for the kinds of ideas and talent that can spark agile business ideas around content creation, audience engagement and impact in the community.

    Oh yeah, I am on that last list. I just want to know who else might be . . .

  7. Judy, you’re close to why the Burger King analogy breaks down.

    Here’s another take: Barrier to entry.

    If I want to open a burger stand to compete with Burger King and offer an unlimited menu (complete personalization of the hamburger), the cost of such a start-up is substantial.

    However, the cost of barrier to entry to compete with a newspaper, for the online start up, is virtually zero.

    That Schudson talk you linked to yesterday had a great take on news start ups.

    As for my news start up, I’m an experience professional, but I’m also a passionate amateur. By that, I mean — I’d like to think that I’m building a real, sustainable business. It obviously hasn’t reached the level that Mr. Garrett considers a real business or real journalism, and maybe it never will, but I think I’m likely to keep doing it so long as it makes me money. And that has got to be a real problem for my print-based competition. Not only does my site make it much harder for the print paper to switch to a paid model online, but I’m pretty confident they’re losing print subscribers as well.

    It’s called disruption. I’m curious to know if Mr. Garrett has read any Clayton Christiansen? In analyzing the incumbent print model vs. the inevitable disruption of low-cost-of-entry digital offerings, it’s important to have a deep understanding of disruptive innovation. Once you do, it’s damn hard to have much of a positive outlook for the future of high-overhead print products.

    Newspapers are just too damn vulnerable to competition from “good enough” disruptive up starts who face none of the legacy costs of the typical incumbent news organization.

    I’ve run sites for newspapers that had tremendous cash flow, but it still wasn’t enough to sustain the news operation as we knew it at the time, but I what I figured out was that if I could get that same cash flow without the news paper, then I could have a substantial news room — not as big as the newspaper news room, but such a news room is not needed for a online-only news product. Online is just so much more efficient for news production.

    The problem newspapers face isn’t that they’ve been giving their content away for free, but that they have no choice in an era when anybody can start a news operation for little or no money.

  8. Howard Owens wrote:

    “The problem newspapers face isn’t that they’ve been giving their content away for free, but that they have no choice in an era when anybody can start a news operation for little or no money.”

    True, and a bigger problem is people don’t value what journalists have traditionally thought of as important (expensive-to-produce) journalism. I think this is especially true in the online medium.

    A feature on an important aspect of government policy that directly affects peoples’ lives is unlikely to get as many page views as breaking news about the crime ‘o the day.

    The economic logic becomes clear. Produce less substantive journalism, and more cheap, easy, jolty stories.

    Judy Sims wrote:

    “…. I believe that it is possible for online-only news media to be profitable. But they can’t be built off the traditional media cost structures. ”

    By that, does she mean paid employees doing serious journalistic work?

  9. Bill Doskoch wrote:

    “True, and a bigger problem is people don’t value what journalists have traditionally thought of as important (expensive-to-produce) journalism.”

    The fallacy is that journalism is expensive to produce. Good journalism is neither hard nor expensive. True, some stories can be expensive and hard and require experience and layers of editors, but the vast, vast majority of news is neither hard nor expensive.

    Journalists intent on clutching to old models, like a Titanic passenger clinking to a deck railing, love to claim that only the old model can support the kind of journalism a democracy needs.

    Reality is, however, it’s just not true. Especially now.

    More from Bill:

    “A feature on an important aspect of government policy that directly affects peoples’ lives is unlikely to get as many page views as breaking news about the crime ‘o the day.”

    To which I say, if nobody is reading your coverage of “an important aspect of government,” how is it serving democracy? How is it serving a greater public good? If it’s not being read, why is it important to produce it?

    But the fact is — people hunger for good government coverage. It’s just sad that newspapers haven’t been giving it to them. For us, the demand is high for our local government coverage, but a better example comes from the Ann Arbor Chronicle, which has become a must read for the people of Ann Arbor precisely because it provides lengthy, exhaustive coverage of public meetings. And, I hasten to add, at a cost structure much, much lower than a print newspaper.

    • I would agree with Howard Owens that much journalism is neither hard nor expensive to produce — if you’re what you’re talking about is spot news.

      I would note that many of the older Canadian newspaper chains that operated monopoly, high-margin papers in small markets were resolutely focused on providing cheap news. Accountability journalism was for suckers.

      The greater the journalistic effort to get to the story, the more it costs. Cheap news used to subsidize the higher-value stuff for newspapers. Nowadays, the world is awash in cheap news.

      Owens again:

      “Journalists intent on clutching to old models, like a Titanic passenger clinking to a deck railing, love to claim that only the old model can support the kind of journalism a democracy needs. ”

      Well, the Toronto Star had 16 people in the Ontario provincial budget lockup on Thursday. The Globe and Mail about 7 or 8, The Canadian Press had 6 — etc., etc.

      I was there for ctvtoronto.ca, and two of my CTV Toronto TV colleagues were there.

      I didn’t see a table or two reserved for pure online ops. Didn’t get pointed to much such coverage afterwards. I’m fairly active on Twitter (@billdinTO) and follow 560 accounts. There are currently 43 on my Toronto-ppl list (which is incomplete; I never use lists, so I haven’t fully fleshed it out. Also that’s just people, not t-dot news feeds).

      But while our stats were pretty good for our budget coverage, I didn’t see a lot of chatter about the budget on Twitter.

      Owens wrote:

      “To which I say, if nobody is reading your coverage of “an important aspect of government,” how is it serving democracy? How is it serving a greater public good? If it’s not being read, why is it important to produce it?”

      I would suggest journalism isn’t always about stats. If an article on an important topic is read by a small number of the right people, it can have a disproportionate impact. I think that was true prior to the Great Disruption, and remains true today.

      But you have to pick your spots and be in tune with your audience — especially if you have limited staff.

      I’m glad Howard Owens is fulfilling a need in Batavia, and I’ll have to check out the Ann Arbour Chronicle.

      I would note that Ann Arbour has a pop. or 114,000, according to Wikipedia. Batavia has a pop. of between 16,000 and 17,000 (ibid).

      Toronto is a market of 2.6 million, with a regional population of more than 5 million. It is widely regarded to be one of the the most ethnically diverse cities on earth — and one of the most competitive news media markets.

      I don’t know if what works in Ann Arbour or Batavia necessarily applies directly to Toronto.

      • Bill, maybe we should define accountability journalism.

        Is it going to public meetings and staying on top of what elected officials are doing? That’s not expensive, but important to democracy.

        Is it filing FOIL/FOIA requests — depending on the scope of the enterprise piece, it can be either very cheap or very expensive. The expensive kind of investigation is actually rather rare and the typical journalist will never even touch that kind of work once in his or her career.

        Is it having bureaus overseas or in the state capitols? It can be, and let’s hope that news organizations continue to do those sorts of things, but they are not — and should not be — the kind of thing a local publisher worries about in a direct, business model manner.

        Me and my little shop, I think we can do 97 percent of the accountability/watchdog journalism that needs to be done for our coverage area (which is 60,000 people).

        There is a piece I would like to do that would cost me about $300 in public documents. At this point, I could actually, maybe, afford that kind of outlay, but the problem is, I’m not sure I’ll have a story at the end of the investigation. A news org with a bigger bankroll can afford that kind of risk. I can’t. Perhaps that’s a failing of the low-cost model, but I also believe that if we stick to the disruptive roadmap, eventually we move up market and can afford bigger projects.

        As for scaling to cover Toronto — lovely city, btw — I see no reason a disruptive news model can’t scale to meet the needs of a large metro area. Yes, there will be things that will need to be done differently, and pure bootstrap will be much tougher to pull off, but I have not doubt it can be done.

        Any business can be disrupted by low-cost competitors, given the right technology and opportunity.

        Please excuse any typos — I type fast and am always in a hurry.

  10. Toronto’s size doesn’t make it any less valuable as a disruptive target for a pure-play online newsroom.

    In fact, scale, works in the pure-play online CEO’s favor.

    Just look at how a lean, pure-play newsroom is disrupting a 112-year-old news operation with surprising ease.

    http://mashable.com/2010/03/23/future-newsroom/

    This phenom won’t go away. It will come to Toronto. As you pointed out: The demographics are too rich to ignore.

    • Robb:

      I’m not under the illusion that Toronto’s media ecosystem will remain as it is for eternity.

      There are two pure online ops (http://torontoist.com/, http://www.blogto.com/) that have carved out good niches for themselves mainly by serving the young urbanite market.

      I blogged about them here – http://bit.ly/bIzS1t

      A relatively recent addition is http://www.mondoville.com/. There’s also Toronto-based http://www.themarknews.com/, but it’s not really about Toronto.

      I would say that in addition to the trad news outlets, there is a very vibrant ethnic news media in Toronto.

      But there are still places in the city that don’t get much coverage. I see a role for locally controlled non-profits there.

      However, if some clever web people with good business sense and an eye for a niche get going, it could well make life even more uncomfortable for the established players.

      You can’t touch the Toronto Star in this market for the ability to full-court-press a major story or to do deep journalism, but the question remains as to how much of a commercial advantage those might be in a short-attention-span world.

  11. Pingback: This Week in Review: The iPad’s skeptics, Murdoch’s first paywall move and a ‘Chatroulette for news’ » Nieman Journalism Lab

  12. dang amazing story man.

  13. If only more than 30 people would read this..

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