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The future of journalism

A study shows that a media business model adapted to digital reality is urgently needed

ilust 1negreirosAs technology advances at an increasingly fast pace, and with the triumph of social media, communication companies (and newspapers in particular) are in trouble because they have lost readers; this results in fewer pages and less advertising, culminating in cost-cutting. One of the most striking cases is the US daily The New York Times, whose sales were down from $3.5 billion in 2000 to $1.9 billion in 2012. Advertising revenue has plummeted by 64%. To understand where journalism is today, journalist Caio Túlio Costa analyzed the industry; based on the analysis, he is proposing a profitable business model for publications to survive in the digital era.

Costa is a professor at the MBA program entitled Journalism and Media in the Digital Era at the School of Advertising and Marketing (ESPM). He spent some time as a visiting researcher at the Columbia University Graduate School of Journalism in New York in 2013. In his study he identified the barriers erected by digital giants Google, Facebook and Twitter, and he concluded that traditional communication companies need to learn how to play with each other and not against each other.

Based on market examples and information, Costa proposes a set of three solutions to confront the crisis of journalism in the transition to the digital era by diversifying revenue flows and sources: the “paywall system” (charging for subscriptions to content); advertising; and production of services with added value. The last component is a term that the telecommunications industry uses to identify products that are not their main source of income. For newspapers, it refers to sub-products such as sponsored content, feature articles, newsletters and publications of books and services in sections, as part of cultural programs, for example. “There are companies that do a very good job of combining these three components, such as America Online, Google and Facebook, which use third-party content. But in general, traditional publications are still chained to the idea that they can solve the problem through advertising and subscriptions and nothing else,” Costa says.

082-085_Jornalismo digital_220Therefore, to ensure opportunities for good, critical and independent journalism, companies have to adjust to the new times. “It’s time to take another look at the business model for journalism that is used in the digital environment. Until now, this old industry has attempted to segue business practices from the traditional environment into the digital age. The world has changed, but journalism companies have not,” according to Costa. “Everyone is racing along at breakneck speed, while the old press is still as slow as molasses. This doesn’t work any more. Journalism must deal with a tumultuous environment, address the generation issue and bring in young people to lead and step in as editors. It’s time to start over – from scratch.”

Costa points out that society needs mediators, researchers, and fact checkers. “If journalists realize that they are no longer the protagonists of information and that anyone can create and distribute information these days, they will be able to deal with this new situation better. Journalists have the technique. They just need to know how to deploy it in a journalism business environment that has turned upside down.”

In his study, Costa analyzed the disconnect between the “traditional value chain” and the “new value chain” in the journalism industry. In the traditional value chain, the structure consists of editorial staff (reporters, photographers, editors, etc.), departments (management, finance, graphics and human resources), the sales unit (responsible for selling advertising space on printed pages) and the distribution unit (that manages the delivery of copies to subscribers and sales outlets). The new reality, reflected in the Internet, is like night and day compared to the traditional press.

Since the end of the 20th century, other players have been emerging: new telecommunications companies, powerful search engines such as Google, a large number of portals and bold gadgets such as smartphones and tablets, in addition to the omnipresent social networks such as Facebook, Foursquare, Instagram, Twitter and YouTube. Consumers now see themselves as protagonists, especially the digital natives (see box opposite), and they have become producers and distributors of information. “With the emergence of interaction in real time in networks, journalists, and hence journalism itself, have completely forfeited the role they bestowed upon themselves as the ‘fourth estate.’ Today, any individual and any institution has media power in the digital ecosystem,” Costa says.

The Internet has become a battleground. According to Costa, a study by the Boston Consulting Group shows that the lion’s share of the digital economy (over 50%) belongs to the telecommunications operators, followed by companies such as Google and Facebook (22%) and gadget manufacturers (14%). Journalism companies are at the bottom of the barrel, with just 7% of sales in the digital marketplace throughout the world.

Costa believes that journalism is hanging on to its role as moderator and is still relevant editorially speaking. However, now the role of journalists is a supporting one that will not eliminate their importance entirely, but the role does call for a change in how they operate. “The question is whether digital journalism companies will continue to bring in sufficient revenue to support writing with investigative capabilities. If they do not reorganize their business, there is no way they will have the money to pay good professionals. They need a profitable business model to stay relevant,” Costa believes.

In this new reality there is reason to ponder “post-industrial journalism,” an idea expressed by Christopher William Anderson of the City University of New York, Clay Shirky of New York University and Emily Bell of Columbia University, researchers who have come together at the Tow Center for Digital Journalism, one of the key references in Costa’s study. “Post-industrial journalism describes a digital media ecosystem that has broken away from the routine and rational processes through which large companies produce news. In a post-industrial journalism world, the production and consumption of news have moved from institutions to individuals,” Anderson notes in an interview with Pesquisa FAPESP. “Good journalism is still what it has been since the mid-20th century: information produced by organizations and individuals that are independent of governments and information that has been verified and that is honest and fair. The Internet has not changed this,” he adds. What has changed are the requirements for practicing good journalism.

According to Costa, the discussion on how to redirect the future of journalism in the digital universe means facing or going around roadblocks such as giants Facebook, Google and Twitter. Facebook is a problem. With 1.5 billion active users in 2013, whenever a Facebook page is opened, the journalism company loses the exclusivity of its content and immediately hands its readers over to the social network. Among other difficulties, this leads to a serious situation with advertising, which is also targeting these readers, who can also migrate to social media for a much lower price. The problem is: How do you keep the world’s largest social network at bay?

And so the Google issue is about the use of journalistic content in search results in order to market advertising on these same pages. On the one hand, newspaper content continues to enjoy prestige because it is credible and relevant. On the other hand, newspapers are not earning a cent from advertising on pages of Google hits. In this case, the dilemma of how to keep at bay the most famous web site with the most hits on the Internet resurfaces.

Next, the Twitter issue is relatively simple. Despite its popularity, users do not have to confine their interaction to 140 characters. On the contrary, conversations often open links to other places, and this creates a gap to the links of the pages of the newspapers themselves.

Costa again underscores the technology issue for reinventing journalism. To illustrate the situation: while Amazon took over The Washington Post (founded in 1877) for $250 million, Facebook bought Instagram (founded in 2010) for $1 billion. “Why are newspapers, whose brands are synonymous with credibility, not worth as much as digital companies that are still wearing diapers?” he asks. The answer from his study: Newspapers are not investing enough in technology – one of the prerequisites for finding pathways to digital journalism. They have to invest in multimedia content that can work on smartphones, tablets and a large number of social media sites, in addition to the web. “Transposing the newspaper product to the Internet isn’t enough. It has to be revolutionized in the digital spectrum. And the natural path has to be based on technology,” he concludes.

Changes in the value chain in the communication industry (nº 2013/04486-5); Grant mechanism Post-doctoral research grant abroad – Regular; Principal investigator Caio Túlio Vieira Costa – ESPM; Investment R$33,025.40 (FAPESP).

Scientific article
COSTA, C. T. Um modelo de negócio para o jornalismo digital. Revista de Jornalismo ESPM. April/May/June 2014.