Posted on October 19, 2009 - by Janet Smith

New Business Models for Newspapers: Let the old one R.I.P.

Unfortunately, there are many intelligent, experienced, passionate professionals who are casualties of newspapers, many who recognize that the existing business model has been outdated for over a decade.  The old infrastructures’ revenue model is dying and should be; it is time to pay final respects, and allow the old model to rest in peace.  For many it was a great ride. 

After years of decline, the journalism profession needs to step forward with new models to pay homage to the past and ensure the future.  It is time to consider new revenue opportunities that scale so investigative journalists can do what they do best.  Learning from successful models in other industries is a reasonable starting place.

A famous business model was initially laughed out of the boardroom.  Literally, the CEO said he was going to change a very old established industry, raise the price per unit by 500% and change the distribution method.  And he would not invest the standard 10% in advertising, he would invest 1%. People would come to him.  The guffaws were from Maxwell House and Howard Shultz of Starbucks was the CEO.  

Another famous case involves Dennis Carter.  Dennis worked at a manufacturer midway in the supply chain squeezed by channel and distribution costs.  Demands for more power at less cost generated a lot of spreadsheets.  A marketing manager, Dennis evaluated business models and requested senior management to not only invest the equivalent of one factory’s production in their brand, but create a jingle.  As one can imagine, it did not go over well at first, but ultimately, Intel Inside was born.

What is the message?

• Disruptive technologies in old, established industries can generate new revenue streams.
• Alliances between similar and dissimilar entities provide interesting advantages.
• The distribution channel is king.
• Great ideas can come from anywhere.

Sometimes, a business model may be counter-intuitive and appear destructive to existing employees and management.   One of the most pragmatic and focused models ever executed is not even a searchable word by Google.

Channabalism, explained by Bryan and Jeffrey Eisenberg in Waiting for your Cat to Bark, is a basic fear felt by many executives and managers that one channel, or line of business, will steal business away from another. There are two facets to this fear: one tied to fears of consumer confusion and loyalty and one tied to managerial salary structures. A brilliant execution of channabalism, Amazon understood that brand alignment is stronger than channel alignment and created the brand that one could buy anything online. But Amazon also understood that books for example, were channel specific: people buy books in stores, online and at collector locations.  

Amazon delivered ‘Brand simply’, ‘Answer consumer demand’, ‘Make it easy!’ and ‘Align the channel.’  They created a profitable channel for book dealers allowing consumers to purchase 100% of books through their brand.

What’s the take-away?

Investigative journalism has great value for many future generations. Knowing that stories posted by reporters in Beijing, Washington or from the local courthouse are researched and validated is a tradition we need to trust will continue.  Although rich,the historical business model of news does not ensure the future of investigative journalism.

Other industries have jewels to draw upon.  Like Amazon, Starbucks and Intel, news sites seek what every business owner seeks: consistent growing revenue base, competitive advantages, happy customers who see results and repeat business. 

It takes courage to create new business models but ultimately it is worth it.