Posted by: structureofnews | September 23, 2010

Best-Laid Plans

The Chicago News Cooperative is talking about plans (cached copy) to charge for content as part of its plans to become self-sufficient in five years.  It’s important, obviously, for non-profit (and for-profit) news organizations to move off a long-term dependence on grant money, and CNC’s plans to launch a series of niche news sites – and charge for them – is an interesting experiment.

Of course, it’s more than just an experiment – it’s a business initiative, not least for CNC and the people they hire for these sites.  So it’s not a bad time to review some of the issues that should be top of mind when looking at embarking on new ventures like this.

Like: Who’s the market?  What are your real costs?  What do you bring to the table? And how will you fend off the competition?

Not to single out CNC, since what they seem to be planning to do isn’t that different from what many others are aiming for.  And I don’t have any inside information about their initiatives.  But they’re in the news.

Among other things, they’re looking to set up a site that will to cover mayoral and other city elections – at $175 for a subscription – and another to cover education intensively, including providing news and analytical information about area schools, for a $2-a-week membership (ie, about $100 a year).

According to Crain’s Chicago Business,

The plan is to develop online “news interest networks” around topics such as politics, education, health care and the arts. They also are trying to set up more contracts for content sales and may soon sign one with a suburban news organization, which Mr. O’Shea declines to name.

Mr. O’Shea, who earned $1 in salary in CNC’s first year, estimates that a group of sites might draw 30,000 to 40,000 subscribers and generate $3 million to $4 million in annual revenue, enough to eventually support a newsroom of 30 to 40 journalists. He says he knows luring members won’t be easy, even though the fee is the cost of a cup of coffee each week.

That looks like it would more than double CNC’s current costs – not a small investment, and a fairly big risk for an organization to take.  Of course, one of the advantages of the web is the ability to adapt relatively quickly if things don’t work as planned, and I don’t think anyone is suggesting they bulk up immediately.  But it’s worth exploring some of the questions that come to mind on reading the piece.

  1. What’s the real market size – who are the potential customers, where are they, and what can they be reasonably expected to pay?  How hard is it to reach them?  I was once involved in an online newsletter project that offered information about China manufacturing; there’s clearly a huge potential market out there for that information, but it’s widely dispersed – and reaching them (in pre internet-everywhere days) was the big obstacle.  CNC doesn’t have the geographic issue, but it does need to have good market research on who might be interested in these services and how much anyone might be willing to pay.  And how well they’re currently served by other providers.
  2. What are the real costs?  Not just the content creation costs, but things like marketing, customer acquisition, customer support costs?  Those numbers can balloon very fast.  What will it cost CNC to acquire 30,000 subscribers?  In some cases, it may cost more than a year’s subscription to get a subscriber.  (There’s still value there, if there’s associated advertising revenue, or the average subscriber stays on for a number of years, but that means you can’t book 100% of the subscription revenues).
  3. What’s your real competitive advantage?  Desire and hard work count a lot, but lots of people can offer desire and hard work, too.  Do you bring something unmatched or unmatchable to the table – experience, knowledge, contacts, technology?  What’s the current competition like – not just in terms of direct competitors, but also in terms of how the needs of potential customer are currently being met.  How much of an advantage will a well-known brand really bring?
  4. What are the barriers to entry?  If you’re successful, how will you fend off the copycats/carpetbaggers?  For example, if you can build a community – quickly – then that raises the switching costs of your customers and makes it harder for someone else to get them.  But if the business is based on providing cleaned-up and sorted public data to readers, what happens if the government starts providing that for free?  If you’re leveraging knowledge of a sector or industry, what’s to stop someone else with similar knowledge getting jumping in as well?  (That’s one reason I’m big on journalist-fed databases, which I believe can become strong competitive advantages and barriers to entry.)

And, of course, those are just some theoretical issues that need to be grappled with; and there’s the much more critical issue of execution – can you do actually do it, and how good a job can you do?

None of this is to suggest that CNC hasn’t thought this out; I have no insight there. This was just a handy excuse to delve into the planning and thinking behind business initiatives.

Thinking big and coming up with big ideas is great – and we shouldn’t let bean-counting kill innovation.  But we also have to distinguish aspiration from business plans.


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