The business model isn’t the problem
The problem that media companies are having isn't that they're still searching for the right business model, it's that their structure—the way the create and present content, and the way they structure their staff—is outdated, and doesn't fit with the business models that we already know are successful.
It's not easy to make money on the Internet, but neither is it filled with penniless hippies, writing only for the love of it. There are profitable sites, but they are structurally very different from traditional media organizations—even when they serve the same or a similar purpose. Media executives don't understand how to make their business fit the model, instead of the other way around.
There are a lot of success stories on the web: Sites that are profitable, sites that offer insight into important issues. But none of those successful sites is set up like a traditional newspaper1. And there's a good reason for that. The web isn't a newspaper, and neither is a tablet or a phone.
Business models that have worked include free with display ads, free with limited ads, subscription only, subscription for access to an app, and paywalls both porous and rigid. Each of these has proved successful—for certain values of success.
What those models have failed to support (again, with the exception of the New York Times) is a large newsroom covering a region or metro area the way a traditional newspaper would. And for the Times, the success has been slowing revenue decline, rather than increasing revenue—or, more crucially, profit. I submit, that's because it's an outdated model. The new reality is one of small teams covering specific topics as well or better than anyone else. Maybe there isn't a place anymore for the legacy costs and inefficiencies built into a 20th-century newsroom. That means fewer positions in the industry, which is a sad thing, but how much worse is that right now?
The example of The Daily is instructive. It couldn't decide if it was going to be a huge, ad-supported news organization or a small, subscription service that just gave the most relevant news2. So it was the worst of both worlds. People balked at paying money for content they weren't interested in—or could get for free elsewhere—and those who did pay didn't generate enough money to sustain reporting on a broad range of topics.
Indeed. as Nick Bergus noted in a conversation with me about this post, The Daily had a revenue stream that a lot of places would envy. But they were bound by the concept of a traditional newsroom, so their revenue couldn't cover the costs. When you have the management structure of a traditional media organization and most of your employees are involved in something other than producing content, it's going to be very difficult to succeed.
You need immense amounts of capital, and a tolerance for losing money in the short to medium-term, to start a huge news organization today. But a small site, with a small staff and focused goals, has a lot of potential and just needs a small amount of money to start. A great example is photographer Sean Reid's site, Reid Reviews. I'm a former subscriber, and if you're interested in a very specific type of photography (mostly what's classicly thought of as street photography) and photography gear (mostly rangefinders and rangefinder-like cameras, but not exclusively so), his site is fantastic. And because it's just him, he can make a living without a huge subscriber base. (Note: I have no idea how much he makes from it, but it's been going for more than five years, so he's likely not losing money on the site.)
The successes—Marco Arment's The Magazine, just to name one other, more recent—really do point toward viable options for the future, even if Marco lays out a convincing case that wasn't his intention or his desire. Small sites can get enough traffic that ads and sponsorships can make them profitable. Or sites that produce meaningful, interesting content can use subscriptions to pay freelancers or even staff, given a broad enough base.
What the successes haven't shown is that a big company that 10 years ago wanted profits to increase 10 or even 20 percent each year, and that has since done little to staunch the flow of blood aside from layoffs, can see its glory days return. Nor have they shown that a news organization that's top heavy and has a traditional corporate structure can thrive without making major changes.
There are some downsides to this, namely that it means popular, easy to produce, high-profit content will usually win out against the kinds of reporting newspapers have traditionally subsidized. Think big investigative projects, narrative stories, etc. But usually doesn't mean always. The success of Arment's The Magazine shows that there is an appetite for well-reported, well-edited, magazine-feature-length stories.
Has this been glaringly obvious to everyone in the world but me?
Except for the New York Times, which I’ll address later. ↩
I’m not saying that you can’t have ads AND sell subscriptions, just that the scale of the two approaches is different.↩