The true cost of free news (its more than you think)

By
Kirk LaPointe

The new Holy Grail is the online business model to sustain high-quality journalism. Everyone has an opinion on how to find it, and there are many questions inherent in this quest. For starters: Should news organizations again charge for their content? If not, will digital advertising sufficiently mature to underwrite the cost of journalism? If not, how will news organizations be financially supported?

Back and forth the discussion has gone in recent weeks, with essays, columns, blogs and Tweets batting arguments and data around. As part of the calculation on the necessary business model, several have attempted to determine how much online traffic, and at what rate for advertising, would be necessary to bankroll the output of a newsroom.

When the online editor of The Los Angeles Times noted recently that Web advertising revenue equaled the newsroom’s payroll, several commentators rushed to judgment and asserted that the Grail had been found.

What has been most missing in this debate about a new business model for journalism is an understanding of the existing business model. It’s important to understand the real cost of gathering and distributing journalism goes far beyond what a newsroom costs.

Many other areas complement and support the newsroom as part of the business. Among the few things that will not change in the new digital order are the functions that ensure journalism finds its audience elegantly, safely and intelligently.

Few calculate the cost of technology, its development and support. Content may be free, but the backbone and frame of the Internet hardly are. The gear and the pipes to run it reliably are no small ongoing investment.

Few look at the cost associated with acquiring advertising — they simply look at the gross revenue of sales, not the salaries and commissions against it, the expense of courting and keeping advertisers in the fold and the cost of make-goods and rebates when the ad campaign doesn’t satisfy.

Hardly any take into account the expense of marketing (no, you can’t build a large audience simply virally), internally through your brand and externally through other brands and media. The fledgling link economy might help exchange brand for brand, but those brands will be found at times through basic awareness marketing.

Want to employ people? You need guidance and support on human resources, a finance team to ensure bills are paid to and by you and to ensure you’re abiding the tax laws.

Ah, lawyers — yes, you need some good ones to keep your operation viable and some great ones to keep your journalism viable.

Presumably you’ve got to rent or own space to run your operation.

And then you have to pay to research, gather and create, well beyond your payroll. Not all information is free, and a newsroom buys a lot of information as a result. When it gathers, it often has to travel to that information and needs to be fed and sheltered when it arrives.

Speaking of payroll, don’t forget to attach benefits to those salaries in medical, dental and other costs to make sure you’re competitive, or else you’ll be spending more on recruitment — another cost few identify — because you’ll be churning through staff. And if you don’t spend smartly on recruitment, you’ll spend expensively on severance.

It is possible for many start-ups to sit out their community obligations, but not for long. Once a business matures it is expected to play a role in building its community through sponsorships and partnerships that spend in order to foster not only audiences but goodwill and brand equity.

Any effective organization has an extensive customer service component to work through complaints. Perhaps in the new media world there won’t be complaints about newspapers not arriving before 6 a.m., but there are bound to be complaints about other issues.

The most difficult calculation will come one day when organizations truly measure the cost of news online within a multiplatform newsroom. To date most newsrooms have simply had one editorial budget. But there will come a time when the allocation of expenses will need to measure the real resources placed against each platform — among other things, to determine how many resources overall are spent producing online content and what that constitutes as a percentage of newsroom expense.

In the enthusiasm to report online revenue against online expense, the former might be accurate but the latter often isn’t. Even for a pure-play online newsroom — forget about trying to cost-separate a multiplatform operation — the tally needs to reflect much more than the journalists on the floor.

Kirk LaPointe is managing editor of the Vancouver Sun, adjunct professor at the University of British Columbia’s graduate school of journalism and a J-Source contributing editor. He has blogged about this topic at themediamanager.com.