eBay Founder Launches Paid News Service

With all the talk of the death of old media and the possible saving of the business by the iPad and/or Kindle it is great to see that at least another revenue-generating model is on the table for pundits to evaluate. Yesterday Civil Beat was launched with the idea being that people will be interested enough in local Hawaii news to shell out an introductory monthly price of $4.99 which goes up to $19.99 after month one. So basically what we have here is an interactive news site which charges $240/year. The Wall Street Journal online, a news source I consider to be one of the best in the business charges $1.99/week or just over $100/year. And by the way, their coverage is global and their news often can’t be found elsewhere.

Obviously Civil Beat is not a new media model but it does seem to be one of the only times a new media venture has launched online where they believe people will pay super-premium prices for an unknown brand. And this move comes at a time when super-established media companies can’t get enough paid subscribers to generate profit. New York’s Newsday, a newspaper with a circulation north of 370,000 per day tried to generate revenue from its content online, put a pay wall around it and after three months generated only 35 subscribers. You have to have incredible confidence to launch a new media company with a super-high pay wall today. And perhaps the reason for this confidence is the person behind the Civil Beat venture, eBay founder Pierre Omidyar.

As the CEO of a media company I should explain why some in the media business are struggling – at least from where I sit. Let’s take newspapers and magazines as an example. In both cases, the fixed costs associated with printing and distribution is millions, or even hundreds of millions of dollars per year. As more marketing dollars move to the Internet, the premium paid for eyeballs has dropped dramatically because of the massive amount of supply online.

For example if a company wanted to reach people in a specific city they used to have to run a local TV, radio or newspaper ad. Now they can reach these people via ads on massive amounts of web content – blogs, news sites, etc which attract people from all over the world. Search engines and social media sites are examples of where a great deal of this ad spend has gone. The same goes for magazines serving specific markets – not geographies… If an automobile magazine publishing company has an expensive New York office with hundreds of staffers and auto blog can get the same readership online with a handful of writers, guess what happens to online industry ad rates – they go down. The challenge for old media is paying for super-expensive legacy infrastructure and people of the past in an age of new media which is quick and nimble.

There is more to it of course. The old media companies for the most part still don’t understand how search engines work. Sure they have people who do but their centralized businesses strategies don’t take this into account because the people at the top don’t know enough about the inner workings of new media. This is also the reason why few of them have figured out how to build new products which help their customers with social network strategy or search engine rankings – they are more or less selling banners and buttons, not aware of how technology has evolved this past decade to allow media companies to provide customers with new and exciting solutions which are more aligned with today’s marketing budgets.

But Omidyar is obviously tech-savvy and dare I say has changed at least one major paradigm in his career. Can he be successful in a new venture which relies heavily on the communities he serves to frame the news content? If I was a betting man I would say the current model of charging $240/year for news will never ever work. So he will have to scale that back to perhaps $.99/week at most- even then, he is going to have super-compelling news to make anyone pay for it.

We live in an age where news travels at the speed of light and often hundreds if not thousands of news sites will write about similar stories. If Civil Beat does become successful, what is to stop a blogger to write similar stories which are available for free?

Somewhere in the mid-nineties, TMC had a very successful enewsletter business where subscribers signed up in large predictable numbers each day. They never deviated. One day we decided to ask demographic questions on the newsletter form to better understand our audience. Overnight our new subscription rate decreased by 96%. And that was when people had patience for filling out forms. We immediately took away the demographic questions and I learned that it is not only extremely difficult to get people to pay for news, they don’t even want to fill out any demographic info to get a newsletter.

The trend from that time until today has been quite clear to me and as a result I am a firm believer that news has to be sponsored or paid for with ads. TMCnet has never charged for news and we never plan to. We have found that if you attract a valuable audience of people who purchase products, advertisers see the value in paying to interact with your global community. The question is will the people of Hawaii have enough extra money in their accounts and desire for interactive local news to prove me wrong?

What’s your opinion on the success of Omidyar’s new venture?

For more, here is the company’s approach to news:

Welcome to Civil Beat. We’re glad you decided to join us.

I’d like to tell you about the journalism you can expect to find here from our team of reporter-hosts. It’s different. And I’m excited to begin talking with you about it before we start publishing articles on May 4.

We start this news service with the belief that we’re here to serve you. That means our daily work is to ask the important questions citizens might have in the face of the complex issues facing our community. And to answer them in a way that helps members reach an informed opinion, based on our reporting and the discussion that will take place as we together create the new civic square.

You’ll find that our initial coverage is centered around five fundamental beats: Hawaii, Honolulu, Education, Land and Money. For each of these coverage areas, we have identified critical issues – and now that you’re here we hope you’ll help us sharpen our focus.

A good example of what I’m talking about is Education, where student achievement and accountability will be at the heart of reporter-host Katherine Poythress’ efforts. Or Hawaii, where reporter-host Chad Blair will explore the impacts of one-party dominance and homelessness. On the Honolulu beat, reporter-host Treena Shapiro will delve into the rail project and city planning, essentially the shaping of the future of our community. On Land, reporter-host Michael Levine, will examine land use decisions and their impact today and for future generations. As we weigh possible solutions to the most pressing challenges facing our community, we think understanding the economic impact of policies is crucial. That’s why two of our reporter-hosts – Noelle Chun and Katherine Nichols – will cover the Money beat. There’s a saying that guides investigative reporting: Follow the money. That’s what we’ll be trying to do on all our beats, but it’ll be their focus. They’ll answer who benefits, and
who is hurt, and whether decisions are in the best interests of our community.

How will we do this to best serve you? First, you’ll be part of the process. You might have noticed that we’ve opened the doors to this new civic square without putting up any news articles. That’s different – a news service without news, at least initially. It’s intentional. We want to begin by talking with you about what we’re doing, to hear what you want from us and what you think we should be asking. We believe conversation and civil debate with our reporter-hosts and with other members is central to what will make Civil Beat valuable. And we want you to see that the core of our service isn’t the article itself. Of course, incisive news reporting soon will be an important part of what we offer. But at the heart of our service are pages dedicated to providing you context and understanding about the issues you need to know about. These “topic pages” are living pages. They’ll grow over time, with your help. We know you’re busy and that our job is to help make it easy for you to learn about and truly understand what’s going on, and what you might be able to do about it. With our approach, you should be able to find the background you need when you want it, without having to surf thousands of pages of documents or make numerous phone calls to unearth what should be readily available to you.

As we do our reporting work, we’ll share our experiences, using Twitter and a blog-like approach on each beat. We’ll bring you along, we’ll point out important developments, and ask for your help and your thoughts. When we’ve come to our own conclusion about an issue, our editorial board will let you know what we think. We think it’s important to take a stand and propose concrete steps, even if you won’t always agree with us. We hope that by sharing our point of view, it’ll help you sharpen your own thinking. Of course, we’ll be inviting you to do the same with us. We believe civil debate and discussion are essential parts of good journalism, and a positive way to create a better community. And that even goes for our reporter-hosts, who’ll be free to let you know when they disagree with the board, just the way you might.

Our journey together has just begun. We hope you come to see this news service as an essential guide to the ebb and flow of life on these beautiful islands. We promise that we’ll do our best to earn your trust and to live up to the promise of this place. Please never hesitate to let my colleague, Assistant Editor Sara Lin, or me know how we’re doing.

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