The News Value-Add Scale


February 9, 2011

At some point people started calling news a “commodity.” The word implies that information has value but its sources are interchangeable and that all news products have the same value.

This is not true. In fact investment in news products have a clear value-add scale and innovation and investment has consistently gone to either ends of this scale.

News products are much more complicated than say, winter wheat, an actual commodity where one bud is pretty much the same, whether it is produced in Nebraska, Ukraine or Australia.

Commodities are also usually component parts of finished goods, like wheat is for bread. Most news products, on the other hand, are finished goods and as such have distinguishing characteristics. For instance, a Sunbeam bread factory may churn out thousands of identical loaves of cheap white bread every day while your pricy neighborhood baker may produce five or ten dozen loaves of expensive French bread a day. These are clearly are two very different things.

News products can be differentiated by the level of effort required to collect information, assimilate it and present it to the reader in a useful way. This differentiation is the value-add provided by the news publisher. Sometimes the value-add is produced by a technical solution, and sometimes the value-add is produced through reporting and analysis.

The News Value-Add Scale. Click to enlarge.

For instance, once a licensing or access fee is paid to the National Football Association or NASDAQ, any new enterprise can obtain real time pro football scores or stock quotes. There is very little reporting work necessary to obtain it. However, the scores and quotes are probably delivered as raw data, and it is up to the news enterprise to organize the huge volume of football and market information in an understandable, meaningful way. ESPN.com and Yahoo! Finance have created successful news products by presenting this raw data in a well-designed, useful manner.

People read ESPN.com and Yahoo! Finance because they need specific information about narrow topics. These news products serve a clear, specific need, one that is clearly identified by their readers, such as “I need to follow my fantasy football league,” or “I want to know how much money my portfolio made today.”

On the opposite end of the spectrum are investigative reporting news products. Major daily newspapers like the New York Times, Wall Street Journal and The Washington Post market themselves by occasionally producing major, groundbreaking news stories. The resulting stories are heavily marketed with the message, “Read us so you don’t miss the big story.”

Few of these investigative reporting stories will directly affect the newspapers’ readers, the news stories serve to broadly inform and edify. Readers choose news products that focus on investigative reporting not because they need it, but because they desire to be edified.

From a business perspective, it is much harder to convince someone they desire something as opposed to serving a perceived need. ESPN.com satisfies a perceived need. The New York Times satisfies a desire.

The Stuff In The Middle

Between these two extremes lays beat writing. Once the backbone of news products, both the source of many investigative pieces and a way to edify readers, readers now have more specialized sources. For instance, auto columns have gone the way of cars.com.

For example, many daily newspapers used to house at least a dozen reporters who would churn out a story (or two) a day on crime, city hall, the state house, the theater scene, even parks and gardening. The constant search for new things to write about drove beat writers to report on all kinds of minutia. While individual reports were rarely groundbreaking, those who read the beat every day got a good sense of what was really happening in that interest area. Then, when real news broke in a beat, there was a paper trail of stories that served as a research base for reporters looking for the bigger story.

Where do you get that kind of information now? Blogs and single topic websites, like cars.com.

But newspaper columns still sound useful. And for those readers looking for edification on hard news topics, there’s still the Economist and NPR. Yet, the market has clearly demonstrated limited interest in paying for beat news.

Not incidentally, this middle space is where community weeklies, Patch.com and hyperlocals sit.

News Innovation Investment

News is a mature industry and as such, its innovation has been not in providing new kinds of news (although that mantle is sometimes claimed by social networking) but by added speed and complexity through new mediums, print to radio to television to 24-hour cable to websites, and so on.  For years news product innovations have been technical, allowing large sums of information to be assimilated and made understandable in ways they never were before.

Twenty years ago Bloomberg terminals were the biggest technical news innovation. They organized large sums of data in a quickly referenced and understandable way. Since then, most news innovations have been variations on Bloomberg’s accomplishment. Yahoo! Finance, ESPN.com, even Everyblock.com are efforts to compile data and redistribute in more efficient ways to those who need to find a needle in the data haystack.

“Is it scaleable?” is the question pushing most innovation efforts, since financiers want to know that their finance risk has a high possible return, in the millions of dollars. Scalability is why most news efforts to date have focused on national news products, and preferably ones with low overhead. The Huffington Post’s recent $315 million price tag is remarkable when one considers that its total paid editorial and sales staff are around 100 people.

Viewed through this lens, financiers will continue to look for the big, national news play with a high potential return.

As we look at the news value-add scale, items on either end of the scale are the ones most likely to receive national attention: big, blockbusting investigative news stories and highly repeatable delivery of raw data.

The stuff in the middle, not so much.  What about Patch.com? I’ve already covered that one.