Technology

Now that Trump is gone, media corporations want to determine how information suits into the streaming future

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NBC Nightly News and Dateline NBC anchor Lester Holt

It's time to think about a new business model for news.

In the past few years, almost every media company has launched a subscription video-on-demand (SVOD) service. Most haven't built their full news departments into the products that are dominated by entertainment.

AT&T, WarnerMedia's HBO Max doesn't contain a linear CNN. NBCUniversals Peacock, owned by Comcasts, contains a bespoke online service, NBC News Now, and other broadcast news, but does not include live cable programming from MSNBC or CNBC. Disney's Disney + doesn't include ABC News and Hulu only after the March pandemic.

Only ViacomCBS's soon-to-be-available Paramount + contains all local and national news content from CBS live. ViacomCBS does not have a cable communication network.

For decades, local and national television news have been a major beneficiary of the pay-TV package. Live TV news was relatively cheap to produce and served a public good and filled airtime. CBS, NBC and ABC broadcast several hours of local and national news every day. CNN, Fox News and MSNBC Air News and related programs day and night. The networks make billions of dollars by billing pay-TV providers for affiliate or retransmission fees and by giving brands advertising time.

Today, media managers are planning a future in which there are only 50 million US pay-TV households – down from about 75 million today. News will almost certainly stay on the traditional pay-TV package for as long as it survives. But when the eyeballs fall, the underlying business will progressively deteriorate.

"The linear bundle will evolve into a largely live offering of sports, news and events," MoffettNathanson analyst Michael Nathanson wrote in a message to customers this week. "News consumption started 2021 on surprisingly strong foundations, but we're obviously concerned about sustainability and comparing ourselves over the course of the year. How long can news last, given such a strong 2020? It's hard to tell that one sustained momentum reached the level of 2020. " ""

It's unclear how news fits into a streaming world

Simply merging news into entertainment-based streaming products makes little sense because the audience for news isn't very large, said Rich Greenfield, media analyst at LightShed Partners.

"News doesn't have that many viewers and that's not going to change," said Greenfield. "News won't go away. Local news will exist. Cable news will exist. They'll just all be smaller businesses."

Last month, CNN, Fox News and MSNBC drew around 1.3 million viewers during the day – and January was a brisk month for news with the Capitol Uprising and the inauguration of the President. During the month, approximately 2 million households saw an average local news broadcast at 6 p.m. or 11 p.m. in New York, the largest US market if you add up all networks (ABC, CBS, NBC, FOX, and CW), according to data from the TV Bureau of Advertising .

Adding a few million subscribers to a streaming platform isn't going to impress Wall Street. For example, Disney's target for Disney + is 260 million subscribers worldwide by 2024.

It's still possible that Disney, WarnerMedia, and Peacock will at some point just include live news with their existing streaming services. But news has over-the-top advertising value because it is seen live and advertisements cannot be skipped. Simply packing messages into SVOD services seems like a missed opportunity to monetize valuable programs that advertisers are looking for.

Media companies should focus on making standalone news businesses profitable, said Christy Tanner, executive vice president and general manager of CBS News Digital.

"There's no reason a media company can't have a successful news operation on a key performance indicator," said Tanner. "It's not a far-fetched concept for a news company to be self-sustaining, profitable, growing, innovative and successful."

Until now, digital news products have been tangential to linear live programming. Fox Corp. is selling Fox Nation, a Fox News spin-off, for $ 5.99 per month. WarnerMedia is considering launching a CNN-focused streaming service. According to CBS Tanner, ViacomCBS's CBSN, a free, ad-based streaming product separate from CBS's linear news, is profitable.

Over time, as subscribers to pay TV bundles continue to decline, the stand-alone, news-based, subscription video products are likely to duplicate the same broadcast and cable programming.

A new approach: bundling TV and print news

Print news and television news have always existed as two separate companies. Now both are becoming digital products.

In the years to come, streaming services will most likely re-develop like a cable television package. We've already seen the first hint of ViacomCBS's partnership with Apple TV + – a package of Apple TV +, CBS All Access and Showtime for $ 9.99 per month. These bundles will almost certainly increase in content and price.

What if news products did the same? Consumers could pay for a streaming entertainment package and separately for a news package.

For the first time ever, a consumer could potentially purchase a subscription to CNN, Fox News, the Washington Post, and the New York Times at a reduced price. The model will not be as profitable as the bundle of cables because subscribers are still just news consumers and not the entire population of television viewers.

However, a news package could expand the subscribers to historical printed publications to increase the number of digital subscriptions while creating a larger audience for television news outside the cable package.

The Washington Post or the New York Times would likely only go for a bundle where the unit economy is either similar enough so that current customers don't have to cancel existing subscriptions, or massaged so that existing subscribers can convert into a bundle. The New York Times announced this week that it has 6.7 million subscriptions to digital media only. The stock is up more than 300% in the past five years. A current digital subscription to the New York Times is $ 8 per month for one year and $ 17 per month thereafter.

Offering a bundle of print and television news could also be a step towards combating disinformation, said Helen Lee Bouygues, founder of the Reboot Foundation, which aims to fight fake news and improve critical thinking.

"The best way to fight disinformation is to use a variety of high-quality sources of information – the best that pay for," said Bouygues. "A bundle would be great, but is there a demand for it?"

Difficult to focus on the future

"Finding a new business model for news is the challenge of our time and I've been trying to find out," said Mosheh Oinounou, president of Mo Digital, who founded CBSN and now consults news organizations on their streaming strategies.

The concept of a bundle may be too futuristic for executives who need to get their financial houses in order before considering new business models.

"That doesn't mean it won't work," said Tanner. "But there are steps every news organization needs to take before doing something this creative."

The first step could be to make digital news more attractive to advertisers.

Oinounou estimates that the news frenzy surrounding Donald Trump's presidency enabled news companies to postpone dramatic changes to their business models by five years. Trump's constant appearances on Fox News and the daily flurry of controversy and news raised the ratings for each news network and kept media companies focused on the status quo.

Digital advertising continues to add pennies to the dollar compared to TV spots. Media managers focus on where the money is, and it's still not digital, Oinounou said.

"The fundamental economy of digital versus cable is not encouraging any of these people to put their best stuff outside of the bundle," Oinounou said. "The reality is that all of these companies should spend most of their resources, time, and attention digging digitally. But it's 2021 and it's still not happening."

The moment may be right to think about new methods of distribution. In the past few months, many of the biggest news organizations have seen a wave of new leadership. Meredith Kopit Levien took over the management of the New York Times in September. Norm Pearlstine, editor-in-chief of the L.A. Times, resigned in December. The Washington Post Editor-in-Chief Marty Baron is retiring. CNN chief Jeff Zucker said Thursday he plans to leave later this year. Stephen Adler, Reuters editor-in-chief for ten years, announced that he would be retiring in April.

Last week, James Goldston, president of ABC News for 17 years, announced that he would be stepping down on March 31st.

"I've decided this is the right time to move on as this incredible era of news is ending and another is beginning," Goldston wrote to his colleagues.

What he didn't say was that part of this past era was incredible because TV managers didn't have to worry about making money. The leaders of the next era may not be so lucky.

Disclosure: NBCUniversal, owned by Comcast, is the parent company of CNBC.

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Katherine Clark