Download “medianomics” strategic choices and business model

“MEDIANOMICS”
STRATEGIC CHOICES AND
BUSINESS MODEL INNOVATION IN
NEWSPAPER PUBLISHING
PROJECT REPORT
17.12.2013
TIMO KETONEN
Project manager
EXECUTIVE SUMMARY
The$ focus$ of$ the$ research$ project$ has$ been$ on$ media$ firms$ and$ more$ specifically$
newspaper$ publishers’$ approach$ to$ find$ new$ sources$ of$ revenue$ in$ the$ rapidly$
changing$digital$ecosystem.$The$design$of$new$and$viable$business$models$is$a$real$
challenge$ in$ the$ constantly$ changing$ media$ landscape,$ where$ consumers$ are$
increasingly$ online.$ In$ fact$ Finnish$ Internet$ users$ are$ now$ among$ the$ most$ avid$
consumers$ of$ online$ news$ and$ rank$ #1$ among$ European$ countries.$ Consumers$
obtain$and$share$their$news$on$multiple$platforms$including$blogs$and$social$media.$
Mobile$ media$ consumption$ is$ clearly$ an$ accelerating$ trend,$ which$ in$ turn$ requires$
new$ business$ models$ and$ new$ ways$ of$ engaging$ consumers$ in$ media$ and$
advertising$content$in$the$right$context.$$$
The$results$from$the$multiple$inFdepth$interviews$in$four$countries$(FI,$SE,$UK,$USA)$
indicate$ that$ the$ change$ in$ consumer$ behavior$ is$ accelerating.$ Recent$ consumer$
surveys$support$this$view.$The$willingness$to$pay$for$content$is$influenced$by$other$
media$content$services$(e.g.$Netflix,$Spotify,$MTV$Katsomo)$and$the$introduction$of$
‘paywalls’$ for$ news$ services$ has$ recently$ taken$ place$ in$ the$ Nordic$ countries.$ The$
monitoring$ of$ consumer$ change$ and$ willingness$ to$ pay$ for$ news$ will$ continue$ in$ a$
longitudinal$ study$ during$ 2014F2016.$ Finland$ will$ be$ part$ of$ the$ study$ mapping$
consumer$behavior$in$10$countries.$$
The$interviews$reveal$that$there$is$an$increased$sense$of$urgency$in$deciding$which$
path$to$choose$and$where$to$invest.$New$concepts$and$platforms$for$news$are$being$
introduced.$ Different$ companies$ have$ chosen$ different$ approaches$ to$ meet$ the$
digital$demand$for$news.$Printed$newspapers$may$become$a$luxury$product$with$the$
increased$cost$of$distribution.$Publishers$that$invest$only$in$printed$newspapers$will$
not$ be$ successful$ in$ the$ future.$ The$ critical$ question$ is$ how$ to$ manage$ digital$
transformation$ and$ utilize$ customer$ insight$ to$ develop$ new$ services$ to$ both$
consumers$and$advertisers.$
An$ agile$ organization$ is$ a$ prerequisite$ for$ innovation.$ It$ is$ vital$ to$ nurture$ a$
corporate$culture$that$supports$ideas,$development$and$prototyping.$The$ability$to$
collect,$ analyze$ and$ utilize$ customer$ data$ is$ of$ essence.$ Service$ design$ based$ on$
customer$ insight$ is$ required$ in$ order$ to$ be$ able$ to$ offer$ valuable$ content$ to$ the$
consumer$ in$ different$ contexts,$ on$ different$ platforms.$ It$ is$ important$ to$ recognize$
the$ various$ phases$ of$ the$ consumers’$ purchase$ path$ and$ to$ offer$ the$ right$ kind$ of$
content$ for$ each$ phase$ including$ advertising$ solutions.$ The$ innovation$ process$ for$
new$ products$ and$ services$ needs$ to$ be$ shortened.$ Trial$ and$ error,$ i.e.$ testing$ with$
consumers$is$part$of$the$service$design$process.$However,$it$should$be$noted$that$”no$
service$concept$survives$its$first$contact$with$customers.”$
$
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TABLE OF CONTENTS
1. FOCUS AND MOTIVATION OF THE RESEARCH PROJECT
FOCUS ON BUSINESS MODEL INNOVATION AND SERVICE DESIGN
MY MAIN MOTIVATION FOR THE RESEARCH PROJECT
2. INTRODUCTION: THE ONGOING CHANGE IN THE MEDIA LANDSCAPE
CHANGING CONSUMER BEHAVIOR
NEW OWNERSHIP IN TRADITIONAL NEWSPAPERS
WILL CONSUMERS PAY FOR DIGITAL NEWS?
3. RESEARCH DESIGN AND RESEARCH METHODS
RESEARCH METHODS AND THE MATERIAL
4. BUSINESS MODEL INNOVATION AND SERVICE DESIGN
DEFINITION OF A BUSINESS MODEL
DEFINITION OF MEDIA
BEING DIGITAL
DEFINITION OF DIGITAL ECOSYSTEM
DEFINITION OF SERVICE DESIGN
5. RESULTS OF THE INTERVIEWS AND KEY DRIVERS OF CHANGE
KEY DRIVERS OF CHANGE
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6. STRATEGIC CHOICES: EFFICIENCY-CENTERED VS. NOVELTY-CENTERED
BUSINESS MODELS
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7. A FEW EXAMPLES: DIGITAL TRANSFORMATION AND DIGITAL FIRST
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INTERNATIONAL PUBLISHERS OF GLOBAL NEWS BRANDS
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THE ECONOMIST – DIGITAL TRANSFORMATION
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THE FINANCIAL TIMES – DIGITAL FIRST
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THE NEW YORK TIMES - DIGITAL FIRST
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NEW MEDIA CONCEPTS IN THE U.S. AND SERVICE DESIGN FOR DIGITAL NATIVES
NORDIC EXAMPLES, SWEDEN
SCHIBSTED – DIGITAL FIRST
VÄSTERBOTTENS KURIREN – DIGITAL TRANSFORMATION
TWO EXAMPLES FROM FINLAND
THE NEW HELSINGIN SANOMAT (TABLOID, ONLINE AND MOBILE) – DIGITAL
TRANSFORMATION
KSF MEDIA DIGITAL STRATEGY (HUFVUDSTADSBLADET) – DIGITAL
TRANSFORMATION
NEW MEDIA CONCEPTS AND BUSINESS MODELS IN FINLAND
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8. CONCLUSIONS AND FURTHER RESEARCH
41
LITERATURE AND REFERENCES
42
ARTICLES, TRADE BOOKS AND REPORTS
42
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1. FOCUS AND MOTIVATION OF THE RESEARCH
PROJECT
Focus on Business Model innovation and Service Design
My$ research$ topic$ has$ had$ a$ clear$ focus$ on$ business$ model$ innovation$ and$ how$
newspaper$ publishers$ are$ coping$ with$ the$ ongoing$ change$ in$ consumer$ behavior$
and$ transition$ to$ digital$ news$ platforms.$ Service$ design$ is$ of$ essence$ “because$ no$
service$ concept$ survives$ its$ first$ contact$ with$ customers.”$ (This$ is$ Service$ Design$
Thinking,$Stickdorn$and$Schneider).$
$
Research(Question:$What$are$the$specific$requirements$for$newspaper$publishers$to$
create$ innovative$ new$ business$ models,$ and$ how$ do$ they$ manage$ digital$
transformation?$ The$ focus$ of$ the$ study$ is$ on$ strategic$ choices$ by$ newspaper$
publishers$and$the$question$is$how$do$they$invest$into$service$design$in$the$digital$
ecosystem?$
$
The$Research$Question$is$further$specified:$
a) How$is$digital$transformation$met$by$international$publishers,$i.e.$owners$of$
global$ news$ brands$ (e.g.$ The$ Economist,$ The$ Financial$ Times$ and$ The$ New$
York$Times.)$
b) How$is$digital$transformation$met$by$Nordic$publishers,$i.e.$owners$of$news$
brands$in$Sweden$and$Finland.$Here$I$have$chosen$to$take$a$closer$look$at$one$
large$and$one$smaller$publisher$in$Finland$and$Sweden.$$
c) The$study$is$put$into$a$time$frame$starting$in$2011$and$ending$in$2014.$
My main motivation for the research project
My$main$motivation$for$research$in$this$field$is$driven$by$a$passion$for$trustworthy$
news$services$and$‘quality$journalism’.$$Newspapers$and$access$to$well$curated$and$
reliable$information$has$been$regarded$as$one$of$the$pillars$of$modern$civilization.$
As$information$behavior$evolves$it$is$relevant$to$understand$how$we$get$reliable$and$
relevant$information$about$current$events.$The$survival$of$reliable$media$is$a$bigger$
issue$in$our$society$than$just$a$matter$of$business.$Social$Media$platforms$only$offer$
a$glimpse$of$a$complex$world.$As$the$late$publisher$Arthur$O.$“Punch”$Sulzberger”$of$
The$New$York$Times$put$it:$“We$sell$judgment.”$What$he$meant$is$that$“The$Times$
sold$ not$ just$ news,$ but$ judgment$ about$ the$ importance$ and$ interest$ of$ news,$ and$
once$ invested$ in$ his$ choice$ of$ subordinates$ he$ wanted$ them$ to$ feel$ secure$ in$ their$
labors,$comfortable$with$their$judgments.”$(Max$Frankel,$The$New$York$Times).$
Newspaper$survival$in$the$digital$era$is$literally$a$question$of$life$or$death.$From$a$
business$model$perspective$it$is$relevant$to$understand$how$traditional$media$firms$
cope$ with$ this$ change$ and$ what$ strategic$ choices$ they$ make.$ Is$ incremental$
improvement$ sufficient$ in$ order$ to$ survive$ or$ are$ disruptive$ business$ models$
required$ to$ secure$ a$ profitable$ business$ in$ the$ future?$ ”Existing$ players$ in$ an$
industry$ almost$ always$ fail$ to$ appreciate$ how$ disruption$ will$ affect$ them$ or$
understand$ how$ to$ adapt$ to$ it,$ and$ media$ companies$ are$ making$ all$ of$ those$ same$
mistakes.”$(Harvard$professor$Clay$Christensen,$PaidContent.org,$February,$2013.)$
As$ a$ separate$ question$ I$ will$ in$ the$ Finnish$ case$ studies$ illustrate$ what$ strategic$
choices$ Finnish$ newspaper$ publishers$ are$ making$ and$ their$ approach$ to$ the$
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changing$consumer$behavior$and$service$design$in$the$digital$ecosystem.$The$media$
industry$has$become$a$global$business$and$the$perspective$for$international$media$
brands$in$quite$different$from$those$operating$in$smaller$markets$and$in$a$language$
limited$by$the$size$of$the$audience.$$
It$is$an$interesting$question$to$address:$how$will$journalistic$quality$and$the$supply$
of$trustworthy$media$content$survive$in$countries$like$Finland$and$Sweden?$In$this$
connection$ I$ refer$ to$ a$ publication$ by$ my$ late$ friend$ Hannu$ Olkinuora,$ emeritus$
EditorFinFChief$ (Hannu$ Olkinuora,$ Marit$ Ingves$ and$ Lia$ Markelin:$ Journalismin$
kohtalo$mediamurroksessa$–$Överlevnadsstrategier$för$minoritetsmedier).$
$
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2. INTRODUCTION: THE ONGOING CHANGE IN THE
MEDIA LANDSCAPE
“We$are$entering$an$era$where$media(will(be(everywhere,(and$we$will$use$all$kinds$of$
media$ in$ relation$ to$ one$ another.$ Media( convergence( encourages$ transmedia(
storytelling,(the$development$of$content$across$multiple$channels.$As$producers$more$
fully$ exploit$ organic$ convergence,$ storytellers$ will$ use$ each$ channel$ to$ communicate$
different$ kinds$ and$ levels$ of$ narrative$ information,$ using$ each$ medium$ to$ do$ what$ it$
does$ best.$ The$ multiple$ forms$ of$ media$ convergence$ are$ leading$ us$ toward$ a$ digital(
renaissance—a$period$of$transition$and$transformation$that$will$affect$all$aspects$of$
our$lives.”$
—$Henry$Jenkins,$Ph.D.,$“Convergence?$I$Diverge.”$MIT$Technology$Review$
Let$ us$ first$ define$ transformation:$ “Transformation$ is$ a$ whole$ scale$ change$ to$ the$
foundational$component$of$a$business:$from$its$operating$model$to$its$infrastructure.$
What$ it$ sells,$ to$ whom$ and$ how$ it$ goes$ to$ market.”$ (Howard$ King,$ The$ Guardian$
Media$ Network).$ Businesses$ often$ build$ and$ develop$ new$ products$ and$ services,$
move$ into$ new$ markets,$ merge$ with$ or$ sell$ to$ competitors,$ but$ none$ of$ these$ are$
necessarily$ transformative.$ Quite$ often$ business$ do$ not$ transform$ because$ it$ is$
deemed$ to$ be$ expensive$ and$ risky.$ This$ has$ certainly$ been$ a$ major$ reason$ for$
organizational$inertia$in$the$media$industry,$where$routines,$systems$and$processes$
have$ been$ created$ to$ ensure$ efficiency,$ reliability$ and$ to$ reduce$ costs$ (Robert$ G.$
Picard,$The$Success$Trap:$Why$doing$things$right$become$wrong$over$time).$
$
The$key$drivers$of$transformation$can$be$defined$as$1)$changing$consumer$demand,$
2)$changing$technology,$and$3)$changing$competition$(e.g.$from$players$outside$the$
industry).$ These$ key$ drivers$ form$ an$ ecosystem$ and$ it$ is$ a$ convergence$ of$ factors$
that$brings$about$changes$in$a$market.$“When$any$of$these$factors$coincide$such$that$
a$business’$operating$model$is$no$longer$fit$to$serve$its$customers,$the$business$has$
reached$ a$ tipping$ point.”$ (Howard$ King).$ Evolving$ businesses$ do$ not$ reach$ tipping$
points,$ instead$ they$ spot$ opportunities$ as$ they$ are$ focused$ on$ their$ customers,$
changing$ and$ adapting$ with$ the$ market.$ Or$ leading$ the$ market$ like$ e.g.$ Apple$ has$
done.$$
As$ the$ digital$ ecosystem$ continues$ to$ rapidly$ evolve,$ the$ media$ industry$ is$ seeing$
both$disruption$and$potential$for$growth.$We$are$now$experiencing$a$convergence$of$
media$ formats$ online$ as$ crossFdevice$ experiences$ become$ the$ new$ norm.$ A$ good$
example$of$this$is$the$decline$in$broadcast$TV$as$new$streaming$services$have$gained$
an$ audience$ formed$ by$ both$ digital$ natives$ and$ more$ senior$ consumers,$ who$ are$
watching$their$favorite$movies$and$TV$shows$when$they$want$and$on$a$device$most$
suitable$ with$ regard$ to$ time$ and$ place.$ $ Streaming$ services$ like$ BBC$ iPlayer$ and$
Netflix$ have$ gained$ a$ large$ audience$ and$ an$ increasing$ number$ of$ commercial$ and$
cable$ TV$ operators$ have$ developed$ their$ own$ services$ for$ streaming$ content.$ With$
regard$to$news$services$mobility$has$become$the$underpinning$of$every$trend:$“As$
media$ is$ generated$ and$ consumer$ on$ many$ devices$ and$ in$ many$ contexts,$ it’s$
increasingly$who$you$are,$where$you$are,$and$who$you’re$with$that$determines$what$
kind$ of$ content$ you$ consume$ –$ not$ necessarily$ what$ screen$ you’re$ using.”$ (Media$
Map$2013,$Bonnier$R&D).$
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Journalism$is$also$entering$a$new$and$yet$uncharted$territory,$as$digital$tools$enable$
an$enhanced$connection$between$news$reporting,$engagement$by$way$of$comments$
and$ sharing$ topics$ for$ news,$ as$ well$ as$ social$ activism.$ Journalists$ increasingly$
employ$ data$ analysis$ and$ visualization$ to$ add$ value$ to$ reporting$ and$ stories$ –$ this$
new$ trend$ is$ called$ ‘data$ journalism.’$ $ There$ are$ also$ new$ forms$ of$ journalism$
represented$ in$ the$ news$ business,$ as$ the$ increased$ use$ of$ video$ adds$ rich$ media$
content$ to$ both$ reporting$ and$ advertising$ online.$ The$ New$ York$ Times$ has$ been$
using$rich$media$elements$in$its$long$form$journalism,$with$reference$to$the$popular$
‘Snow$Fall’$article$on$NYTimes.com.$It$reached$2.9$million$users$in$its$first$week,$and$
was$sold$separately$as$an$eFbook.$What$was$remarkable$with$this$case$it$reached$a$
vast$ number$ of$ readers$ (33%)$ who$ had$ never$ visited$ NYTimes.com$ before$ and$
showcased$the$impact$of$quality$journalism$combined$with$visual$data$and$video.$
$
The$ digital$ world$ of$ devices$ and$ mobility$ is$ changing$ the$ way$ we$ consume$ media$
today.$The$modern$smartphone$market$is$now$six$years$old.$When$the$iPhone$was$
introduced$in$2007$the$vision$was$that$all$of$us$will$have$the$Internet$in$our$pockets,$
and$now$that$is$truer$than$ever.$The$recent$report$by$Nielsen$shows$that$64%$of$U.S.$
mobile$ phone$ owners$ have$ chosen$ a$ smartphone.$ In$ addition,$ 80%$ of$ Americans$
who$had$bought$a$mobile$phone$in$the$past$three$months$purchased$a$smartphone.$$
$
The$rise$of$mobility$is$clearly$supported$by$data:$the$rise$of$mobile$usage$and$screen$
jumping$ (multiscreen$ usage)$ has$ doubled$ the$ time$ Americans$ spend$ online$ in$ the$
matter$of$only$three$years$from$2010$to$2013.$Smartphones$have$a$share$of$39%$and$
tablets$12%,$remembering$tablets$were$only$introduced$in$the$spring$of$2010$when$
the$first$iPad$came$on$sale$in$the$U.S.$Interestingly,$while$smartphones$only$account$
for$ a$ relatively$ small$ 25%$ share$ of$ online$ time$ for$ Americans$ aged$ 50$ and$ older,$
whilst$tablets$represent$a$16%$share,$the$highest$among$age$groups$(Mediapost.com,$
September$2013).$
$
Age$seems$to$be$a$large$factor$in$smartphone$penetration,$as$81%$of$young$people$
between$ 25$ and$ 34$ are$ smartphone$ users$ and$ teens$ are$ not$ far$ behind$ with$ a$
penetration$of$70%.$Among$older$people$aged$55+$half$of$the$people$are$still$using$
feature$ phones.$ Obviously$ this$ bears$ relevance$ for$ service$ design,$ as$ many$ of$ the$
new$media$services$are$clearly$designed$for$the$digital$natives.$
$
News$ services$ are$ available$ for$ smartphones$ and$ tablets$ in$ a$ variety$ of$ apps$ from$
traditional$ news$ organizations$ like$ BBC,$ CNN,$ The$ Financial$ Times,$ The$ Guardian,$
The$ New$ York$ Times$ and$ many$ more.$ Almost$ half$ of$ UK$ Internet$ users$ are$ going$
online$ via$ mobile$ phone$ data$ connections,$ according$ to$ the$ Office$ for$ National$
Statistics.$ The$ most$ rapid$ growth$ was$ among$ younger$ people,$ where$ 71%$ of$
internetFconnected$ 16$ to$ 24FyearFolds$ used$ mobile$ devices.$ BBC$ has$ reported$ that$
mobile$access$to$its$services$has$increased$rapidly$and$is$more$than$50%$of$all$traffic$
on$weekends.$BBC's$popular$iPlayer$service$is$widely$accessed$on$smartphones$and$
tablets.$Viewers$prefer$the$tablet$form$factor$for$TV$viewing,$with$accelerating$sales$
of$ the$ devices$ leading$ to$ an$ increase$ in$ streaming$ media$ consumption.$ As$ for$ The$
Financial$Times$15F20%$of$new$subscriptions$each$week$are$being$sold$on$a$mobile$
device$and$advertising$on$mobile$devices$is$increasing.$FT$has$reported$that$mobile$
devices$account$for$more$than$one$third$of$FT.com$traffic$and$app$usage$is$growing$
particularly$fast$in$the$age$group$from$25$to$34$yearFolds.$$
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Changing consumer behavior
In$the$Digital$News$Report$by$Reuters$Institute$it$was$found$that$49%$of$18$to$24F
yearFolds$read$a$digital$newspaper,$the$highest$reach$of$any$age$group.$The$survey$of$
11,000$Internet$users$in$nine$countries$revealed$that$25$to$34FyearFolds$are$twice$as$
likely$ to$ part$ with$ their$ cash$ for$ digital$ news$ than$ older$ readers.$ According$ to$ the$
study,$20%$of$25F$to$34FyearFolds$said$they$had$paid$for$online$news$compared$with$
less$than$10%$of$those$aged$over$55.$This$should$be$good$news$for$all$media$firms$
developing$ new$ services.$ And$ multiFplatform$ availability$ of$ services$ is$ increasingly$
important,$ as$ 33%$ get$ news$ on$ at$ least$ two$ digital$ devices$ while$ 9%$ us$ three$ or$
more$ devices$ (Digital$ News$ Report$ 2013,$ Reuters$ Institute$ for$ the$ Study$ of$
Journalism,$Oxford$University,$2013).$Finland$will$be$included$in$a$longitudinal$study$
during$2014F2016$as$a$partner$to$Reuters$Institute$and$it$will$be$of$utmost$interest$
to$ media$ firms$ to$ follow$ this$ study$ closely$ as$ the$ digital$ ecosystem$ and$ new$
platforms$for$paid$content$keep$evolving$(FinnMedia,$November,$2013).$$
$
In$ a$ recent$ study$ by$ EDGE$ research$ group$ of$ media$ behavior$ of$ representatives$ of$
generation$ Y$ (born$ between$ 1983$ and$ 1993)$ it$ was$ found$ that$ they$ have$ formed$
routines$ in$ their$ media$ consumption,$ but$ different$ routines$ when$ compared$ with$
older$generations.$The$media$landscape$is$fragmented$in$the$sense$that$information$
can$ be$ accessed$ through$ various$ device$ and$ platforms$ at$ any$ time$ and$ anywhere,$
this$ also$ affects$ the$ way$ the$ digital$ natives$ behave.$ They$ do$ not$ necessarily$ define$
media$ in$ the$ same$ way$ as$ representatives$ of$ generation$ X$ do.$ A$ large$ number$ of$
young$ people$ own$ smartphones$ (up$ to$ 86%$ in$ the$ survey$ and$ 89%$ use$ apps)$ and$
tablets$ (27%$ have$ a$ tablet$ and$ 84%$ use$ apps)$ and$ they$ are$ willing$ to$ pay$ for$
content.$(Changing$media$behavior$–$the$case$of$Generation$Y,$Academic$MindTrek$
conference,$ October,$ 2013).$ Not$ surprisingly$ the$ survey$ shows$ active$ usage$ of$ the$
smartphone$from$waking$up$until$going$to$sleep,$and$the$´heavy$users´$of$the$tablet$
use$ it$ more$ than$ 3$ hours$ a$ day.$ The$ simultaneous$ usage$ of$ TV$ with$ a$ laptop$
computer$ and$ a$ smartphone$ are$ clear$ trends$ in$ the$ survey.$ The$ report$ comprises$
160$individual$media$diaries$written$by$students$at$Åbo$Akademi$University$in$the$
spring$of$2013.$
$
The$consumer$research$conducted$by$the$EDGE$research$group$is$summarized$in$a$
separate$report,$as$well$as$a$study$of$new$mobile$value$services,$measuring$the$way$
consumers’$engage$with$the$service.$
New ownership in traditional newspapers
The$ past$ summer$ has$ signaled$ a$ new$ era$ of$ ownership$ in$ media,$ particularly$ in$
established$newspapers.$For$traditional$owners$of$newspapers$the$sale$of$the$titles$
reflects$ a$ change$ in$ strategy$ and$ in$ the$ case$ of$ The$ Washington$ Post$ even$ an$ exit$
from$funding$journalism.$
$
At$ the$ end$ of$ July$ the$ German$ publisher$ Axel$ Springer,$ one$ of$ the$ largest$ media$
groups$ in$ Europe,$ announced$ that$ it$ will$ sell$ off$ its$ regional$ newspapers$ and$
magazines$ to$ Funke$ Mediengruppe$ for$ a$ significant$ purchase$ price$ of$ 920$ million$
euros.$Springer$will$however$retain$its$big$national$titles$including$Bild,$the$highestF
circulation$ newspaper$ in$ Europe$ and$ Die$ Welt.$ Strategic$ focus$ will$ shift$ to$
investment$into$digital$media$platforms$without$journalistic$content$like$the$careers$
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platform$Stepstone,$the$housing$portal$ImmoNet.de$and$the$price$comparison$portal$
Idealo.$For$a$traditional$publisher$this$represents$a$new$strategic$focus$and$it$signals$
the$ end$ of$ an$ era$ where$ journalism$ was$ at$ the$ core$ of$ the$ operations$ of$ Axel$
Springer.$Axel$ Springer$ founded$ the$ group$ in$ 1946$ with$ a$ daily$ newspaper.$ For$
many$ in$ Germany$ this$ shift$ of$ strategy$ has$ been$ a$ shock,$ not$ least$ to$ the$ German$
Journalist$Association.$As$for$Axel$Springer$AG$digital$business$already$accounts$for$
approx.$40%$of$total$group$sales$and$45%$of$total$earnings.$Now$the$intention$is$to$
drive$ this$ development$ further.$ Axel$ Springer$ has$ clearly$ chosen$ to$ distance$ itself$
from$its$relatively$costly$classic$journalistic$products$in$favor$of$new$digital$business$
models.$ This$ follows$ an$ international$ trend$ of$ shrinking$ circulation$ figures$ and$
markedly$falling$advertising$revenues$in$print$media.$$
$
The$ news$ from$ Germany$ can$ be$ compared$ with$ the$ developments$ in$ the$ USA.$ On$
Saturday$August$3$it$was$announced$that$The$New$York$Times$is$selling$The$Boston$
Globe$ and$ the$ rest$ of$ its$ New$ England$ Media$ Group$ to$ John$ Henry,$ the$ billionaire$
who$is$the$principal$owner$of$the$Boston$Red$Sox,$for$$70$million$in$cash.$This$came$
as$ no$ surprise$ as$ The$ Boston$ Globe$ was$ put$ on$ sale$ (once$ again)$ in$ February.$
Financially$ the$ deal$ reflects$ a$ massive$ decline$ in$ the$ valuation$ of$ the$ regional$
newspaper$business:$The$New$York$Times$Company$bought$The$Boston$Globe$back$
in$ 1993$ for$ $1.1billion.$ This$ follows$ a$ sharp$ downfall$ in$ both$ print$ circulation$ and$
advertising:$ The$ Globe$ has$ seen$ its$ average$ weekday$ circulation$ plunge,$ tumbling$
51.6%$from$506,996$in$1993$to$just$245,572$in$2013.$It$is$easy$to$figure$out$why$the$
transaction$ took$ place:$ The$ New$ York$ Times$ is$ a$ global$ brand$ with$ a$ digital$
subscriber$base$of$699,00$while$The$Boston$Globe$has$only$attracted$39,000$digital$
subscribers$ and$ is$ a$ regional$ player$ with$ its$ Boston.com$ website.$ The$ buyer,$ John$
Henry$ sees$ opportunity$ in$ the$ local$ marketplace:$ "The$ Boston$ Globe’s$ awardF
winning$ journalism$ as$ well$ as$ its$ rich$ history$ and$ tradition$ of$ excellence$ have$
established$it$as$one$of$the$most$well$respected$media$companies$in$the$country.”$He$
also$ cited$ the$ “essential$ role$ that$ its$ journalists$ and$ employees$ play$ in$ Boston,$
throughout$ New$ England,$ and$ beyond.”$As$ for$ business$ model$ development$ it's$
harder$to$see$what$will$happen$next.$The$only$thing$that's$obvious$is$that$The$Boston$
Globe$will$now$have$an$owner$with$strong$local$interest.$$
$
For$ The$ New$ York$ Times$ Company$ the$ sale$ implies$ even$ more$ focus$ on$ its$ main$
brand$and$its$digital$development.$Arthur$Sulzberger$Jr.,$the$Publisher,$representing$
the$ last$ of$ the$ great$ American$ newspaper$ families,$ released$ a$ statement$ to$ its$ staff$
and$public:$"The$Times$is$not$for$sale,$and$the$trustees$of$the$OchsFSulzberger$Trust$
and$the$rest$of$the$family$are$united$in$our$commitment$to$work$together$with$the$
company's$board,$senior$management$and$employees$to$lead$The$New$York$Times$
forward$ into$ our$ global$ and$ digital$ future."$ (Christine$ Haughney,$ The$ New$ York$
Times,$August,$2013).$
$
This$ statement$ followed$ the$ biggest$ news$ of$ all$ year:$ the$ sale$ of$ the$ iconic$
Washington$ Post$ by$ the$ Graham$ family$ to$ Jeff$ Bezos,$ the$ founder$ of$ Amazon.$ The$
deal$was$announced$on$Monday$August$5$and$it$took$all$the$newsrooms$in$America$
by$ shock.$ The$ journalism$ at$ The$ Washington$ Post$ has$ been$ respected$ and$ solid$
throughout$the$years,$famed$for$reporting$on$the$Watergate$scandal$in$the$1970's$to$
the$ Edward$ SnowdenFNational$ Security$ Agency$ surveillance$ story,$ along$ with$ The$
Guardian$in$June$of$this$year.$Losses$due$to$the$rapid$downfall$in$print$revenues,$not$
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unlike$The$Boston$Globe$case,$is$the$main$reason$for$the$sale.$The$company$was$in$its$
seventh$ consecutive$ year$ of$ declining$ revenues,$ and$ in$ spite$ of$ a$ strategy$ "to$
innovate$ like$ hell$ in$ digital$ and$ other$ businesses$ and$ offset$ the$ declines$ in$ print$
revenues"$ it$ did$ not$ succeed.$ Hence$ the$ head$ of$ the$ family,$ The$ Washington$ Post$
Company$ Chairman$ Donald$ Graham$ was$ forced$ to$ find$ a$ solution$ to$ save$ The$
Washington$Post,$and$he$found$the$savior$in$Jeff$Bezos$who$paid$$250$million$out$of$
his$own$personal$wealth$for$the$Post$and$some$smaller$newspapers$included$in$the$
deal.$$
$
The$ biggest$ question$ remains$ unanswered$ F$ will$ Jeff$ Bezos$ find$ a$ new$ business$
model$to$fund$quality$journalism$at$a$profit?$As$a$cunning$businessman$he$issued$a$
letter$to$the$Washington$Post$employees,$underlining$that$the$values$of$the$Post$do$
not$ need$ changing:$ "The$ paper’s$ duty$ will$ remain$ to$ its$ readers$ and$ not$ to$ the$
private$ interests$ of$ its$ owners.$ We$ will$ continue$ to$ follow$ the$ truth$ wherever$ it$
leads,$ and$ we’ll$ work$ hard$ not$ to$ make$ mistakes.$ When$ we$ do,$ we$ will$ own$ up$ to$
them$quickly$and$completely."$(Jeff$Bezos,$The$Washington$Post,$August$2013).$$
$
Jeff$Bezos$certainly$has$deep$pockets$with$a$reported$fortune$of$approx.$$25$billion.$
He$ has$ a$ provenFtrack$ record$ as$ an$entrepreneur$ who$ has$ disrupted$ the$ book$
business$ with$ Amazon.com$ and$ Kindle$ eFreaders,$ and$ he$ has$ reinvented$ the$ retail$
business.$ Amazon$ now$ has$ revenues$ in$ excess$ of$ $61$ billion$ and$ it$ continues$ to$
invest$and$innovate$eFcommerce$not$just$in$the$U.S.,$but$globally.$
$
Expectations$are$high$for$a$turnaround$and$most$people$wish$to$see$an$injection$of$
new$ ideas$ into$ the$ troubled$ publishing$ industry.$ There$ has$ been$ real$ media$ frenzy$
over$the$subject$of$an$'Internet$King'$buying$a$media$icon.$Amazon's$experience$and$
knowFhow$can$be$utilized$as$to$how$media$content$can$be$reused$and$sold$in$many$
forms$on$multiple$platforms$reaching$and$engaging$a$wider$audience.$And$there$will$
more$than$likely$appear$new$delivery$platforms$for$content$over$time.$Amazon’s$eF
reader$ Kindle$ is$ already$ in$ place$ as$ one$ digital$ delivery$ platform.$ LongFform$
journalism$and$investigative$reporting$can$perhaps$be$published$both$as$part$of$the$
content$of$the$Washington$Post$and$as$‘Kindle$Singles’.$Content$can$be$packaged$as$
part$ of$ the$ Amazon$ Prime$ offering,$ combined$ with$ advertising$ based$ on$ the$ use$ of$
personal$data$and$purchase$history$for$recommendations.$Amazon$is$not$the$owner$
of$The$Washington$Post,$but$the$synergies$are$clearly$there.$
$
In$ other$ words,$ whilst$ Jeff$ Bezos$ is$ known$ to$ take$ a$ longer$ perspective$ on$ his$
personal$ investments$ it$ will$ be$ more$ than$ interesting$ to$ see$ what$ this$ new$
ownership$means$over$the$next$year$or$two.$He$will$certainly$not$rest$his$case.$In$the$
meantime$ Jeff$ Bezos$ and$ John$ Henry$ are$ building$ on$ an$ image$ of$ not$ only$ being$
successful$businessmen,$but$also$respectable$citizens$and$publishers.$
Will consumers pay for digital news?
Providers$of$news$are$focused$on$increasing$digital$revenues$to$replace$income$lost$
because$newspapers$and$news$broadcasters$have$experienced$declines$in$audiences$
and$advertising.$Newspaper$publishers$beleaguered$by$digital$developments$for$the$
past$ decade$ are$ starting$ to$ believe$ that$ business$ models$ to$ support$ digital$
journalism$ have$ emerged.$ Their$ increasing$ optimism$ is$ driven$ by$ a$ number$ of$
factors:$the$growing$revenue$from$‘paywalls’$and$digital$applications$for$tablets$and$
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smartphones,$as$well$as$a$more$favorable$shift$in$public$attitudes$towards$paying$for$
online$ news.$ These$ trends$ are$ leading$ more$ newspapers$ to$ shut$ off$ or$ reduce$ the$
flow$of$free$digital$news,$with$the$Daily$Telegraph$and$the$Sun$recently$introducing$
pay$ services$ in$ the$ U.K.,$ and$ about$ half$ of$ U.S.$ newspapers$ currently$ charging$ for$
some$ digital$ news$ services.$ Although$ there$ is$ reason$ for$ publishers$ to$ feel$ some$
relief,$harnessing$the$new$revenue$streams$is$not$a$simple$choice$of$whether$or$not$
you$ ask$ digital$ readers$ to$ pay.$ A$ lot$ of$ strategic$ decisions$ have$ to$ be$ made$ about$
which$ of$ the$ different$ pay$ systems$ they$ adopt,$ given$ they$ produce$ varying$ results$
and$ some$ newspapers$ are$ better$ placed$ to$ benefit$ from$ pay$ systems$ than$ others$
(Professor$Robert$Picard,$Digital$News$Report$2013).$
$
Publishers$with$a$global$audience$and$a$strong$brand$like$The$Financial$Times$seem$
to$ be$ better$ off.$ A$ number$ of$ large$ publishers$ known$ for$ their$ traditional$ media$
news$brands$are$now$generating$15F25%$of$their$total$revenue$from$digital$media$
with$audiences$as$much$as$10$times$larger$than$their$print$editions.$The$New$York$
Times,$ for$ example,$ has$ put$ mobile$ at$ the$ forefront$ of$ its$ bundled$ digital$
subscription$options$that$include$online$access,$smartphones$and$tablets,$as$well$as$
laptops$ and$ hard$ copy$ newspapers$ (Magda$ AbuFFadil,$ Huffingtonpost.com,$
September,$2013).$$
Even$for$these$publishers$advertising$remains$the$biggest$challenge.$$
$
(
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(
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3. RESEARCH DESIGN AND RESEARCH METHODS
Research methods and the material
I$ have$ carried$ out$ a$ desktop$ study$ and$ inFdepth$ interviews$ with$ media$ experts$ in$
four$ countries.$ Altogether$ 80$ interviews$ were$ carried$ out$ in$ Finland,$ Sweden,$ the$
U.K.$and$USA.$The$interviews$have$involved$media$executives,$commercial$directors$
and$editorsFinFchief,$as$well$as$business$managers$with$an$R&D$focus.$A$majority$of$
the$ interviews$ were$ conducted$ with$ Finnish$ publishers$ and$ representatives$ of$
related$ industry$ associations.$ Also$ some$ new$ players$ (aggregators$ and$ curators;$
potential$disruptors)$have$been$studied$in$order$to$get$an$overall$picture$of$what$is$
happening$ in$ the$ news$ business$ with$ regard$ to$ new$ media$ concepts$ and$ business$
models.$ For$ the$ purpose$ of$ further$ analysis$ I$ will$ exclude$ those$ interviews$
conducted$with$magazine$publishers$and$focus$on$newspaper$publishers.$The$main$
focus$ of$ the$ analysis$ has$ been$ the$ interviews$ with$ CEO’s$ in$ Finland$ and$ Sweden,$
together$with$the$interviews$with$global$news$brand$owners$in$the$U.K.$and$USA.$
$
It$ should$ be$ noted$ that$ the$ aim$ of$ the$ significant$ number$ of$ interviews$ was$ to$
prepare$ for$ selected$ case$ studies$ in$ order$ to$ analyze$ the$ strategic$ choices$ of$
newspaper$ publishers$ with$ regard$ to$ the$ performance$ of$ these$ firms$ in$ both$
economic$terms$(measured$in$terms$of$revenue$from$digital$services)$and$in$terms$
of$the$engagement$of$consumers$(measured$in$terms$of$digital$subscriber$base,$and$
those$consumers$that$opt$for$a$‘combo’$package$including$digital$&$print).$$
$
The$ interviews$ have$ been$ analyzed$ based$ on$ the$ key$ messages$ in$ accordance$ with$
the$ Interview$ Guide.$ The$ key$ questions$ in$ the$ interviews,$ particularly$ with$ CEO’s$
have$focused$on$business$model$innovation,$how$digital$transformation$is$managed$
and$ how$ the$ design$ of$ new$ services$ in$ the$ digital$ ecosystem$ is$ processed$ either$
within$the$firms$or$based$on$open$innovation.$$With$regard$to$writing$the$PhD$thesis$
there$ is$ a$ need$ to$ dig$ deeper$ into$ literature$ regarding$ content$ analysis$ and$ case$
studies.$ For$ this$ purpose$ I$ will$ need$ to$ carry$ out$ a$ further$ literature$ review$
(including$ Case$ Study$ Research:$ Design$ and$ Methods,$ fourth$ edition$ by$ Robert$ K.$
Yin,$2013).$
$
Supporting$ the$ interviews$ with$ media$ professionals$ a$ separate$ study$ was$ carried$
out$in$the$summer$of$2013$including$10$interviews$with$Finnish$advertisers$and$key$
business$development$professionals.$This$study$was$done$by$Service$Design$Agency$
Palmu$ for$ FinnMedia$ in$ order$ to$ map$ the$ changing$ needs$ of$ advertisers.$ The$ final$
report$ was$ published$ in$ November,$ 2013$ and$ serves$ as$ a$ basis$ for$ strategic$
development$by$FinnMedia$for$the$whole$media$industry$in$Finland.$$
$
Additional$ material$ comprise$ 40$ keynotes,$ seminars$ and$ work$ shops$ where$ the$
researcher$ has$ had$ the$ opportunity$ to$ enter$ into$ a$ dialog$ with$ media$ executives,$
board$ members,$ journalists$ and$ students$ in$ Media$ Management.$ The$ keynotes$ are$
published$ on$ SlideShare$ and$ the$ researcher$ has$ also$ written$ a$ blog$ featuring$
material$from$interviews$and$seminars$on$Blogger.$
$
Links:(EDGE$&$MEDIANOMICS$blog:$http://timoketonen.blogspot.fi(
Keynotes$on$SlideShare:$http://www.slideshare.net/timoketonen$
$
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4. BUSINESS MODEL INNOVATION AND SERVICE
DESIGN
The$ways$that$media$firms$obtain$income$from$their$activities$and$the$opportunities$
for$continued$revenue$from$the$sources$are$changing$along$with$audience,$creating$
the$ conditions$ that$ have$ brought$ the$ significant$ financial$ pressures$ to$ bear$ on$ the$
enterprises.$(Robert$G.$Picard,$Value$creation$and$the$future$of$news$organizations).$$
$
The$ Media$ Industry$ including$ Publishing$ is$ facing$ a$ tremendous$ change$ as$ we$ go$
from$ a$ traditional$ business$ model$ based$ on$ printed$ products$ subscribed$ by$
consumers$ and$ partFfinanced$ by$ advertising$ revenue$ to$ a$ new$ digital$ era,$ where$
there$is$no$single$formula$for$success.$The$Business$Model$for$printed$newspapers$is$
180$years$of$age:$On$the$morning$of$September$3rd$ 1833$a$new$kind$of$newspaper$
“the$Sun”$went$on$sale$on$the$streets$of$New$York.$It$was$made$cheap:$at$one$penny,$
it$was$oneFsixth$of$the$price$of$most$other$papers$and$it$appealed$to$people$who$had$
not$ bought$ newspapers$ before.$ In$ hindsight$ it$ was$ a$ turning$ point$ because$ it$
introduced$ a$ new$ business$ model$ to$ the$ industry.$ The$ Sun’s$ large$ circulation$
attracted$ advertisers,$ and$ the$ resulting$ revenue$ enabled$ the$ Publisher$ to$ keep$ the$
price$of$the$newspaper$down$and$its$circulation$up.$$
This$ model$ worked$ well$ for$ a$ long$ time.$ The$ flow$ of$ advertising$ revenue$ stream$
increased$ enormously$ during$ the$ last$ half$ of$ the$ twentieth$ century$ making$
newspapers$ very$ profitable$ firms$ and$ became$ the$ impetus$ for$ the$ growth$ of$ large,$
publicly$ traded$ newspaper$ companies$ (Robert$ G.$ Picard).$ Since$ the$ 1970’s$
advertising$ income$ for$ newspapers$ nearly$ tripled$ in$ real$ terms.$ This$ growth$ of$
advertising$income$created$a$fundamental$change$in$the$newspaper$business$model,$
making$ the$ industry$ increasingly$ dependent$ upon$ advertising$ revenue.$ The$
dependence$on$advertising$increased$from$71%$of$total$revenue$in$1956$to$82%$of$
revenue$at$the$end$of$the$twentieth$century$(Robert$G.$Picard).$$
Today$ most$ American$ newspapers$ are$ in$ trouble.$ Indeed$ advertising$ revenues$
(including$ print$ and$ online$ advertising)$ in$ the$ U.S.$ is$ now$ down$ to$ the$ level$ of$ the$
1950’s,$ which$ means$ that$ the$ bulk$ of$ newspaper$ revenue$ has$ been$ eroded.$ So$ far$
only$a$few$newspaper$publishers$have$succeeded$in$bringing$up$their$subscription$
revenues$with$new$subscription$models$in$the$digital$ecosystem.$
$
In$ emerging$ markets$ (Africa,$ Asia)$ the$ news$ industry$ is$ roaring$ ahead,$ but$ the$
challenge$of$the$rapidly$developing$digital$ecosystem$is$lurking.$$Also$in$Europe$the$
readership$of$printed$newspapers$has$dropped$significantly$in$recent$years$(WANF
IFRA).$ Advertising$ sales$ is$ heavily$ dependent$ on$ a$ large$ readership,$ still$ the$
fundamental$business$model$in$most$publishing$firms.$In$Finland$the$print$editions$
of$ newspapers$ still$ have$ a$ relatively$ large$ readership,$ but$ the$ question$ is$ for$ how$
long.$ Will$ the$ change$ in$ consumer$ behavior$ take$ one$ generation$ (20$ years)$ or$ will$
there$be$a$faster$transition$towards$an$allFdigital$publishing$model?$The$majority$of$
print$ subscribers$ represent$ older$ generations$ (50+).$ How$ will$ the$ revenue$ stream$
change$ over$ time?$ Today$ approx.$ 50%$ of$ newspaper$ income$ in$ Finland$ is$ derived$
from$subscriptions$and$50%$from$advertising$revenue$(FinnMedia$–$The$Federation$
for$the$Finnish$Media$Industry).$
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Definition of a Business Model
Definition$of$Business$Model:$there$are$many$definitions$of$business$models$in$both$
academic$and$trade$literature.$Below$are$three$definitions$that$I$have$found$of$value$
for$the$purpose$of$my$dissertation:$
$
1. “A$ business$ model$ is$ a$ concise$ representation$ of$ how$ an$ interrelated$ set$ of$
decision$ variables$ in$ the$ area$ of$ venture$ strategy,$ architecture,$ and$
economics$ are$ addressed$ to$ create$ sustainable$ competitive$ advantage$ in$
defined$
markets.”
(Morris$et$al,$2005$p.$727)$
2. “A$business$model$is$a$useful$notion$that$(as$BadenFFuller$and$Morgan$find)$
enhances$ the$ understanding,$ labeling$ and$ classification$ of$ firms’$ operations.$
Defined$ by$ Amit$ and$ Zott$ as$ ‘the$ content,$ structure,$ and$ governance$ of$
transactions$ designed$ so$ as$ to$ create$ value$ through$ the$ exploitation$ of$
business$opportunities’,$the$concept$fell$from$grace$at$the$time$of$the$dot.com$
crash,$but$has$regained$visibility$and$importance$in$the$recent$downturn.$Its$
renaissance$is$seen$in$the$growing$number$of$sources,$from$academic$articles$
and$executive$reports$to$media$publications,$as$well$as$the$range$of$contexts$
which$ have$ been$ studied:$ from$ internetFbased$ companies$ to$ ventures$ in$
healthcare,$ biotechnology,$ and$ open$ source$ communities.$ “
(Svejenova,$Planellas$and$Vives,$2010).$
3. “A$ business$ model$ is$ a$ conceptual$ tool$ that$ contains$ a$ set$ of$ elements$ and$
their$ relationships$ and$ allows$ expressing$ a$ company's$ logic$ of$ earning$
money.$ It$ is$ a$ description$ of$ the$ value$ a$ company$ offers$ to$ one$ or$ several$
segments$ of$ customers$ and$ the$ architecture$ of$ the$ firm$ and$ its$ network$ of$
partners$ for$ creating,$ marketing$ and$ delivering$ this$ value$ and$ relationship$
capital,$ in$ order$ to$ generate$ profitable$ and$ sustainable$ revenue$ streams.”$
(Osterwalder,$2004$p.$15)$
Alexander$Osterwalder$has$done$extensive$research$in$business$models$with$a$focus$
on$business$model$ontology,$as$presented$in$his$PhD$thesis.$He$has$since$developed$a$
commercial$ tool$ named$ ‘The$ Business$ Model$ Canvas’$ –$ a$ strategic$ template$ for$
developing$ new$ or$ documenting$ existing$ business$ models.$ The$ business$ model$
canvas$ is$ often$ used$ by$ startFups$ and$ existing$ ventures.$ It$ is$ a$ visual$ chart$ with$
elements$describing$a$firm’s$value$proposition,$infrastructure,$customers,$costs$and$
revenue$ streams.$ $ According$ to$ Osterwalder$ “Business$ model$ innovation$ is$ about$
new$ways$of$creating,$delivering$and$capturing$value.”$
Whether$the$new$business$models$in$publishing$are$truly$disruptive$or$not$is$a$core$
question$to$be$addressed$in$the$dissertation.$In$this$context$we$need$to$look$at$the$
process$ of$ innovation$ in$ media$ firms$ backed$ by$ theory$ on$ how$ business$ model$
innovations$are$different$from$technological$innovations$(The$Innovator’s$Dilemma:$
When$New$Technologies$Cause$Great$Firms$to$Fail,$Christensen,$1997).$The$notion$of$
a$business$model$is$further$discussed$by$Markides$in$a$series$of$articles$(Disruptive$
Innovation:$ In$ Need$ of$ Better$ Theory,$ Markides$ 2006).$ Strategic$ innovation$ is$ a$
fundamentally$ different$ way$ of$ competing$ in$ an$ existing$ business$ (Charitou$ and$
Markides,$2003).$$
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$
One$example$is$the$way$Amazon$competes$in$book$retailing,$i.e.$quite$different$from$
a$traditional$retailer$like$Barnes$&$Nobles.$Amazon$invented$a$new$business$model$
in$the$1990’s,$where$books$are$purchased$online$and$delivered$as$printed$books$or$
electronically.$ Today$ Amazon$ is$ selling$ books$ across$ the$ globe$ and$ is$ the$ leading$
player$ in$ the$ book$ business$ and$ has$ also$ become$ a$ publisher$ of$ books.$ More$ than$
half$ of$ the$ books$ sold$ by$ Amazon$ are$ eFBooks$ for$ its$ Kindle$ devices$ and$ Kindle$
applications$ on$ other$ devices$ such$ as$ smartphones$ and$ tablets.$ For$ the$ purpose$ of$
my$dissertation$I$will$look$at$disruption$in$other$industries$e.g.$book$publishing$and$
the$ music$ industry$ in$ order$ to$ get$ a$ framework$ for$ understanding$ the$ change$ and$
potential$disruption$in$publishing.$
$
Zott$ and$ Amit$ argue$ that$ “business$ model$ design$ is$ a$ key$ decision$ for$ a$ new$ firm$
entrepreneur$ and$ a$ crucial$ –$ perhaps$ more$ difficult$ –$ task$ for$ managers$ in$ charge$
with$rethinking$an$old$model$to$make$their$firm$fit$for$the$future.”$(Zott$and$Amit,$
2010$p.$216).$In$an$earlier$paper$the$same$authors$argued$that$any$given$business$
model$design$can$be$noveltyFcentered$and$efficiencyFcentered$at$the$same$time.$The$
essence$ of$ a$ noveltyFcentered$ business$ model$ design$ is$ conceptualization$ and$
adoption$ of$ new$ ways$ of$ conducting$ economic$ exchanges.$ This$ can$ be$ achieved$ by$
connecting$ previously$ unconnected$ parties$ (like$ book$ authors$ and$ readers),$ by$
linking$ transaction$ participants$ in$ new$ ways$ (like$ eBay),$ or$ by$ designing$ new$
transaction$mechanisms$(e.g.$Amazon$in$eFcommerce$including$payments).$Business$
model$innovation$may$complement$innovation$in$products$and$services,$methods$of$
production,$distribution$or$marketing,$and$markets$(Schumpeter$1934).$
$
EfficiencyFcentered$business$model$design$refers$to$the$measure$that$firms$may$take$
to$ achieve$ transaction$ efficiency$ through$ their$ business$ models$ (Zott$ and$ Amit,$
2010,$ p.$ 185).$ The$ notion$ of$ efficiencyFcentered$ business$ model$ design$ is$ not$
intended$ to$ capture$ all$ means$ by$ which$ a$ firm$ can$ strive$ for$ efficiency$ (e.g.$ the$
reduction$of$staff$or$production$cost),$although$these$measures$have$been$common$
in$ the$ media$ industry$ in$ the$ recent$ years$ as$ print$ circulation$ and$ advertising$ have$
continued$to$fall.$
$
Part$ of$ the$ reason$ why$ media$ firms$ have$ not$ been$ innovating$ enough$ may$ be$
“organizational$ inertia’$ (The$ Success$ Trap:$ Why$ doing$ things$ right$ become$ wrong$
over$time,$Robert$G.$Picard,$lecture$at$Tampere$University,$October$2011.)$According$
to$Professor$Picard$media$firms$face$three$choices:$
$
1. Do$nothing$and$ignore$needs$to$innovate$(doom)$
2. Disruptive$innovations$coming$in$are$beginning$to$take$their$toll$(not$only$in$
technology,$ also$ in$ products);$ leave$ innovations$ to$ outsiders$ and$ new$
entrants$
3. Innovate$ internally;$ reshape$ themselves$ and$ the$ industry$ for$ greatest$
advantage$
$
Innovation$ challenges$ for$ established$ media$ firms$ are$ listed$ as:$ innovations$ offer$
less$ near$ term$ reward$ potential$ than$ current$ operations$ (current$ operations$ are$
very$profitable$for$publishers);$organizational$resistence$and$inertia$inhibit$reaction.$
Routines,$systems$and$processes$are$created$to$ensure$efficiency,$reliability,$and$to$
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reduce$ costs.$ However,$ these$ combined$ with$ company$ culture$ to$ stifle$ change$ and$
innovation.$ The$ end$ result$ is$ organizational$ inertia$ and$ the$ way$ media$ firms$ are$
structured$and$complex$makes$this$inertia$even$bigger.$In$this$context$it$is$relevant$
to$ cite$ Peter$ Drucker’s$ phrasing:$ “Culture$ eats$ strategy$ for$ breakfast.”$ Media$ firms$
need$ to$ change$ their$ corporate$ culture$ to$ open$ up$ for$ new$ business$ models$ and$
innovation.$
Definition of Media
Marshall$McLuhan$was$a$professor$of$English$literature$and$Canadian$by$birth.$He$is$
best$ known$ for$ his$ work$ in$ communication$ theory,$ and$ his$ theories$ have$ also$ had$
practical$applications$in$the$media$industry$and$advertising.$He$had$about$him$the$
air$ of$ a$ man$ who$ believed$ that$ it$ was$ the$ business$ of$ prophets$ to$ bring$ prophetic$
news$–$a$notion$that$has$put$its$stamp$on$many$editors$of$prominent$newspapers.$$
$
McLuhan’s$book$‘The$Gutenberg$Galaxy:$The$Making$of$Typographic$Man”,$published$
in$1961,$discussed$the$‘Gutenberg$Era’$with$its$focus$on$mediaFinduced$events$(Ref.$
W.Terrence$ Gordon,$ McLuhan’s$ Compass$ for$ the$ Voyage$ to$ a$ World$ of$ Electric$
Words,$introduction$to$The$Gutenberg$Galaxy).$It$was$a$pioneering$study$in$the$fields$
of$oral$culture,$print$culture$and$media$ecology.$Print$culture$gained$ground$in$the$
middle$ of$ the$ 15th$ century,$ after$ a$ German$ smith$ named$ Johannes$ Gutenberg$ had$
invented$the$use$of$movable$typing$in$print$in$around$1440.$His$invention$was$the$
printing$press,$which$allowed$the$mass$production$of$printed$books$(“Savitauluista$
laseriin$ –$ kirjapainotaidon$ historia”,$ Lars$ Gardberg,$ 2011).$ Before$ the$ invention$ of$
the$ printing$ press$ books$ were$ copied$ by$ hand.$ I$ will$ not$ discuss$ this$ technological$
innovation$ in$ any$ further$ detail,$ but$ it$ truly$ transformed$ the$ dissemination$ of$
information$as$the$Gutenberg$press$was$economically$viable$for$printers$and$readers$
alike.$ Hence$ this$ was$ the$ biggest$ revolution$ in$ the$ history$ of$ communication$ since$
man$discovered$alphabetic$writing.$Before$that$communication$was$represented$by$
cave$paintings,$drawn$maps$and$ideographic$writing$like$pictographs$by$e.g.$Aztecs$
and$native$Americans,$or$hieroglyphs$in$ancient$Egypt$(Gardberg,$2011).$$
$
McLuhan’s$focus$was$to$study$the$influence$of$communication$media$independent$of$
their$content.$This$is$an$interesting$notion,$as$Steve$Jobs$said$when$introducing$the$
iPad$in$January$2010:$“The$last$time$there$was$this$much$excitement$about$a$tablet,$
it$had$some$commandments$written$on$it.”$(Steve$Jobs,$Walter$Isaacson,$2011).$$
McLuhan’s$next$book$“Understanding$Media:$The$Extensions$of$Man”$first$published$
in$ 1964$ introduced$ into$ the$ language$ our$ present$ usage$ of$ the$ term$ ‘media’$ (Ref:$
Lewis$ H.$ Lapham,$ introduction$ to$ Understanding$ Media).$ McLuhan$ has$ also$ coined$
many$other$terms$that$have$since$become$widely$used,$e.g.$“Age$of$Information”$and$
“Global$Village”$predicting$the$World$Wide$Web$thirty$years$before$it$was$invented.$
Perhaps$the$most$cited$term$is$‘The$Medium$is$the$Message”.$I$will$take$some$time$to$
discuss$ McLuhan’s$ discourse$ and$why$the$term$was$later$reintroduced$in$the$form$
“The$Medium$is$the$Massage”$in$a$new$book$published$in$1967.$This$book$was$to$be$
his$best$seller$and$also$led$to$some$advertising$consultancy$work$later$in$his$career.$$
$
In$describing$the$term$“Medium$is$The$Message”$McLuhan$pictures$the$light$bulb$as$
a$medium$without$any$content,$it$creates$an$environment$with$its$mere$presence.$$
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“Whether$the$light$bulb$is$being$used$for$brain$surgery$or$night$baseball$is$a$matter$
of$indifference.$It$could$be$argued$that$these$activities$are$in$some$way$the$!́content&́&
of$ the$ electric$ light,$ since$ they$ could$ not$ exist$ without$ the$ electric$ light.$ This$ face$
merely$ underlines$ the$ point$ that$ ‘the$ medium$ is$ the$ message’$ because$ it$ is$ the$
medium$ that$ shapes$ and$ controls$ the$ scale$ and$ form$ of$ human$ association$ and$
action.”$(McLuhan,$1964)$$
$
McLuhan$noted$that$all$media$have$characteristics$that$engage$the$reader,$listener$or$
viewer$ in$ different$ ways$ –$ this$ is$ a$ particularly$ interesting$ notion$ that$ has$ been$
further$ refined$ by$ researchers$ today$ in$ the$ field$ of$ media$ audience$ engagement.$
What$ kind$ of$ media$ are$ more$ engaging$ to$ the$ consumer$ is$ a$ question$ which$
McLuhan$ discusses$ in$ his$ chapter$ about$ ‘hot$ and$ cold$ media’.$ I$ will$ take$ the$
opportunity$ to$ quote$ McLuhan$ by$ citing$ the$ following$ paragraph$ in$ his$ book$
“Understanding$Media”:$$
$
“There$is$a$basic$principle$that$distinguishes$a$hot$medium$like$radio$from$a$cool$
one$like$the$telephone,$or$a$hot$medium$like$the$movie$from$a$cool$one$like$TV.$A$
hot$ medium$ is$ one$ that$ extends$ one$ single$ sense$ in$ ‘high$ definition’.$ High$
definition$ is$ the$ state$ of$ being$ well$ filled$ with$ data.$ A$ photograph,$ is$ visually,$ F$
high$ definition’.$ A$ cartoon$ is$ ‘low$ definition’,$ simply$ because$ very$ little$ visual$
information$ is$ provided.$ Telephone$ is$ a$ cool$ medium,$ or$ one$ of$ low$ definition,$
because$ the$ ear$ is$ given$ a$ meager$ amount$ of$ information.$ And$ speech$ is$ a$ cool$
medium$of$low$definition,$because$so$little$is$given$and$so$much$has$to$be$filled$in$
by$the$listener.$Hot$media$are,$therefore,$low$in$participation$and$cool$media$are$
high$ in$ participation$ or$ completion$ by$ the$ audience.$ Naturally,$ therefore,$ a$ hot$
medium$like$radio$has$very$different$effects$on$the$user$from$a$cool$medium$like$
the$telephone.”$$
$
There$ are$ two$ points$ to$ observe$ here,$ recognizing$ that$ McLuhan’s$ thinking$ took$
place$50$years$ago$when$a$telephone$was$just$that$–$a$telephone.$The$first$point$is$
that$ he$ has$ its$ focus$ on$ the$ medium,$ not$ the$ content$ i.e.$ what$ is$ being$ said$ on$ the$
phone$or$in$a$speech,$where$most$of$us$would$agree$that$the$content$is$of$high$value.$
The$term$‘Content$is$King’$was$coined$much$later,$in$an$article$written$by$Bill$Gates,$
the$founder$of$Microsoft,$in$1996,$when$announcing$that$the$television$network$NBC$
and$Microsoft$had$agreed$to$enter$the$interactive$news$business.$David$Carr,$author$
and$ journalist$ at$ The$ New$ York$ Times$ has$ stated$ there$ has$ been$ a$ long$ line$ of$
“academics$who$have$made$a$career$out$of$deconstructing$McLuhan’s$effort$to$define$
the$ modern$ media$ ecosystem”.$ This$ interpretation$ is$ owing$ to$ McLuhan’s$ eclectic$
writing$ style$ and$ his$ ignorance$ toward$ sociohistorical$ context.$ However,$ Carr$
concludes$that$Marshall$McLuhan$figured$out$that$“electronic$interdependence$is$the$
defining$aspect$of$our$time$50$years$before$anybody$ever$updated$his$Facebook$page$
or$posted$his$whereabouts$on$Twitter.”$(Marshall$McLuhan:$Media$Savant,$article$in$
The$New$York$Times,$January$6,$2011).$$
$
The$second$observation$on$McLuhan’s$use$of$‘hot$and$cold$media’$is$that$it$reflects$
the$ available$ technology$ at$ the$ time$ of$ writing.$ Today$ a$ smartphone$ would$ be$
considered$a$!́hot$medium$́$ as$you$can$do$so$many$things$with$it$and$it$has$become$
everyone’s$ personal$ communication$ tool$ and$ source$ of$ media.$ The$ content$ comes$
with$ the$ application,$ so$ in$ a$ sense$ the$ smartphone$ is$ ‘the$ electric$ light$ bulb’$ as$ it$
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creates$an$environment$with$its$mere$presence$(just$to$cite$McLuhan$again).$A$TV$set$
has$been$a$rather$‘cool$medium’$until$these$days,$when$we$have$learned$that$the$new$
Smart$ TV’s$ give$ access$ to$ internet$ and$ a$ host$ of$ content$ services$ for$ news,$
entertainment$and$gaming.$Netflix$is$a$content$service$typically$availably$on$modern$
Smart$ TV$ sets$ or$ Apple$ TV$ with$ its$ abundance$ of$ content$ available$ through$ App$
Store$and$iTunes.$$
$
McLuhan$ later$ refined$ his$ thinking$ in$ the$ book$ “The$ Medium$ is$ the$ Massage:$ An$
Inventory$of$Effects”$published$in$1967.$By$adopting$the$term$‘massage’$he$denoted$
the$ effect$ each$ medium$ has$ on$ the$ human$ senses,$ taking$ inventory$ of$ how$ media$
massage$the$sensorium.$According$to$McLuhan’s$biographer$W.$Terrence$Gordon$the$
title$of$the$book$was$actually$a$mistake$–$a$typo$from$the$beginning.$However,$when$
McCluhan$saw$the$typo$he$exclaimed$“Leave$it$alone!$It’s$great,$and$right$on$target!”$
as$he$had$gained$insight$that$he$needed$to$revitalize$his$language$and$the$description$
of$ media$ (Marshall$ McLuhan:$ Escape$ into$ Understanding,$ W.$ Terrence$ Gordon,$
2002).$$In$the$foreword$to$the$biography$Gordon$states$poignantly:$$
$
“McLuhan$ wrote$ with$ no$ knowledge$ of$ galvanic$ skin$ response$ technology,$
terminal$ node$ controllers,$ or$ the$ Apple$ Newton.$ He$ might$ not$ have$ been$ able$
even$to$imagine$what$a$biomouse$is.$But$he$pointed$the$way$to$understanding$all$
of$ these,$ not$ in$ themselves,$ but$ in$ their$ relation$ to$ each$ other,$ to$ older$
technologies,$ and$ above$ all$ in$ relation$ to$ ourselves$ our$ bodies,$ our$ physical$
senses,$our$psychic$balance.$When$he$published$Understanding$Media$in$1964,$he$
was$ disturbed$ about$ mankind’s$ shuffling$ toward$ the$ twentyFfirst$ century$ in$ the$
shackles$of$nineteenth$century$perceptions.$He$might$be$no$less$disturbed$today.$
And$he$would$continue$to$issue$the$challenge$that$confronts$the$reader$at$every$
page$of$his$writings$to$cast$off$those$shackles.”$$
Being Digital
In$the$middle$of$the$1990’s,$or$more$precisely$in$1995$I$had$the$opportunity$to$visit$
the$ MIT$ Media$ Lab$ in$ Massachusetts$ on$ a$ trip$ arranged$ by$ Tekes$ (The$ Finnish$
Funding$ Agency$ for$ Technology$ and$ Innovation).$ I$ was$ a$ young$ media$ enthusiast$
then,$ a$ Vice$ President$ at$ a$ regional$ media$ group$ in$ Finland$ with$ business$ focus$ on$
the$ commercial$ printing$ operations.$ I$ had$ alreadt$ developed$ an$ interest$ for$ ‘all$
things$ digital’$ including$ Macintosh$ software$ and$ hardware$ widely$ used$ in$ the$
graphic$ arts$ industry$ at$ that$ time.$ I$ was$ also$ responsible$ for$ the$ development$ of$
digital$ printing$ and$ our$ company$ was$ a$ partner$ in$ the$ Tekes$ funded$ project$
“Electronic$ printing$ as$ part$ of$ the$ Value$ Chain”,$ started$ in$ order$ to$ develop$ the$
printing$of$user$guides$out$of$a$database$to$Nokia$mobile$handsets.$$
$
This$is$when$I$came$across$the$book$“Being$Digital”$by$Nicholas$Negroponte.$In$the$
introduction$to$the$book$he$confessed:$“Being$dyslexic,$I$don’t$like$to$read.$As$a$$
child$ I$ read$ train$ timetables$ instead$ of$ the$ classics,$ and$ delighted$ in$ making$
imaginary$ perfect$ connections$ from$ one$ obscure$ town$ in$ Europe$ to$ another.$ This$
fascination$gave$me$an$excellent$grasp$of$European$geography.”$(Negroponte,$1995)$
That$is$what$information$management$could$do$for$you,$long$before$we$had$Google$
Maps.$Thirty$years$later$Nicholas$Negroponte$worked$as$director$for$MIT$Media$Lab$
and$columnist$for$WIRED$magazine,$writing$about$his$visions$about$technology.$$
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$
I$was$completely$awed$by$the$visit$and$saw$the$first$Internet$newspaper$called$the$
‘Fishwrap’$on$the$MIT$campus.$In$fact$the$book$‘Being$Digital’$introduced$the$concept$
of$ ‘Daily$ Me’,$ an$ electronic$ newspaper$ customized$ for$ an$ individual’s$ taste.$ Today$
one$may$think$this$is$commonplace,$however,$the$concept$was$introduced$at$a$time$
when$the$World$Wide$Web$had$just$been$introduced$to$a$larger$audience$and$books$
and$ encyclopedia$ published$ on$ CDFROM$ were$ gaining$ ground.$ In$ his$ book$
Negroponte$ discusses$ the$ differences$ between$ bits$ and$ atoms$ in$ a$ chapter$ called$
‘The$ DNA$ of$ Information’.$ In$ his$ mind$ the$ best$ way$ to$ appreciate$ the$ merits$ and$
consequences$of$‘being$digital’$is$to$reflect$on$the$bits$and$atoms.$Although$we$had$
undoubtedly$entered$into$an$information$age,$most$information$was$delivered$to$us$
in$the$form$of$atoms,$which$make$up$physical$tangible$objects$such$as$CD’s,$books,$
magazines$and$newspapers.$Digital$information$is$made$up$of$bits,$the$smallest$unit$
of$information$on$a$computer.$Negroponte$wonders$what$business$the$information$
and$entertainment$industries$are$in?$“Is$the$publisher$of$a$book$in$the$information$
delivery$ business$ (bits)$ or$ in$ the$ manufacturing$ business$ (atoms)?”$ (Negroponte,$
1995).$ He$ argues$ that$ the$ historical$ answer$ is$ both,$ but$ predicts$ that$ will$ change$
rapidly$as$information$appliances$become$more$ubiquitous$and$userFfriendly.$Now,$
nearly$20$years$later$many$publishers$are$still$pondering$are$they$in$the$business$of$
bits$or$atoms,$or$both.$And$why$is$that?$Because$the$manufacturing$business$(atoms)$
was$ a$ profitable$ one$ and$ advertisers$ had$ few$ other$ alternatives$ to$ choose$ from$ in$
the$world$of$atoms.$$
$
On$ a$ notion$ mobile$ handsets$ had$ just$ been$ introduced$ in$ 1995$ (in$ Europe$ GSM$
standard$cellphones)$and$they$were$just$mobile$telephones$at$that$time,$computers$
connected$to$each$other$on$the$Internet$was$the$big$thing.$$
$
The$ book$ Being$ Digital$ offers$ a$ profound$ insight$ and$ visions$ of$ a$ digital$ future.$
Negroponte$ provides$ a$ general$ history$ of$ several$ media$ technologies$ and$ analyzes$
the$ advantages$ and$ disadvantages$ of$ the$ technologies,$ as$ described$ in$ the$ case$ of$
publishing$above$and$is$discussed$in$more$detail$in$the$case$of$a$printed$book:$$
$
“Right$ now$ it$ is$ hard,$ but$ not$ impossible,$ to$ compete$ with$ the$ qualities$ of$ a$
printed$ book.$ A$ book$ has$ a$ highFcontrast$ display,$ is$ lightweight,$ easy$ to$ ‘thumb’$
through,$ and$ not$ very$ expensive.$ But$ getting$ it$ to$ you$ includes$ shipping$ and$
inventory.$In$the$case$of$textbooks,$45$percent$of$the$cost$is$inventory,$shipping,$
and$returns.$Worse,$a$book$can$go$out$of$print.$Digital$books$never$go$out$of$print.$
They$are$always$there.”$$
$
The$thinking$evolving$around$atoms$and$bits$leads$Negroponte$to$describe$the$book$
he$is$writing$as$made$of$“unwieldy$atoms”$that$will$probably$be$replaced$by$a$digital$
copy$by$the$time$anyone$reads$this$book.$Whilst$several$versions$of$eBooks$exist$of$
Being$Digital$I$have$reread$the$book$in$paperback$format,$made$of$unwieldy$atoms.$$
$
Amazon$was$incorporated$in$July,$1994$and$the$site$went$online$as$Amazon.com$in$
1995.$ It$ started$ as$ an$ online$ shop$ for$ printed$ books,$ with$ ordering$ online$ and$
advanced$logistics$put$in$place$to$deliver$books$first$in$the$U.S.$and$later$in$Europe,$
Latin$ America$ and$ China.$ Today$ Amazon$ also$ offers$ eBooks$ and$ eReading$ devices$
such$as$the$Kindle.$Today$Amazon’s$founder$Jeff$Bezos$carries$the$title$“CEO$of$the$
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Internet”$ as$ Amazon$ has$ made$ full$ use$ of$ the$ bits$ by$ entering$ the$ fields$ of$ books,$
movies,$ music,$ Kindle$ devices,$ cloud$ computing,$ IT$ infrastructure$ (ISP$ –$ Internet$
Service$Provider)$and$social$media.$By$way$of$$“Being$Digital”$Amazon$evolved$to$a$
“Media$ Powerhouse”$ with$ an$ eCommerce$ market$ share$ of$ 60%$ in$ books,$ 22%$ in$
video,$ 19%$ in$ music,$ 19%$ in$ consumer$ electronics$ and$ 19%$ in$ cloud$ services$
(WIRED$ Magazine,$ December$ 2011).$ Jeff$ Bezos$ said$ in$ a$ recent$ interview:$ “We$ are$
culturally$pioneers.$We$like$to$disrupt$even$our$own$business.$Other$companies$have$
different$ cultures$ and$ sometimes$ don’t$ like$ to$ do$ that.$ Our$ job$ is$ to$ bring$ those$
industries$along”$(Steven$Levy,$WIRED$magazine,$December$2011).$$
$
Another$example$of$“Being$Digital”$is$Apple.$The$company$has$been$a$forerunner$of$
computing$ technology$ since$ the$ introduction$ of$ the$ first$ Apple$ Macintosh$ personal$
computer$ in$ January,$ 1984.$ Its$ visionary$ coFfounder$ Steve$ Jobs$ (1955F2011)$
“revolutionized$ everything$ he$ touched”$ (Steven$ Levy,$ WIRED$ magazine$ special$
edition,$October$5,$2011).$He$was$a$true$entrepreneur$whose$motto,$used$in$an$Apple$
advertising$ campaign$ in$ 1997,$ was$ “Think$ Different”.$ The$ author$ of$ this$ thesis$
confesses$to$being$an$Apple$“fanboy”,$whilst$I$also$acknowledge$the$achievements$of$
the$other$leading$tech$companies$like$Amazon,$Google$and$Microsoft.$The$common$
denominator$for$all$these$companies$is$that$they$have$been$founded$and$managed$by$
visionary$entrepreneurs,$however,$very$different$in$terms$of$personal$character.$$
$
Back$ to$ Apple:$ “Driven$ by$ demons,$ Jobs$ could$ drive$ those$ around$ him$ to$ fury$ and$
despair.$ But$ his$ personality$ and$ products$ were$ interrelated,$ just$ as$ Apple’s$
hardware$and$software$tended$to$be$as$if$part$of$an$integrated$system.”$(Steve$Jobs,$
Isaacson,$ 2011).$ Job’s$ passion$ for$ perfection$ and$ ferocious$ drive$ helped$ Apple$
revolutionize$ six$ industries:$ personal$ computers,$ animated$ movies,$ music,$ mobile$
phones,$ tablet$ computing$ and$ digital$ publishing.$ (Isaacson,$ 2011).$ One$ could$ also$
argue$ that$ Apple$ has$ been$ driving$ the$ paradigm$ shift$ from$ online$ shopping$ on$ the$
Internet$to$mobile$platforms,$by$way$of$introducing$its$App$Store$as$a$platform$for$
development$of$various$entertainment,$gaming$and$eEcommerce$applications$for$the$
iPhone$(smartphone$platform)$and$the$iPad$(tablet$platform).$$
$
From$a$business$model$perspective$it$is$of$interest$to$compare$Apple$with$Amazon,$
as$ they$ have$ quite$ different$ business$ models.$ Apple$ designs$ upmarket$ devices$
combined$with$userFfriendly$user$interface$(iOS$operating$system)$and$with$services$
like$App$Store$and$iTunes,$forming$a$complete$ecosystem.$The$devices$are$priced$at$a$
premium$and$Apple$takes$a$30%$provision$of$media$content.$Whilst$Apple$is$deviceF$
centric$one$could$argue$that$Amazon$is$cloudFcentric,$who$do$not$develop$their$own$
software$ (Kindle$ devices$ are$ operated$ on$ a$ version$ of$ Android$ OS,$ developed$ by$
Google).$In$another$words$for$Apple$“hardware$is$king”,$whilst$for$Amazon$“content$
is$ king”.$ Amazon$ draws$ its$ profits$ from$ streamed$ media,$ whilst$ Apple’s$ profits$ are$
derived$from$selling$devices$and$downloaded$media.$$
(
(
(
(
(
(
(
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Definition of Digital Ecosystem
The$original$definition$of$an$ecosystem$relates$to$biology.$An$ecosystem$is$a$complex$
set$of$relationships$among$the$living$resources,$habitats,$and$residents$of$an$area.$It$
includes$plants,$trees,$animals,$fish,$birds,$microorganisms,$water,$soil,$and$people.$
$
A$complete$digital$ecosystem$consists$of$hardware,$software,$and$services.$All$play$a$
particular$role$in$the$ecosystem$in$order$for$it$to$function$as$a$whole.$Based$on$the$
design$ of$ the$ hardware,$ the$ function$ of$ the$ software,$ and$ the$ services$ provided,$
ecosystems$ can$ target$ specific$ parts$ of$ the$ market$ or$ the$ market$ as$ a$ whole$ (Ben$
Bajarin,$2011).$Microsoft’s$XBOX$is$an$example$of$a$hardware,$software,$and$services$
solution$ targeted$ for$ a$ specific$ part$ of$ the$ market,$ i.e.$ gaming.$ The$ point$ is$ that$ all$
three$components$are$necessary$for$a$holistic$ecosystem.$The$important$thing$about$
ecosystems$ is$ that$ they$ create$ dependencies.$ These$ dependencies$ can$ lead$ to$
consumer$ loyalty.$ Microsoft,$ Google,$ and$ Apple$ are$ out$ to$ create$ ecosystems$ that$
drive$loyalty.$They$all$have$a$different$approach$to$the$business$model.$Microsoft$has$
until$ recently$ been$ a$ software$ company,$ but$ is$ now$ attempting$ to$ create$ its$ own$
services$offering$content$like$games$and$music,$as$well$as$becoming$a$manufacturer$
of$mobile$and$tablet$devices.$
$
It$is$a$clear$trend$that$consumers$make$purchase$decisions$about$products$based$on$
whose$ecosystems$they$desire$to$be$a$part$of,$or$the$ones$that$work$better$for$their$
life$ or$ environment.$ The$ hardware,$ software,$ and$ services$ will$ be$ important$ but$
more$importantly,$consumers$will$commit$to$and$invest$in$ecosystems.$As$it$relates$
to$ personal$ computing,$ there$ are$ three$ main$ companies$ who$ enable$ ecosystems$
today.$ They$ are$ Apple,$ Google$ and$ Microsoft.$ Microsoft$ and$ Google$ are$ more$
horizontal$(providing$software$to$manufacturers$of$smartphones,$tablets$and$PC’s),$
where$ Apple$ is$ more$ vertical$ (its$ focus$ has$ been$ on$ devices$ designed$ for$ different$
consumer$ needs$ with$ ultimate$ user$ experience$ in$ mind).$ The$ history$ of$ the$
technology$industry$informs$us$of$a$fascinating$value$shift.$This$shift$begins$where$
value$is$initially$in$hardware,$then$as$the$market$matures$it$moves$to$software$and$
then$ eventually$ to$ services.$ One$ important$ part$ of$ the$ service$ offering$ is$ relevant$
content$ and$ all$ tech$ companies$ are$ looking$ to$ attract$ developers$ into$ their$
ecosystem.$Partly$Amazon$is$a$player$here$too,$with$its$Kindle$eFreaders$and$Kindle$
Fire$tablets$and$its$customer$base$of$200$million$people$is$a$vast$market$for$content$
like$ music,$ media$ and$ music.$ Unlike$ Apple,$ Google$ and$ Microsoft,$ Amazon$ is$ not$
primarily$a$software$company.$
$
As$ for$ the$ mobile$ ecosystem$ Android$ (Google)$ and$ iOS$ (Apple)$ dominate$ the$
smartphone$ market$ in$ the$ U.S.$ More$ than$ half$ of$ U.S.$ smartphones$ are$ running$
Android,$while$40%$are$iPhones.$Windows$phone$has$a$market$share$of$only$2%,$so$
Microsoft$ has$ a$ long$ way$ to$ go$ as$ it$ has$ now$ acquired$ the$ mobile$ device$ business$
from$Nokia.$$
$
Finnish$ Internet$ users$ are$ now$ among$ the$ most$ avid$ consumers$ of$ online$ news$
according$ to$ the$ online$ measurement$ firm$ comScore.$ When$ ranking$ the$ European$
countries$ by$ reach,$ the$ Nordic$ countries$ lead$ the$ top$ 3$ as$ 97%$ of$ Finnish$ Internet$
users$visited$a$news$site$during$September,$20013,$followed$by$Sweden$and$Norway$
(comscoredatamine.com).$ According$ to$ Ericsson$ mobile$ Internet$ subscriptions$ will$
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triple$ by$ 2019,$ including$ smartphones,$ mobile$ PC’s,$ tablets$ and$ mobile$ routers$
(Ericsson,$Mashable.com).$
$
$
$
Figure$1.$Number$of$mobile$Internet$subscriptions$worldwide$(Ericsson)$
$
Definition of Service Design
Design$ is$ a$ general$ term$ referring$ to$ the$ creation$ of$ new$ products$ and$ services.$
Design$ refers$ to$ a$ plan$ or$ drawing$ produced$ to$ show$ the$ look$ and$ function$ or$
workings$ of$ a$ building,$ garment,$ or$ other$ object$ before$ it$ is$ made$ (Oxford$
Dictionaries).$$
$
Service$design$is$an$interdisciplinary$approach$that$combines$different$methods$and$
tools$from$various$disciplines.$It$is$a$new$way$of$thinking$as$opposed$to$a$new$standF
alone$academic$discipline.$(Stickdorn$and$Schneider).$$Service$design$is$the$activity$
of$ planning$ and$ organizing$ people,$ infrastructure,$ communication$ and$ material$
components$of$a$service$in$order$to$improve$its$quality$and$the$interaction$between$
service$provider$and$customers.$The$purpose$of$service$design$methodologies$is$to$
design$ according$ to$ the$ needs$ of$ customers$ or$ participants,$ so$ that$ the$ service$ is$
userFfriendly,$ competitive$ and$ relevant$ to$ the$ customers.$ The$ backbone$ of$ this$
process$is$to$understand$the$behavior$of$the$customers,$their$needs$and$motivations.$$
Customer$insight$is$of$essence$in$service$design.$
$
$
$
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There$are$also$several$academic$approaches$to$service$design.$Service$design$aims$to$
ensure$ service$ interfaces$ are$ useful,$ usable$ and$ desirable$ from$ the$ client’s$ point$ of$
view$ and$ effective,$ efficient$ and$ desirable$ from$ the$ supplier’s$ point$ of$ view$
(Professor$Birgit$Mager,$2009,$This$is$Service$Design$Thinking$2010).$
“Service$Designers$visualize,$formulate$and$choreograph$solutions$that$are$not$yet$
available.$They$watch$and$interpret$needs$and$behaviors$and$transform$them$into$
potential$ future$ services.$ In$ the$ process,$ exploring,$ generating$ and$ evaluating$
approaches$are$used$similarly$and$a$redesign$of$existing$services$is$just$as$much$a$
challenge$ as$ the$ development$ of$ new$ innovative$ services.”$
Birgit$Mager,$Professor$for$service$design$at$Köln$International$School$of$Design.$
“Service$Design$helps$to$innovate$(create$new)$or$improve$(existing)$services$to$
make$ them$ more$ useful,$ usable,$ desirable$ for$ clients$ and$ efficient$ as$ well$ as$
effective$ for$ organizations.$ It$ is$ a$ new$ holistic,$ multiFdisciplinary,$ integrative$
field.”$Stefan$Moritz,$2005$(This$is$Service$Design$Thinking,$2010).$
$
Service$ designers$ draw$ on$ the$ methodologies$ of$ fields$ such$ as$ ethnography$ and$
journalism$ to$ gather$ customer$ insights$ through$ interviews$ and$ by$ shadowing$
service$ users.$ Many$ observations$ are$ synthesized$ to$ generate$ concepts$ and$ ideas$
that$are$typically$portrayed$visually,$for$example$in$sketches$or$service$prototypes.$$
$
Figure$2.$Service$design$process$(Service$Design$agency$Palmu)$
$
$
Service$ design$ thinking$ and$ methodologies$ are$ used$ to$ design$ both$ physical$ and$
digital$ services,$ and$ are$ now$ more$ commonly$ used$ in$ designing$ media$ related$
services$in$the$digital$ecosystem.$Service$design$is$relevant$to$the$case$studies$in$my$
dissertation,$where$I$will$take$a$closer$look$at$new$services$designed$especially$for$
digital$and$mobile$platforms.$$
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5. RESULTS OF THE INTERVIEWS AND KEY DRIVERS
OF CHANGE
Key Drivers of Change
The$ results$ from$ the$ interviews$ have$ underlined$ the$ notion$ that$ a$ major$ business$
paradigm$ shift$ is$ underway$ in$ newspaper$ publishing.$ Four$ key$ drivers$ of$ change$
were$identified$as$a$pattern$repeatedly$discussed$in$the$course$of$the$interviews:$
$
• Consumer$behavior$(time$spent$on$media$and$how$media$is$consumed)$
• Cost$of$print$&$distribution$(particularly$the$cost$of$physical$distribution)$
• Disruptive$technology$(the$new$‘ecosystem’$with$tablets$and$smartphones)$
• The$change$in$advertising$(mass$marketing$vs.$targeted$content$marketing)$
In$ addition$ to$ these$ a$ few$ other$ topics$ came$ up$ in$ the$ interviews,$ including$ the$
changing$society$and$the$polarization$that$affects$how$income$is$distributed$amongst$
citizens$and$information$behavior$in$general.$Also$political$reasons$were$mentioned$
as$there$has$been$an$increase$in$the$VAT$for$printed$products$in$Finland$from$zero$to$
10$per$cent$over$the$years$from$2011$to$2013.$At$the$same$time$the$VAT$for$digital$
content$remains$at$the$high$level$of$24$per$cent.$However,$this$is$a$political$matter$
and$ it$ relates$ to$ regulation$ and$ certain$ EU$ directives.$ Hence$ I$ have$ chosen$ not$ to$
discuss$the$VAT$aspect$any$further$in$this$context.$$
$
Distribution$ cost$ i.e.$ the$ cost$ of$ physical$ distribution$ is$ the$ critical$ key$ driver$ of$
change$ with$ regard$ to$ print.$ The$ recent$ trend$ in$ Finland$ is$ quite$ worrying$ F$ Itella$
(previously$The$Finnish$Post,$a$distribution$company$with$a$monopolistic$position$in$
the$Finnish$market)$has$declared$that$distribution$of$letters,$invoices,$magazines$and$
newspapers$ is$ no$ longer$ its$ core$ business.$Instead$it$will$focus$on$eCommerce$and$
logistics.$The$consequence$of$rapidly$declining$volumes$of$print$and$increased$cost$
owing$ to$ escalating$ wages$ and$ the$ price$ of$ fuel$ has$ a$ doubleFeffect$ on$ the$ price$ of$
distribution.$And$these$price$changes$may$lead$to$print$becoming$a$“luxury$product”$
that$consumers$cannot,$or$will$not,$pay$for.$
$
These$four$‘Key$Drivers’$are$all$interrelated$and$this$interrelation$will$be$argued$in$
the$ dissertation.$ However,$ the$ change$ in$ consumer$ behavior$ (Audience$ Evolution:$
New$ technologies$ and$ the$ transformation$ of$ media$ audiences,$ Napoli,$ 2011)$ is$ the$
one$key$driver$that$affects$all$of$the$three$others,$including$the$way$consumers$are$
able$to$consume$printed$products$in$the$future.$The$‘Information$Explosion’,$i.e.$how$
many$ messages$ per$ day$ can$ we$ actually$ handle,$ has$ a$ lot$ to$ do$ with$ consumer$
engagement$in$media$and$advertising$content.$$
$
Advertising$ is$ also$ affected$ by$ consumer$ behavior$ and$ the$ way$ we$ purchase$
products$today$as$eCommerce$is$gaining$ground$and$we$use$a$number$of$sources$to$
obtain$information$about$products$and$services$included$search$engines,$blog$posts$
and$other$referrals$in$social$media$as$well$as$content$marketing.$$
$
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$
Figure$3.$Consumers’$purchase$behavior$(Service$Design$agency$Palmu)$
$
There$ is$ an$ increased$ sense$ of$ urgency$ to$ find$ new$ business$ models$ among$ media$
firms$ in$ general$ and$ newspaper$ publishers$ in$ particular.$ The$ attitude$ of$ industry$
leaders$has$changed$in$the$past$two$years,$which$is$clear$when$comparing$the$results$
from$ early$ discussions$ when$ preparing$ the$ research$ plan$ in$ 2011$ and$ those$ of$ the$
interviews$conducted$later$from$April$2012$to$August$2013.$The$research$work$was$
started$with$literature$studies$and$preliminary$discussions$with$publishers$in$2011.$
At$ that$ time$ Nordic$ newspaper$ publishers$ did$ not$ feel$ the$ change$ in$ consumer$
behavior$and$advertising$as$strongly$as$it$is$seen$today.$$
$
Now$the$general$sentiment$is$that$the$old$business$models$need$to$be$reviewed$and$
investments$into$digital$transformation$are$a$necessity.$Based$on$the$interviews,$the$
year$2013$seems$to$be$the$year$of$$‘paywalls’,$which$means$that$digital$content$is$no$
longer$ free$ online$ and$ several$ models$ for$ offering$ digital$ content$ on$ mobile$
platforms$have$been$launched.$Some$Finnish$newspapers$have$already$followed$the$
example$set$by$The$New$York$Times$in$March$2011.$The$soFcalled$‘metered$paywall’$
allows$media$audiences$to$read$only$a$limited$number$of$articles$for$free$in$order$to$
build$ a$ digital$ subscription$ base.$ This$ year$ can$ really$ be$ defined$ as$ the$ year$ when$
publishers$are$focusing$on$developing$new$subscription$models$for$paid$content.$$
$
Only$ a$ few$ international$ publishers$ offer$ content$ for$ free$ on$ the$ web,$ e.g.$ The$
Guardian$ where$ the$ strategic$ choice$ seems$ to$ be$ to$ become$ one$ of$ the$ global$
websites$ for$ news,$ underlined$ by$ investments$ into$ editorial$ staff$ in$ the$ U.S.$ and$
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Australia.$However,$The$Guardian$can$be$seen$as$one$of$the$exceptions$seeking$for$
global$ dominance$ in$ the$ EnglishFspeaking$ world.$ Moreover$ The$ Guardian$ Media$
Group$is$owned$by$a$foundation,$without$the$immediate$necessity$to$make$a$profit.$
$
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6. STRATEGIC CHOICES: EFFICIENCY-CENTERED VS.
NOVELTY-CENTERED BUSINESS MODELS
The$interviews$reveal$that$some$firms$have$chosen$to$stick$to$the$old$business$model$
with$a$technological$focus$on$the$print$based$business$model$for$as$long$as$possible.$
These$ companies$ are$ efficiencyFcentered$ and$ the$ main$ part$ of$ revenue$ is$ derived$
from$the$old$print$based$business$model$(bottom$left$in$figure$3).$In$ePublishing$they$
strive$for$a$reduction$in$transaction$costs$and$offer$only$limited$value$as$far$as$the$
user$experience$is$concerned$on$digital$platforms.$$
$
Some$ publishers$ look$ at$ even$ a$ greater$ degree$ of$ efficiency$ through$ industry$
consolidation$ (top$ left$ in$ figure$ 3),$ which$ requires$ investments$ into$ corporate$
acquisition$and$competencies$in$finding$synergies$within$the$acquired$framework$of$
newspapers.$The$focus$is$still$on$cost$efficiency$across$the$organization,$with$some$
investment$into$new$ways$of$finding$revenue$in$the$digital$ecosystem.$$
$
Figure$4a.$Strategic$choices$in$publishing$(examples)$
$
$
A$good$number$of$the$interviewed$publishers$(bottom$right$in$figure$3$below)$have$
invested$ into$ digital$ transformation$ with$ a$ certain$ degree$ of$ incremental$
improvement$ of$ the$ printed$ products.$ Digital$ transformation$ implies$ investment$
into$ new$ products$ and$ services$ in$ the$ digital$ ecosystem,$ including$ wellFdesigned$
mobile$ applications.$ These$ companies$ have$ typically$ also$ decided$ to$ set$ up$ a$
‘paywall’$and$most$have$already$implemented$one$during$2013.$
$
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The$ last$ category$ of$ publishers$ in$ the$ top$ right$ corner$ of$ figure$ 3$ clearly$ have$ a$
noveltyFcentered$ business$ model$ and$ a$ more$ aggressive$ ‘Digital$ First’$ approach$ in$
order$ to$ create$ value$ to$ customers$ and$ to$ build$ a$ digital$ future.$ These$ firms$ have$
invested$ both$ in$ the$ creation$ of$ digital$ publishing$ platforms$ and$ the$ analysis$ of$
reader$ engagement$ based$ on$ collection$ of$ data$ related$ to$ the$ behavior$ of$ the$
subscriber$base.$These$companies$are$most$often$‘global$brands’,$with$an$audience$
across$the$world.$$
$
Figure$4b.$Strategic$choices$in$publishing$(description)$
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7. A FEW EXAMPLES: DIGITAL TRANSFORMATION AND
DIGITAL FIRST
International publishers of global news brands
The Economist – Digital transformation
The$ Economist$ is$ an$ institution,$ established$ in$1843.$ It$ took$ The$ Economist$ 160$
years$to$get$to$1$million$print$subscriptions$and$only$9$more$years$to$reach$a$total$of$
more$than$1.5$million$subscribers$(latest$publicly$available$figure$is$from$ABC$data$
and$ stands$ at$ 1,555,917$ representing$ the$ total$ average$ print$ and$ paid$ digital$
editions$ circulation$ from$ January$ to$ June$ in$ 2013.$ This$ represents$ a$ yearFonFyear$
growth$of$5.5%).$The$Economist$hope$to$reach$2$million$in$total$subscriptions$"in$the$
next$few$years",$according$to$Nick$Blunden,$SVP,$Global$Head$of$Digital$and$Content$
Strategy.$Focus$has$from$the$very$beginning$been$on$international$affairs$and$trade,$
a$sound$base$for$the$interests$of$a$global$audience$today.$As$mentioned$in$a$recent$
interview$ with$ Andrew$ Rashbass,$ CEO$ of$ The$ Economist$ Group,$ 'trust'$ and$
transparency$is$the$core$of$the$content$of$each$issue$(interview$by$Chris$Smith,$The$
Guardian).$$
$
The$ Economist$ online$ presents$ impressive$ numbers$ for$ its$ special$ content$ in$ the$
digital$ ecosystem:$ 7.7$ million$ unique$ online$ visitors$ per$ month.$ The$ Social$ Media$
sites$show$quite$high$figures$for$the$likes$and$followers$of$The$Economist.$$The$share$
of$ print$ is$ declining,$ but$ Nick$ Blunden$ is$ still$ “rather$ bullish$ about$ the$ future$ of$
print”$and$thinks$The$Economist$will$still$have$a$print$edition$in$10$years$time.$
$
As$ to$ audience$ measurement$ The$ Economist$ tracks$ downloads,$ but$ behavioral$
tracking$is$not$yet$done$in$depth.$However,$reader$panels$are$conducted$on$a$regular$
basis.$For$the$near$future$top$priorities$include$development$of$the$mobile$web$and$
new$ apps$ to$ guarantee$ availability$ on$ all$ relevant$ mobile$ platforms.$ Advertising$ is$
becoming$ much$ more$ a$ targeted$ process,$ according$ to$ Nick$ Blunden,$ who$ has$ a$
background$of$heading$an$advertising$agency$prior$to$joining$The$Economist$a$few$
years$ ago.$ Advertising$ is$ according$ to$ Nick$ Blunden$ “working$ rather$ well$ on$ the$
tablet$editions$for$premium$advertisers”,$e.g.$Intelligent$Life$magazine$published$by$
The$ Economist$ is$ free$ on$ the$ tablet$ and$ its$ content$ is$ sponsored$ by$ Credit$ Suisse.$
Intelligent$Life$has$a$circulation$of$175,000.$
$
The$ Economist$ has$ now$ unbundled$ its$ subscriptions$ as$ of$ April,$ 2013.$ New$ price$
points$have$been$set$up$accordingly.$The$pilot$was$started$in$the$U.S.$at$the$end$of$
2012$and$has$now$been$rolled$out$to$the$rest$of$the$world,$commented$Susan$Clark,$
MD,$ The$ Economist$ Digital$ &$ Group$ Marketing$ Director.$ "The$ rise$ of$ globalization$
helps$ our$ business,$ and$ the$ fact$ that$ English$ has$ become$ the$ second$ language$ for$
many$people"$boosts$growth.$$
$
Readers$of$The$Economist$can$now$choose$between$digital$only,$print$only$or$a$full$
subscription$ across$ the$ platforms$ including$ mobile,$ online$ and$ print.$ The$ digital$
subscriber$ base$ is$ growing,$ however,$ many$ people$ still$ choose$ a$ bundle$ of$ digital$
and$print$subscription.$"Many$of$us$still$lead$multiFplatform$lives."$In$fact$only$20%$
opted$for$the$digitalFonly$subscription$in$the$U.S.,$where$60%$of$the$audience$of$The$
Economist$ is$ today.$ Scandinavia$ is$ reportedly$ also$ a$ strong$ market$ with$ high$
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readership$ and$ interest$ for$ global$ affairs$ and$ international$ business.$ Currently$ a$
digital$ subscription$ is$ priced$ at$ €3.92$ per$ week$ (the$ same$ as$ the$ price$ for$ a$ print$
subscription),$while$the$print$+$digital$subscription$is$priced$at$€4.75$per$week.$
$
With$a$concept$of$expanding$onto$several$platforms$across$the$mobile$ecosystem$it$
may$not$take$too$long$to$reach$2$million$subscribers?$The$digital$transformation$of$
The$Economist$is$one$to$watch$in$the$global$media$landscape.$The$economic$results$
for$The$Economist$have$been$among$the$best$in$the$news$industry.$$Results$for$the$
financial$year$ended$31$March$2013$showed$a$turnover$of$£346m$for$The$Economist$
Group$and$an$operating$profit$of$£68m,$a$record.$Profit$after$tax$was$up$3%$to$£49m.$
In$terms$of$revenue$60%$is$derived$from$selling$content,$up$from$44%$five$years$ago,$
and$39%$of$revenue$is$from$digital$sources,$up$from$29%$three$years$ago.$
$
The Financial Times – Digital First
The$125Fyear$old$Financial$Times$(FT)$is$one$of$the$world’s$leading$business$news$
and$information$organizations,$recognized$internationally$for$its$authority,$integrity$
and$ accuracy$ (FT.com).$ The$ Financial$ Times$ is$ a$ division$ of$ Pearson$ PLC,$ which$
provides$ a$ broad$ range$ of$ business$ information,$ news$ and$ services.$ The$ FT$ Group$
has$a$50%$shareholding$in$The$Economist.$FT$is$reporting$success$with$its$web$app,$
launched$ in$ 2012.$ The$ FT$ also$ publishes$ ‘How$ To$ Spend$ It’,$ a$ lavish$ lifestyle$
magazine$ on$ private$ economy$ and$ luxury$ articles$ (also$ available$ as$ a$ mobile$ and$
tablet$ app$ and$ online$ on$ HowtoSpendit.com).$ The$ FT$ is$ quite$ progressive$ with$
investment$into$its$digital$platforms$and$sees$the$future$of$the$newspaper$as$digital$
without$the$shade$of$a$doubt.$
$
The$ FT$ has$ almost$ 600$ journalists$ worldwide.$ Although$ the$ circulation$ for$ the$
printed$newspaper$has$been$sliding$down$the$FT$has$its$largest$readership$ever$and$
FT's$ audience$ is$ comprising$ wealthy$ and$ powerful$ people$ across$ the$ globe.$
According$to$Jon$Slade,$Commercial$Director,$FT$provides$"actionable$content"$to$a$
quality$audience.$The$FT$has$a$combined$print$and$online$average$daily$readership$
of$2.1$million$people$worldwide$and$a$combined$paid$print$and$digital$circulation$of$
more$than$629,000$(up$5%$year$on$year)$according$to$latest$public$figures$presented$
on$ the$ FT$ website.$ Digital$ subscribers$ now$ represent$ a$ larger$ portion$ than$ the$
circulation$of$the$printed$newspaper$standing$at$387,00$at$the$end$of$October,$2013$
(up$24%).$Mobile$is$an$increasingly$important$channel$for$the$FT,$driving$a$third$of$
FT.com$ traffic$ and$ 24%$ of$ digital$ subscriptions.$ App$ usage$ is$ growing$ particularly$
fast$among$the$25F34$year$old$people,$which$is$good$news$with$regard$to$the$future$
of$ readership.$ More$ editorial$ resources$ are$ now$ shifted$ from$ print$ to$ online$
reporting$as$focus$is$shifting$to$a$24Fhour$service$for$marketFmoving$news$(fastFT).$
$
Despite$ falling$ print$ sales,$ the$ revenue$ of$ the$ newspaper$ circulation$ has$ achieved$
profitability$ as$ it$ exceeded$ the$ cost$ of$ print$ production$ and$ distribution.$ Price$
increases$ have$ boosted$ profits$ and$ one$ could$ say$ that$ in$ the$ case$ of$ FT$ print$ is$
becoming$“a$luxury$product”$for$those$subscribers$who$wish$to$have$a$printed$copy$
of$the$content.$
$
The$ FT$ has$ been$ successful$ in$ its$ premium$ offer$ to$ subscribers,$ adding$ its$ well$
followed$ Lex$ column,$ eFpaper$ access,$ and$ letter$ from$ the$ editor$ to$ the$ package.$ As$
many$as$33%$of$new$digital$subscribers$have$opted$for$the$‘premium’$offering.$They$
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pay$ $2.49$ a$ week$ more$ for$ the$ privilege.$ And$ for$ FT’s$ business$ model$ this$ implies$
they$get$more$revenue$for$almost$zero$in$extra$cost.$Premium$or$VIP$subscriptions$
are$ one$ innovation$ any$ selfFrespecting$ quality$ publisher$ should$ be$ thinking$ about$
for$2014$(Ken$Doctor,$Newsonomics).$
$
Measurement$of$audience$behavior$with$regard$to$job$title$and$personal$interests$is$
of$ particular$ relevance$ to$ FT,$ allowing$ consultancy$ to$ advertisers$ utilizing$ an$
analytics$ tool$ called$ 'Deep$ View'.$ In$ this$ way$ FT$ can$ help$ advertisers$ to$ direct$ the$
right$story$to$targeted$audiences$at$the$right$time.$However,$print$is$not$dead,$as$the$
FT$still$provides$a$good$platform$for$premium$advertising$with$its$print$subscription$
base.$Advertising$is$reported$to$remain$weak,$however,$FT$have$reported$growth$in$
digital$ and$ luxury$ advertising,$ including$ a$ significant$ 23%$ increase$ in$ mobile$
advertising.$$
!
The New York Times - Digital First
As$ a$ researcher$ one$ tries$ to$ be$ objective$ dealing$ with$ facts$ and$ looking$ at$ posing$
questions$ hoping$ to$ get$ answers$ with$ regard$ to$ the$ future$ of$ journalism$ and$ new$
business$ models$ in$ the$ media$ industries.$ With$ this$ respect$ I$ have$ to$ confess$ I$ was$
rather$emotional$when$watching$the$movie$“Page$One:$Inside$The$New$York$Times$
and$ the$ Future$ of$ Journalism”$ produced$ and$ written$ by$ Kate$ Novack$ and$ Andrew$
Rossi.$ The$ movie$ –$ and$ the$ related$ book$ edited$ by$ David$ Folkenflik$ –$ really$
dramatizes$ the$ transformation$ of$ media$ and$ the$ difficulties$ traditional$ media$
companies$ were$ facing$ a$ few$ years$ ago.$ Both$ regular$ readers,$ the$ producers$ said$
they$ didn’t$ want$ to$ worship$ The$ Times,$ but$ wanted$ to$ tell$ the$ story$ of$ journalism$
with$the$notion$of$“The$Times$as$an$influential$institution$during$a$time$of$turmoil.”$$
$
Back$ in$ January$ 2009$ Michael$ Hirschorn$ had$ written$ the$ piece$ in$ The$ Atlantic$
entitled$“End$Times:$Can$America’s$paper$of$record$survive$the$death$of$newsprint?$
Can$ journalism?"$ asking$ the$ provocative$ question:$ “What$ if$ The$ New$ York$ Times$
goes$out$of$business$–$like$this$May”.$And$the$company$was$then$making$huge$losses.$
Clay$ Shirky,$ the$ New$ York$ University$ professor$ of$ new$ media$ had$ been$ comparing$
the$advent$of$the$Internet$to$the$invention$of$the$printing$press$in$the$15th$century,$
before$ most$ of$ us$ got$ to$ understand$ the$ magnitude$ of$ the$ transformation$ of$ the$
media$ landscape.$ Perhaps$ it’s$ against$ this$ background$ journalist$ David$ Carr$ –$ a$
brilliant$ journalist$ and$ a$ colorful$ character$ in$ the$ movie$ –$ put$ a$ headline$ for$ his$
section$ of$ the$ book:$ “Print$ is$ Dead:$ Long$ Live$ The$ New$ York$ Times”.$ He$
appropriately$ writes$ that$ “the$ paper$ matters$ precisely$ because$ people$ don’t$ just$
push$ a$ button$ when$ they$ have$ a$ random$ thought$ or$ merely$ give$ some$ TwitterF
driven$topspin$to$a$nice$little$bit$of$news$the$see$floating$by$on$the$Web.”$He$further$
states:$ “I$ still$ believe$ that$ the$ front$ page$ of$ The$ Times$ can$ convey$ authority$ unlike$
any$ other$ media$ artifact$ on$ the$ planet.”$ David$ Carr$ writes$ the$ Media$ Equation$
column$ for$ the$ Monday$ Business$ section$ of$ NYT$ and$ blogs$ regularly$ at$ Media$
Decoder.$$
$
So$ how$ are$ The$ Times$ doing$ today?$ I$ had$ the$ opportunity$ to$ visit$ The$ New$ York$
Times$ Company$ Research$ &$ Development$ Lab$(R&D$ Lab)$ hosted$ by$ Matt$ Boggie,$
Director$of$Technology$Strategy$and$R&D$at$The$New$York$Times.$Matt$Boggie$has$
worked$at$The$Times$since$2010$and$was$previously$involved$with$media$as$a$Senior$
Manager$at$Accenture.$
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$
The$ R&D$ Lab$ "works$ to$ innovate$ around$ new$ technologies,$ anticipating$ consumer$
behaviors$ and$ building$ new$ interfaces$ for$ news".$ The$R&D$ Lab$ has$ a$ charter$ of$
“being$ahead$of$the$crowd”$i.e.$a$mission$of$looking$three$years$ahead.$The$emphasis$
of$R&D$is$on$Development$of$new$media$concepts.$The$R&D$Lab$comprises$a$team$of$
7$ creative$ technologists,$ who$ are$ together$ with$ Matt$ Boggie$ trying$ to$ find$ new$
trends$ and$ create$ prototypes$ in$ order$ to$ illustrate$ what$ might$ work$ in$ the$ near$
future.$Any$concepts$are$then$productized$and$launched$to$the$market$by$the$R&D$
Lab$or$in$partnership$with$the$newsroom,$or$with$the$NYT$technology$organization.$
So$ in$ this$ sense$ The$ New$ York$ Times$ Company$ has$ a$ very$ clear$ and$ markedly$
forwardFlooking$ attitude$ towards$ new$ innovation$ and$ service$ design.$ Media$ is$
regarded$ as$ a$ service$ to$ the$ audience$ involving$ an$ element$ of$ coFcreation$ and$
serving$ the$ various$ needs$ of$ a$ fairly$ broad$ media$ audience$ forming$ the$ NYT$
community.$
$
The$ ‘paywall’$ introduced$ in$ March$ 2011$ has$ worked$ well,$ and$ more$ people$ are$
becoming$digital$subscribers$or$choose$bundles$e.g.$with$a$Sunday$print$subscription$
supplemented$ by$ digital$ content$ on$ weekdays.$ The$ numbers$ show$ a$ continuing$
decline$ in$ print$ subscriptions,$ however,$ these$ are$ still$ relevant$ with$ regard$ to$
advertising$income.$$
$
Business$ Insider$ wrote$ a$ rather$ positive$ summary$ of$ the$ NYT$ financial$ report$ in$
February$ stating$ that$ “its$ revenue$ from$ readers$ and$ subscribers$ overtook$ that$ of$
advertising$for$the$first$time$in$2012,$as$the$media$group$reported$a$boost$in$profits.$
For$the$full$year,$the$group$posted$a$profit$of$$133$million,$compared$with$a$loss$of$
$39.7$ million$ in$ 2011.”$ The$ New$ York$ Times$ are$ back$ in$ black$ figures$ and$ this$
progress$has$continued$in$2013.$
$
Mark$Thompson,$the$former$BBC$chief$who$became$president$and$chief$executive$at$
the$ Times$ last$ November,$ claimed$ progress,$ noting$ that$ the$ number$ of$ digital$
subscribers$is$growing:$"For$the$first$time$in$our$history,$annual$circulation$revenues$
surpassed$those$from$advertising.$Our$pay$model$continued$to$prove$itself.”$$
$
NYT$ has$ introduced$ a$ subscription$ model$ offering$ flexibility$ to$ readers$ including$
different$ platforms:$ print,$ online$ and$ mobile$ platforms$ with$ apps$ for$ tablets$ and$
smartphones.$Visitors$to$the$NYTimes.com$website$only$get$three$free$articles$each$
day.$ The$ New$ York$ Times$ is$ also$ available$ on$ new$ platforms$ such$ as$ Flipboard,$
where$digital$subscribers$of$NYT$get$access$to$the$full$content.$$
$
In$terms$of$the$development$of$new$media$concepts$in$the$digital$ecosystem$NYT$are$
not$focusing$on$any$particular$ecosystem,$as$the$players$tend$to$change$over$time.$A$
very$different$set$of$players$dominate$they$tech$industry$today,$compared$with$5F10$
years$ago.$
$
The$ focus$ for$ research$ is$ to$ break$ down$ the$ content$ into$ smaller$ pieces$ and$
repackage$it$into$different$experiences,$powered$by$content$consumed$on$platforms$
at$home$or$for$example$moving$about$in$New$York$City.$An$example$of$this$would$be$
how$to$improve$your$cooking$experience$at$home$and$what$you$see$in$the$streets$of$
New$York,$i.e.$information$beyond$the$events$and$objects$that$you$see.$Work$is$also$
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put$down$on$guided$services$recommended$by$The$New$York$Times$or$for$example$
the$best$election$coverage$for$those$interested$in$politics.$The$New$York$Times$also$
has$a$very$good$technology$section$including$the$Bits$Blog,$focusing$on$the$business$
of$new$technology.$These$stories$are$produced$by$the$newsroom,$i.e.$the$R&D$Lab$is$
not$involved$with$the$actual$content$of$the$newspaper$or$its$blogs$on$the$NYTimes$
website.$ Demos$ built$ at$ the$ media$ lab$ are$ shared$ with$ the$ newsroom$ a$ couple$ of$
times$each$month.$
$
The$researcher$was$given$a$guided$tour$of$the$R&D$Lab,$together$with$a$small$group$
of$students$from$Stanford$University.$Many$of$the$demos$are$presented$on$the$R&D$
Lab$website$and$below$I$have$described$in$brief$two$of$the$prototypes$shown:$
“Reveal"$ i.e.$ a$ "Magic$ News$ Mirror"$ –$ you$ can$ speak$ to$ the$ mirror$ and$ ask$ for$
headlines,$ news$ in$ New$ York$ or$ the$ weather$ report$ for$ Manhattan,$ or$ even$ your$
personal$ health$ information.$ The$ intention$ is$ not$ that$ the$ mirror$ is$ the$ actual$
interface$for$reading$news$at$length,$but$you$can$pick$out$the$news$whilst$brushing$
your$teeth$and$then$read$the$complete$news$at$your$breakfast$table.$
$
Another$interesting$demo$that$I$choose$to$call$"Data$Visualized"$F$i.e.$data$shown$on$
a$large$screen$across$the$wall,$where$you$can$see$the$number$of$articles$published,$
the$number$of$words,$pages$read,$and$tweets$shared$on$a$given$day.$This$could$be$a$
tool$ for$ the$ newsroom$ to$ illustrate$ audience$ engagement.$ Other$ interesting$
development$projects$include$the$creative$use$of$new$technology$platforms,$such$as$
Google$Glass.$The$NYT$news$app$was$the$first$of$its$kind$to$be$launched$on$Google$
Glass$last$spring.$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
From$ a$ business$ model$ point$ of$ view$ NYT$ is$ planning$ to$ put$ up$ a$ number$ of$ new$
price$ points$ and$ diversified$ products,$ e.g.$ specific$ media$ services$ for$ elections,$
sports$ updates$ for$ big$ events$ like$ The$ Olympic$ Games$ etc.$ The$ focus$ is$ on$ new$
product$ groups$ that$ serve$ the$ needs$ of$ different$ people$ (not$ necessarily$ living$ in$
New$York$or$in$the$U.S.).$Although$the$‘paywall’$is$driving$digital$subscriptions$NYT$
is$ still$ looking$ at$ finding$ means$ to$ offer$ relevant$ content$ to$ people$ who$ are$ not$
necessarily$ able$ or$ willing$ to$ pay$ for$ the$ current$ packages$ offered.$ There$ are$
opportunities$ in$ developing$ the$ offering$ for$ parts$ of$ the$ content$ to$ certain$ target$
groups.$ NYT$ will$ be$ focusing$ on$ creating$ new$ mobile$ products,$ according$ to$ Matt$
Boggie.$This$needs$to$be$looked$at$with$a$critical$eye$in$order$build$specific$content$
that$people$are$willing$to$pay$for.$
$
Engagement$ is$ measured$ in$ a$ number$ of$ ways:$ how$ people$ spend$ their$ time$ with$
media$ during$ the$ day,$ e.g.$ mobile$ activity$ in$ the$ morning,$ online$ browsing$ during$
work$ hours$ and$ tablet$ usage$ in$ the$ evening.$ NYT$ is$ also$ analyzing$ data$ to$
understand$ better$ how$ consumers$ move$ towards$ digital$ subscriptions,$ as$ well$ as$
patterns$of$sharing$on$e.g.$Twitter.$Linking$behavioral$patterns$to$purchase$behavior$
is$a$little$more$difficult,$however,$NYT$are$working$on$mobile$tracking.$Advertisers$
have$been$looking$at$The$New$York$Times$more$as$an$attractive$platform$for$brand$
advertising,$ and$ NYT$ has$ a$ much$ more$ diverse$ audience$ when$ compared$ with$ e.g.$
financial$newspapers$like$FT$or$WSJ.$NYT$are$looking$more$for$textual$and$syntactic$
analysis$of$what$people$are$reading$–$“if$I$read$a$certain$type$of$articles$e.g.$opinions,$
what$other$kind$of$articles$am$I$likely$to$read?”$NYT$has$a$recommendation$engine$in$
place$today,$and$are$looking$to$do$more$with$recommendations$later.$It’s$still$early$
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days$ in$ this$ process.$ As$ to$ the$ innovation$ process$ within$ The$ New$ York$ Times$
Company$ it’s$ really$ everyone’s$ task,$ including$ the$ newsroom,$ R&D$ and$ other$
departments$of$the$company.$$
$
One$ can$ sense$ a$ budding$ confidence$ at$ NYT:$ three$ new$ digital$ products$ are$ to$ be$
launched$ in$ 2014,$ including$ new$ price$ points$ and$ a$ premium$ tier$ for$ subscribers.$
The$ digital$ initiative$ has$ been$ a$ success,$ 90%$ of$ print$ subscribers$ have$ included$
digital$ services$ in$ their$ package$ and$ it$ all$ adds$ up$ to$ $150$ million$ in$ new$ digital$
reader$revenue.$NYT$leads$the$news$industry$with$56%$of$its$revenues$coming$from$
readers$(Ken$Doctor,$The$Newsonomics$of$The$New$York$Times’s$Paywalls$2.0).$
New Media Concepts in the U.S. and Service Design for digital
natives
Service$ design$ is$ becoming$ vital$ in$ the$ new$ media$ landscape.$ It$ is$ quite$ important$
that$the$user$experience$is$matched$with$the$device$being$used,$so$service$design$is$
actually$about$the$combination$of$relevant$content$combined$with$the$right$kind$of$
user$experience$on$each$platform$being$used$for$media$consumption.$Not$forgetting$
the$relevance$of$building$elements$enabling$engagement$and$social$sharing.$
$
Many$ of$ the$ new$ services$ are$ being$ designed$ with$ these$ principles$ in$ mind.$ For$
example$The$Washington$Post$has$just$launched$'Topicly'$F$a$highly$visual$platform$
for$ its$ website$ and$ mobile$ platforms.$ Grouping$ articles$ by$ theme$ and$ then$ linking$
these$under$an$image$in$a$grid,$the$homepage$is$a$collection$of$different$news$topics.$
You$ can$ then$ navigate$ onwards$ to$ relevant$ stories,$ commentaries,$ graphics$ and$
multimedia$surrounding$the$issue.$Topicly$is$powered$by$proprietary$technology$to$
give$ users$ timely$ news$ that$ Post$ editors$ think$ will$ interest$ readers.$ All$ Post$
journalism$ —$ stories,$ blog$ posts,$ photos,$ and$ videos$ —$ is$ being$ processed$ in$ 15F
minute$ snapshots,$ and$ topics$ are$ being$ determined$ in$ realFtime$ based$ on$ content.$
The$more$content$that$is$published$about$a$topic,$the$higher$the$topic$appears$in$the$
display.$Advertising$on$the$site$is$native;$so$all$adverts$appear$in$the$same$format$as$
the$news$topics$around$them.$Land$Rover,$the$official$launch$sponsor,$for$example,$
has$ its$ own$ grid$ on$ the$ homepage,$ the$ only$ significant$ difference$ being$ that$ it$ is$
qualified$ as$ a$ ‘sponsored$ topic’.$ I$ guess$ you$ could$ call$ this$ content$ marketing.$ The$
new$ service$ is$ particularly$ aimed$ at$ mobile$ users,$ and$ the$ plan$ is$ to$ include$ social$
media$data$in$its$algorithm.$
BuzzFeed$ is$ a$ news$ service$ designed$ for$ the$ digital$ natives.$ In$ their$ own$ words$
“BuzzFeed$ is$ the$ leading$ media$ company$ for$ social$ news$ and$ entertainment,$
intensely$ focused$ on$ delivering$ highFquality$ original$ reporting,$ insight,$ and$ viral$
content$across$a$rapidly$expanding$array$of$subject$areas.”$With$85$million$visitors$
in$August,$it$is$fast$becoming$one$of$the$most$popular$sites$on$the$web.$Considering$
the$1$billion$users$of$Facebook$and$where$they$get$their$news,$Buzzfeed$is$top$of$the$
list$when$it$comes$to$stories$shared$by$users,$ahead$of$the$Huffington$Post,$CNN$and$
the$ BBC$ (Rory$ CellanFJones,$ 7$ reasons$ why$ Buzzfeed$ is$ the$ death/savior$ of$ news).$
BuzzFeed$ also$ integrates$ sponsored$ stories$ on$ its$ platform,$ i.e.$ this$ kind$ of$ ‘native$
advertising’$is$hard$to$separate$from$the$media$content$in$its$service.$
$
Another$ interesting$ newcomer$ is$ NowThis$ News$ F$ the$ social$ news$ video$ startup$ is$
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building$ its$ service$ on$ short,$ visual$ news$ videos.$ NowThis$ News$ is$ available$ as$ a$
website$ and$ apps$ for$ Android$ and$ iOS$ users.$ Not$ unlike$ the$ popular$ BuzzFeed$
service,$NowThis$News$is$aiming$at$the$diginative$audience$and$it$has$also$developed$
a$shortFformat$video$service$(30s$video$clips$online$and$in$its$mobile$apps).$NowThis$
news$has$also$introduced$even$shorter$15s$video$news$in$the$social$media$platform$
Instagram.$ The$ photoFsharingFturnedFvideoFsharing$ app$ is$ one$ that$ a$ number$ of$
news$ organizations$ have$ played$ around$ with,$ but$ few$ have$ made$ the$ sort$ of$ push$
NowThis$has.$EditorFinFchief$Ed$O’Keefe$says$the$shorter$style$of$video$it$produces$
for$ Instagram$ and$ Vine$ is$ now$ “the$ focus$ of$ our$ company.”$ (Caroline$ O’Donovan,$
Nieman$Journalism$Lab).$NowThis$News$is$an$aggregator$i.e.$it$gets$most$of$its$raw$
material$ from$ other$ sources,$ but$ it$ curates$ the$ content$ to$ fit$ each$ platform.$ The$
question$here$is$Instagram$the$right$platform$for$news$services$and$what$is$the$logic$
for$building$revenue?$$
Nordic examples, Sweden
Schibsted – Digital First
A$ Nordic$ example$ of$ a$ “Digital$ First’$ media$ firm$ is$ Schibsted,$ who$ have$ started$ to$
cannibalize$their$old$business$model$as$early$as$2002F2003,$when$they$established$
websites$ to$ compete$ with$ the$ advertising$ sections$ of$ the$ newspapers.$ These$
websites$ like$ BytBil.com$ and$ Blocket.se$ have$ proved$ to$ be$ a$ success$ and$ set$ a$
benchmark$ for$ classified$ advertising$ on$ the$ Internet.$ Nowadays$ Schibsted$ Sverige$
(the$ Swedish$ division$ of$ the$ media$ firm)$ gets$ more$ than$ half$ of$ its$ revenues$ from$
digital$services$and$mobile$traffic$and$revenue$is$on$the$rise.$In$fact$‘Aftonbladet’,$the$
evening$newspaper,$was$the$first$Swedish$newspaper$on$the$Internet$in$1994.$Early$
in$2013$Aftonbladet$was$the$first$newspaper$in$the$Nordic$countries$to$report$more$
revenue$ from$ online$ advertising$ than$ print$ advertising,$ based$ on$ a$ total$ reach$ of$
more$than$2.8$million$daily$readers.$
$
An$ interesting$ new$ service$ in$ Scandinavia$ is$ ‘Aftonbladet$ Flip’,$ available$ on$ the$
tablet.$ Aftonbladet$ is$ already$ the$ most$ popular$ mobile$ news$ service$ in$ Sweden.$ Its$
brand$new$iPad$edition$is$quite$visual$and$simple$to$navigate$i.e.$you$can$tap$on$the$
content$ on$ the$ home$ page$ and$ open$ up$ a$ window$ of$ more$ articles$ relating$ to$ the$
chosen$topic$of$top$news,$culture,$fashion,$entertainment,$sports,$TV$content$etc.$The$
home$page$includes$sponsored$content$from$an$advertiser.$As$a$reader$you$can$log$
in$on$Facebook,$get$recommendations$for$articles$from$your$friends$and$participate$
in$ developing$ the$ service.$ In$ fact$ Aftonbladet's$ development$ team$ have$ actively$
listened$to$users$in$the$process$of$designing$the$new$user$interface.$
$
The$daily$newspaper$FSvenska$DagbladetF$has$also$developed$its$digital$offering$with$
focus$on$mobile$applications$and$its$tablet$app$(eSvD).$A$‘soft’$paywall$allowing$25$
free$ articles$ per$ month$ was$ introduced$ in$ April$ 2013,$ and$ according$ to$ CEO$ Raoul$
Grünthal$of$Schibsted$Sverige$the$mobile$traffic$to$the$website$is$“skyrocketing”.$The$
new$ EditorFinFChief,$ with$ background$ in$ digital$ development,$ said$ that$ the$ total$
reach$ of$ Svenska$ Dagbaldet$ is$ more$ than$ 1$ million$ readers$ daily$ combining$ print,$
online$ and$ mobile.$ He$ will$ focus$ on$ sharpening$ the$ content$ of$ the$ newspaper$ and$
online$journalim,$as$well$as$launching$new$digital$products$in$the$near$future.$$
$
Raoul$ Grünthal$ says$ that$ there$ will$ hardly$ be$ only$ one$ “fixed$ business$ model”$ for$
news$ in$ the$ future.$ Instead$ he$ anticipates$ constant$ change$ and$ to$ “conquer$ the$
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market$ each$ year.”$ The$ focus$ must$ be$ on$ the$ customer,$ the$ reader$ instead$ of$
focusing$inside$the$media$firm.$The$only$thing$he$regrets$is$that$Schibsted$has$been$
too$ patient$ in$ dealing$ with$ conservative$ attitudes,$ i.e.$ he$ wants$ to$ move$ faster$ in$
creating$ new$ services.$ And$ having$ said$ this,$ Schibsted$ has$ been$ leading$ the$ way$ in$
the$Nordic$countries.$
$
Schibsted$ have$ stated$ that$ they$ want$ to$ be$ the$ number$ one$ worldwide$ in$ online$
classified$ ads$ by$ replicating$ its$ highFmargin$ business$ one$ market$ after$ another.$
Today$free$online$classifieds$represent$about$25%$of$Schibsted$group’s$revenue,$but$
it$ accounts$ for$ 47%$ of$ the$ groups$ EBITDA$ (earning$ before$ interest,$ tax$ and$
depreciation).$ Through$ acquisitions$ Schibsted$ now$ operates$ more$ than$ 20$
franchises$ world$ wide$ including$ Finland.$ The$ operations$ are$ steered$ from$ its$ head$
office$in$Oslo,$providing$KPI’s,$guidelines$and$training.$$
$
Västerbottens Kuriren – Digital Transformation
Sometimes$I$really$feel$privileged$as$a$researcher$when$I$get$the$opportunity$to$meet$
new$ people$ who$ are$ prepared$ to$ change$ the$ world.$ Well,$ if$ not$ the$ world,$ at$ least$
these$guys$seem$to$know$how$to$transform$the$media$business$in$Scandinavia.$This$
kind$of$a$feeling$struck$me$as$I$boarded$the$plane$back$to$Stockholm$on$the$way$back$
from$the$northern$city$of$Umeå$in$Västerbotten,$Sweden.$
$
The$ visit$ took$ place$ in$ early$ January$ at$ VästerbottensFKuriren$ (VK),$ where$ I$ was$
welcomed$ by$ Sture$ Bergman,$ CEO$ of$ VKFkoncernen$ (VK$ Media$ Group)$ and$ Ingvar$
Näslund,$ EditorFinFChief$ of$ VK.$ VK$ Media$ Group$ comprises$ of$ two$ newspapers$ –$
namely$VK$and$Folkbladet$published$in$the$north$of$Sweden,$in$the$city$of$Umeå$and$
its$surroundings,$as$well$as$a$‘freebie’$named$Totalt$Umeå,$Nöjesmagasinet$and$some$
external$ brands$ where$ VK$ are$ resellers$ (Daily,$ Mix$ Megapol$ and$ Radio$ Rix).$ All$
except$ for$ Daily,$ a$ printing$ company,$ are$ directly$ related$ to$ media$ content.$ Sture$
Bergman$is$a$former$EditorFinFChief,$who$has$initiated$a$big$cultural$change$as$part$
of$his$job$as$CEO.$Sture$Bergman$claims$that$the$conditions$of$corporate$culture$at$
VK$ and$ other$ media$ firms$ has$ been$ characterized$ by$ conditions$ in$ their$ market,$
which$ is$ part$ of$ the$ history$ of$ how$ newspapers$ have$ evolved$ in$ the$ local$ and$
regional$community.$$
$
The$ most$ important$ aspect$ towards$ change$ is$ insight,$ i.e.$ becoming$ aware$ of$ the$
need$ for$ change.$ Fundamental$ change$ cannot$ happen$ if$ people$ do$ not$ really$
understand$ why$ it$ is$ necessary,$ both$ on$ an$ individual$ and$ an$ organizational$ level.$
Sture$ and$ his$ management$ team$ carried$ out$ a$ survey$ and$ found$ that$ VK$ is$ a$
company$ with$ a$ hierarchic$ culture,$ where$ clans$ rule$ characterized$ by$ internal$
relationships$and$processes.$The$cultural$change$was$driven$by$the$need$to$focus$on$
the$customers,$both$readers$and$advertisers$and$their$changing$needs$–$in$order$to$
establish$an$'innovation$culture'$driven$by$entrepreneurship.$$
$
The$ management$ program$ was$ initiated$ in$ 2011$ with$ a$ focus$ on$ being$ at$ the$
forefront$ of$ development.$ The$ objective$ has$ been$ to$ generate$ a$ passion$ for$
experimentation$ and$ new$ ideas.$ All$ the$ departments$ were$ moved$ into$ the$ same$
office$ and$ on$ the$ same$ floor$ (including$ previously$ competing$ newspapers$ VK$ and$
Folkbladet)$–$without$any$silos$or$walls$between$functions.$VK$editorial$departments$
now$ work$ with$ customer$ segments$ and$ are$ basing$ publishing$ decisions$ on$ their$
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situations$ and$ need$ for$ information.$ The$ key$ questions$ asked$ include:$ a)$ what$
stories$should$be$published$and$where,$b)$the$right$platform$for$various$information$
and$news,$and$c)$how$to$combine$different$platforms$to$maximize$reach$over$a$day$
and$a$week?$This$kind$of$development$is$also$encompassing$the$mobile$and$online$
services,$where$a$new$kind$of$a$‘semantic$web$approach’$is$in$progress.$$
$
Any$decision$on$a$‘paywall’$will$be$based$on$producing$enough$relevant$and$valuable$
content$to$each$reader$(or$customer$segment).$This$is$a$true$challenge$and$requires$
a$lot$of$proactive$thinking$and$data$analysis,$which$was$not$taking$place$previously.$
Measurement$was$traditionally$based$on$the$number$of$readers$of$print$and$online$
visitors.$VK$ranks$among$the$top$Swedish$online$sites$for$news,$in$spite$of$its$focus$
on$ the$ north$ of$ Sweden.$ Print$ is$ not$ forgotten$ –$ VK$ are$ developing$ and$ launching$
new$printed$products.$
$
As$ a$ publisher$ VK$ has$ both$ a$ passion$ for$ development$ and$ a$ structured$ approach$
towards$ funneling$ new$ ideas$ into$ projects$ that$ can$ actually$ be$ launched$
commercially.$As$Sture$Bergman$put$it$he$wants$“200$ideas$to$select$from,$not$only$2$
as$ was$ the$ case$ in$ the$ past”.$ This$ emphasizes$ the$ management$ effort$ of$ getting$
everyone$ on$ board.$ VK$ has$ also$ recruited$ new$ resources$ on$ his$ management$ team$
from$ other$ industries$ e.g.$ HRD$ Manager$ (with$ a$ background$ in$ ICA,$ Swedish$
largest$retailer),$ a$Development$ Manager$ (IT$ and$ telecom$ background)$ and$ a$ Sales$
and$Marketing$executive$(from$the$other$retailer$Coop).$And$the$proactive$approach$
of$the$EditorFinFChief$$underlines$the$importance$of$change$within$the$editorial$team.$
$
The$project$initiated$by$the$management$has$taken$place$in$three$phases:$$
(i)$ Information$ and$ analysis;$ (ii)$ improvement$ of$ efficiency;$ and$ (iii)$ development.$
Needless$to$say$efficiency$is$required$in$the$changing$media$landscape,$as$Swedish$
local$ newspapers$ have$ generally$ lost$ both$ in$ reach$ and$ advertising$ income$ in$ the$
recent$ years.$ VK$ have$ managed$ to$ achieve$ flat$ figures$ with$ this$ regard,$ and$ have$
remarkably$improved$efficiency$at$the$same$time.$$
$
Now$ the$ focus$ for$ the$ next$ three$ years$ is$ built$ around$ three$ main$ areas$ of$
development:$
1. $A$new$Business$Model$for$online$publishing.$
2. $The$ development$ of$ ‘Totalt$ Umeå’,$ the$ weekly$ freebie,$ aimed$ at$ fortifying$ its$
position$as$#1$in$view$of$local$competition.$
3. $A$ unique$ mobile$ service$ platform$ including$ editorial$ and$ commercial$
competence$(new$platform$for$a$media$service$concept).$
$
The$ main$ challenge$ remains$ the$ change$ of$ culture.$ In$ order$ to$ achieve$ overall$
success$and$to$remain$as$profitable$as$VK$has$been,$there$is$a$real$need$for$change$in$
attitudes.$The$whole$media$group$needs$to$turn$from$inside$to$focus$on$people$and$
businesses$ on$ the$ outside.$ As$ Sture$ Bergman$ put$ it$ in$ his$ recent$ presentation$ at$ a$
Media$Forum$in$Oslo:$“It$is$not$enough$that$we$know…$It$is$not$enough$that$we$have$
to…$We$must$have$the$will$to…$It’s$scary!$It’s$inconvenient!$It$is$difficult!$But$great$
fun!”$
$
It's$all$about$attitude$F$agility$F$and$a$new$innovative$culture.$
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Two examples from Finland
The new Helsingin Sanomat (tabloid, online and mobile) – Digital
transformation
Helsingin$ Sanomat$ (HS)$ is$ the$ largest$ subscription$ based$ newspaper$ in$ the$ Nordic$
region$published$by$Sanoma$News.$HS$has$a$net$coverage$of$1.9$million$Finns.$The$
number$ of$ print$ readers$ was$ 859,000$ at$ the$ end$ of$ 2012,$ with$ a$ circulation$ of$
364,000$ in$ total$ (including$ digital$ subscribers).$ The$ website$ HS.fi$ has$ 1.4$ million$
unique$ visitors$ per$ week.$ The$ HS$ brand$ family$ also$ includes$ weekly$ and$ monthly$
supplements,$ two$ free$ sheets$ and$ Channel$ Four$ TV$ news.$ Why$ did$ Helsingin$
Sanomat$need$to$change?$Well$the$reason$is$obvious,$consumer$behavior$is$changing$
and$the$circulation$of$the$printed$paper$has$been$falling$since$the$millennium$shift,$
and$ the$ curve$ has$ been$ steeper$ during$ the$ last$ 3F4$ years$ (F3,8%).$ Meanwhile,$ the$
number$of$unique$mobile$visitors$to$the$HS$website$has$surged.$$
$
Petteri$ Putkiranta,$ Business$ Director$ of$ HS,$ admits$ that$ previously$ the$ business$
model$for$the$web$was$unclear,$with$free$content$and$income$only$from$advertising$
and$banners.$The$‘Combo’$subscription$model$has$been$a$success,$in$2012$33%$of$HS$
customers$paid$for$a$combination$of$digital$and$print$content.$Now$that$figure$stands$
at$ 45%$ according$ to$ Pekka$ Soini,$ CEO$ of$ Sanoma$ News.$ Tablets$ have$ changed$ the$
usage$patterns$and$perception$of$digital$content,$the$HS$tablet$app$user$spends$11x$
more$ time$ with$ the$ content$ than$ an$ average$ web$ user,$ and$ 5x$ more$ time$ than$ an$
average$mobile$app$user.$The$tablet$app$was$introduced$already$at$the$end$of$2010,$
and$HS$now$have$more$than$40,000$tablet$users.$Since$2010$there$have$been$many$
new$steps$in$the$development$of$the$HS$offering.$The$‘paywall’$for$all$digital$content$
(online$and$mobile)$was$implemented$in$November,$2012.$
$
The$printed$newspaper$was$relaunched$in$tabloid$format$in$January,$2013.$Mobility$
in$ paper$ format$ has$ also$ been$ and$ important$ investment$ in$ order$ to$ stay$
competitive.$ Both$ changes$ have$ had$ a$ positive$ impact.$ As$ for$ digital$ content$ most$
consumers$prefer$the$premium$package$including$all$content$and$archives$at$14.90$
euros$/$month.$Since$the$paywall$was$introduced$the$number$of$unique$visitors$is$up$
by$+3%,$whilst$page$views$are$down$by$F3%$(only$5$articles$per$week$can$be$freely$
viewed).$ Many$ sections$ of$ the$ printed$ newspapers$ perform$ better$ than$ ever,$
according$to$Petteri$Putkiranta.$Tabloid$has$been$a$good$format$with$regard$to$the$
attention$ value$ of$ advertising.$ Advertisers$ and$ media$ agencies$ say$ Helsingin$
Sanomat$ is$ now$ clearly$ more$ interesting$ than$ before.$ Petteri$ Putkiranta$ makes$ a$
point$ of$ the$ need$ for$ continuous$ development$ and$ stressed$ that$ analytics$ is$ now$
extensively$ used$ to$ track$ audience$ behavior$ and$ advertising$ performance$ on$ all$
digital$ platforms.$ He$ stressed$ the$ importance$ of$ the$ 'HS$ Brand$ promise':$ Quality$
content,$engaged$readers.$
$
KSF Media Digital Strategy (Hufvudstadsbladet) – Digital transformation
The$ newspaper$ Hufvudstadsbladet$ (HBL)$ was$ founded$ in$ 1864$ and$ is$ today$
published$ by$ KSF$ Media,$ a$ media$ group$ which$ also$ publishes$ a$ number$ of$ local$
SwedishFspeaking$newspapers$in$southern$Finland.$HBL$is$still$the$largest$Swedish$
language$ daily$ in$ Finland.$ Fredrik$ Nars,$ Director$ of$ Digital$ Media,$ presented$ the$
digital$producs$of$HBL$including$eHBL,$the$new$mobile$services$and$the$redesigned$
weekly$magazine$HBL+$launched$in$October,$2012.$$
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$
Fredrik$ Nars$ assesses$ that$ the$ media$ environment$ in$ Finland$ has$ been$ changing$
rapidly$and$the$print$subscriptions$continue$to$slide$down$and$the$use$of$new$media$
devices$is$up.$Newspapers$are$read$30$minutes$per$day,$while$the$Internet$is$used$2$
hours$ per$ day$ by$ Finns.$ And$ more$ ‘media’$ is$ consumed$ on$ social$ media$ platforms.$
Today$most$Finnish$newspapers$publish$‘oneFtoFone$replicas’$on$tablets$like$eHBL.$
$
Fredrik$ Nars$ puts$ KSF$ Media’s$ strategy$ in$ context$ and$ highlights$ particularly$ the$
digital$ strategy$ for$ HBL.$ It$ started$ with$ eReading$ tests$ on$ Åland$ islands$ in$ 2010,$
where$ the$ following$ insights$ were$ gained:$ the$ average$ consumers$ wants$ a$ ‘1to1$
digital$paper’,$but$the$digitally$savvy$consumers$want$more$interactivity.$Hence$the$
launch$ of$ the$ daily$ eHBL$ and$ the$ weekly$ digital$ magazine$ HBL+$ as$ separate$
products,$ the$ latter$ targeting$ new$ digitally$ savvy$ customers.$ Today$ 22%$ of$ HBL’s$
subscriber$base$are$digitally$active$and$the$number$is$increasing.$HBL$digital$future$
issues$ includes$ the$ launch$ of$ digitalFonly$ subscriptions,$ paywall$ for$ the$ website$
HBL.fi,$SpotifyFlike$payment$options$and$Studio$HBL.$Before$the$summer$the$online$
platform$ was$ updated$ with$ more$ content$ and$ more$ frequently$ updated$ content,$
behind$ a$ ‘paywall’.$ DigitalFonly$ subscriptions$ have$ already$ been$ introduced.$ Studio$
HBL$ was$ launched$ in$ May,$ i.e.$ webFTV$ with$ content$ relating$ to$ culture,$ sports$ and$
entertainment$ in$ a$ ‘talk$ show’$ format.$ Currently$ a$ new$ digital$ vision$ for$ 2015$ is$
being$ drawn$ up,$ with$ the$ strategic$ question$ of$ HBL’s$ future$ engagement$ with$ its$
customers:$ in$ which$ channels,$ using$ different$ technologies,$ considerations$ for$ new$
types$ of$ content$ and$ issues$ concerning$ the$ B2C$ and$ B2B$ business$ models.$
Competence$is$an$equally$important$issue,$dealing$with$the$competencies$of$people,$
and$the$need$for$alliancies$and$strategic$partnerships.$HBL$has$recently$worked$on$
the$ service$ design$ of$ a$ new$ digital$ product,$ which$ is$ planned$ to$ launch$ in$ January,$
2014.$The$work$on$development$of$new$digital$services$will$continue$in$2014$at$KSF$
Media.$
$
Fredrik$ Nars$ is$ a$ fan$ of$ Winston$ Churchill,$ citing$ “V”$ meaning$ that$ newspaper$
revenues$ form$ the$ shape$ of$ "V"$ i.e.$ we$ are$ now$ in$ the$ valley$ between$ analog$ and$
digital$ revenues,$ where$ the$ digital$ revenues$ are$ not$ fully$ compensating$ for$ the$
analog$ loss.$ Another$ quote$ from$ Churchill:$ “A$ pessimist$ sees$ the$ difficulty$ in$ every$
opportunity;$an$optimist$sees$the$opportunity$in$every$difficulty.”$
New media concepts and business models in Finland
SUMMA$is$a$brand$new$concept$with$content$published$by$Talentum,$and$designed$
as$ a$ media$ service.$ Talentum's$ core$ activities$ include$ publishing$ media$ and$
literature$ for$ professionals$ of$ various$ fields$ and$ organizing$ topical$ training$ and$
other$events.$Books,$magazines$and$events$focus$on$content$from$professionals$in$all$
walks$ of$ life$ from$ business$ information,$ HR,$ health$ care,$ legal,$ and$ marketing$
to$information$ technology$ and$ private$ investments.$ It's$ leading$ titles$ include$ the$
weekly$'Talouselämä'$(business)$and$'Tekniikka$&$Talous'$(technology$and$economic$
trends),$ as$ well$ as$ 'Arvopaperi'$ (private$ investment)$ and$ 'M&M'$ (marketing$ and$
advertising).$As$a$professional$book$publisher$Talentum$publishes$a$vast$number$of$
titles.$ SUMMA$ sums$ this$ all$ up$ in$ one$ service,$ with$ a$ SpotifyFlike$ pricing$ model$ at$
69.50€/month$ including$ access$ to$ all$ books,$ magazines$ and$ online$ content.$ The$
responsive$design$of$the$service$allows$easy$access$online$and$on$a$smartphone$or$
tablet.$
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$
What's$ nice$ about$ the$ UI$ design$ it's$clean$ and$ easy$ to$ navigate$ on$ any$ device.$ You$
can$ customize$ the$ topics$ and$ titles$ you're$ interested$ in$ and$ it$ also$ allows$ to$ get$ a$
glimpse$of$all$content$published$by$Talentum$at$one$glance.$According$to$CEO$Aarne$
Aktan,$the$service$is$intended$to$be$a$gateway$to$all$content$of$interest$to$those$who$
are$currently$perhaps$subscribing$to$only$one$specific$title.$$
$
There$are$several$price$points$for$those$not$opting$for$the$allFin,$which$to$my$mind$is$
rather$ expensive.$ By$ subscribing$ to$ one$ title$ you$ get$ all$ of$ its$ content$ and$ limited$
access$ to$other$ content$ as$ well$at$ the$ price$ for$ the$title$ you$ have$ chosen.$ The$ price$
for$ a$ single$ magazine$ and$ its$ online$ content$ is$ 16.90$/month.$ If$ you$ subscribe$ to$
three$titles$you$get$all$the$content$for$29.90$/month.$By$paying$20€/month$you$can$
get$access$to$all$books,$and$you$can$download$them$in$e.g.$iBooks$and$order$printed$
books$ through$ an$onFdemand$ service$ to$ your$ home$ or$ office$ address.$ Easy$ access$
and$flexible$pricing$according$to$your$needs$is$to$my$mind$one$key$to$success.$This$is$
quite$a$novel$concept$and$is$not$offered$by$any$other$publisher$in$Finland$yet.$
$
The$ Business$ Model$ is$ based$ on$ content,$ however,$ it$ seems$ obvious$ that$ content$
marketing$ is$ well$ suited$ for$ those$ interested$ in$ certain$ topics$ like$ e.g.$ HR$
development$ or$ legal$information.$ Aarne$ Aktan$ commented$ in$ the$ interview$ that$
"banners$are$banned"$in$the$new$service$F$let's$wait$and$see$what$happens$next$with$
regard$to$advertising$services$on$the$SUMMA$platform.$Customer$data$and$utilizing$
different$ user$ profiles$ should$ be$ a$ key$ to$ success$ in$ advertising$ sales$ and$ I$ would$
expect$ to$ see$ more$ of$ this$ in$ the$ next$ few$ months.$ SUMMA$ was$ only$ released$ in$
October$2013,$so$the$service$will$certainly$be$tweaked$on$the$go.$It's$really$inspiring$
to$see$a$new$media$service$being$launched$in$Finland$and$I$trust$there$will$be$more$
information$available$about$its$usage$and$success$in$the$new$year.$
$
Another$ 'new'$ service$ that$ has$ now$ been$ redesigned$ is$ Teknari.$Teknari$ is$ a$ true$
innovator$ in$ digital$ publishing$ on$ both$ tablets$ and$ computers.$It$ is$ a$ publishing$
concept$launched$already$3$years$ago,$just$when$the$first$iPad$was$out$in$the$market$
(in$fact$before$it$came$on$sale$in$Finland).$Teknari$is$a$startup,$and$according$to$CEO$
Sami$ Kalsi$ they$ are$ fulfilling$ a$ dream$ to$ provide$ a$ media$ service$ based$ on$ content$
available$on$new$technology$platforms.$Teknari$has$its$focus$on$cars$and$consumer$
electronics,$ with$ rich$ media$ content$ including$ car$ reviews$ and$ news$ about$ new$
products$like$smartphones,$tablets$and$related$consumer$technology.$The$biweekly$
tablet$'magazine'$is$complemented$by$the$website$with$online$news$and$a$program$
on$ MTV3,$ as$ well$ as$ the$ Teknari$channel$ on$ YouTube.$Tests$ and$ reviews$ are$
extensive$and$cover$a$wide$number$of$gadgets:$pictured$below$is$the$review$of$the$
new$iPhone$5c$and$5S$featured$in$the$September$issue.$$
$
Teknari's$Business$Model$is$based$on$advertising$on$the$tablet$and$it$sells$its$content$
to$MTV3$for$the$TV$program.$Last$spring$Teknari$experimented$with$'paid$content',$
however,$ they$ are$ now$ back$ to$ the$ original$ business$ model$ with$ free$ content.$ You$
can$download$the$Teknari$app$on$an$iPad$(the$app$is$for$free$on$App$Store).$Android$
tablets$ can$ be$ used$ to$ read$ the$ HTML$ betaFversion.$ Teknari$ are$ working$ on$ a$
responsive$ design$ for$ smartphones,$ which$ will$ be$ launched$ in$ the$ near$ future.$
Advertising$ is$ utilizing$ the$ advantages$ of$ the$ tablet,$where$ they$ are$ providing$ a$
platform$ for$ interactive$ advertisements$ providing$ a$ rich$ media$ experience$ for$ the$
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user.$The$tablet$application$has$been$downloaded$on$more$than$85,000$devices$and$
the$ FlashFmagazine$ on$ the$ website$ gets$ 100,000F150,000$ unique$ visitors$ for$ each$
issue.$ The$ number$ of$ active$ users$ varies$ for$ each$ issue,$ for$ instance$ for$ the$ above$
issue$ the$aggregate$ number$ of$ unique$ users$ of$ the$ tablet$ app$ and$ website$ was$
122,527.$ This$ can$ be$compared$ with$ the$ circulation$ of$ Finnish$ car$magazines$ that$
range$from$approx.$25,000$to$120,000$for$Teknari's$competitors$in$print,$according$
to$Publishing$Director$Minna$Tuomisto.$$
$
EDGE$ research$ group$ is$ cooperating$ with$Teknari$in$ studying$ users.$Together$ with$
Teknari$ staff$ EDGE$ researchers$ have$ digged$ deeper$ and$ below$ the$ surface$ in$
studying$ reader$ experiences.$ We$ are$ combining$ our$ experience$ and$ competence$
within$ consumer$ research$ with$ experts$ on$ usability$ and$ user$ experience,$ i.e.$ our$
colleagues$at$MediaCity.$The$collaboration$and$multiFmethod$model$will$deliver$inF
depth$ knowledge$ of$ Teknari$ users$ and$ most$ important,$ added$ value$ to$ Teknari$
about$ the$ readers.$ We$ also$ believe$ that$ people,$ who$ enrich$ their$ lives$ through$
technology$ and$ forerunning$ digital$ media$ services$ as$ Teknari$ are$ motivated$ to$
contribute$ in$ improving$ these$ services$ even$ further.$ The$ results$ of$ the$ user$ study$
have$been$wrappedFup$at$the$end$of$the$year,$and$give$valuable$information$to$both$
the$publisher$and$the$advertisers.$$
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‘MEDIANOMICS’
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41
8. CONCLUSIONS AND FURTHER RESEARCH
The$results$from$the$multiple$inFdepth$interviews$in$four$countries$(FI,$SE,$UK,$USA)$
indicate$ that$ the$ change$ in$ consumer$ behavior$ is$ accelerating.$ Recent$ consumer$
surveys$support$this$view.$The$willingness$to$pay$for$content$is$influenced$by$other$
media$ content$ services$ and$ the$ introduction$ of$ ‘paywalls’$ for$ news$ services$ has$
recently$ taken$ place$ in$ the$ Nordic$ countries.$ The$ monitoring$ of$ consumer$ change$
and$ willingness$ to$ pay$ for$ news$ will$ continue$ in$ a$ longitudinal$ study$ during$ 2014F
2016.$Finland$will$be$part$of$the$study$mapping$consumer$behavior$in$10$countries.$
The$interviews$reveal$that$there$is$an$increased$sense$of$urgency$in$deciding$which$
path$to$choose$and$where$to$invest.$New$concepts$and$platforms$for$news$are$being$
introduced.$ Different$ companies$ have$ chosen$ different$ approaches$ to$ meet$ the$
digital$demand$for$news.$Printed$newspapers$may$become$a$luxury$product$with$the$
increased$cost$of$distribution.$Publishers$that$invest$only$in$printed$newspapers$will$
not$ be$ successful$ in$ the$ future.$ The$ critical$ question$ is$ how$ to$ manage$ digital$
transformation$ and$ utilize$ customer$ insight$ to$ develop$ new$ services$ to$ both$
consumers$and$advertisers.$
A$ possible$ future$ research$ direction$ would$ be$ to$ investigate$ which$ approach$ has$
proven$to$be$most$successful.$It$is$intended$that$the$research$will$continue$in$2014$
with$ further$ data$ collection$ of$ key$ performance$ indicators$ (KPI’s)$ for$ the$ digital$
transformation$ for$ the$ chosen$ case$ studies$ described$ in$ the$ previous$ chapter.$ The$
writing$of$the$thesis$will$continue$during$2014F2015$and$my$intention$is$to$have$the$
manuscript$for$the$monogram$ready$for$dissertation$in$2016.$
$Below$is$a$list$of$recommendations$drawn$up$for$media$firms$based$on$research:$
1. Collect,$ analyze$ and$ utilize$ customer$ data.$ The$ more$ you$ do,$ the$ more$ it$ adds$
value.$$
2. Test$and$tryFout$different$products$and$services$based$on$customer$insight.$$
3. Offer$ valuable$ conent$ to$ the$ consumer$ in$ different$ contexts,$ on$ different$
platforms.$
4. The$key$is$to$recognize$the$various$phases$of$the$consumers’$purchase$path$and$
to$offer$the$right$kind$of$content$for$each$phase$including$advertising$solutions.$
5. Make$digital$payments$smooth$and$easy.$This$is$one$key$to$success,$as$shown$by$
several$successful$companies$selling$content,$e.g.$Amazon$and$Apple.$
6. An$ agile$ organization$ is$ a$ prerequisite$ for$ innovation:$ develop,$ test$ and$ learn.$
Emphasize$the$value$of$customer$insight$in$developing$new$services.$Nurture$a$
corporate$culture$that$supports$ideas,$development$and$prototyping.$
7. Shorten$ the$ innovation$ process$ for$ new$ products$ and$ services.$ From$ years$ to$
months$or$cycles$of$a$few$weeks.$Trial$and$error$can$be$the$right$way$to$succes.$
Remember$that$”no$service$concept$survives$its$first$contact$with$customers.”$
8. Don’t$be$afraid$of$cannibalizing$your$old$business$model.$The$print$business$has$
served$you$well$long$enough.$
9. Think$ of$ advertising$ as$ a$ service.$ Combine$ relevant$ content$ from$ your$
advertiser$ with$ journalistic$ content$ and$ add$ value$ targeted$ to$ the$ individual$
consumer.$
10. Build$ networks$ and$ partnerships$ in$ e.g.$ customer$ analytics$ and$ content$
marketing$services$
‘MEDIANOMICS’
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LITERATURE AND REFERENCES
Articles, trade books and reports
$
After$email,$getting$news$is$the$most$popular$activity$on$smartphones,$tablets$(comment$on$
Pew$Research$Center$Report).$The$Poynter$Institute,$Poynter.org,$October$1,$2012.$
$
Amazon$owns$the$Internet,$December,$WIRED$Magazine,$2011.$
$
An$Individual$Business$Model$in$the$Making:$a$Chef’s$Quest$for$Creative$Freedom,$Silviya$
Svejenova,$Marcel$Planellas,$Luis$Vives,$Long$Range$Planning$Vol.$43,$issues$2F3,$pp.$408F
430,$Elservier,$2010.$
$
The$Art$of$the$Start,$Guy$Kawasaki,$Penguin$Group,$2004.$
Audience$Economics$–$Media$Institutions$and$the$Audience$Marketplace,$Philip$M.$Napoli,$
Columbia$University$Press,$2003$
$
Audience$Evolution$–$New$Technologies$and$The$Transformation$of$Media$Audiences,$Philip$
M.$Napoli,$Columbia$University$Press,$2010.$
$
Being$Digital,$Nicholas$Negroponte,$Vintage$Books,$1995.$
$
Building$Theories$from$Case$Study$Research,$Kathleen$M.$Eisenhardt,$The$Academy$of$
Management$Review,$1989.$
$
The$Business$Model:$Recent$Developments$and$Future$Research,$Christoph$Zottr,$Raphael$
Amit$and$Lorenzo$Massa,$Journal$of$Management$Vol$37$No.4,$July$2011.$
$
Business$Model$Design:$An$Activity$System$Perspective,$Christoph$Zott$and$Raphael$Amit,$
Long$Range$Planning$43,$pp$216F226,$Elsevier,$2009.$
$
Business$Model$Design$and$the$Performance$of$Entrepreneurial$Firms,$Christoph$Zott$and$
Raphael$Amit,$Organization$Science$Vol$18$No.2,$pp$181F199,$2007.$
$
Business$Models$as$Models,$Charles$BadenFFuller$and$Mary$S.$Morgan,$Long$Range$Planning,$
43,$pp.$156F171,$Elsevier,$2010.$
$
The$Business$Model$Innovation$Factory,$Saul$Kaplan,$John$Wiley$&$Sons,$2012.$
$
Business$Model$Generation,$Alexander$Osterwalder$and$Yves$Pigneur,$John$Wiley$&$Sons,$
2010.$
$
The$Business$Model$Ontology:$A$Proposition$in$A$Design$Science$Approach,$PhD$thesis,$
University$of$Lausanne,$2004.$
$
The$Business$of$Media:$A$Survival$Guide,$Larry$Dignan,$Amazon$Kindle$Single,$2011.$
$
Case$Study$Research:$Design$and$Methods,$Fourth$Edition,$Robert$K.$Yin,$SAGE$Publications,$
2009.$$
$
Changing$Media$Behavior:$The$Case$of$Generation$Z,$Johanna$Lindström,$AnnaFGreta$
Nyström,$Ron$Lindqvist,$Academic$MindTrek$conference,$October$2013.$
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$
College$of$Future$Could$be$Come$One,$Come$All”,$article$in$The$New$York$Times,$November$
19,$2012.$
$
Designing$for$Growth:$A$Design$Thinking$Tool$Kit$for$Managers,$Jeanne$Liedtka$and$Tim$
Ogilvie,$Columbia$University$Press,$2011.$
$
Digital$News$Report,$Reuters$Institute$for$the$Study$of$Journalism,$Oxford$University,$2013.$
$
Disruption$Guru$Clay$Christensen$says$incumbent$media$players$are$making$a$classic$
mistaken,$Matthew$Ingram,$paidcontent.org,$February$28,$2013.$
$
Disruptive$Business:$Desire,$Innovation$and$the$ReFdesign$of$Business,$Alexander$Manu,$
Gowere$Publishing,$2010.$
$
Do$Paywalls$Change$the$Engagement$Equation?,$Magda$AbuFFadil,$Huffington$Post,$
September$30,$2013.$
$
The$Economics$of$Financing$Media$Companies,$Robert$G.$Picard,$The$Fordham$University$
Press,$2002$(2nd$edition$2011).$
$
Emerging$Mobile$Strategies$for$News$Publishers,$Shelley$Seale,$INMA,$2012.$
$
The$entrepreneurs$business$model:$toward$a$unified$perspective,$Michael$Morris,$Minet$
Schindehutte$and$Jeffrey$Allen,$Journal$of$Business$Research$58,$pp$726F735,$2005.$
$
Essential$Drucker.$Innovation$and$Entrepreneurship,$$Peter$Drucker,$Routledge,$2011.$
$
The$Evolution$of$Business$Models$and$Marketing$Strategies$in$the$Music$Industry,$Valerie$L.$
Vaccaro,$Deborah$Y.$Corn,$The$International$Journal$on$Media$Management,$6,$pp.$46F58,$
Mediajournal.org.$
$
Financial$Times$reaches$highest$circulation$in$its$125Fyear$history,$Roy$Greenslade,$
TheGuardian.com,$October$30,2013.$
$
Finnish$Internet$Users$are$Most$Avid$Consumers$of$Online$News,$comscoredatamine.com$$
November$15,$2013.$
$
Finnish$Media$Consumption:$Results$from$a$survey$in$2012,$Ron$Lindqvist,$AnnaFGreta$
Nyström,$Timo$Ketonen$and$Anders$Dahl,$EDGE$research$group,$Åbo$Akademi$University,$
July$2013.$
$
Fredric$Karén:$“Mormor$lärde$mig$att$aldrig$ge$upp”,$Svenska$Dagbladet,$September$9,$2013.$
$
Free:$The$Future$of$a$Radical$Price,$Chris$Anderson,$Hyperion,$2009.$
$
A$Guide$to$Open$Innovation$and$Crowdsourcing:$Advice$from$Leading$Experts$in$the$Field,$
Paul$Sloane,$Kogan$Page,$2011.$
$
The$Gutenberg$Galaxy$–$The$Making$of$Typographic$Man,$Marshall$McLuhan,$with$new$
essays$by$W.$Terrence$Gordon,$Elena$Lamberti,$and$Dominique$ScheffelFDunand,$2011.$
$
Gränspassager:$bildning$i$tolkningens$tid,$Bengt$Kristensson$Uggla,$Adlibris,$2012.$$
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$
The$Handbook$of$Media$Audiences,$Virginia$Nightinggale,$WileyFBlackwell,$2011.$$
$
Havaintoja$mediaFalan$jatkuvasta$muutoksesta,$Viestintäalan$toimialastrategian$esiselvitys,$
Viestinnän$Keskusliitto,$Service$Design$agency$Palmu,$November,$2013.$
$
How$Kodak$Squandered$Every$Single$Digital$Opportunity$It$Had,$Pete$Pachal,$Mashable.com,$
January$20,$2012.$
How$people$use$tablets$and$what$it$means$for$the$future$of$news,$Journalism.org,$October$
25,$2012.$
$
The$Innovator’s$Dilemma:$When$New$Technologies$Cause$Great$Firms$to$Fail,$Clayton$m.$
Christensen,$Harvard$Business$School,$1997.$
$
The$Innovator’s$Solution:$Creating$and$Sustaining$Succesful$growth,$Clayton$M.$Christensen$
and$Michael$E.$Raynor,$Harvard$Business$School,$2003.$
$
Instead$of$shoehorning$it$in,$NowThis$News$is$building$video$content$that$fits$in$where$the$
audience$lives,$Caroline$O’Donovan,$Nieman$Journalism$Lab,$September$16,$2013.$
$
The$Intention$Economy:$When$Customers$Take$Charge,$Doc$Searls,$Harvard$Business$
Review$Press,$2012.$
$
Itella$pohtii$lehtien$sopimusten$lopettamisia,$Teemu$Luukka,$Helsingin$Sanomat,$HS.fi$
December$17,$2013.$
$
Jeff$Bezos$on$Post$Purchase,$The$Washington$Post,$August$5,$2013.$
$
Kodak$and$the$Brutal$Difficulty$of$Transformation,$Scott$Anthony,$Harvard$Business$Review,$
Blogs,hbr.org,$January$17,$2012.$
$
Journalismin$kohtalo$mediamurroksessa.$Överlevnadsstrategier$för$minoritetsmedier,$
Hannu$Olkinuora,$Marit$Ingves,$Lia$Markelin,$Tankesmedjan$Magma,$2012.$
$
The$Lean$Startup,$Eric$Ries,$Crown$Business,$2011.$
$
Making$Sense$of$Converging$Media,$Kim$Holmberg,$Timo$Ketonen$and$Malin$Brännback,$
Academic$MindTrek$Conference,$October$2013.$
$
Marshall$McLuhan:$Media$Savant,$article$in$The$New$York$Times,$January$6,$2011.$
$
Mobile$Internet$Subscriptions$to$Triple$by$2013,$Source:$Ericsson,$Mashable.com,$November$
22,$2013.$
$
The$Myths$of$Innovation,$Scott$Berkun,$O’Reilly$Media,$2010.$
$
New$Business$Models$in$the$Music$Industry$–$Rethink$Music$white$paper,$James$Martin,$
Blog.midem.com,$June$26,$2013.$
$
The$News$Industry,$Special$Report,$The$Economist,$2011.$
$
Newsonomics:$Twelve$New$Trends$That$Will$Shape$the$News$You$Get,$Ken$Doctor,$St.$
Martin’s$Press,$2010.$
‘MEDIANOMICS’
Åbo Akademi University – School of Business and Economics
45
$
The$newsonomics$of$The$New$York$Times’$Paywalls$2.0,$Ken$Doctor,$NiemanJournalismLab,$
Niemenlab.org,$November$21,$2013.$
$
Nordic$giant$Schibsted$wants$to$be$world's$No$1$for$online,$theguardian.com$$
December$3,$2012.$
Open$Business$Models:$How$to$Thrive$in$the$New$Innovation$Landscape,$Henry$Chesbrough,$
Harvard$Business$School$Press,$2006.$
$
Open$Innovation:$Researching$a$New$Paradigm,$edited$by$Henry$Chesbrough,$Wim$
vanHaverbeke$and$Joel$West,$Oxford$University$Press,$2006.$
$
Paid$Digital$Content:$The$Journey$Begins,$World$Association$of$Newspapers$and$News$
Publishers$(WANFIFRA),$2013.$
$
Personal$Media$Day$result$report:$Studying$consumers$everyday$media$consumption$with$eF
diaries,$Niklas$Kiviluoto,$Ron$Lindqvist,$Timo$Ketonen,$Malin!Brä n
b
ac ,* E
k
DG
E*r es earch
*
group.,$Åbo$Akademi$University,$November,$2012.$$$$$
$
Page$One:$Inside$The$New$York$Times$and$the$Future$of$Journalism,$David$Folkenflik,$
Participant$Media,$2011.$
$
Pearson$says$FT$is$not$for$sale$as$digital$subscriptions$overtake$print,$article$in$The$
Guardian,$Monday$February$25,$2013.$
$
Punch$Sulzberger$and$His$Times,$Max$Frankel,$The$New$York$Times,$September$30,$2012.$
$
Rebuilding$Your$Business$Model:$The$CEO’s$Role$In$Business$Model$Reinvention,$Vijay$
Govindarajan$and$Chris$Trimble,$Harvard$Business$School$Publishing,$2011.$
$
$
Responses$to$Disruptive$Strategic$Innovation,$Constantinos$D.$Charitou$and$Constantinos$C.$
Markides,$MIT$Sloan$Management$Review,$2003.$
$
Savitauluista$laseriin$–$kirjapainotaidon$historia,$Lars$Gardberg,$2011.$
$
Screenjumpers$Double$Time$Online,$Jack$Loechner,$Mediapost.com,$September$19,$2013.$
$
Seven$Ways$iTunes$Changed$the$Music$Industry,$Alex$Pham$and$Glenn$Peoples,$
Billboard.com,$April$25,$2013.$
$
The$Shift$from$Print$to$Digital…$and$beyond,$Thomas$Baekdal,$Baekdal$Media,$2011.$
$
The$State$of$the$News$Media$2013:$An$Annual$Report$on$American$Journalism,$The$Pew$
Research$Center’s$Project$for$Excellence$in$Journalism.$
$
Socialnomics:$How$Social$media$Transforms$the$Way$We$Live$and$Do$Business,$Erik$
Qualman,$John$Wiley$&$Sons,$2009.$
$
“Staten$måste$ta$ansvar$för$sin$mediepolitik”,$interview$with$Raoul$Grünthal,$Lena$Skogberg,$
HBL.fi,$September$15,$2013.$
$
‘MEDIANOMICS’
Åbo Akademi University – School of Business and Economics
46
Steve$Jobs,$Walter$Isaacson,$Simon$&$Schuster,$2011.$
$
Steve$Jobs$F$Revolutionary,$Steven$Levy,$special$edition,$WIRED$Magazine,$October,$2011.$
$
The$Success$Trap:$Why$doing$things$right$become$wrong$over$time,$Professor$Robert$G.$
Picard,$Lecture$in$Media$Management,$University$of$Tampere,$October$26,$2011.$
$
The$Theory$of$Economic$Development:"An#Inquiry#Into#Profits,#Capital,#Credit,#Interest,#and#
the$Business$Cycle,$Joseph$Alois$Schumpeter,$Transaction$Publishers,$1934.$
$
This$is$Service$Design$Thinking,$Marc$Stickdorn$and$Jakob$Schneider,$John$Wiley$&$Sons,$
2011.$
$
The$Times$Isn’t$for$Sale,$Its$Publisher$Declares,$Christine$Haughney,$The$New$York$Times,$
August$7,$2013.$
$
Trends$in$News$Consumption:$1991F2012,$In$Changing$News$Landscape,$
Even$Television$is$Vulnerable.$The$Pew$Research$Center$for$The$People$&$The$Press,$
September,$2012.$
$
“Trust$is$the$key$for$media$owners”,$Andrew$Rashbass,$CEO$of$The$Economist$Group,$
interview$by$Chris$Smith,$The$Guardian,$March$12,$2012.$
$
Understanding$Media$–$The$Extensions$of$Man,$Marshall$McLuhan,$with$a$new$introduction$
by$Lewis$H.$Lapham,$1994.$
$
Understanding$the$Entrepreneurial$Mind,$Alan$L.$Carsrud,$Malin$Brännback$(editors),$
Springer$Science+Busines$Media,$2009.$
$
Unzipping$the$Digital$World:$How$To$Thrive$and$Survive,$Keith$Willets,$TM$Forum,$2012.$
$
Vad$har$vi$lärt$oss?$Om$medieanvändarnas$roll,$Anette$Novak,$Stiftelsen$Institutet$för$
mediestudier,$2012.$
$
Value$Creation$and$The$Future$of$News$Organizations:$Why$and$how$journalism$must$
change$to$remain$relevant$in$the$twentyFfirst$century,$Robert$G.$Picard,$Formalpress,$2010.$
$
Viestintäalasta$voittaja,$Viestintäalan$toimialastrategia,$Viestintäalan$Keskusliitto,$Idean,$
2009.$
$
What$is$digital$transformation?$Howard$King,$The$Guardian$Media$Network,$
theguardian.com$November$22,$2013.$
$
What$is$Service$Design?$Professor$Birgit$Mager,$Service$Design$Network,$Design$Council.$$
$
Why$American$Newspapers$Gave$Away$The$Future,$Richard$J.$Tofel,$Now$and$Then$Reader,$
2012.$
$
Why$It’s$All$About$the$Digital$Ecosystem,$Ben$Bajarin,$Techopinions,$December$16,$2011.$
$
7$reasons$why$Buzzfeed$is$the$death/savior$of$news,$Rory$CellanFJones,$BBC.co.uk,$October$
15,$2013.$$
!