The Next Newsroom Project

A couple of weeks ago, I visited BitTorrent’s headquarters in San Francisco for a briefing with CEO Eric Klinker. This was a routine appointment that turned out to be far more interesting that I expected.

Over at SiliconBeat, for instance, I shared some of Klinker’s thoughts on the current mania for cloud computing, and why he’s a skeptic. And last weekend, I used his remarks as a basis for a Sunday column on why things are changing more slowly than we think. Klinker noted that one of BitTorrent’s priorities is to find ways to get embedded into televisions because 99 percent of all video is still viewed through the tube.

That was an eye opener for me, since I view BitTorrent as one of the revolutionaries. The BitTorrent filesharing protocol released in 2001 became one of the primary ways people began sharing video content early last decade, and in fact still carries a big chunk of the video content across the Internet. That rang piracy alarms, and eventually the creators of BitTorrent started a for-profit business in 2004 out of the protocol to find legitimate uses and a sustainable business. The protocol is still open source, available to anyone to use.

So my visit with Klinker was to understand where BitTorrent was, and what kind of progress they had made. The company has raised about $40 million in venture capital and has about 45 employees. Klinker said the company is “moderately profitable,” in part because it has a healthy revenue stream from distributing browser tools for third parties. But the company is still trying to focus on finding a robust, growth business model.

So in addition to the above thoughts, I wanted to share some other lessons I took away from that interview that I think are relevant to people interested in the future of media:

1. Things are changing more slowly than we think. See the column link above.
2. In thinking about business models, the way BitTorrent is trying to frame their approach is around the concept of “scarcity.” More on that in a minute.
3. Video games are an important source to watch in developing business models for the Web.
4. These first three have led BitTorrent to focus on the freemium model.

If you want to check out some of the latest evolutions of BitTorrent, check out their labs page here. In the meantime, here’s more detail on each point:

1. Pace of change: In a nutshell, when you get outside the Silicon Valley bubble, people’s habits remain stubbornly resistant to change. Rather than get bogged down in ideology, smart companies recognize this and try to fit their services into people’s lives, rather than trying to force users to make a major shift in their usage.

BitTorrent is thinking a lot about the user experience. They’ve hired someone to focus exclusively on this issue. If you haven’t used BitTorrent, or haven’t downloaded a torrent, or even done file sharing, it’s worth noting that these can be somewhat complex for the average user. BitTorrent is trying to simplify the finding of content, the dowloading of it, and the playing of it. I’m always surprised, still, when I talk to folks designing some new online news service at how little thought they’ve given to the user experience. “We want to make it a more seamless user experience,” Klinker said.

2. Scarcity: In trying to explore business models, BitTorrent has used the framework of “scarcity.” In essence, the Web has given us most content in abundance. And when that happens, it’s futile to try to monetize it. “The Internet is like a big copying machine,” Klinker said. “And a lot of media is struggling with this. It’s what we call the ‘scarcity crisis.’ It’s hard to control bits and extract money for content that everyone has.”

To that end, BitTorrent is trying to identify the things only it can offer users, and then find the value in them. “You can extract value for the things that are scarce,” Klinker said.

That’s still a work in progress for BitTorrent. But I like the idea of using scarcity as a way to focus thinking around monetization.

3. Video games: I’m not a gamer. And neither is Klinker. But we had an interesting digression into a trend we’ve both been following: They way social gaming companies like Zynga are demonstrating the power of new forms of business models on the Web. In particular, “free-to-play” games like Mafia Wars and Farmville have become huge hits. But Zynga is making a ton of money by exploiting people’s willingness to buy virtual goods. I wrote about the intersection of virtual goods and news here. BitTorrent is not about to get into the virtual goods business. At least not yet. But they’re watching closely for ways to offer free services and then sell additional goods and services.

“How do I extract value from things that aren’t scarce?” Klinker said. “Games have been leading media in the right direction.”

4. Freemium.  The company is in the process of revamping the BitTorrent client to allow developers to build applications that can run on top of it. Users would just add them with one click, much like any app store you’re used to seeing. BitTorrent is still working out how the revenue would be split. For instance, someone could install the BitDefender app, which is free and offers various security features, but pay for some premium services, with some of the revenue going to BitTorrent. “We think this has a strong future on the Internet,” Klinker said of the freemium model.

On a separate note:

Klinker pointed to BitTorrent’s involvement in the recent “Pioneer One” video project. Pioneer One was intended to be a TV series and pilot, but didn’t have any luck with TV networks. So the creators raised $6,000 through Kickstarter and then used that to shoot a pilot, which was distributed by BitTorrent. I don’t get the sense that this is any future business model for BitTorrent. But it’s an interesting intersection between the lowering costs of content creation, crowd funding, and new forms of distribution.

Earlier this week at the Founder Showcase, a Silicon Valley start-up pitch contest, I sat through a number of lukewarm ideas for new companies. But one that made me sit up was a presentation by Gene Massey, CEO of MediaShares.

The concept he was pitching also got the panel of judges excited, though it didn’t win the top prize that night. The concept is a bit more complex than the typical 2-minute presentation I typically hear at these things. But let me try to boil it down.

Massey has developed a new type of crowdfunding model that basically enables someone to sell direct shares in a single project through a legal initial public offering of stock.

He refers to the concept several different ways, such as “fan financing.” But in essence, someone can use MediaShares to sell stock in something like a film, documentary, a race car, or an album. Through MediaShares, you can sell as little as one share of stock to someone.

Some of the panelists worried that this seems to risk all sorts of legal problems. But what was impressive is that Massey not only has received a patent on the process, but claims that he also has the blessing of the U.S. Securities and Exchange Commission.

Massey is in the process of demonstrating how this would work by raising money to fund a film through CinemaShares.com:

CinemaShares.com is using a patented technology that allows the potential audience to invest in a movie, observe the filmmaking process, and get a free DVD copy of the movie when it is completed. Never before has an audience been offered the opportunity to purchase a copy of a movie in advance of production.

The pitches at the event were short, so there were lots of questions left unanswered. It’s not entirely clear what those shares entitle the holders to receive. Does it automatically mean they have some say in governance or decisions of some kind?

I wasn’t able to track Massey down afterward. I did manage to find Massey’s PowerPoint, which I’ve added at the end of this post.

But still, the idea sent my mind racing. We’ve seen some interesting innovation in community funding of journalism from Spot.us. MediaShares would seem to extend that.

Could an organization sell direct shares in a a costly investigative series? Or ongoing coverage of a topic?What incentives would they have to offer to get people to buy shares?

Or, could a new news organization sell shares directly to raise start-up and operating costs?

What do you think? Is this a twist on crowd funding that news organizations should explore?

Here’s Massey’s PowerPoint:

And here’s a video of Massey explaining the concept on Vator.Tv:

The latest roundup of stories we’re reading around the Web about the future of news.

MediaShift . Writers Talk About Working the Hyper-Local Beat | PBS

Missouri School of Journalism: Citizen Journalism vs. Legacy News: The Battle for News Supremacy

Sure to generate lots of heat. But having a hard time finding the underlying study.

Yahoo! Media Chief Says Content Farms Won’t Kill Journalism As We Know It « The Biz Blog – Forbes.com

Maybe not kill it, but leave it deformed or seriously wounded. This issue is bad for the Web, not just journalism.

A few days ago on the Journalism That Matters email list, someone posted a note that Blognetnews.com, a news aggregation service of some kind, had gone under, probably due to lack of advertising revenue. I had never heard of Blognetnews.com, let alone read it. Someone asked whether any aggregators were making money.

My guess: No. Or not much. For all the energy being poured into creating different aggregation services, I firmly believe there is no business there. There are three reasons for this.

First, whenever you convene a bunch of engineers to talk about the future of news, they inevitably want to focus on the issues of aggregation and personalization. The premise here is that there is a massive problem plaguing people on the Web. Namely, there is so much content being created every day (6 billion pages is a figure that gets tossed around a lot, but I’ve never seen that confirmed) and that people are drowning and need help finding the best stuff.

The thing is, I think this is mainly a problem for a handful of news nerds (like me) and Silicon Valley insiders. But beyond that, most people aren’t really that worried about it. They just don’t care that much. They don’t have the capacity to read much more than they read now. This means that the market for such aggregation services is much smaller than is typically assumed.

Second, factor in that the cost of starting these types of services, which has fallen dramatically over the past decade. Any decent programmer can throw these together and push them out. So there are way too many of these services, slicing the potential market into even smaller chunks that each will have trouble generating enough audience.

Third, in terms of finding stuff, the bulk of people are still fairly passive in their consumption habits, despite the way the Web has created avenues for greater participation. They’re content with what they’re getting through their Facebook and Twitter streams, or catching the top headlines from Yahoo News. There’s a reason that Yahoo News is still far larger than Google News. Most people don’t want to do the work of assembling their news, creating context, building a profile, re-finding their friends through another service.

The harder challenge is finding new ways to create quality, relevant information that expands the universe of news that people can consume. And then packaging that in a way that fits the way people want to consume it, when they’re ready to consume it.

As an aside, I do think that aggregation as a feature on news sites is helpful and appreciated. And the same with posting links to your followers on Facebook and Twitter. But finding new ways to re-package over and over the same stuff floating on the Web just doesn’t address a burning problem in most people’s daily lives. And failing that test, it doesn’t make much sense as a standalone business.

Of course, the answer is no, far from it. But last week, On The Media devoted its entire show to examining different aspects related to the future of newspapers. Much of this represented well covered ground, so for those of you involved in this discussion for a long time, there may not be much new here.

However, there were a couple of interesting segments that I’d recommend. The first is Google’s Quest To Save Newspapers, an interview with The Atlantic’s James Fallows. He points to two reasons Google is trying to help newspapers:

“A low-road reason, which they admit but don’t stress, and a high-road reason. The low-road reason is something Eric Schmidt, the CEO and – full disclosure – a longtime friend of mine, he said that Google could not afford to be seen as the vulture picking off the dead carcass of the news industry.

The high-road reason that I was – initially I thought was just kind of blather but I became more persuaded of, is that they think that it is in their interest as providers and indexers of information online. If that information becomes polluted, bad, junky, people are going to have less reason to turn to them.”

The full segment is here:

The other segment worth a listen is the interview with Yochai Benkler, who gives a well-reasoned look at the current transition and some reasons for optimism as host Brooke Gladstone explains:

“And he applauds the transition to a mixed system in which concerned citizens combine their time and expertise with professionals to unearth and disseminate important information. It’s already happening, he notes. A patron-funded independent investigative newsroom called ProPublica won the Pulitzer Prize this year for its coverage of a New Orleans hospital making life and death decisions during Katrina.”

Though I’m not sure that I really buy the idea that ProPublica is really all that new when it comes to news models. Yes, it’s non-profit. But basically it’s a newsroom of professional journalists doing investigative reporting, though funded by a wealthy patron rather than ads. But still, it doesn’t look like the revolution to me in terms of how news is gathered or distributed.

That segment is here: