What We Know About the Business of Digital Journalism

Columbia Journalism School | Tow Center for Digital Journalismin a few years, mired in debt. But those that surpassed that break-even point andwent on to establish a mass audience could become immensely profitable—andthose steep fixed costs created a natural barrier to competition.Online, the equation changes dramatically. Observers sometimes underestimatethe expense involved in running a high-quality, high-traffic online publication.But the barriers to entry are radically lower than in print or in broadcast. Whilea number of aspects of the online ad market have favored advertisers over publishers,simple audience fragmentation goes a long way toward explaining whynews outlets have seen their revenue squeezed so tightly. Today, someone wantingpolitical news or movie reviews has dozens of alternatives to choose from orstumble across.A new curve for media costs onlineOn the Internet, the steep initial investment to launch a media business canbe much smaller — but so are the profits (shaded areas) that come withincreasing scale. An opportunity exists for small news sites with minimalcosts; large newsrooms need to assemble far wider audiences than theydid offline, or find ways to boost the revenue from each user.high $Legacy media revenue(print or broadcast)Legacy media costsOnline media revenueOnline media costslow $low highaudienceaudienceNOTE: Plots not based on actualdata; for illustration only.Thus both revenue and costs are lower online. To be more precise, the costcurve has been stretched out. The steep initial investment required to launcha media business is gone, and that has opened up opportunities for low-costlocal or topical sites that aim to build an audience in the thousands or tens ofDollars and Dimes: The New Cost of Doing Business 97