NYTimes.com’s 3D Video news section is a new way to report information that needs to go beyond print, photography, and interactive flash graphics. Using 3D technology, the 3D Video news section will be a tab on the NYTimes.com website that will enable users to play 3D video of events like important speeches, natural catastrophes, and milestone events.
Formed as a venture by the New York Times Company, the 3D video section will be integrated into the existing managerial structure of NYTimes.com, and will be an integral part of the newsroom.
With the blockbuster success of 3D movies such as Avatar, and with 3D technology becoming increasingly ubiquitous, all that was needed to make 3D news a reality is fast Internet speeds. Ultrabroadband, which operates at 200 times current Internet speeds at about 1 gigabyte per second, is expected to hit the market by 2012 – giving customers unparalleled fast access to the Internet. To exploit this technology, news needs to move and adapt, and considering the dire state of traditional news media today – 3D news could be the answer.
This plan will equip the New York Times newsroom with 3D cameras and editing software, and train reporters in their usage. It will enable reporters to take their stories to the next level, and add a new dimension to digital news, which has now become the preferred way most consumers get their news.
3D video news will be the best generator of revenue for the New York Times to date, which has been suffering from lowered subscription costs leading to lower advertising rates. 3D video news will increase viewership, target advertising, and command larger than ever CPMs, making NYTimes.com the preferred way everybody gets their news. NYTimes.com will have the first mover advantage over all competitors, and can roll out content as soon as ultrabroadband hits the small business and consumer market.
It will also solve problems of unfaithful readership, by becoming the first news organization to provide news beyond print and photography. It will utilize existing journalistic skills to tell a story, but through an entirely new technology. Under the New York Times brand name, which is trusted and reputable, 3D video will keep customers faithful, and attract new ones.
The Company
The New York Times is a daily newspaper that began publishing in 1851. It is circulated nationwide through all 50 states, including the District of Columbia. It is also circulated worldwide .
The Times has a website, NYTimes.com, that commands a large market. In 2009, NYTimes.com was attracting 17.9 million unique users per month. Content is also distributed through social media (Twitter, Facebook) and mobile applications available for most smart phones.
For NYTimes.com, the primary revenue source is advertising. Earlier this year, the company also announced that starting 2011, NYTimes.com would no longer be free to use. Using micropayments, where users pay for content piece by piece. The more somebody uses the site, the more he or she will be paying. According to Arthur O. Sulzberger Jr., the publisher of the New York Times, the company is relying on reader loyalty to ensure future success. However, no further details about how exactly the company will be implementing micropayments were offered. A few articles will be free to use, he said, till users hit a pay wall and have to begin shelling out money.
NYTimes.com’s primary competitors are other news sites like Yahoo! News and CNN.com. Internationally, its sister website, global.nytimes.com, which combines content from the New York Times and the International Herald Tribune, has to compete against news websites like Reuters and the BBC.
Digital News: A Summary
The Internet has had enormous impact on traditional news companies. In 2008, it surpassed all media except television as the preferred way that consumers get their news, according to the Pew Research Center . The jump towards online news was enormous. In 2007, only 24 percent of Americans said they were getting news primarily from the Internet. In 2008, this number rose dramatically to 40 percent. 2008 was by and large considered the milestone, and just the beginning, of the dramatic shift towards digital news consumption. Delivery of news through digital methods had become the norm by 2009. According to the Project for Excellence in Journalism , six out of 10 Americans were getting their news online by then.
What is interesting about the digital shift is that social media or blogs are not ready to take audiences away from traditional news organizations. Though more people are consuming news online, they are doing so using online versions of newspapers. The Project for Excellence in Journalism says that this trend could change, especially with the younger generation. In a survey by Nielsen, the younger demographics were likely to point to news aggregators like Google as being the primary way they get their news. They are more like to be “grazers” – get the headline, the author, and the first few sentences of the story, and then leave it at that. The challenge for traditional news organizations is to get users to the website, instead of letting them leave before stepping foot inside .
Audience Behavior
How people perceive news, especially online, has changed dramatically. They are no longer passive consumers. Indeed, the news that is most read online is usually one that triggers some sort of participation. This has come about mostly due to social media sites like Facebook and Twitter that allow audience participation, and the increased portability of news due to users who get their news via cellphone or portable computers.
The problem for traditional news sites is that audiences are “grazers.” Though half of all audience traffic for news is tied to legacy news organizations like the New York Times and CNN, nobody is spending much time at those websites. According to Nielsen , the average news user spends only 3 minutes and 4 seconds on a news website per session. But visitors to the New York Times website spends at least a minute longer there than on news aggregator sites like Google. The challenge is to keep people’s attention, and this business plan will do that.
Figure 1: Top 20 sites by sector (Source: PEJ’s State of the Media 2010)
According to Nielsen, NYTimes.com was the fifth most visited site in 2009, commanding 18.5 million unique visitors.
Economics
Advertising, as always, remains the problem in the digital shift. Though some companies experimented with pay walls, there were increased signs that consumers are not ready to pay for news.
However, the one place where news companies are trying to increase advertising is videos.
Figure 2: Online Ad Spending by format in 2009 (Source: eMarketer, “U.S. Ad Spending Turns a Corner”, December 11, 2009)
As shown in the figure above, the only category that grew other than search was video advertising, which reached $1.02 billion in 2009, up 40.2% from $732 million in 2008. Because advertising has shown that it alone will not be a sufficient source of revenue, news organizations are increasingly looking at alternative revenue streams. The most obvious one is charging users for content, either through a pay wall (made successful by the Wall Street Journal) or micropayments. As discussed above, The New York Times announced earlier this year that it will be charging users to read it online using micropayments.
How can traditional news companies make the shift to digital but still keep high revenue?
Opportunities
How to solve the “grazing” problem.
According to the PEJ report, consumers look at many different sites to get their news . Establishing a brand and ensuring users remain loyal to that brand is one of the best ways a news site can ensure success. Users are discriminating to some degree: if NYTimes.com is able to gain loyalty for a specific “type” of news, and be the best at it, they can guarantee that people will return. Therefore, our proposal of using UBB to incorporate 3D videos of events will make NYTimes.com “the place to go” for a specific kind of news.
Ensuring interactivity is key to success.
News sites can no longer afford to keep information flowing uni-directionally. News is a social currency to most people. NYTimes.com needs to retain interactivity in order to keep customers. In our 3D video scheme, we would also have a real-time chat box in which users can submit comments, feedback, and carry on conversations about the content they are watching. At the same time, if they also have video footage or photos of the event in question, they can submit these. Their footage will also be available to those watch the content on NYTimes.
People don’t want to pay. What can we do?
Most of the research by PEJ indicates that there are a few situations in which people are willing to pay. As the Wall Street Journal model shows, people pay for news that is difficult to get through other means, like finance news. People will also pay for high quality, high value content, which is why iTunes is successful. Our 3D video plan will be high quality, and 3D – difficult to get through other means.
Advertising
Video advertising has shown enormous gains in the past year. Our plan utilizes video, which commands a higher CPM than other forms of advertising methods like banners or pop-ups.
Competitors/Threats
Currently, no news organization utilizes 3D news delivery. Because of the relative newness of the technology, our plan estimates that there will not be any competition from other news organizations. Of course, as 3D technology gains a foothold, other news organizations will seek to do what our plan does: to integrate the technology in the delivery of the news online.
Our biggest competitor in 3D video news will most likely be the Wall Street Journal, which also competes with the New York Times for consumers. However, at this time, WSJ.com has indicated no desire to go 3D.
The only other news organization which is experimenting with 3D technology is Sky News, based in the UK. Sky News debuted its “Second Life Newsroom”, which enables customers to “visit” the Sky News newsroom through Second Life – they can be presenters, create and anchor their own shows, and so on. Sky has also indicated that they are considering the possibility of presenting news and events through 3D. 7,000 people did the Hajj pilgrimage and “went” to Mecca via Second Life in 2007.
However, Sky News is not doing what our plan does: utilize the resources of the New York Times to give our reporters 3D capabilities through training and technology to bring consumers event coverage in 3D. Therefore, we do not see any competition in the short term. We will have the first mover’s advantage – and therefore build customer loyalty before other news organizations. We will also have the technological advantage – make our mistakes and learn from them – before everyone else.
Competitive Advantage
Not only are we moving first, we are also able to use the enormous clout of the New York Times Company to leverage our position. We can exploit the expertise of the current New York Times staff – both editorial and technological – and therefore gain a considerable advantage.
We can also enter into partnerships with pioneers in the 3D technology field, like Sony Corp., which produces 3D capable cameras (stereoscopic cameras). According to Sony’s Chief Technology Officer, Gary Podorowsky, Sony 3D cameras are the best in the market. If we combine the resources of the New York Times and Sony, we could benefit from huge economies of scale, putting us at an advantage over small companies that may try to produce 3D video.
Because 3D content is expensive to produce, we have a massive advantage over competitors because we are working with the New York Times. Financing will be easier, partnerships will be simpler, and we can benefit from the clout the organization has. Furthermore, we will be producing all content in-house – giving us full control over what we choose to produce and when.
One of the major weaknesses that ESPN has with reference to their plan of broadcasting the Soccer World Cup in 3D is that there are only 85 live sporting events over the entire time period. There will be plenty of “black space” on the channel when no games are being played. We do not have that problem – we produce as and when it is necessary to produce content, and we will only produce necessary content that consumers want.
Weaknesses
The biggest weakness of our product is the 3D glasses, which would have to be worn to watch the 3D videos on the website. However, we believe that with 3D technology becoming a little bit more mainstream, people will be willing to wear those glasses.
If you already will own a 3D television set, will be watching the 2010 soccer World Cup in 3D on ESPN , or be watching the new 3D network that Sony and Discovery are planning to launch together, 3D glasses will be as much a fixture in the home as anything else.
The other problem is the massive reorganization of reporting and journalism that will be needed to make this plan a reality. The costs of retraining and equipment will be discussed more below, but at the outset, incorporating 3D video into NYTimes.com will need reporters to rethink the way they shoot and produce video.
Our plan operates under the umbrella of the New York Times, and specifically under NYTimes.com. The existing management structure of NYTimes.com will be kept the same, with an extra arm added to oversee the 3D video section on the website.
The extra arm will be divided between “editorial” and “technology” teams. The editorial team, comprised of 8-10 journalists with extensive digital media skills, will be responsible for organizing the video components. This includes deciding which events to cover, how best to create the video, and also working with NYTimes.com’s other reporters to create hybrid projects.
For example, if the New York City Marathon is being covered, there will be of course a print piece accompanying the video, along with photographs, and perhaps an interactive graphic showing the race route. Therefore, the Editorial team will be working closely with the NYTimes editors and reporters to create the project.
The technology team is focused more on training and the technical aspects of the video production. Comprised of 13-15 people, the team will be responsible for teaching camera work to both the video reporters and the regular reporters, producing the video, and will be working very closely with the editorial team.
Because this is a very creative enterprise, both teams would be acting mostly independently, but supervised by a manager who will co-ordinate between both teams and determine overall strategy. That manager will also be the main liaison to the web editor of NYTimes.com, as well as the managing editor for the New York Times.
Apart from this staff of about 26 people, resources for sales, marketing, distribution, and so on will be shared with the NYTimes.com’s existing pool of people.
Content Production
Content production in 3D technology is of course the biggest obstacle in this business plan. It is difficult to shoot in 3D, and requires expensive equipment and extensive training.
There is also not a lot of content out there. Since our plan relies exclusively on in-house content, production needs to be fast, and plentiful. Therefore, retraining in 3D technology and editorial decisions need to be fast – so content will be plentiful on the website. The entire point of digital news is that people constantly want to see fresh new content, and there is a grave danger that stale content will be left up for weeks without new videos coming in.
Eye Fatigue Problems
The issue of eye fatigue is definitely going to be a factor. Though this is not relevant to people who watch 3D movies, makers of 3D television sets are now grappling with the headaches, eye fatigue, and other health problems the technology brings up. Though this may not affect us as much – because we aim to have short, 5-10 minute videos, not 24-hours-a-day broadcasts – this is a technical issue that will be still factored in when creating the videos and deciding how long they will be.
The glasses
Many have questioned 3D technology because people will not want to wear 3D glasses all the time. This is another factor that will be considered when dealing with 3D videos on NYTimes.com. Though this is again more of an obstacle for longer, full-length broadcasts of 3D content, our plan needs to figure out how to get the glasses to subscribers.
Starting 2011, the New York Times website will no longer be free to use. Therefore, when consumers subscribe, a box of 3D glasses will be sent to them. Glasses are cheap to produce, and distribution costs will be negligible. As long as every household has a few pairs, the technical issues behind how people will access the videos will be solved.
Technology
Reporters will be equipped with a Sony 3D camera. Sony announced earlier this year it was building a range of consumer-friendly and easy-to-use cameras to film in 3D . Though exact retail costs were not disclosed by Sony, a look at other similar technology by Panasonic indicates a possible price point of $21,000 per camera . At the beginning, we can invest in 5 cameras, and as more reporters are comfortable with using the technology, buy more.
1
5
$105,000
2
8
$168,000
3
12
$252,000
Editing software can be bought at a one-time cost of about $50,000.
Training
Training in shooting 3D will require experts to be brought in to teach shooting and camera work. We estimate a one-time cost of $25,000 for this. Once the editorial and tech staff know how to use this, they can train other reporters.
Sources
At the outset, the financing will be done through the New York Times Company, which will pay all the costs associated with buying equipment and retraining.
After this, the 3D video arm will be largely independent, and use advertising to pay the rest of the costs. Online video advertising is clearly a better money spinner than traditional advertising. Video advertising commands a more profitable CPM than banner ads or other forms of online advertising. At the beginning of the video, an advertisement will be played. Throughout the video, advertisers will be able to put logos in the corner, with an option of interjecting advertisements in the middle of the video, depending on the length of the broadcast.
Recently, DoubleClick compared the effectiveness of video advertisements versus static advertisements. The study found that video ads received click-through-ratios between 4 and 7 times that of static banner ads . With video ads, it is also easier to measure interaction rates with users, which means advertising can be targeted better.
The above figure shows the results of a survey by eMarketer and the Interactive Advertising Bureau that looked at CPMs commanded by different types of advertising. It showed a much higher CPM in video ads than any other ad format. The average CPM was $43. The CPM commanded by video ads range from $40 to $50. This is a huge lead over banner ads which are sold by publishers, which command only a $10 to $20 CPM.
The success of advertising on Hulu, which has advertisements at the beginning of clips, as well as between, is a good testament to how profitable this plan will be. Hulu sells ads at a slightly lower CPM, around $25 per 1,000 views. However, because Hulu’s content is not original, this is to be expected. Our plan has original content, which can certainly command a higher CPM.
It is also important to note the domino effect this will have on CPMs in other areas of NYTimes.com. The more people that view videos are also likely to stick around and look at other sections of the website, which means a higher traffic overall and more revenue overall. According to the New York Times’s most recent earnings report, digital advertising revenues grew 18 percent in the first quarter of the year, a positive sign that this is the right time to expand on the digital front.
The majority of the consumer base for NYTimes.com’s 3D video news sections will come largely from the people who use the web to get their news.
Online news users tend to be younger than print news readers, with 29 percent of them under 30 years old. 50 percent of them are employed full time. This data, gathered from an online news survey by PEJ and the Internet and American Life Project, is presented below.
According to Quantcast, NYTimes.com is evenly read by males and females, with a large proportion having a post-graduate degree. This means that our product is targeted towards the “young” and technologically savvier populations. They are also the ones more likely to be ready to experiment with the new technology, and more ads can be targeted to them as they have more disposable income.
Where to advertise?
This service needs to go viral. Word-of-mouth advertising has been shown to create “buzz” around a product. Therefore, advertisements on sites like Mashable, Facebook, and Twitter would be the best way to get the word out. YouTube is another good way to go viral. Videos with a fun, edgy feel about this new service will be put on YouTube and more likely to be viewed by the target demographic.
Of course, in house advertising would be a good way to get existing readers to try this out for themselves. Ads in the print edition of the newspaper and on the website would make this very effective. To target further, ads in the sections of the newspapers read by young adult would be most effective.
For the following projections, we are assuming an initial viewership of 20 percent of the current number of readers of NYTimes.com. For month 1, 3.5 million users will watch the video. There will be one video per month in months 1-5, and four videos per month for months 6-12. Every month, we are estimating viewership to rise slightly, by 100,000 per month. The CPM commanded is $43. There are two ads per video.
1
3.5
$0.30
2
3.6
$0.31
3
3.7
$0.32
4
3.8
$0.33
5
3.9
$0.34
6
4
$1.38
7
4.1
$1.41
8
4.2
$1.44
9
4.3
$1.48
10
4.4
$1.51
11
4.5
$1.55
12
4.6
$1.58
Costs in the first month are under $200,000. The service will be profitable right from its inception.
There is no doubt that news organizations need resuscitation. Small breakthroughs have been made possible by digital news. However, the problem is that companies like the New York Times do not offer anything vastly new on their website, save a few graphics and interactive designs.
This business plan solves that, making people want to pay (through micropayments) for a niche product that cannot be found anywhere else. The product is unique, but relatively easy to implement. It requires minimal investment in technology and retraining, but because it operates under the trusted and reputable brand name of the New York Times, has an existing consumer base that ensures its profitability.
It commands high CPMs from advertisers, and will both keep existing customers but also “steal” them away from competitors because we have something they do not: coverage of events and stories in an unprecedented way that transports you right to the scene. Whether it is a historic speech or a devastating earthquake, readers of the New York Times can be there and experience it themselves, knowing all the while that they can trust that they are looking at content that is produced with the highest journalistic standards in mind.
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