The New York Times and Springer Are Wrong About Blendle | Monday Note

The New York Times and Springer Are Wrong About Blendle | Monday Note.

 

by Frédéric Filloux

With its idea of creating “iTunes for the press”, Blendle rattles the news industry’s cage. In spite of blessings from The New York Times and Axel Springer, the shiny new thing might just be a mirage.  

Last week, two young Dutch people came up with a string of magic words: “iTunes for the press”, “New York Times”, and “Axel Springer”.The founders of Blendle, Alexander Klöpping and Marten Blankesteijn, were promising a miracle cure to a sick industry: a global system for the distribution of editorial products (the iTunes reference), backed by the gold standard of digital journalism (The New York Times), and also supported by the European leader of the rebellion against Google (Axel Springer). Great casting, great promises. Like handing out Zmapp doses in an Ebola ward.

Blendle’s principle is to unbundle publications and sell stories by the slice, for €0.10 to €0.30 ($0.13 to $0.38) each. (Actually, on Blendle.nl, some articles shoot up to €0.89 or $1.11, publisher’s choice). Basically, you register and get €2.50 credit, browse a well-designed kiosk (or an equally good app), and cherry-pick what you want. Blendle added unique features such as the possibility of a refund for a story you don’t like; its founders saying its a mandatory feature for any e-commerce business (“returns” account for around 4% of transactions). Launched in April on the Dutch market, the service is a success: 135,000 subscribers so far. According to the founders, 20,000 to 30,000 are added each month. Not bad for a 16-million-people country that enjoys an internet penetration of 94%.

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This indisputable success spread beyond Netherlands when Blendle announced The New York Times Company and Axel Springer SE had invested a combined €3m ($3.8m) in the startup. (For more on the subject, see coverages by Les Echos (in French), The GuardianBloomberg BusinessWeek.)

I see many reasons to cast strong doubt about Blendle’s sustainability as a global business, and I see no benefit for digital media. The idea of unbundling news content is an old one. I recall a 1995 conversation with Nicholas Negroponte, at the time head of MIT’s MediaLab. Back then, he envisioned exactly what Klöpping and Blankesteijn are trying to implement now (both were 2-year old at the time.)

Negroponte’s vision never materialized and there are many reasons for this.

The first one is the hyper-abundance of free content, especially in English, a notion completely overlooked by Blendle’s advocates. Years ago, I used to tell my colleagues at Schibsted ASA in Norway that their country was so small (4.5m inhabitants) and their market position so dominant, with the huge traffic machines of their large print and digital publications, that if they put out online text in Pashto, it would still drive serious audience numbers. (Schibsted became a $2.2bn global player thanks to a strong diversification strategy served by a remarkable execution.) In the case of Blendle, the Dutch language serves as a cordon sanitaire, a kind of firewall mostly shielding publishers from the interference of free contents. In other words, it makes a relative sense for De Volkskrant, NRC, or De Telegraaf  to join Blendle since they are already well-positioned on a small market.

This cannot work for the English language and its 1.2 billion speakers spread across the world, including 350 million native speakers. Pick any subject in the news cycle — say, Blendle precisely. In a few clicks, I will get a 800 words story from the Economist, a 900 words one for the Guardian, another 700 words article for BusinessWeek and a 1600 words piece from TechCrunch. And I’m not mentioning the… 24,400 other “Blendle” references that pop-up in Google News. In this list, only The Economist intends to join the Dutch service. Hence my question: Would you pay even 20 cents to get the Economist story while a profusion of good coverage is available just one click away for free? Me neither.

Second reason for discounting the Blendle model: News media have always built their business on a “cross-subsidy” system. Quite often, high audience stories — that don’t even cost much to produce (sports as an example), support low audience but costly reporting such as foreign coverage or “enterprise journalism” (that is when editor decide to assign large  resources to go after a worthwhile subject –needless to say, this concept has become an endangered species.) Granted, a media powerhouse such as The New York Times still produces unique contents that justify paying for it (about the recent NYT economics, read Ken Doctor’s piece on NiemanLab). But I doubt that a buy-by-the-slice Blendle revenue will contribute for more than a fraction of a percentage point to the $200m a year cost of operating the Grey Lady’s 1300-staff newsroom.

Third reason: Lack of serendipity. A well-edited media — print or digital — is a clever assemblage of diversified subjects aimed a triggering readers’ curiosity for topics outside their usual range of interests. That’s not likely to work in Blendle’s model, because it relies on three entry points — Trending, Realtime and StaffPicks — that actually transfer the classical user-induced serendipity to the editors of the service. I doubt lots of media are actually willing to give up the opportunity to capture reader’s attention on the widest possible spectrum by leaving the reins in Blendle’s hands.

Fourth reason: Advertising loss. While digital ads is mostly a failure for the news industry, separating ads from content sounds like a weird idea. Today, publishers are working hard to get a more granular profile of their audiences in order to serve them with more relevant contents, tailored ads, and ancillary products. Content dissemination won’t help this process.

Why then do the NYT and Springer, both strongly attached to the value of their editorial production, jump aboard this boat? For the Times, it might have to do with the idea of diversifying revenue streams in every possible ways by extracting more dollars for its vast supply of occasional readers. Axel Springer’s motive is different. The German giant is literally obsessed with undermining Google’s de facto position in the news sector. Hence the bets it takes here and there, buying the French search engine Qwant or taking over the babbling Open Internet Project. Both choices are far from promising high potential, scalable moves.

Publishers who are tempted by the Blendle model also choose to ignore the damage suffered by the music industry. Once the user was given the opportunity to buy each song separately (for a dollar, not 20 cents), the ARPU quickly collapsed, and there was no turning back. Also, at the time, the paid-for music was not competing against free content — except for piracy — in the way that today’s paid contents have to face a profusion of free editorial, sometimes excellent.

And finally, let’s not forget that the original “iTunes model” is not as shiny as it used to be. For Apple, its ARPU went from $4.3 per user for Q1 2012, to $1.9 per user for  Q1 2014, a 56% drop. The reason: Users are massively switching to the flat-fee/no ownership model of music streaming (hence Apple bet on Beats.)
Even before it reached news media, the iconic iTunes system was already seriously damaged.