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December 15, 2008

The Future of Main Stream Media, pt 3
by Reggie Middleton

Reggie Middleton on the Marginalization of Mainstream Media, pt 3

This following is a reply from the MSM official referred to in part 2 of this series. Since it is about a week or two old (I've been a bit busy), I recommend you refresh your memory so we can pick up from where we left off.

MSM official comment:

I think the structure of your proposed model makes sense. Here's the 'but'. Who is going to pay to evaluate the blogger provided information to make sure it checks out before posting, linking to or printing it? As you know, when I found BBB (that's BoomBustblog.com) on the Internet I was impressed but didn't blindly accept it. I took my own time and used my own independent contacts to establish a sense of whether RM was providing credible information or whether he was just some random guy. It wasn't easy, as RM (that's Reggie Middleton) has an extremely low profile. But it had to be done before I would be willing to pass along the info to my employer's customers. The cost of my time was paid for by my employer who acquired it from rack sales, subscriptions and advertising revenue from previous editions. Fortunately, blogger RM checked out and the information was useful in my employer's product which, in theory, means that quality information will have generated eyeballs, ad dollars and sales that will support future information evaluation.

I can see his point here, but this vetting process only has to be done once. Now, that RM has proven to be worthy source of deep information and opinion, his content can be used repetitively without the same vetting process.

Also, as good as the info was, blogger RM can be quite verbose and arcane with terminology. In order to make the material accessible to a general audience, somebody has to be able to evaluate and understand the info and have the ability to synthesize it into words that apply to a non-expert audience, which takes more time and, by definition, money.

Essentially, it takes time to track down the definition of expert-only words and skill, or at least a decent vocabulary, to translate those words into something easy-to-understand.

Someone also has to tease out the information that is relevant to readers in a given community where the paper is published so the readers know why it is important to them, which also takes time and knowledge of the community.

I understand his point here as well, but with a specific request I can convert the content into layman's language. See this complement I received from a journalist: "It was great working with you on the XXXXX story - believe me, I talked to a lot of so-called experts on that ISDA Master Agreement before I finally found the right person (you!) who could make sense of it and convert it into a plain English for me, which of course was what I needed to convert it into plan English for XXXXXX readers. Look forward to meeting you on that yacht -- or anywhere else for that matter. Best, XXXXX"

So even great info like that on BoomBustBlog takes some massaging to make it fit for a large audience, and BBB is the best case scenario in which the info is reliable, relevant and newsworthy.

In many cases, if not most, professional reporters chase down info from bloggers only to learn it doesn't pan out, the source was compromised, the info was wrong or unsubstantiated, it doesn't apply to a broader audience or isn't relevant to the community the MSM professional serves.

The result there is just lost time -- and money -- that the newspaper eats as part of an important and ultimately valuable service of sifting and winnowing in order to make the reader feel he or she got their 75 cents worth out of the daily product.

This is unavoidable, the first time around. As I stated earlier though, this vetting process is only necessary once per content source and is not different than interviewing a new reporter or editor for a job, or procuring any other asset.

Now, I'm not saying there aren't myriad problems of conflict, structure, credibility, access, relevance and even corruption in the MSM. There are. Those situations are wrong and a disservice to customers, advertisers and the public as a whole. I'm just saying somebody needs to figure out a way to combine the impressive ability of the blogosphere to churn up data with the difficult job of MSM professionals who read, evaluate, double-check, simplify and contextualize the information. And they have to find a way to make that process profitable without government subsidy if the goal is to provide private, independently operated, professional sources of information that are critical to the health of our nation. Your model is a step in the right direction, but there are holes that need to be filled to make it work on a national and international scale.

Yeah, well it is was something that just popped into my head and I threw into a post at 3am. I am working on filling the holes now. As a matter of fact, there are a lot of holes in my head that I need to fill as well J

This is a follow up email from the same MSM professional:

I've been thinking a lot lately about the market-forced transitions occurring in the MSM in light of our discussion and I think there is strong merit to a model similar to what you suggested, if some big wrinkles can be smoothed out. I've already listed some concerns, but this is a new one.

It seems there's already a crude version of your pay-per-source model already in use in the cable news industry. Currently, cable news shows hire "experts" in fields such as medicine, the military, politics etc., to be on retainer and comment on issues raised in stories. The original idea was to ensure the networks had a stable of qualified experts who would be beholden to the news agency when they comment, which in theory would increase the credibility of the reports. The first issue is once you have somebody who is "beholden" to an institution, you have already injected an inherent potential conflict of interest. The problem is the model was quickly corrupted by both sides. Media companies became infatuated with certain experts not b/c they provided the highest-quality content, but b/c they were perceived as good for ratings. This could only happen when the "experts" appealed to the generalist market. The specialist market should, most likely would reject the opinions of the popular crowd. Take James Cramer, for instance. The average Joe investor seems to look up to him, but he really doesn't have a strong following in the hedge fund manager community, now does he? The "professional sources" quickly realized they could leverage their newfound notoriety into lucrative consulting contracts, speaking tours, etc., and, unencumbered by the rules journalists follow to prevent conflicts of interest, didn't disclose their own conflicts, even conflicts strong enough to clearly corrupt their integrity as news sources. This can be solved by contractually requiring all conflicts and reasonably derived potential conflicts to be declared by all pundits.

Media companies looked the other way b/c they realized it was cheaper to take a couple press releases and pay some dueling "experts" to yammer than it was to hire professional journalists and pay for their time to research issues and report on the results.

Spend one hour watching Fox, CNN and MSNBC to witness the results. I'm sorry, but I refuse to watch Fox, and I may be offended if you request such againJ Spend another hour researching their finances to see how it is a system that produces diminishing returns.

Your model, without some tweaking, would pave the way for bloggers to simply wade further into the "professional source" business. It would certainly be a good way to make blogging more lucrative, but if I were running a news organization I would have serious doubts about how it served my customers. See my conflicts disclaimer comment above.

This is the long way of saying that if we want to protect whatever integrity exists in professional journalism, any new models need to account for the cost of maintaining a wall between advertising and content, time to independently verify information and disclosure or regulation of relationships sources may have with subjects in the news that are pertinent to the coverage.

And, if we intend to maintain independence from the government, the model can't ask for the government to regulate disclosure. It would have to be a system that pays for itself via the marketplace, most likely through a combination of advertising and subscriptions.

It would be a difficult, but incredibly fascinating, exercise to found a news service based on a new model.

For financial analysis and investors, meritorious selection is very easy. Everybody should be evaluated based upon their track record. The better you have done (in absolute terms, not relative terms) and the longer you have done it, the more credible you are. Plain and simple! If you actually put a percentage gain/loss figure in that little streaming ticker that I see under everybody's talking head on CNBC, the viewers would look at many of them in a totally different light. A Totally Different Light!. The same goes for bank analysts, management consultants and so-called institutional investors. It doesn't matter if you are totally unknown or Warren Buffet. This is why I have decided to publish periodic and comparative performance reports for my work. See past performance.

The following is an update to the initial blogger licensing model that I posted (I'm shocked nobody picked up the typo in the original one). It is one of several scenarios of MSM leveraging the blogosphere for gain.

Scenario for the world's best red velvet cake recipe article
Larger audience, but likely less price elasticity
MSM unique viewers (not impressions, but users)	1,500,000
x Blogger fee per unique viewer	$0.0005
x Days content is run	7
Fee to blogger for the article	$5,250.00
Contractual commitment days for blogger	84
Annual content fees	$63,000.00
Added value in reader interaction via comments, bringing additional and significant credibility and stickiness to the content and MSM site (MSM site must allow blogger to cross promote his own site as well) to be negotiated if added value is measureable and tangible	An ad revenue split would be a prime example of a win, win situation here.

At first blush, I can see the MSM management looking at these numbers saying, you must be out of your damn mind. Why would I pay $5k for a cake recipe. That mentality is why I feel many in the MSM will eventually get ran over by the Web 2.0 paradigm. Anybody who feels compelled to ask that question just doesn't understand that you are not paying $5k for a cake recipe, you are paying $5k for instant credibility, more credibility than a general reporter can ever garner, on the topic, and near guaranteed, concentrated stickiness. You are also paying for a depth of knowledge that is impossible for a layperson to posses; even a layperson who job it is to seek such expertise. The average MSM executive wouldn't even wince at paying $5k for conventional advertising and may even consider it a bargain depending on the impressions purchased per dollar. I believe we have progressed passed the days of impressions and eyeballs, and we are not entering the realm of deep interests and interaction.

In the example above, the best possible Red Velvet cake available is made by my personal friend, Cakeman Raven, and anybody who has had the occasion to taste his product will not disagree. He is also quite the marketable personality. Customer testimonials, and simply eating his cake, is what establishes credibility, and his knowledge of the subject is deep and broad. The social interaction capable in having him produce and stand behind the specialized content portends stickiness, micro subscription fees via premium content and social media networking (Facebook/LinkedIn/Twitter/discussion Group/interactive comment style) that is worth far more than the $5k in total. Every dollar over $5,250 is incremental value, assuming all costs were taken into consideration.

You see, the major asset of the MSM is eyeballs and volume. The value (and money) to be extracted out of that asset is segregating and extracting the specialist's interests out of that mass volume and delivering them specifically what they want. They will be willing to pay MUCH more and spend MUCH more time in the medium if their button is hit. Thus, the key is to transform the MSM from a large generalist outlet to an intelligent, dynamic congregation of diverse yet DEEP specialist content.

Scenario for finding the next multi-$billion REIT, bank or insurer to collapse
Smaller audience, but likely greater price elasticity
MSM unique viewers (not impressions, but users)	500,000
x Blogger fee per unique viewer	$0.0100
x Days content is run	7
Fee to blogger for the article	$35,000.00
Contractual commitment days for blogger	42
Annual content fees	$210,000.00
Added value in reader interaction via comments, bringing additional and significant credibility and stickiness to the content and MSM site (MSM site must allow blogger to cross promote his own site as well) to be negotiated if added value is measureable and tangible	An ad revenue split would be a prime example of a win, win situation here.

Using my blog as an example, I don't appeal to everyone. As a matter of fact I probably don't appeal to most which makes my content for the extreme minority, but those who do have an interest have an extreme interest. Users spend 40 and 50 minutes at a time on the site. They sign in or view nearly every day, and I am able to charge a significant multiple of what the MSM financial rags charge. The key is to take this specialist content and open it up to the masses, 5% of which will have aligned specialist interests. You take that 5%, and instead of targeting a few hundred thousand as I may do, you funnel it through the existing MSM infrastructure to target 10 million. 5% of 10 million is a lot, particularly when you can get 100% of that 10 million by finding the best producers of that 5% content and stringing them together to produce what I alluded to above - a diverse community deep specialist interests content. With the social networking technology freely available through open source code and the instantaneous search abilities of media tech titans such as Google (whose technology should be replicated, not licensed, to avoid concentrating too much power or influence in one company), this is NOT hard to do. It can be ran alongside the generalist media rag, but I feel in a relatively short period of time it will come to dominate. Just imagine as one deep specialist content category is hyperlinked to another, which is then linked to another creating a daisy chain of knowledge and expertise that will draw in viewers who thought they had no interest whatsoever in a particular topic, only to be sucked in through the curiosity of how arcane industry "A" affects their favorite cottage industry, hobby or interest "B". A perfect example of how this could have been set up with the correct infrastructure was the GGP article (and GGP: Requiem) regarding Las Vegas casinos (gaming industry people sucked into learning more about REIT valuation and development) or the Giants of Wall Street article where football fans could be sucked into learning more about derivatives. I know the reporters behind both of these stories did an above average job in ferreting out the info for the stories, but just imagine if the infrastructure that I recommended were in place…

Costs

Part of the problems of the MSM paper outlest is cost. They are paying too much to support an infrastructure that is generating too little. You would think that as large as some of them are, the economies of scale would give them an advantage over what I may be able to create. Well, if you thought that you are wrong. The MSM, in general, just don't know what they are doing when it comes to new media. They should have, 10 year ago, bought out those young upstarts that are now taking their business. Like it or not, bloggers are competing successfully with MSM outlets. As an entrepeneur, my first call to action would be to jettison those things that a) I suck at, and b) are too expensive to profitably maintain.

That means making the AP the not-for-profit distributor for more than just pictures and news stories. The AP should be a standardized techonology distribution platform from which the newspapers "blog" as some could say. Google does it (and does it for free with great success, may I add) with Blogger.com. Six Degrees does it with Typepad.com (with great success, and for free may I add). The AP should do it for NY Times, Dailey News, Washington Post, etc. They pay XXXX nominal dollars into the tech pool and get a standardized platform out of it from which to launch theie platform. Then, if they want to differentiate themselves with customized technology widgets, they can feel free to do so. I think their resources woudl be better served putting that time and money into their content, but who am I to judge.

Here we have, diminished costs with a standardized outsourced tech platform without leaving too much influence to for profit companies such as Google, who, if they decided to get into the proprietary content business, would litereally crush much of what's left of the MSM. With the freed up monies and resources outsourcing tech, they could focus much more on investigative journalism, blogger co-ventures, and all types of creative news content, not to mention streamlining by focusing on core competencies.

As usual, questions, queries, comments and (polite) criticisms are quite welcome.

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2009 Reggie Middleton

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