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Vasily Gatov: The main contribution of newspapers is the editorial process

It's unthinkable that print media will die out, because there's no better way to choose texts and incentivize writers financially than the editorial process, says Vasily Gatov, head of RIA Novosti's Media Lab, deputy chairman of the Guild of Editors, member of IFRA board and moderator of the key panel at the International Future Media Forum. The year 2012 will be all about analyzing massive amounts of data, which, if successful, will add value to traditional media outlets.

- What are the main trends in the media industry? Clearly, the main theme last year was "the death of the newspaper," but now it seems that this issue doesn't feature as prominently on the industry's agenda. What happened instead?

- I would put it differently: "the death of the newspaper" was a hot topic in 2009-2010. In 2011, the socialization of media, primarily through social networks, but also through social actions based on shared interests and values fostered by consumers of the same media, came to the forefront. To some degree, 2012 has been greatly influenced by the developments of 2011. The priority now is the analysis of massive amounts of data that are of interest to wide audiences and are also managed by these audiences.

Getting back to newspapers, the main issue is that some publishers and media actors realized sooner than others that information distribution channels are changing. Remember Bulgakov's Master and Margarita? "The trouble is not that man is mortal, but that he's suddenly mortal." Things seem fine and then BAM! A man is strolling around Patriarshy Ponds in perfect health, and a few minutes later Annushka spills oil, he slips and dies a tragic death. Looking at the future of print media with all seriousness, I can say that its life expectancy greatly depends on the ability of owners to spend the minimum amount of money to keep it going. I don't believe there's anyone willing to invest in a paper media startup now. That's too risky and expensive: It costs about $20 million. If a media outlet like that already exists, then it's a question of good management: it can be kept afloat, but attempts to create one from the ground up are essentially doomed. Even if you spend $20 million on a digital startup, maybe it won't make more than $20 million in profit, but it'll be valued at $400 million.

- Are you talking about a digital startup that provides online services or online content?

- The Huffington Post clearly shows that there can be success in providing content.

- The Huffington Post is a one-of-a-kind phenomenon. What about the Russian market? Slon.ru executives say that the website broke even in the third quarter of 2011, which is a great achievement for an Internet-based Russian media outlet. Many other projects operate at a loss: Money is leaving newspapers but doesn't seem to be able to make it to the Internet.

- It does though, and in rather substantial amounts. However, there are only a few hundred print projects that have access to the ad revenue as opposed to tens of thousands of digital media outlets that can get a bite of the similarly large ad revenue pie. The money is spread too thin. Advertisers find themselves confronted with a wide range of choices, but unlike the 400-year-old print media industry, the digital industry has no readily available tools for making the right choice.

- So, it's just a question of time?

- Yes, that and the quality of the tools used for measuring digital audiences, since they are not precise enough now. In purely economic terms, it is clear that the results are somewhat off, no matter how fine-tuned these tools may seem. Even having less reach, print media are more effective than digital assets. We have long been aware that this is not the way things should be. That means we are off in our measurements. We need time to fix this.

I'm not a trained social scientist, but I'm trying to get a handle on these issues. It so happens that the statistics rule for population works for physical information carriers, but fails when it comes to estimating Internet audiences. Therefore, we shouldn't even try to measure website audiences the same way we measure television viewership. So far, we've been using the rich frequency model, which is 80 years old and cannot be applied to the communications models developed in the 1990s.

- Is Russia following in the steps of Western media in this regard?

- Russia is faced with similar problems, but market leaders who began to build up their audiences before others have better measurement tools at their disposal. They can count conversion rates more accurately. In addition, the U.S. online media advertisement market is about equal in size to the entire Russian ad market. Size matters.

- What's up with magazines? Interview was launched on paper and seems to be doing just fine.

- Just like newspapers, magazines are not a thing of the past. There's a different angle to this issue. Before you can create a successful business, you need to create capital value, which can be anything from a brand to a warehouse. If you want to build a self-reproducing audience and advertisement machine that will effect the secondary conversion, then you need to create a system that sells 50,000 copies a month and be fitted out with money traps. You'll need to put anywhere from $500,000 to $1 million into it before it starts to pay dividends. In order to be able to sell 50,000 copies effortlessly, you first need to print about 1 million copies. Only after you spend this money and sink $10-15 million into scrap paper will you start making money. This kind of investment can be better forecasted in Western economies, whereas in Russia it's much more uncertain. You may well end up sinking your money with one editor and trying to retrieve it with another.

- Which media niches provide quicker ways to make a return on an investment?

- Online services or something similar. If you update your content in real-time, it's no longer content but a service.

Content niches are in no way different from the ones already available offline. However, there are two things that set them apart. It is much more difficult to become successful online if you peddle an item of general interest or a hypervisual product that greatly depends on the quality of picture or video. The resolution of the iPad 3 screen offers quality that is very close to paper, but these niches are still very small and are quickly filled by the brands that are already successful offline, such as Cosmo, National Geographic and the like.

To be specific, it's obvious that clear-cut editorial models for local digital media are not available. They will certainly become available and be the most successful ones. However, no one in the United States, India or Russia knows yet how they will work.

- If a publication occupies a narrow niche, it won't be able to attract a  wide audience and sell ads, meaning that it won't be able to make enough money to pay its editorial staff members.

- You are trying to drag me into a conversation about the vices of the online ad business.

As a nation, we are very envious of the quality of manufacturing in other countries. We don't have much to be proud of locally and that's why we like to say: "Whereas in normal countries..." Things are the same with online advertisement. People who started this business in Russia saw how thing are in America and thought: "That's the kind of life I want." They needed to come up with a model to sell things to the  meager Internet audiences that were available back then in Russia. That's why of all the more or less viable models, the Russian Internet uses only the model based on number of clicks. Even though it works only in the restricted environment of Moscow- and St. Petersburg-based websites that are prepared to pay up to 80% in commission and attract paying visitors to them. The regional Internet is based on direct sales that have no place for IMHO VI.

As far as niches go, I'm confident that experiments should indeed be conducted, especially if they don't come at a cost, as in the case of top4top.ru. As they say in Stanford, fail forward fast.

- Of all Russian Internet startups, which ones make you hopeful?

- I'd say PublicPost.ru. although they have made quite a few mistakes. PublicPost is an attempt to mimic Huffington Post using a different set of editorial principles.  I closely follow other information resources such as RIA Novosti or Lenta.ru that use their resources and capabilities to blaze the trail in the industry. The Internet is an extremely public environment; therefore, one can easily observe someone else's success, especially so if the information is publicly available.

- What do you think about the widespread use of user content by professional media outlets and the fact that they build it into their respective editorial models?

- Everybody in Russia and the West has tried their hand at this.  The underlying idea is that there are tons of freely available content and there's no reason not to make use of it.

One of the problems associated with this content is that supplies are not infinite. In addition, there's no economic model to support it. Bloggers have no economic reasons to generate content on a regular basis.

The main problem associated with user content has to do with the fact that there are no other effective models for paying writers other than the editorial one. Sooner or later, bloggers are drawn into becoming editorial board members.

One of the mistakes made by early innovators was that they were coming up with electronic and robotized editorial boards, but there's nothing better that editors. As I mentioned earlier, 2012 will be the year of data management. Perhaps, they will come up with something where large chunks of socially meaningful data will become available in the form of content. So far, we've been dealing exclusively with crudely designed projects.

- It looks like we are back to square one.

- The key contribution of newspapers was to invent and refine the editorial process, which is the media's main asset. They came up with a way of telling long stories and leading readers to do certain things. This is value, not just a dead-tree business. The Internet media with finely tuned editorial processes are the ones that operate successfully. This is exactly why we picked Lenta.ru.

- What about Lenta.ru and other Internet-based media that publish content originally posted by other English and Russian language-based websites?

-  There's no shame in copy editing. That's half of what the U.S. press is. You need to re-tell the story using different language than was used in the original piece. Most importantly, when you do so, you should be confident that the original source is providing trustworthy information. Information verification is essentially what the editorial process is all about.

The U.S. press is built along the same lines. It's not based on The New York Times at all, but rather on local municipal papers that operate based on a shared principle: local events are covered by newsrooms, regional events involve copy editing syndicated content in a given region, and the national agenda involves copy editing of the Associated Press. In addition, there are columns that can be either original or syndicated. The larger the newspaper, the more staff writers it has. The Boston Globe can afford staff writers, whereas Providence Journal from Rhode Island can't.