Here is an important paper on ways to build innovation in Australia. The author is Elias Bizannes.

Australia’s mass media need to overhaul their business models if they are to survive.

Managers have neglected business models appropriate for the digital economy, such as de-bundling and re-bundling of content to cater for digital natives. An example of de-bundling would be isolating a single song from a CD, or a single article from a newspaper. Re-bundling involves selling collected pieces of de-bundled content on different platforms.

Professor Arne Krokan of Norway’s University of Science and Innovation said technologies to re-bundle newspaper content and enable micro-payments online or via mobile phones were available “but they have not been embraced”.

Professor Krokan, who consults to media groups in Scandinavia, told the first Australian meeting of the Association of Internet Researchers that newspaper companies around the world had been slow to benefit from the digital revolution.

In Australia media companies move dated content from newspapers and broadcast outlets to web sites. This is shovelling, not re-bundling.

Newspapers also refuse to de-bundle in the physical world. Why not sell separate sections? As soon as I buy weekend newspapers I discard the sports, recruitment, cars and real estate sections without opening them. Why not sell only the business or sports section to interested readers? Just as Apple sells single songs via iTunes.

A song can be replayed and enjoyed several times. Would this happen with single pieces of journalism? Perhaps the answer is a reflection of the quality of some newspaper writing. Or perhaps people perceive newspaper content as ephemeral, the sort of mindset that sees newsprint as wrapping paper for tomorrow’s fish and chips.

Much of the success in the digital world relates to perception as much as reality.

Professor Krokan said convergent technologies permitted new media services. It was important here to understand the whole picture or context. “We need to take into consideration a range of factors including available technologies, changing markets and consumer behaviours, the influence of geography (local is becoming highly popular because of its ability to provide unique content), consumers’ knowledge and competence, variations of culture, and digital business models.”

The main driving forces in the digital economy were convergent technolgies, changing consumer behaviour and deterritorialisation. In the last case, this is where multi-national companies sell into domestic markets. “Amazon sells more books in my country than the combined sales of the three largest Norwegian bookstores. The market is worth about $US 20 million.”

An example of convergent technologies is IPTV, or television available over fast broadband, which undermined the business model of commercial free-to-air TV networks.

European newspapers had started to offer services beyond news to align with changing consumer desires. One of the most popular sections of some papers is a weightwatchers’ club, for example.

Professor Krokan said another feature of digital services was the blurring of the roles of consumers and producers. Consumers were fast becoming producers of content. “In Norway, people take videos with their mobile phones and post them to newspaper web sites.”

Dr Axel Bruns of Queensland University of Technology said citizen journalism provided an example of this blurring of roles, for which he had coined the term “produsage”.

A variety of citizen journalism models had emerged, but “produsage” had some key characteristics. These included content generated by average citizens, limited editorial oversight, continuous updating, more comment and debate than in mainstream media, and multiple perspectives for stories, Dr Bruns said.

Some of the best-known examples included OhMyNews in South Korea, Kuro5hin, Plastic.com, and the Al Gore-funded Current TV. “We see constant and collaborative evolving of content,” Dr Bruns said.

Progressive media such as the BBC were adapting their business models to accommodate changing audiences, and this provided an example of “harvesting the hive” – taking advantage of the vast content that citizen journalists produced. But the long-term economic sustainability of this model remained a “significant question,” he said.

Professor John Hartley of QUT said the business model for broadcasting needed “a makeover”. “Broadcasting as we know it is over.” TV was heading into a post-broadcast phase, driven by the Internet. “Mass media do not last forever. Some simply go away.”

Young people were becoming “produsers” via Internet sites such as MySpace, Flickr and YouTube.

Australia needed faster broadband services to accommodate this change. “We must revise our view of creativity, and revise the broadcast model of creativity, which leaves the general public sprawled brainlessly on the couch.”

* Published in the Bulletin of the Pacific Area Newspaper Publishers’ Association in January 2008.

For a typical daily newspaper, only about 15 per cent of the total budget is spent on producing content. Distribution and printing account for at least 60 per cent of the cost of a daily newspaper.

So if media companies could find cheaper and simpler ways to distribute their content, more money could be spent on content.

Enter the e-reader. It is a mobile reading device designed primarily for storing and displaying digital documents. The best-known e-reader devices in 2009 were the Amazon Kindle, the iRex iLiad and the Sony Reader. They are used mostly for reading books, though some daily newspapers are available on them. Most are only available in the US and Europe.

Perhaps one third of one percent of the reading population of the United States owns an e-reader. Newspapers could provide each of their readers who had subscribed for more than two years an e-reader as recognition of loyalty. The e-reader could become a status symbol. Readers could keep the device while they continue to subscribe. This would reduce distribution and printing costs, though managers would need to do the sums to calculate when this approach became financially viable. A newspaper could negotiate a good price by buying e-readers in bulk.

The world’s largest newspaper printing plant, owned by News Corporation, started production in March 2008. Based in Broxbourne, north of London, it is larger than 20 football fields and can produce 3.2 million newspapers a night. That plant cost $US 917 million.

The cost of a printing press tends to be amortized over 30 years, so that means News Corporation will spend about $30.5 million a year on printing. By comparison, the cost of hosting a major web site that transfers several hundred gigabytes of data a day is negligible. Amazon’s huge server farms cost about $35,000 a year. Compared with printing on paper, distribution costs for online editions of newspapers are almost zero.

Analysts estimate it costs about $650 million a year to print and deliver The New York Times. As of April 2009 about 830,000 people had subscribed to the paper for more than two years. To give an e-reader to each of those subscribers, at $400 per device, would cost the Times about $332 million. These numbers are simplistic and it would cost money to close down the printing presses and dispose of the fleets of trucks and other distribution tools.

But for a media organization starting fresh, or looking for new business models, e-readers offer an option.

Early in 2009 the Hearst Corporation announced it would release an e-reader for newspapers some time in 2010. It would be American letter in size and weigh less than half a pound. In April 2009 News Corp chief executive Rupert Murdoch said his company was investing in a mobile device for reading newspapers on a screen. The project was in its early software development stages, and he provided few details.

In March 2009 Plastic Logic said it planned to release an un-named e-reader in January 2010. The Plastic Logic product will have a screen 10.7 inches diagonally (about 27cm) compared with the 6-inch (15cm) display of the Kindle. The Plastic Logic device would weigh about the same as the Kindle (10.3 ounces or 292 grams) because it will be made from plastic rather than glass and silicon. It will also be more robust and durable.

The e-readers on the market in 2009 were compact and personal, like a mobile phone, while the Hearst, News Corp and Plastic Logic versions are intended for newspapers. They are potentially attractive to audiences if newspapers can get the content and business model right. Hearst and its partners plan to sell the e-readers to publishers and take a cut of the revenue derived from selling magazines and newspapers on these devices. The publishers will develop their own branding and payment models.

The devices have other selling points. They are perceived as being greener than newsprint. Don Carli, executive vice president of SustainCommWorld, and senior research fellow with the Institute for Sustainable Communication, said print had come to be seen as a wasteful and environmentally destructive “despite the fact that much of print media is based on comparatively benign and renewable materials”.

Companies like Kodak had faced the same challenge as newspapers in trying to decouple the business of capturing and preserving memories from the business of selling analog film photography and photo-finishing systems. Newspapers were likely to face similar problems trying to decouple newsgathering, journalism and advertising from production and delivery in print to delivery via e-readers, Carli said.

“The carbon cost of print will no longer be swept under the rug. It will soon have to appear on the balance sheets of advertisers, publishers and retailers. It will also appear in the price tags of goods and services. Business models that fail to recognize full lifecycle cost and value will be unlikely to succeed going forward. As we exit the global recession we will simultaneously be transitioning to a low carbon global economy that will change the meaning and value of waste and inefficiency,” Carli said.