Russ: This is The BusinessMakers Show, heard here and online at thebusinessmakers.com. It's guest time on the show, and I'm very pleased to be with Jason Pontin, Editor in Chief and Publisher of Technology Review-the authority on the future of technology-an independent publication owned by Massachusetts Institute of Technology. Jason, welcome to the BusinessMakers Show.
Jason: Hey Russ, it's a pleasure to be here.
Russ: Jason joined the publication in '04 as editor, and then in August of 2005 he became publisher as well, at which time he embarked on what The Boston Globe described as a strategic overhaul of the Technology Review. I'm curious, Jason, is the strategic overhaul complete?
Jason: Well, I believes it's fair to say we've done most of the things I hoped we'd do in 2005, but media's in a tricky place. So the strategic overhaul is still ongoing.
Russ: That essentially includes a significant expansion of the digitized version, correct?
Jason: Yeah, so the basic idea was that we would allow a probably over-distributed print magazine that was printed too many times a year, to fall to a natural circulation level. And then invest most of our efforts in publishing a daily website with between five to seven news stories with video and text-to-speech and social networking-and a whole bunch of modern goo-gahs and trinkets. And that was where we would get our audience, and that's where we would pick up our revenues. And it's, by and large, worked. So when they made me the publisher, there were around 300,000 print subscribers and not much of a website. And now the total audience of Technology Review around the world, including the website and-
Jason: --international editions, is about 2 million people.
Jason: Well, thank you.
Russ: Describe, or contrast, the digital version of Technology Review versus the publication; are they identical?
Jason: No, they're very different. So I am a strong believer that print is great at what print does. Print is excellent at delivering longer format invested of stories, and it's still the best format to see infra graphics, charts, photographs, and things like that. So we allow print to be print. And we don't pursue the strategy, which I see many print publishers doing, of trying to make the magazine compete with the Internet. The magazine couldn't look less like the Internet. Online we do what online does very well, which is to provide timeliness, information you can use, and opinion. So I like to think that the two are very different, and certainly the audiences are-only overlap around 20, 25 percent. So we're pleasing different communities with the two.
Russ: Interesting. When you were talking about what the magazine does it, reminded me sometimes there's still advantages to paper.
Jason: Well, paper has all sorts of advantages. And even it didn't-older readers by which in this case I mean people over 30-people over 30 still by-and-large prefer to go and read at least longer pieces in a format they can actually hold in their hands. Now, at some point in the next two years, five years, ten years, there'll be a thing called electronic ink, which will be pieces of paper which you can rattle around, which are flexible, which will be as interactive as a webpage. And I think those will replace paper magazines, but those are still a few years off. The company that makes them that touches on the basic technology, E Ink, has succeeded with the really difficult technological problem of making the thing legible. They're still struggling there with a power source, so even though the piece of paper is small and flexible, the power source is about as big as an A1 battery. And until they've got it somehow embedded in the piece of paper, and there are ways you can do that, I think we're not quite there yet with electronic ink. But give it a decade.
Russ: Well, I'd like to remind all of my BusinessMaker listeners who are not totally familiar with the Technology Review-it is the authority of the future of technology. And that little episode there sort of demonstrated it.
Jason: We're not just the authority on the future of technology, Russ, it's the oldest technology magazine in the world. It was funded in 1899.
Russ: Okay. Well, now I know we're kind of venturing into this manifesto of yours about the future of newspapers and magazines. And I believe you contend that they definitely have a future, but it's gonna be a different future.
Jason: Yeah, but here's my basic thesis-there are people out there who will look you in the eye, and they will tell you that nothing will save magazines and newspapers. And indeed, things look pretty dark at the moment for us. Just in the 1st quarter of 2009 magazine advertising revenue was down 30 percent.
Russ: Whew! Okay.
Jason: And-which is hard for any company to sustain. Circulation was down in the same period by 5 percent, and everywhere magazines and newspapers are, are going broke. In my own town of Boston, The New York Times company, which owns the Boston Globe, has said that if the Boston Globe will not give at least $20 million in union concessions, they're gonna close the thing down. But here's the thing, even if they did do that, the Boston Globe would still lose $85 million next year.
Jason: So, on the face of it these aren't sustainable businesses. This looks bad, but the people who tell you that magazines and newspapers can't be saved, by-and-large, are academics-
Jason: -or they are new media professors, or they are pundits who've never run a media business.
Jason: And by-and-large people who do this for a living kind of know what has to be done. The reason why magazines and newspapers are hurt at the moment is they're not doing the things that, for instance, we did five years ago. And let me just briefly sketch these-some of the stuff you gotta do. First of all, you need to have a sustainable rate-base in print. And what that means is that least 75 percent of your audience needs to be renewing the magazine with only minimal consumer marketing. That may sound really obvious, to have a loyal customer base, but it's not what people are actually doing in publishing. In publishing you can get whatever circulation you want if you're willing to pay for it-at least for a while. And for years magazines and newspapers, because they were run by ad sales people-
Jason: -overdistributed the magazine hoping to make up the difference in print ad sales. But as advertising collapsed, the whole system began to break down. So, you allow your circulation to actually be profitable, which for me means that any investment you make in a single reader has to actually return a profit within three years. Now, for us that means a circulation of around 180,000 in print. So magazine and newspapers are all going to be a lot smaller. The second thing you've gotta do, is start protecting your content online. If you're gonna be charging people in print, you've got stop giving it away online. What kind of business thinks they can have a sustainable profit center when anyone who is paying in the case of The Economist, 120 bucks-
Jason: -can simply load a webpage and get the same content for free.
Jason: Just got to stop that right now!
Russ: That makes sense.
Jason: Yeah, so you charge online. And you need to go and allow as much flexibility for that charging of consumers online as possible. People should be able to go and buy stories by the day, they should be able to buy stories by the story, or they should be able to buy a full-time subscription for a week, a month-leave it up the reader. At the same time, not all content wants to be subscription based. The content that works as a subscription based is content that is unique, that helps people do their job, or which is proprietary. There's a whole bunch of other stuff, which-you know-magazines and newspapers push-would still produce, but still-it's kind of a commodity. A lot of people do it and that's the news. We should still make the news, but the news is going to be advertising supported. And this is where it gets a little bit technical. The reason why newspapers have been unable to make up online, the advertising rates which they're losing in print, is at the moment we don't have an advertising technology online that allows what's called display advertising, banner advertising, to compete with key word advertising that Google and search firms sell. That's a technological problem. There are smart people working on that, and that's gonna be fixed in a next two or three years. So, spend less money on circulation. Have smaller magazines. Charge for the content that you do have that is unique. And of the stuff that you're producing for free, have a better advertising system to go and support it. You do those things and magazines are gonna be smaller, they're gonna probably be less profitable, but they're sustainable in the long run.
Russ: We're talking with Jason Pontin, Editor in Chief and Publisher of Technology Review. And we'll be back with more, with Jason, after this. You're listening to the BusinessMaker show heard here, and online, at thebusinessmakers.com.
Russ: This is The BusinessMakers Show, heard here and online at thebusinessmakers.com. And continuing on with Jason Pontin, Editor in Chief and Publisher of Technology Review-I really was tuning in to what you were saying about the future of newspapers and publications. And I've spent time on your website. I've not paid anything, at least not yet, is this something planned for the future?
Jason: Yeah, you're gonna have to start paying, Ross, sir.
Russ: [Laughing] Okay, all right!
Jason: So-so my theories are theories that are going to have an actual manifestation in our business practices. Starting in July, all the magazine subscription content will go behind a subscription. And if you want to read it, you're going to have to pay for it. And you'll be-as I say-able to buy it on the basis of a story, or a package of stories, or an issue. Or you'll be able to buy a full-scale subscription. And if you buy a subscription, we want to be Switzerland about how you receive it. You can receive a digital version of the magazine. You can read the subscription content as web html stories. Or if you're-you know-old-fashioned like me, we'll even deliver you a print magazine. But it costs us around $40,000 to go and produce from one of our long and vascular stories. A team of 20 people works on those stories, and it sometimes takes us a year and a half to write them. I think it is simply nuts to go and give away that stuff for free, and believe you're gonna make it up in an advertising base that has declining revenues. Now, this isn't to say there won't be lots of free content online.
Jason: We'll still produce five to seven stories, but these will be web stories that we produce in a day, two days, who value to us is less and value you to is less, which is why it's free. And on that we'll go and support that with advertising revenues.
Russ: Okay. How do you plan on integrating a social media platform into this paid version of the content?
Jason: Well, now that's an interesting question. So the way we first introduced the idea of there being content that we own, that people shouldn't give away, is we created a registration wall-
Jason: -in which you actually have to go and put your name and then some information. And because people are by-and-large averse to doing that, and they're still giving them something, the thing that we've been giving them is a social network. So we have 80,000 people on our site who trade images and stories and comments and videos and chat on a daily basis. Oh, the other thing which we can do if you register on our site, is we have a protocol text-to-speech where every single story on our website, including whitepapers, is read out by a small speech bot. And you can download it to your iPhone, to your Palm you can put it on your car radio, you can listen to on iTunes. And you can listen when perhaps, reading a magazine or website isn't convenient. So we-we've thought hard about breaking in the readership to the idea that there is a place which you have to ask permission, before you can simply have free reign over our site.
Russ: Do you see any other print publications that are moving this progressively in the digitized direction?
Jason: Well, it's really interesting. So I-I'm not saying that I'm a genius at all, but because we were smaller than The New York Times or a Conde Nast publication, and because I had MIT as my sponsor those two things were very liberating. So being smaller, I didn't have this gigantic print business that I had to maintain. In fact, with our readership who was overwhelmingly digitally inclined, I could see my print business declining very quickly.
Jason: At the same time MIT said, "Listen, we're not gonna close you down." We would like you to be sustainable and profitable, but we're pretty smart people and we know that the world of print is kind of changing. So MIT said, "Listen, this isn't an open check and you can't do this forever, but we're willing to accept some transitional costs. Please regard us as your venture capitalists as you make these shifts." So it was great having an owner who did that. The problem with most big media companies is they're, by and large, publicly traded companies in many cases-very often saddled with enormous amounts of debt, which they have to service.
Jason: MIT said, "We trust you. We're not mainly a publishing company so at some level we don't care that much." But they told me two things. They said, "Make us proud in terms of the content you produce, and try and be as innovative in business practices as we are with the technologies we create." And I said, "Well, no pressure guys, but-but [Russ laughs] sure, sure.
Russ: Well, here's to MIT. That's-
Russ: -that's pretty good. And that's cool! Well, let's shift gears for a second because-
Russ: -because another thing that certainly is impacting you and all companies and all media, is this nasty, nasty recession that we're in. And I know you've gotten involved in discussions on entrepreneurship during this recession. Share your perspective on that.
Jason: It is a tough time, Russ, to be an entrepreneur at the moment if you've taken venture capital money. I don't think the venture capital business is widely understood outside the very small coterie of venture capitalists. VCs have a very simple business. The general partners take money from limited partners, high net with individuals, and also from-you know-institutional investors. And they look for their investments to out-perform the market in aggregate every single year of the investment. And then they're looking for an exit strategy within, ideally, two to seven years.
Jason: At the moment there are no exit strategies. There are no exit strategies at all! No one's going public. The last company I saw to have a very successful IPO was the Rosetta Stone, which was a very kind of unique set of circumstances. Companies that are amazing companies, who were teed up to have-you know-moon shot IPOs, aren't going out. At the same time, no one's making any acquisitions in larger public companies. They're not doing that if you're a public company, because you're stock is deflated in value.
Jason: And the company that you might want to buy, this little start-up, well, it's valuation was set three years ago by a venture capitalist who made it up. So that's the last company you're gonna wanna go and do a stock swap with if you're an acquiring company. This means that VCs have turned to their entrepreneurs and they said, "We're not giving you a penny more, or maybe a tine of a penny, but not much. Here's what we want you-we want you to batten down the hatches, reduce your costs, rethink your business model. Oh, and by the way, you better start creating some revenues right now. That is a tough, tough, tough position to be in as an entrepreneur. In Silicon Valley and Boston where I live and in places like Houston, I see companies that had every reason to be highly optimistic, having to rethink who they are and what kinds of things they'll be producing.
Russ: Okay. We're talking with Jason Pontin, Editor in Chief and Publisher of Technology Review. And you're listening to The BusinessMakers Show, heard here and online at thebusinessmakers.com.
Russ: This is The BusinessMakers Show, heard here and online at thebusinessmakers.com and continuing on with Jason Pontin of Technology Review. We talked about how dismal it is right now for venture and angel funding, but there is these huge amounts of money now, Jason talking specifically about some of the stimulus funds. Share your perspective on that.
Jason: So there's this huge windfall. So the time when VCs aren't spending everything and everyone's hurting, the Obama Administration has promised $100 billion in technology funding for our friends in Silicon Valley, in Houston, in Boston. Just to give you some context-the entire sum spent on biofuels-in the history of the funding of biofuels in the world-is $4 billon. And the Obama Administration plans to go and chuck about $40 billion at that sector. So, here's the thing
Russ: I must point out, you kind of roll your eyes when you say that too.
Jason: Yeah well, I was rolling my eyes so let me preface this by saying as a East Coast member of the liberal media elite, I find the president as dreamy as the next journalist. That said, I have profound reservations about the technology provisions in the stimulus package and here's why-I think it's bad macro economic policy. And I think it is probably not going to fund the technologies that will give the long-term economic growth of the future. So here's where it's bad economic policy. There are many, many better places to go and spend money if you want to create jobs in the short term and get people spending. Ironically, one of the best things is food stamps, because people who have food stamps are broke and spend it. You can also spend it on picks and shovel activities where you actually get people to work. Technology's a terrible thing to invest for stimulus, because technology eliminates jobs. Technology disrupts jobs and creates new businesses in the long term. In the short term it puts people out of work, that's what technology does. And even when it does succeed it creates jobs in seven years-it's a terrible thing to go and invest in for stimulus. You probably couldn't think of a worse thing to invest in if you wanted to go and create a stimulative effect.
Jason: Let's go to the second half, which is funding the technologies of the future. I don't think governments are particularly good at making specific technology selections. And that's what the Obama Administration is planning to do. They're planning to fund very specific things, specific types of Wi-Fi, cellulosic ethanol. And I don't know about your laws, but I don't think just because one has a law degree from Yale, served-you know-eight years in the House of Representatives, and now serves as the President's Chief of Staff, that one necessarily knows a lot about some of these really quite difficult areas of-
Russ: I totally agree.
Jason: -modern technology. And the thing is we have a way to do this in this country. Wa-the way we do it is the government should fund a lot of money into discovery research through traditional grant-giving bodies like the NSF, like the National Institutes of Health, and then technology transfer departments in universities push the technologies that have the most market pull out into the marketplace. And then VCs, who are called risk capitalists for a reason, fund them and then entrepreneurs take them to market. We've been doing this in this country for 50 years. We know how it works and it's made this country the economic engine over the world. It makes me scared when governments start to do this. There are three historical examples of governments-bad ones-of governments doing this. The first one is famously disastrous. The French decided in the early '90s that the Internet-was just too Anglo-Saxon and too free market. And they wanted to have their own Internet, which they called Minitel, it's the French Internet. The only thing that Minitel did was retard the growth of the Internet in France, by about a decade. In the-the '90s the Japanese had a great idea. They decided that the future of computing was the super computer. And so they poured billions into the super computer industry at the very time, when in this country we discovered that rack personal computers-and in fact the personal computer revolution itself did everything that-you know-mini computers and superl computers did. An example from here at home, the ethanol industry-[Russ chuckles]-ethanol was the single worst fuel ever created. It has a higher carbon imprint than petroleum. It produces less power. And it is by definition, uneconomic. And that's why the government subsidizes it. So these are examples of the governments choosing technologies, and I just wish we weren't going down this road.
Russ: It doesn't sound like any wins there.
Jason: No, none of them were particularly successful.
Russ: All right. Well, we've run out of time for the radio broadcast with Jason Pontin, Editor in Chief and Publisher of Technology Review. But obviously there is more, so go to thebusinessmakers.com and check out the Jason Pontin web extra.