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Disruptive Innovations and Paradigm Shifts in Journalism as a Business: From Advertisers First to Readers First and Traditional Operational Models to the AI Factory

Disruptive Innovations and Paradigm Shifts in Journalism as a Business: From Advertisers First to... Since the early years of the 21st century, the newspaper industries of Western liberal democracies have been in a perpetual crisis caused by disruptive digital innovators outside the industry. Until recently, the industry and researchers have conveyed a predominantly pessimistic view of the future. This paper argues that after numerous unsuccessful innovations, the industry is now in the middle of a global paradigm shift with a huge impact on journalism as a business and showing a promising path forward. The new “Readers First Paradigm” is replacing “Advertisers First” The former constitutes a new way of doing business, consisting of two main changes: a revised value proposition focusing on reader preferences and subscriptions; a fully digitized operational model built around AI and machine learning. The article shows that until recently, the paradigm shift has been largely overlooked by researchers in the field. Further, a theoretical framework of industrial paradigm shifts is developed to describe and explain the new paradigm’s emergence and growth. Additionally, a generic “ideal-type” systemic description of the paradigm is provided, identifying the individual components and how they work together. Keywords journalism as a business, paradigm shift, business models, digital attention economy, readers first national, regional, local, and niche). However, here, the Introduction focus is on the striking similarities in both value propositions Since the turn of the century, the legacy newspaper industry and operational models across such differences. Based on has been in a perpetual crisis in Western liberal democracies. these changes, we suggest labeling this new paradigm the As a whole, it has shrunk around 25% to 50%—depending “Reader First Paradigm,” which is in the process of replacing on the country—in terms of circulation, revenue, and num- the “Advertiser First Paradigm.” Whereas advertising typi- ber of journalists. Further, both the industry itself and cally comprised 60% to 80% of income in the latter, those researchers have conveyed a predominantly pessimistic view figures are reversed by the former. At a high level, the Reader of the future. First Paradigm consists of a new system of two tightly inter- Here, “legacy newspapers” is used to mean traditional woven components, each being innovative in its own right, newspapers transforming their journalism, reach, and way of as follows: a new value proposition focusing on reader pref- doing business in the context of the digital attention econ- erences and a highly digitized operational model built on AI omy. This definition is similar to that of Nygren et al. (2018, and machine learning organized as an AI factory (Iansiti & p. 37). Further, fully digital and “adjacent” news organiza- Lakhani, 2019). However, at a granular level, this paradigm tions like Huffington Post, BuzzFeed, and even Substack are consists of a bundle of smaller innovations knit together as a considered to partly belong to this category, as they are spin- offs reminiscent of processes, personnel, and cultural out- looks stemming from the legacy players. Kristiania University College, Oslo, Norway This paper argues that the industry is in the middle of a Corresponding Author: paradigm shift that shows a promising path forward for leg- Jens Barland, Kristiania University College, PB 1190 Sentrum, Oslo 0107, acy newspapers. Moreover, differences exist between coun- Norway tries and newspapers targeting various segments (global, Email: jens.barland@kristiania.no Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open coherent systemic whole. The definition here of the Reader key objects of study—legacy newspapers and the industrial First Paradigm offers a more coherent and analytically well- ecologies in which they are embedded—imply complexities. defined systemic concept, than the terms “readers first,” Thus, this approach is advantageous as it allows for a variety “reader revenue model,” or “audience first” as applied inter- of sources to provide a more comprehensive understanding changeably by The International Media Association (INMA) on the object of study. The data here includes the following: and practitioners in the field (Piechota & Brock, 2019). (1) quantitative data related to the development of the indus- Additionally, this article stipulates the key components try; (2) quantitative data related to the case studies extracted and systemic aspects of the Readers First Paradigm. Further, from cost accounting and other reporting systems; (3) quali- we develop a framework for how those components come tative and quantitative data related to the case studies com- together and build a systemic whole. The systemic perspec- piled from internal and public documents, strategy papers, tive is supported by a theoretical approach merging perspec- yearly reports, company presentations, etc.; (4) qualitive data tives from innovation theory, recent works on business collected from speeches, workshops, and interviews with models and the digital attention economy, organizational key individuals; (5) secondary data as articles and studies theory, and design thinking. As organizations embedded in related to the organizations and the ecology studied. complex digital ecosystems are ontologically complex phe- The study builds on the premises of pragmatist epistemol- nomena, we believe this broad approach is required to under- ogy within the philosophy of science, as in its modern form stand larger, systemic shifts of a paradigmatic nature. In this expressed in the works of Rorty (1979, 1982, 1990) and rec- regard, the tendency of researchers to focus on narrow topics ognized as a unique foundational position in recent works on and research questions imbues the risk of not noticing such research design and research methodology relevant to man- systemic changes. This may explain why many researchers agement and media sciences (Creswell & Creswell, 2020). did not recognize the wider significance of innovations To select and prioritize case studies for this paper, we con- among early movers of the new paradigm for a long time. ducted a comparative quantitative industry analysis of the The arguments proceed in five steps. First, we lay out the legacy media industries of Norway and the US (Bakke et al., research strategy and the methodological and philosophical 2021). Here, we identified newspapers with huge growth foundations of the article. Second, we make a brief recapitu- since 2015-2020, despite the industry contracting substan- lation of how until recently, researchers in the field inter- tially and combined them with assessments by media execu- preted the trajectory of the industry, arguing that they mostly tives to make the final selection. missed the emergence of the new paradigm. Third, as the The empirical support for our findings is built on a combi- concept of paradigm shifts is elusive and often used as just a nation of primary and secondary data. The Norwegian pri- label for a bigger shift, we propose a generic analytical mary data consists of an extensive case study of the media framework of industrial paradigms, their key components, group Amedia, which owns 80 local legacy newspapers. and how they emerge and decline. Fourth, we consider the Here, data gathering in included internal and open-source emergence and development of the Readers First Paradigm. documents entailing both qualitative and quantitative data Finally, we combine the analytical framework and empirical and 15 hours of semi-structured interviews with strategically evidence to put together a coherent “ideal-type” description selected managers. Further, a broader perspective on the of the aforementioned paradigm. Norwegian context was provided by including primary data from the Schibsted Media Group, the largest media group in Norway, from which three highly ranked managers were Research Strategy interviewed for about 6 hours in total. Moreover, a combina- This article is part of an ongoing project initiated in 2019 that tion of primary and secondary data provides and enriches the explores changes in value propositions and business models data with a broader international context, thus exploring the among newspapers in Norway and internationally. The international origin and development of the observed changes. research strategy is built on three key principles: it is multi- Further, the Norwegian newspapers pointed to international disciplinary in perspective, has a mixed-method approach to case studies, gathered at the International News Media collection and analysis of empirical data, and is based on a Association (INMA) as sources of inspiration. Thus, for the pragmatist epistemology reflecting our position coming present study, we used INMA memberships over a period of mainly from the management sciences. 2 years, which gave access to 28 case studies and an extensive The multidisciplinary perspective is necessary given the range of workshops, plenary discussions, oral presentations, subject matter of value propositions and business models, as QA sessions, and slide sets involving editors and other senior those concepts relate to and build on a wide array of sub- managers from the industry. The membership also secured disciplines of management sciences. Here, the sub-fields access to INMA researchers, tech suppliers to the industry, implied by the nine-variable business canvas of Osterwalder like Piano, Viafoura, and others, and innovators outside the and Pigneur (2010) is an example. industry, like Netflix and Spotify. The audio-visual INMA The mixed-method approach is partly derivative of the material had a total duration of 51 hours. More specifically, multidisciplinary perspective but is also appropriate as the the INMA case studies covered newspapers across all Bakke and Barland 3 continents, including among others, the Financial Times (FT) This description fits well with the state of the industry in and The Guardian in the UK, Politiken and Jyllands-Posten in Western liberal democracies at the turn of the century (Bakke Denmark, Washington Post (WP), Wall Street Journal (WSJ), et al., 2021). However, this privileged position has not been and Boston Globe in the US, and Lensing Group in Germany. sustainable. Considering the emergence of the internet, The INMA case-studies and the role of INMA itself as an Picard (2003) predicted changes in reader and advertiser international organization for newspapers propagating and behavior “that challenge [newspapers] long-term survival” teaching key elements of the new paradigm underline the (p. 127). Here, due to the likely slow change in consumer global character of the paradigm shift. The material from behavior, he saw no potential for a short-term crisis. More INMA is best characterized as a mix of primary and second- specifically, upon analyzing threats related to digitization, ary data and entails both quantitative and qualitative data. In increased internet usage, mobile phones, etc., Picard (2003) the references, we have added Appendix 1 at the end to pro- predicted that “there will be no major shocks to their busi- vide an overview of the main sources that were referred to in ness models for a decade or more” (p. 133). While this pre- the Norwegian and INMA case studies. diction hit the mark, Picard was vague about what the These sources were supplemented by a wide range of required transformation would look like. open-source material from the industry like innovation A decade and a half later, researchers in the field struggled reports from WSJ and New York Times (NYT), material to see a successful path forward. Without a broader systemic from tech suppliers like Piano and extensive studies of rele- framework, a broad range of initiatives, like digitization, vant literature from the last 20 years. click-bait and viral reach, paywalls, data harvesting, sub- Here, it is important to stress that this rich database is scription initiatives, new product bundles, etc., were investi- addressed in accordance with the mixed-method approach and gated and mostly judged as failures. Here, the the principles of case study research. As a mixed-methods conceptualization of paywalls, metrics, and key performance approach, the study is positioned in the gray zone between an indicators (KPIs) serve as an illustration. In this context, exploratory and explanatory mixed-method sequential design Myllylahti (2014, p. 179) studied paywalls across several (Creswell & Creswell, 2020; Tashakkori & Johnson, 2020). legacy newspapers, found no consistent improvements, and The proposed coherent systemic description of the new concluded that “the revenue generated by paid online news paradigm, its components, and how it works as an “ideal content is not substantial enough to make paywalls a viable type” are built on the concept of analytical generalization business model.” Similarly, Carson (2015) was unable to dis- (Yin, 2017). cern consistent performance differences and rejected pay- The suggested “ideal type” description of the “readers first walls as a “solution.” However, she noted that the WSJ and paradigm” may be ascribed a similar epistemological status FT apply paywalls with success and, in our view, correctly for the legacy newspaper industry, as Womack et al. (2007) did identified the superior value of their content from the con- for “physical product” industries when synthesizing the bun- sumer perspective as the likely explanation. Nevertheless, dle of innovations in Japanese automotive industries under the she did not elaborate on possible wider implications. “lean production” systemic umbrella (which later spread glob- Meanwhile, Sjøvaag (2016, p. 14) found that most paywalled ally within automotive and other industries). content relates to some of the most resource-demanding journalistic areas that a newspaper covers—such as politics, social issues, economy, and culture—and saw paywalls as a A New Paradigm Emerges: Without mechanism for protecting editorial investments. This is remi- niscent of a monopolistic mindset, as it focuses on internal Being Suitably Recognized production costs rather than the demand side and reader pref- When newspapers started digital experimentation by pre- erences. Further, Myllylahti (2017b, p. 3) noted that legacy senting some news for free on the web in the 1990s, it was on news increasingly uses audience monitoring tools as part of the backbone of often quite profitable businesses, thriving as editorial decision-making. However, she predominantly local monopolies or oligopolies. The main source of revenue viewed this as a threat to the quality of journalism and not as was usually advertising, whereas subscription and single- an opportunity to enhance quality. Thus, implicitly convey- copy sales were seldom higher than 20% to 40%. In this con- ing the message of allowing reader preferences to exert text, the investor, Warren Buffet, made the following increased influence on journalistic value propositions will comments on the newspaper business: negatively impact the quality of journalism. Additionally, Myllylahti (2017a) also espoused a pessimistic view of jour- When Charlie and I were young, the newspaper business was as nalistic quality in relation to the impact of KPIs. The lack of easy a way to make huge returns as existed in America. As one conceptualizing metrics, KPIs, and paywalls within a sys- not-too-bright publisher famously said, “I owe my fortune to temic framework was still predominant in her latest sum- two great American institutions: monopoly and nepotism.” No mary on paywall research (Myllylahti, 2019). paper in a one-paper city, however bad the product or however Moreover, Anderson et al. (2012) recognized the crisis inept the management, could avoid gushing profits (Cunningham, 2013, p. 89). created by the emerging digital ecosystems in which 4 SAGE Open newspapers are embedded. From the premise that “good high-quality newspapers focusing on business news—to also journalism” was always subsidized, predominantly by adver- fail, as they did not address the weaknesses of journalism tising, they conveyed pessimism about the very possibility of rooted in the Advertising First Paradigm, which was ill served profitable quality newspapers. to deliver on “jobs” that readers were willing to pay for. In this context, Picard (2016) noted that in revenue terms, First movers started innovating as early as 2008 to 2009 the primary business of newspapers in the 20th century was (FT) and 2013 (Amedia), but wider diffusion of the new con- advertising and that newspapers have been unable to develop cepts took time. It is only in the last 1 to 3 years that we have journalism with a commercial value compensating for the seen many newspapers delivering impressive growth based loss of those revenues. Focusing on business models, Villi on the Readers First Paradigm. Moreover, the paradigm and Picard (2019) analyzed a range of innovation initiatives seems applicable across a wide range of newspapers—inter- and concluded that none delivered sufficient results in terms national, national, local, and with both a general focus and of customer and revenue growth. Thurman et al. (2019) more niche players like business newspapers. reflected the broader sentiment in this period with a contribu- These changes in the newspaper industry can be contextu- tion with the telling title “On digital distribution’s failure to alized into a larger cross-industry digital realignment where solve newspapers” existential crisis: symptoms, causes, con- industries that were previously highly analog and insulated sequences, and remedies’, which pessimistically concluded in nature have undergone digital transformations increas- that “newspapers’ online experiments have not reversed their ingly driven by AI and machine learning. This has led to falling fortunes.” A notable exception to this sentiment is broad convergences between industries operating within Schlesinger and Doyle (2015), to which we will revert later. shared digital ecologies, which are intermingled in complex Historically, when competitors challenged the Advertiser competitive and cooperative relations (Iansiti & Lakhani, First paradigm, newspapers innovated by redefining the 2019; McAfee & Brynjolfsson, 2017; Rogers, 2016). For “jobs to be done” (Christensen et al., 2016), thus making legacy newspapers, the larger attention economy, as defined their journalistic product more attractive. However, these by social media in particular, is not only a competitor. Here, innovations did not represent paradigm shifts as they aimed social media giants such as Facebook and Google are simul- to maintain the attractiveness of newspapers as marketplaces taneously important partners as sources of traffic generating for advertising and not in creating journalistic products that new subscriptions and revenue through cooperation agree- generate profits in their own right (Pressman, 2018, 2020). ments. This is a symbiotic relationship, as newspapers gener- However, with the advent of the digital attention economy— ate free content that boosts revenues for the aforementioned with Facebook and Google offering vastly superior platforms players (Cf. Myllylahti, 2020; Venkataraman, 2022). for advertising—the potential of the Advertising First Meanwhile, as a space where cultural and journalistic elites Paradigm dwindled. At this time, when the two-sided mar- communicate and debate, Twitter seems to play an important ketplaces of newspapers struggled, some innovators started role in forming epistemological and cultural biases that may to improve their journalistic products to make readers will- affect the value propositions of newspapers. Specifically, it ing to pay for them. This was enforced upon them as their possibly alienates them from broader parts of the readership protected environments were replaced by global ecosystems (Klein, 2021). To delineate the scope, in the following, we constituting a fully digitized competitive battlefield. More only cursorily discuss how those relations impact the Readers specifically, the innovators of the digital attention economy First Paradigm. offered the advertising-driven model of Google-Facebook- To achieve a better understanding of how the above Fogg and the subscription-driven model of Netflix-Fogg changes took place, we start by proposing a generic theoreti- (Bakke et al., 2020; Zuboff, 2019). Both operationally build cal framework of industrial paradigm shifts, which is also on analytics as well as AI and machine learning algorithms suitable to grasp the changes in the newspaper industry. informed by behavioral sciences (Fogg, 2003), offering pow- erful tools for the prediction and modification of consumer A Framework of Industrial Paradigms behavior. Innovative newspapers embracing the Readers First paradigm have adopted both versions to increase sub- There is a comprehensive tradition within media economics scription revenue (first priority) and defend smaller but still and management (cf. Albarran et al., 2018; Picard, 2017a), important advertising revenue (second priority). yet according to Storsul and Krumsvik (2013), until their On the other hand, several newspapers fighting to main- anthology was published, innovation did not play a major tain the Advertising First Paradigm opted for “click-bait” and role as a perspective within media studies. Storsul and viral strategies to generate traffic attractive to advertisers. Krumsvik (2013) requested more innovation media research Nevertheless, those attempts mostly failed, as they funda- be undertaken but recognized that apart from representing a mentally reproduced an outdated advertising first approach distinct set of industries, there was nothing inherently special by means of better technological tools (Wu, 2016). Further, about innovation in media. Moreover, innovation has been attempts to protect the journalistic product through paywalls studied from different perspectives, varying from philosophy and other innovations tended—with the exception of a few and history of science (Barnes, 1982; Kuhn, 1970; Nickles, Bakke and Barland 5 2003) to economics (Fagerberg et al., 2006; Nelson & Winter, confronted with disruptive innovations, many organiza- 1982; Schumpeter, 1934, 1950) and management sciences tions go out of business as their path dependencies are too (Bower & Christensen, 1995; Christensen et al., 2015, 2016, hard to overcome (Antonelli, 1997). In this context, the 2018; Francis & Bessant, 2005). Our framework merges market, competition, and disruptive innovations provide these perspectives, recognizing their joint conceptual dis- selection mechanisms, explaining why under certain eco- tinctions between incremental and radical innovations while logical conditions, some paradigms are viable, and others simultaneously taking advantage of how they enrich each are not (Baum & Rao, 2004; Lewin et al., 2004). other in other areas. Christensen’s definitions of “sustaining and disruptive The concept of paradigm shifts originates from Kuhn’s innovations,” originating within management sciences, are (1970) study of innovations in science, in which he stipulated built on key provisions of the Schumpeterian tradition, where two modes: “normal science” and “revolutionary science.” disruptive innovations from an innovative challenger may Long periods of conservative, tradition-bound normal science cause paradigmatic shifts within an industry. However, the are punctuated by occasional crises and revolutions. Normal origin of the disruption or the innovation it brings is often science extends and articulates the paradigm, but does not test found outside the industry itself. Pointing to a complex of it, as the paradigm defines the research tradition, shared cog- path dependencies incumbents suffer from “architectural nitive order, accepted tools, legitimate research questions, inertia” that gives disruptive attackers advantages, Christensen and practices of a discipline. Within normal science, a para- predicted that incumbents would struggle to adapt, thereby digm is a reproduced institutional order—including educa- becoming likely victims of negative selection. tional institutions, professional guilds, research journals, Combining these approaches, we propose a three-phase etc.—that productively adds to the growth of knowledge framework for industrial paradigm life cycles. First, in the through small steps. Confronted with a crisis where a growing emerging phase, innovations reap high returns. Second, in body of empirical and theoretical findings does not fit within the declining phase, returns are diminishing, enforcing a the paradigm and the marginal gain of each new finding is higher frequency of and investment in innovations to keep diminishing, a conservative hegemony may be challenged, growing. Third, in the crisis phase, return on innovations and transformative ideas and practices emerge as serious approximates zero, and businesses within the paradigm alternatives. Repeated failures of an established paradigm to experience significant losses. New paradigms are likeliest to handle a crisis, along with the emergence of a promising new emerge in what we call the “zone of increasing crises,” as approach, may trigger a revolution. During the final phase of illustrated in Figure 1. a revolution, practitioners advocating for a new paradigm The outlined innovation perspective serves as an over- succeed in replacing the old paradigm and its supporters, sub- arching reference for understanding the transformation of the sequently rewriting the history of the field to make their para- newspaper industry and fits well with the high-level devel- digm appear to be the only true alternative. opment observed since the early years of this century. In Similarly, the Schumpeterian tradition describes incre- 2010, Picard noted that “innovation efforts in news organiza- mental, gradual improvements adding to an existing order tions are at their highest levels ever but unfortunately spec- consisting of a complex of practices, organizational struc- tacularly unsuccessful in solving the fundamental problems tures, and technologies, which can be understood as a of the enterprise” (Picard, 2017b, Loc. 105). This picture is Kuhnian paradigm that is occasionally replaced by a radi- vivid in the NYT innovation report, which, in 2014, depicted cal innovation, which creatively destructs the old order and an enterprise investing more than ever in innovations, only to signals the emergence of a new paradigm. Here, Schumpeter see them brutally failing (New York Times [NYT], 2014). (1950) understood market-driven capitalism as a process of More specifically, the 2014 report illustrated the Advertising continuous change sometimes leading to “industrial muta- First paradigm in decline, where innovations delivered tion . . . that incessantly revolutionizes the economic struc- diminishing or negative returns, whereas the 2017 report ture from within . . . destroying the old one . . . creating a indicated that a paradigm shift was underway (NYT, 2017). new one” (p. 85). Core to this perspective is the concept of Picard (2018, p. 6) summarized important conditions for this selection of viable innovations within market-driven indus- shift “The market has shifted from oligopoly and monopoly trial ecologies. Nelson and Winter (1982) further developed tendencies to high competition for consumers time, attention the understanding of incremental improvements, emphasiz- and expenditures.” which led to numerous newspapers going ing their programmatic nature based on institutionalized out of business. practices imbued with tacit knowledge. They incorporated Moreover, to gain a deeper understanding of paradigm rationality and planning in the bounded version of March shifts, the conceptual framework needs to account for the and Simon (1993) and viewed businesses as entities that underlying mechanics and transformations of real organiza- operate in open environments but with strong limits on their tions in terms of their systemic properties, as defined by their abilities to fundamentally modify themselves and enact value propositions, operational models, and cognitive orders. change due to the conservational gravity of sunk-cost However, the characterization of a shift as paradigmatic is assets, existing operations, and cognitive orders. However, a judgment call, as new paradigms evolve over time and tend 6 SAGE Open Figure 1. Phases of paradigms and the crisis zone where a shift is likely to occur. to carry stocks of knowledge from the old paradigm while withstanding (i.e., growing or contracting) the selection redefining their meaning, recombining them, and merging pressures of its environment determines whether it is an them with new elements. To make this judgment transparent, emerging or declining paradigm. This analytical frame- we propose a set of criteria to be fulfilled for an innovation to work of paradigm shifts is summarized in Figure 2. be deemed paradigmatic. More specifically, we suggest add- In accordance with the innovation perspectives built on ing concepts from the business model frameworks of here, it can be expected that a paradigm shift within an indus- Osterwalder and Pigneur (2010, 2015), Bland and try and individual organizations takes time, as it is the accu- Osterwalder (2019), Iansiti and Lakhani (2019) jobs theory mulative and transformative systemic effects of a learning as outlined by Christensen et al. (2016) and design thinking process affecting the three dimensions in a way that passes and agile methods (Brown & Katz, 2019) to the merged the viability test. This is well illustrated by the leaked inter- innovation perspective outlined above. nal report on the digital transformation of WSJ, as even Building on and combining the approaches discussed though it is among the most successful examples within the above, we propose the definition of a paradigm shift in new paradigm, it still struggles with its old paper-based leg- business as a viable systemic change, transformatively acy operation and associated culture (Wall Street Journal affecting three main dimensions of the business: (1) the [WSJ], 2020a). A recent account of the change process in FT value proposition bundle and its gravitational profile; (2) by an internal change agent pictures a similarly discontinu- the operational model; and (3) the institutional and cogni- ous and bumpy transformation process (Jones, 2022). tive order of the business. A paradigm entails a particular Moreover, when a paradigm shift occurs, incumbents may configuration of these three dimensions. Since the object not recognize the systemic properties of the new paradigm of study is businesses, the change must produce outcomes and thus imitate individual aspects and make superficial superior in terms of competitiveness—which is measured adaptions in trying to emulate what they falsely believe is the by customer growth, customer satisfaction, revenue, and key concept of the challengers’ new successful approach profitability—as compared to the old paradigm by prov- (Womack et al., 2007). As a new paradigm entails the devel- ing fitter in surviving the selection pressures of the ecol- opment and adoption of a new cognitive order within the ogy in which it is embedded. We term this “the viability business—changing both the tacit and explicit assumptions test” of a paradigm. The likelihood of passing it is decided of the previous paradigm—the cognitive order might be part by the balance of forces between ecological pressure and of the architectural inertia that must be overcome. However, internal change abilities. In contrast to selection in a this cognitive order may be beneficial or obstructive in terms purely Darwinian sense, the ability to survive is thus con- of making the transformation into a new paradigm. Thus, tingent on the creative and transformative capabilities of value- and ideology-driven cognitive orders may trump organizations to enact successful innovations capable of rational business deliberations and cause businesses to cling Bakke and Barland 7 Figure 2. Framework for analysis of a business paradigm and relation to relevant theory. to a doomed paradigm or choose less-than-optimal ways for- FT digital transformation was already a success. Schlesinger ward from a viability perspective. and Doyle (2015) viewed this as the result of a premeditated In this context, it should be noted that it is to be expected management strategy. Furthermore, in January 2013, an that a new paradigm surviving the viability test takes a sig- email memo from Lionel Barber, editor of the FT, to his staff nificant amount of experimentation and trial and error before became public. The memo revealed a strategy “to reshape the a successful configuration emerges. Additionally, adaptions FT for the digital age” and called for a response to the disrup- and broader acceptance within an industry are likely to take tive effects of new entrants such as Google, LinkedIn, and time. Twitter: “. . . our competitors are harnessing technology to revolutionize the news business through aggregation, per- sonalization and social media. Mobile alone, for example, Early Instances and Subsequent accounts for 25 per cent of all the FT’s digital traffic” (Barber, Followers of the Readers First 2013; Giner, 2014). Public reports since 2013 show consis- Paradigm tent growth in digital subscriptions, which passed one mil- lion in 2019 (Mayhew, 2019), and increased profitability As we have not identified earlier cases, FT is likely among despite advertising trending downward. Proving sustainabil- the earliest innovators of the Readers First Paradigm. ity, the FT readership showed increased engagement mea- Through open sources and INMA material, we have recon- sured by frequency and duration of reading the digital structed key elements of the developmental history of FT. As edition, which now comprises about 90% of total subscrip- Amedia was an early follower, we also applied the material tions (De Bono, 2021). Since 2007, FT has gone from being gathered from our study of them. Further, Amedia senior largely a UK print outlet to a global digital product for busi- manager (PN) claimed that “In 2013, FT was the global inno- ness professionals and decision makers, with >80% of the vation leader and inspired us to adopt key features of their approach that was suitable to the local media market in readers being from outside the UK, according to the Global Norway.” Information about FT that gained public attention Capital Markets Survey 2020. in 2012 to 2013 largely confirms the Amedia assessment and Closer examination of the FT case supports the hypothe- fits our stipulated timeline of the innovation trajectory of the sis of a Schumpeterian creative destruction. A starting point new paradigm (Indvik, 2013). is the second paywall in 2007. As important as ensuring Additionally, Schlesinger and Doyle (2015) observed online subscription revenue was that the new paywall pro- major systemic changes in the FT value proposition and vided comprehensive electronic user data informing further operational model. Through a Schumpeterian lens, they product development. These data taught FT indispensable speculated that the time when it was written was the early lessons about how readers engage with their product, which days of a Schumpeterian creative destruction of legacy news- allowed them to develop their journalistic value proposition papers. Whereas digital income in 2000 was negligible, by with a keen awareness of user behavior and preferences. In 2012, with 316,000 digital subscriptions out of 602,000, the this context, an FT executive stated: 8 SAGE Open I can see through our analytics exactly what . . . people are described the decision to focus on subscriptions and readers doing on the site and am actually understanding their behavior first as “a lifesaving strategic move confronted with an exis- and their needs . . . and judge from their behavior as to which tential crisis.” Since then, as measured during 2015 to 2020, parts we can improve, and that leads to product innovation (cited the six newspapers in Norway with the highest growth in in Schlesinger & Doyle, 2015, p. 313). subscriptions and revenue are all from the Amedia Group (Bakke et al., 2021). Since 2015 to 16, numerous other news- Thus, user data from inside the paywall turned out to be papers have also made astonishing progress by emulating the “pure gold” from an advertiser’s point of view, according to approaches of FT and Amedia, Similarly, by embracing this Bob Grimshaw, managing director of FT.com and the archi- approach, INMA has become a key institution, giving the tect of the metered subscription model (Starkman, 2014). It paradigm momentum. Starting around 2020, on a weekly allowed FT to adopt the “Google model” for targeted adver- basis, INMA offers case studies, courses, and workshops tisements. This double value of the data harvested turned teaching key aspects of the Readers First paradigm. The case 2008 into the year when FT, as per Grimshaw, “really accel- studies cover all continents to consistently report on the high erated down” on the digital subscription model (Starkman, yearly growth in digital subscriptions, some of which are 2014). By 2021, FT confirmed that “AI and machine learn- well beyond 100%. INMA recommends the same approach ing become increasingly important . . . those tools open up a to advertising, as behind their walled gardens, newspapers lot of new opportunities” (De Bono, 2021). In this context, can offer highly attractive arenas for targeted advertising in the head of analytics at FT defined three phases on top of the environments with trusted brands, attractive demographics original concept, each of which added new innovations to and high conversion rates (Bakke et al., 2020). Additionally, their Reader First-strategy since 2014 (Seale, 2021): phase 2, in alliance with FT Strategies (The FT consulting arm) and the “quality era,” focused on improving quality for repeat Google, INMA has built a lab with the objective of optimiz- visitors through personification and recruiting subscribers ing strategies, methods, and tools for the legacy newspaper among them; phase 3, the “engagement era” built on the industry with the aim of increasing subscriptions (King, “Recency, Frequency, Volume” concept to increase the use 2021a). In 2020, FT Consulting supported 71 newspapers in of their product; and most lately, phase 4, the “Life Time their endeavors to implement Readers First strategies (De Value” era, which enabled FT to virtually eliminate churn Bono, 2021). Further, FT consulting describes the transfor- with a net retention of approximately 110% as the revenue mation as comprehensive, implying substantial changes in from existing customers has been increasing year-on-year the three dimensions of our paradigm framework (Harding & (De Bono, 2021). Eisenband, 2021). The Amedia case mirrors FT. First, the journalistic prod- Moreover, upon assessing the empirical material, we pro- uct was improved through data harvesting and analytics and pose in Figure 3 a condensed, high-level description of the eventually through AI and machine learning, both of which timeline, the main phases, and key developments of the secured growth in digital subscriptions. Next, the same tools “Readers First Paradigm.” were applied to a targeted advertising operation. In Amedia, this, along with other innovations, led to new priorities in terms of topics to cover and writing stories in alignment with Key Properties and the Systemic user preferences, which enabled the prediction of the number Character of the Readers First of readers per article, reading duration per subscriber, and the Paradigm number of new subscribers elicited as a direct result of an Applying the analytical framework proposed above, this sec- article. tion elaborates on the key components and systemic proper- The first priority of both FT and Amedia is developing ties of the Reader First Paradigm. journalism as a business, with advertising and other products as the second. Regarding advertising, in 2012, FT concluded the following: Value Proposition Bundle and Gravitational Profile of the Readers First Paradigm . . . [advertising is] increasingly subject to competition because of the movement of revenues from print to digital and the strong The idea of systematically developing the value proposition position in the digital space of players such as Google, Apple, of a business can be traced back to the ontological analysis and Amazon. The ambition is to drive up subscription or by Osterwalder (2004), and the succinct observation by Peter “content revenues” so that in the next few years these become Drucker that “the customer rarely buys what the company the main basis of the enterprise’s revenues (Schlesinger & thinks it’s selling him,” which is arguably the starting point Doyle, 2015, p. 311). of Christensen’s “jobs theory” (McGrath, 2017). In recent years, the value proposition concept and associated tool- Amedia came to the same conclusion in 2013 to 14, when boxes have been elevated to a strategic approach across their click-bait and viral reach initiative Buzzit failed to pro- industries (McGrath, 2017; Ulwick, 2017). tect advertising revenue. Senior manager (PN) in Amedia Bakke and Barland 9 Figure 3. Phases in the evolving of the readers first paradigm. More specifically, a value proposition consists of the jobs Pressman (2020), and the interviewees in this study. In the that a product or service aims to support through the related past, newspapers were forced to innovate and improve their customer segments (Osterwalder & Pigneur, 2015). The spe- products from the readers’ point of view whenever reduced cific product or service needs to address pains and possible circulation threatened advertising revenue. Here, Pressman bad outcomes related to those jobs as well as the positive (2018) noted that journalistic ideals of being fact-based, fair, outcomes/gains that they may deliver to specific customer and striving for objectivity in the American press evolved as segments. a commercial response to crises in circulation: Any newspaper may offer a combination of value propo- sitions tailored to different markets, segments, and individu- Although some people think objectivity is the press’ natural als. Therefore, it is important to understand the bundle of mode, for most of American history, newspapers were proudly value propositions and their individual items’ relative impor- partisan. Not until the 1920s did objectivity catch on as a professional ideal. A wave of newspapers mergers and closings tance, which we will term its gravitational profile. [. . .] and the surviving papers had to appeal to a broader swath The key value proposition questions answered differently of the public. Overt partisanship in the news pages would as per the new paradigm are as follows: (1) What is the most alienate large parts of the target audience. important customer segment for the organization? (2) What job is your product undertaking for that segment? Briefly Similarly, journalistic innovations during the 1960s to stated, the answer for question (1) is a shift from advertisers 80s, such as deep diving, critical and opined journalism, (old paradigm) being the most important customer segment and broader coverage of soft topics, are answers to compe- to readers (new paradigm). For question (2), in the old para- tition from TV, which made newspapers inferior in areas digm, the most important job is to provide advertisers with where they used to enjoy semi-monopoly (Pressman, 2020). an attractive marketplace, whereas the role of journalism is However, whereas those innovations aimed to preserve the mainly a supportive function delivering that marketplace. In Advertising First Paradigm, the innovations of the Readers the new paradigm, the primary job is to deliver journalistic First Paradigm represent a disruption. value that the readership is willing to pay for, whereas adver- Osterwalder and Pigneur (2015, p. 12) distinguished three tising remains an add-on and secondary source of revenue. types of jobs that are relevant to the value proposition of Historically, newspapers, with few exceptions, have newspapers. First, “functional jobs” relate to specific problem offered two-sided marketplaces, where the key to success tasks to be solved. Here, newspapers may deliver a broad was mutually reinforcing network effects. However, jour- array of actionable knowledge relevant to functional jobs nalistic quality, as experienced by the readership, was not important to their readership. Second, they perform “social totally insignificant; it had to achieve sufficient circulation jobs,” where the choice of newspaper contributes to social to be an attractive platform for advertising. Thus, in condi- status, belonging, identity, and readers’ cultural capital. tions of monopoly or semi-monopoly, demands placed on Finally, they also perform “personal jobs,” where newspapers journalistic quality, humility, and receptiveness toward user may create emotional value for their readership. In this preferences were modest, according to Picard (2017b), 10 SAGE Open context, the polarized climate of the US and several Western defined by business process, technologies, skill sets, and countries indicates a viable commercial space for newspapers organizational set-up, deliver their value proposition to their appealing to emotions rather than fact-based, actionable customers. knowledge. While the new paradigm gravitates to be more Traditionally, journalism has been an endeavor with sensitive and deferring toward readership preferences, news- humans as the key productive resource that selects the topics, papers have a business choice concerning the segments being conducts research, and frames the narratives by means of focused on and the preferences being prioritized. Further, suc- professional expertise. However, as humans scale poorly cessful newspapers may balance jobs differently depending both in handling large data volumes and broad scales of com- on the segments being targeted. As a recent example, the pub- petencies, the digital attention economy represents major lisher of WSJ indicated a keen awareness of the aforemen- challenges to this “old” model. tioned types of jobs for his newspaper (Latour, 2021; Watford, News media face pressure to build organizational and 2021), with the priority being functional jobs to emphasize cognitive capacities that can process exponentially grow- facts, truth, and trust and deliver actionable knowledge for ing quantities of information within continuous news business as key parts of the value proposition. Nevertheless, cycles. The responses among early innovators combined WSJ also focuses on social jobs by building communities for agile design thinking and the AI factory. Agile design CEOs, CTOs, etc., and ensuring that it enhances the cultural thinking relies heavily on insights into limits on human capital of its readership, while also focusing on undertaking rationality, focusing on continuous learning through personal jobs for each reader through personalization and experimentation in short cycle times (Brown & Katz, insight into particular personal needs. 2019; Harvard Business Review, 2020; Kahneman, 2011; The full power of the value proposition of the Reader First Simon, 1971; The Agile Manifesto, 2001). It is a human- Paradigm is dependent on the AI factory, which is the core of driven concept combining key elements of the philosophy its operational model. The term was introduced by Iansiti and of the Toyota Production System and modern approaches Lakhani (2019, Loc. 940) as a scalable technological and orga- to the development of software. Through this approach, nizational mechanism that “reinvents the core of the modern rapid learning is, as the WP described it, “achieved by firm.” Further, the AI factory enables an organizational deci- hypothesizing, testing, learning, and implementing in sion-making engine capable of overcoming traditional human continuous cycles” (King, 2021b). The power of this and organizational cognitive limitations and boundaries. More approach is multiplied when integrated with the AI fac- specifically, for newspapers, it is key to personalize the prod- tory, which, as an organizational and technological con- uct, enabling every reader to experience a unique version. This struct is part of a cross-industry shift where organizations helped solve a major problem of segmentation, which so- are increasingly built on software as opposed to humans called “market driven journalism” (cf. McManus, 1994, 2009) (cf. Iansiti & Lakhani, 2019). The AI factory exponen- did not solve. In this context, Picard (2017a, Loc. 2014–2018) tially extends the cognitive and learning capabilities of stated the following: “Because audiences are collections of humans and other organizational processes through individuals, it is impossible to assess what each wants,” which AI-driven algorithms for collecting, analyzing, and test- created journalism aiming to serve the “largest audience group ing huge amounts of behavioral and other data. As to the detriment of smaller groups.” Further, he noted that this examples, see NYT (https://www.nytimes.com/privacy/ approach had detrimental effects on the quality of newspapers cookie-policy#what-is-a-tracker) and Der Spiegel (https:// and contributed to their downfall. Here, the AI factory enables www.spiegel.de/how-we-deal-with-your-data) who make a solution by growing audiences through the addressing of their data harvesting policies transparent on their web- multiple overlapping microsegments that can be aggregated to sites. In the Readers First paradigm, mutual learning larger audiences while simultaneously precisely targeting between journalists and readers is increasingly mediated individuals. Through its cognitive capabilities, the AI factory through AI and machine learning. Figure 4 illustrates how allows for value propositions serving a unique product to the systemic combination of the human-driven agile every individual, thus creating a dynamic link between value design (red section) and software-driven learning of the proposition and operational model and consequently enabling AI factory (green section) drive perpetual innovation. rapid, continuous improvement of the former by facilitating Here, it can be seen that both rely heavily on data and use learning among journalists and readers that is mediated by AI raw (input—gray section) and second order data as inter- software. This allows newspapers to identify small segments preted by either machines or humans. that are still large enough to vindicate journalistic attention The AI factory is part of a “learning triangle” where jour- and thus, optimize editorial investments. nalists and readers interact while mediated by AI agents (Figure 5). This scales much better than traditional journalis- tic processes. Consequently, this also introduces a new set of Operational Model of the New Paradigm agents that populate organizational processes, creating The operating model defines the way a firm delivers value to hybrid human–machine combinations. Thus, the trend of their customers—that is, how they, in practical terms, as organizations being increasingly built using software and AI Bakke and Barland 11 Figure 4. The AI factory as a scaling tool enhancing learning by human driven design thinking and agile methodologies.* Figure 5. The AI-driven human-machine learning triangle. agents is likely to intensify (Brynjolfsson et al., 2018). The Cognitive Order and Strategy Alternatives in the field of AI and machine learning is expanding rapidly across Reader First Paradigm industries. If anything, its impact on journalism as a business When value propositions and operational models are trans- is likely to grow. For a better understanding of the technol- formed, it is to be expected that they are accompanied by ogy and its trajectory, see Taulli (2020). 12 SAGE Open changes in the cognitive order of news organizations and the business move to protect this growth potential. On the other institutional superstructure of journalism in which they are hand, NYT has recently experienced challenges to their tradi- embedded (Bjerke et al., 2019; Picard, 2017b). As noted, tional “objective” fact-based approach from a vocal internal those institutions were allowed to develop self-sufficient group of journalists demanding journalism based on “moral quality criteria that were partly insulated from readership clarity” and more journalism like the 1619 Project (NYT, preferences (Shirky, 2008). However, Pressman (2018, 2020) 2019), which has been heavily criticized by professional his- showed that when distribution volumes fell below critical torians for grave factual inaccuracies (Gurri, 2021; Magness, thresholds, newspapers were pressured to innovate and align 2020; Stephens, 2020). The NYT’s internal media critic, their value propositions with reader preferences, which indi- Smith (2021) indicated a possible move in a direction that is rectly reduced the impact of this institutional superstructure. “opposite of its stated broader strategy” and that it, for busi- However, within the Readers First paradigm, protection of ness reasons, may drift toward appealing to an attractive left- the institutional superstructure against market forces ist niche and produce more journalism like the 1619 Project. becomes disrupted, bringing journalism into continuous In this context, Pfister (2021) cited a former senior editor: interaction and dialog with readers. This is both a daily pro- “We cannot afford to give our readers the impression that cess and serves as aggregated input to analytical exercises NYT is going to be a leftist version of Fox” (our translation). aimed at adjusting editorial strategies and directing editorial Here, we are not judging whether NYT is actually going in investments. Senior Manager (PN) at Amedia stated that “we the direction Smith (2021) predicted or whether it would be made dashboards for every journalist, so they could monitor wise from a business perspective, instead we are using it as an reader responses to all their articles, number of readers, example of internal ideological power plays enforcing a responses to the content, etc. When they learn that ‘my arti- potentially hurtful business strategy. The point of these exam- cle generated twenty new subscriptions yesterday’, it is proof ples is given that the Reader First Paradigm is sensitive to that ‘I am making a difference’, which causes enduring reader preferences, there are segments requiring different behavioral changes.” Further, Amedia Publisher (GJ) noted journalistic value propositions to succeed, and commercial that “when I ask for a quantitative analysis of stories doing strategies, journalistic cultures, and internal power plays may well in terms of reader frequency, duration, ranking, etc., and affect value propositions and prioritized reader segments. stories not doing well on those metrics, I apply this to redi- Further, profitable journalistic value propositions appealing rect journalistic resources to topics and ways of framing that to social jobs, personal jobs, and ideology-driven niche seg- are evidently doing well.” ments may lead to recklessness when it comes to adherence to Over time, it is likely that journalism as a practice and facts, balance, and fairness, as the value created for their read- institution will be shaped and transformed by new reader- erships is peripherally related to functional jobs. centric value propositions and AI-based operational models. Here, the outcome in terms of journalistic culture and qual- The Viability Test of the Readers First Paradigm ity, is contingent on strategy choices driven by economic considerations constrained by the size and preferences of the By 2021, a growing number of newspapers adopted the new addressed market segments. paradigm, succeeding independently of segment, global, In this context, the Amedia case points to a culture of less national, local, general, or business news. Figure 6 lists some moralizing and less arrogance replaced by more humility in selected innovators. Those are no exceptions; publishers world- the selection of topics and storytelling accommodating read- wide gained 50% net digital subscribers in 2020, according to ership preferences as well as an increased emphasis on fair- the Piano benchmark of 320 media sites (Silberman, 2021). ness, balance, and inclusiveness in the journalistic strategy. Recent case studies show newcomers to the paradigm This is well tailored to smaller local markets, where huge succeeding rapidly, taking advantage of strategies and tools market shares are required to reach economies of scale developed by the innovators. Several are documented by (Bakke et al., 2020). INMA. For instance, The Telegraph, a British newspaper, Meanwhile, newspapers with a national or global reach adopted the Readers First strategy in 2018 to 2019 and almost have more options to balance the types of jobs they seek to doubled their subscriptions between January 2020 and undertake for their readership. WSJ, for instance, focuses on December 2021, from approximately 400,000 to 800,000 functional aspects, and its news operation enjoys the highest (Taylor, 2022). This indicates that the paradigm has matured credibility in the US market (WSJ, 2020b). However, it into an institutionalized stock of knowledge that is transfer- allows for more biased and less rigorous contributions in the rable to new organizations and capable of supporting signifi- Op-Ed section, apparently appealing to a segment of their cant improvements when skillfully implemented. center-right readership (Trachtenberg, 2020). Nevertheless, By January 2022, these developments caught the attention Latour (2021) estimated a US potential of about 10 million of the community of industrial analysts, when Mather new subscribers based on their facts-driven news operations. employed David Clinch to report on the reader revenue and Here, the news section’s strict organizational independence subscription focus now embraced globally by all types of from the Op-Ed section can be reasonably interpreted as a news media (Clinch, 2022). Bakke and Barland 13 Figure 6. Key figures of selected early readers first innovators. Figure 7. The readers first paradigm and its components. metering, and typically implies offering 1 to 5 free articles The Reader First Paradigm as a Coherent Whole per month. In this context, Seaman and Zohar (2021) reported As indicated above, the value proposition, operational model, that, on average, registered users enact 20 to 30 times more and cognitive order need to be coherently interwoven to be page views than non-registered users, and the likeliness of effective (Figure 7). More specifically, the value proposition conversion to a paying customer is 15 to 20 times higher than must deliver on jobs that readers are willing to pay for. that for non-registered users. The process is continuously Unless this condition is satisfied, paywalls are obviously algorithmically optimized and accompanied by a battery of useless. Within the Readers First Paradigm, paywalls are not KPIs. However, the measurement of clicks and viral reach is simple charging mechanisms; they are part of an elaborate a poor driver of conversion and retention. The WSJ group system of growing subscriptions through conversions and CEO illustrated the significance of this by warning that with- churn reduction. Conversions are achieved by building per- out the machinery of personalization, “great media brands sonalized profiles of visitors on their websites, social media, might not survive” (Tobitt, 2020). etc. before they become paying customers by tracking behav- Digital first is mostly understood as taking distributional ior, reading patterns, etc. Here, the key is offering a few free advantage of the growing market for 24/7 and 365-day digi- articles per month on the condition that users register using tal news, with the paper edition as a snapshotted second their name, email, and cell phone number. This is termed priority. Here, the Reader First Paradigm adds scalable 14 SAGE Open data-harvesting, personalization, and additive micro seg- Overall, these developments make continuous focus on mentation as well as agile continuous product development developing and refining the value proposition a key success and improvement through combining agile organizational factor, entailing a balancing act enshrined with dilemmas. processes and the AI factory. Thus, the AI Factory properly Chief editor (EEH) from Aftenposten illustrated this by stat- combined with agile design thinking offers newspapers an ing: “Relying 100% on automatic personalization is anti- innovation machine that supports improvements in all thetic to editorial driven quality journalism. Our job is also aspects of their offerings (Bakke et al., 2020). to challenge and widen readers’ horizons. We therefore By adapting the new paradigm, newspapers have a strate- combine automatic personalization based on user prefer- gic opportunity to become structurally and operationally mul- ences with push of material reflecting editorial strategy and tisided platforms that are more like Facebook, Google, etc. judgement.” From a business perspective, we note that this Here, the core interaction and value units determining the strategy relies on the assumption that there are sizeable character of the platform are pieces of journalistic work (arti- reader segments that appreciate being challenged. cles, videos), on top of which several new offerings can be built. Further, through the analytic capabilities of the AI fac- Overall Conclusions and Outlook tory, newspapers are put in a position to perform pull-facility- match operations that efficiently filter and match individual We predict that the Readers First Paradigm will continue to profiles with the various offerings on the platform (Choudary, spread, evolve, and improve and propose five preliminary 2015, pp. 121–136). The platform model may serve as an conclusions: innovation enabler through which newspapers continuously improve their core product and offer their own add-on prod- First, the Readers First paradigm seems adaptable to vir- ucts (reader communities, in-depth journalism for special tually all types of digitized newspapers and content in all market segments, etc.), in addition to offering a variety of kinds of format. third-party products, including engaging the readers as con- Second, the Readers First Paradigm offers an innovation tent producers—all of which are optimized for micro seg- platform for newspapers, which enables growth in both ments down to the individual. The most successful example depth (improved journalistic quality) and breadth (launch- of expanding a newspaper into a multisided digital platform is ing of several new products and services based on a plat- probably the NYT, which in the first 6 months of 2020 form model). reported 24.1 million USD as subscription revenue from Third, the Readers First Paradigm challenges the concept of stand-alone products that are vaguely but still related to jour- quality as historically developed by the institutions of jour- nalism such as cooking, games, and others (Perlberg, 2020). nalism, which is weakly linked to reader preferences. In this However, for newspapers fundamentally built on func- context, the Advertising First Paradigm allowed for stan- tional jobs and trust, additional products need to be carefully dards internal to the journalistic institutions, which were evaluated to ensure compatibility with their brand values influenced by enlightenment ideals that considered the read- (Bakke et al., 2020). ership in need of education and moral improvement. Moreover, the Readers First Paradigm is immersed in com- However, as the sole or main guide to quality, it may cause plex digital ecologies. Successful newspapers are likely to the downfall of those adhering to it. However, the Readers both protect their own data and business behind a walled gar- First paradigm productively engages with reader prefer- den, while simultaneously remaining deeply entangled with ences and behavior as sources of quality enhancement, the big platform players that serve as distribution partners and which enables product innovation similar to other competi- sources of new subscriptions (Myllylahti, 2020; van Dijck tive industries. et al., 2019). In this context, newspapers with significant Fourth, there is a sophisticated market for factual and revenues dependent on Facebook and Google are exposed to actionable knowledge to help readers navigate an envi- considerable risk, as minor changes in platform policy and ronment characterized by information overload and fake algorithms may have detrimental effects on their revenues. news that the Readers First Paradigm has the capacity to Amedia is aware of this and, consequently, factors in the risk address. However, when applied without the constraints and opportunities in their choice of strategy: “Facebook can- of core journalistic values of adherence to facts and fair- not be wished away . . . it is about optimization, utilizing ness, this paradigm is a powerful tool that may, by playing advantages and protecting against downsides” (Senior man- on emotions and tribal epistemologies, grow audiences ager, PN). Additionally, Facebook plays a key role in Amedia’s and revenue, even if the realm of the factual is ignored or ecology: “Measured against total traffic, Facebook is very obstructed. This option is available to newspapers along important in the routing of external traffic into our walled gar- the entire ideological spectrum. den” (PN). However, when platforms go in new directions, Fifth, while we expect further bankruptcies, many play- this may affect the strategic options available to the news ers still have significant growth potential, which is due to industry, like the new limitations put on tracking across web- the following but to varying extents: a fully digitized sites for Facebook and others, which may strengthen the value business model with zero marginal cost scales well, thus of the walled garden data of newspapers. opening growth opportunities in terms of geography and Bakke and Barland 15 segments not available in the paper era; the demand - Participation in two so-called master classes related to among elites for actionable knowledge from trusted strategies, tools, etc. for implementation of the Readers sources may grow; the new regulations hampering First paradigm (total of 18 hours) Facebook, Google, and others may be advantageous for - Participation in the 2021 and 2022 subscription sum- newspapers, as the value of their unique datasets may mits (total of 24 hours) increase; if polarization and culture wars increasingly - Participation in weekly organized 1-hour presenta- define the market, there will be profitable positions for tions related to the Readers First paradigm (9 hours) newspapers appealing to segments to the right and left - Full access to INMA’s news and essay archives with less emphasis on functional jobs. Declaration of Conflicting Interests However, we emphasize the tentative character of these The author(s) declared no potential conflicts of interest with respect takeaways. This is because the ecology of the digital atten- to the research, authorship, and/or publication of this article. tion economy, in which newspapers are inextricably inter- mingled, is changing dynamically with an unseen pace of Funding new innovations, consumers changing their preferences, The author(s) disclosed receipt of the following financial support and regulators trying to change the competitive playing for the research, authorship, and/or publication of this article: This field. study is funded by our institution, Kristiania University College. Ethics Statement Appendix 1 Nils Arne Bakke and Jens Barland confirm that all ethical guidelines that apply to interviews of sources and processing of data have been High Level Overview of Primary Data Referred to observed. The sources are resourceful top executives, and they have in the Paper all received written information about the project, about data process- ing, about the right to withdraw their statements, and they have The interviews in Amedia and Schibsted were taped and signed this information document. Other data is in publicly available stored according to GDPR and specific Norwegian laws and documents. The project’s data processing is registered with the regulations related to the storage of sensitive research data. “Norwegian center for research data” with reference number 289059. The interviewed sources (partly cited in the paper) are as follows: ORCID iDs Nils Arne Bakke https://orcid.org/0000-0003-1109-632X - EH, Group Editor, Schibsted Media Group Jens Barland https://orcid.org/0000-0003-4315-159X - PN, VP of Business Development, Amedia - EEH, former Publisher, Aftenposten (Schibsted- References owned national newspaper) 2020 Albarran, A. B., Mierzejewska, B. I., & Jung, J. (Eds.). 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Disruptive Innovations and Paradigm Shifts in Journalism as a Business: From Advertisers First to Readers First and Traditional Operational Models to the AI Factory

SAGE Open , Volume OnlineFirst: 1 – Apr 28, 2022

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References (145)

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SAGE
Copyright
© The Author(s) 2022
ISSN
2158-2440
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2158-2440
DOI
10.1177/21582440221094819
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Abstract

Since the early years of the 21st century, the newspaper industries of Western liberal democracies have been in a perpetual crisis caused by disruptive digital innovators outside the industry. Until recently, the industry and researchers have conveyed a predominantly pessimistic view of the future. This paper argues that after numerous unsuccessful innovations, the industry is now in the middle of a global paradigm shift with a huge impact on journalism as a business and showing a promising path forward. The new “Readers First Paradigm” is replacing “Advertisers First” The former constitutes a new way of doing business, consisting of two main changes: a revised value proposition focusing on reader preferences and subscriptions; a fully digitized operational model built around AI and machine learning. The article shows that until recently, the paradigm shift has been largely overlooked by researchers in the field. Further, a theoretical framework of industrial paradigm shifts is developed to describe and explain the new paradigm’s emergence and growth. Additionally, a generic “ideal-type” systemic description of the paradigm is provided, identifying the individual components and how they work together. Keywords journalism as a business, paradigm shift, business models, digital attention economy, readers first national, regional, local, and niche). However, here, the Introduction focus is on the striking similarities in both value propositions Since the turn of the century, the legacy newspaper industry and operational models across such differences. Based on has been in a perpetual crisis in Western liberal democracies. these changes, we suggest labeling this new paradigm the As a whole, it has shrunk around 25% to 50%—depending “Reader First Paradigm,” which is in the process of replacing on the country—in terms of circulation, revenue, and num- the “Advertiser First Paradigm.” Whereas advertising typi- ber of journalists. Further, both the industry itself and cally comprised 60% to 80% of income in the latter, those researchers have conveyed a predominantly pessimistic view figures are reversed by the former. At a high level, the Reader of the future. First Paradigm consists of a new system of two tightly inter- Here, “legacy newspapers” is used to mean traditional woven components, each being innovative in its own right, newspapers transforming their journalism, reach, and way of as follows: a new value proposition focusing on reader pref- doing business in the context of the digital attention econ- erences and a highly digitized operational model built on AI omy. This definition is similar to that of Nygren et al. (2018, and machine learning organized as an AI factory (Iansiti & p. 37). Further, fully digital and “adjacent” news organiza- Lakhani, 2019). However, at a granular level, this paradigm tions like Huffington Post, BuzzFeed, and even Substack are consists of a bundle of smaller innovations knit together as a considered to partly belong to this category, as they are spin- offs reminiscent of processes, personnel, and cultural out- looks stemming from the legacy players. Kristiania University College, Oslo, Norway This paper argues that the industry is in the middle of a Corresponding Author: paradigm shift that shows a promising path forward for leg- Jens Barland, Kristiania University College, PB 1190 Sentrum, Oslo 0107, acy newspapers. Moreover, differences exist between coun- Norway tries and newspapers targeting various segments (global, Email: jens.barland@kristiania.no Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open coherent systemic whole. The definition here of the Reader key objects of study—legacy newspapers and the industrial First Paradigm offers a more coherent and analytically well- ecologies in which they are embedded—imply complexities. defined systemic concept, than the terms “readers first,” Thus, this approach is advantageous as it allows for a variety “reader revenue model,” or “audience first” as applied inter- of sources to provide a more comprehensive understanding changeably by The International Media Association (INMA) on the object of study. The data here includes the following: and practitioners in the field (Piechota & Brock, 2019). (1) quantitative data related to the development of the indus- Additionally, this article stipulates the key components try; (2) quantitative data related to the case studies extracted and systemic aspects of the Readers First Paradigm. Further, from cost accounting and other reporting systems; (3) quali- we develop a framework for how those components come tative and quantitative data related to the case studies com- together and build a systemic whole. The systemic perspec- piled from internal and public documents, strategy papers, tive is supported by a theoretical approach merging perspec- yearly reports, company presentations, etc.; (4) qualitive data tives from innovation theory, recent works on business collected from speeches, workshops, and interviews with models and the digital attention economy, organizational key individuals; (5) secondary data as articles and studies theory, and design thinking. As organizations embedded in related to the organizations and the ecology studied. complex digital ecosystems are ontologically complex phe- The study builds on the premises of pragmatist epistemol- nomena, we believe this broad approach is required to under- ogy within the philosophy of science, as in its modern form stand larger, systemic shifts of a paradigmatic nature. In this expressed in the works of Rorty (1979, 1982, 1990) and rec- regard, the tendency of researchers to focus on narrow topics ognized as a unique foundational position in recent works on and research questions imbues the risk of not noticing such research design and research methodology relevant to man- systemic changes. This may explain why many researchers agement and media sciences (Creswell & Creswell, 2020). did not recognize the wider significance of innovations To select and prioritize case studies for this paper, we con- among early movers of the new paradigm for a long time. ducted a comparative quantitative industry analysis of the The arguments proceed in five steps. First, we lay out the legacy media industries of Norway and the US (Bakke et al., research strategy and the methodological and philosophical 2021). Here, we identified newspapers with huge growth foundations of the article. Second, we make a brief recapitu- since 2015-2020, despite the industry contracting substan- lation of how until recently, researchers in the field inter- tially and combined them with assessments by media execu- preted the trajectory of the industry, arguing that they mostly tives to make the final selection. missed the emergence of the new paradigm. Third, as the The empirical support for our findings is built on a combi- concept of paradigm shifts is elusive and often used as just a nation of primary and secondary data. The Norwegian pri- label for a bigger shift, we propose a generic analytical mary data consists of an extensive case study of the media framework of industrial paradigms, their key components, group Amedia, which owns 80 local legacy newspapers. and how they emerge and decline. Fourth, we consider the Here, data gathering in included internal and open-source emergence and development of the Readers First Paradigm. documents entailing both qualitative and quantitative data Finally, we combine the analytical framework and empirical and 15 hours of semi-structured interviews with strategically evidence to put together a coherent “ideal-type” description selected managers. Further, a broader perspective on the of the aforementioned paradigm. Norwegian context was provided by including primary data from the Schibsted Media Group, the largest media group in Norway, from which three highly ranked managers were Research Strategy interviewed for about 6 hours in total. Moreover, a combina- This article is part of an ongoing project initiated in 2019 that tion of primary and secondary data provides and enriches the explores changes in value propositions and business models data with a broader international context, thus exploring the among newspapers in Norway and internationally. The international origin and development of the observed changes. research strategy is built on three key principles: it is multi- Further, the Norwegian newspapers pointed to international disciplinary in perspective, has a mixed-method approach to case studies, gathered at the International News Media collection and analysis of empirical data, and is based on a Association (INMA) as sources of inspiration. Thus, for the pragmatist epistemology reflecting our position coming present study, we used INMA memberships over a period of mainly from the management sciences. 2 years, which gave access to 28 case studies and an extensive The multidisciplinary perspective is necessary given the range of workshops, plenary discussions, oral presentations, subject matter of value propositions and business models, as QA sessions, and slide sets involving editors and other senior those concepts relate to and build on a wide array of sub- managers from the industry. The membership also secured disciplines of management sciences. Here, the sub-fields access to INMA researchers, tech suppliers to the industry, implied by the nine-variable business canvas of Osterwalder like Piano, Viafoura, and others, and innovators outside the and Pigneur (2010) is an example. industry, like Netflix and Spotify. The audio-visual INMA The mixed-method approach is partly derivative of the material had a total duration of 51 hours. More specifically, multidisciplinary perspective but is also appropriate as the the INMA case studies covered newspapers across all Bakke and Barland 3 continents, including among others, the Financial Times (FT) This description fits well with the state of the industry in and The Guardian in the UK, Politiken and Jyllands-Posten in Western liberal democracies at the turn of the century (Bakke Denmark, Washington Post (WP), Wall Street Journal (WSJ), et al., 2021). However, this privileged position has not been and Boston Globe in the US, and Lensing Group in Germany. sustainable. Considering the emergence of the internet, The INMA case-studies and the role of INMA itself as an Picard (2003) predicted changes in reader and advertiser international organization for newspapers propagating and behavior “that challenge [newspapers] long-term survival” teaching key elements of the new paradigm underline the (p. 127). Here, due to the likely slow change in consumer global character of the paradigm shift. The material from behavior, he saw no potential for a short-term crisis. More INMA is best characterized as a mix of primary and second- specifically, upon analyzing threats related to digitization, ary data and entails both quantitative and qualitative data. In increased internet usage, mobile phones, etc., Picard (2003) the references, we have added Appendix 1 at the end to pro- predicted that “there will be no major shocks to their busi- vide an overview of the main sources that were referred to in ness models for a decade or more” (p. 133). While this pre- the Norwegian and INMA case studies. diction hit the mark, Picard was vague about what the These sources were supplemented by a wide range of required transformation would look like. open-source material from the industry like innovation A decade and a half later, researchers in the field struggled reports from WSJ and New York Times (NYT), material to see a successful path forward. Without a broader systemic from tech suppliers like Piano and extensive studies of rele- framework, a broad range of initiatives, like digitization, vant literature from the last 20 years. click-bait and viral reach, paywalls, data harvesting, sub- Here, it is important to stress that this rich database is scription initiatives, new product bundles, etc., were investi- addressed in accordance with the mixed-method approach and gated and mostly judged as failures. Here, the the principles of case study research. As a mixed-methods conceptualization of paywalls, metrics, and key performance approach, the study is positioned in the gray zone between an indicators (KPIs) serve as an illustration. In this context, exploratory and explanatory mixed-method sequential design Myllylahti (2014, p. 179) studied paywalls across several (Creswell & Creswell, 2020; Tashakkori & Johnson, 2020). legacy newspapers, found no consistent improvements, and The proposed coherent systemic description of the new concluded that “the revenue generated by paid online news paradigm, its components, and how it works as an “ideal content is not substantial enough to make paywalls a viable type” are built on the concept of analytical generalization business model.” Similarly, Carson (2015) was unable to dis- (Yin, 2017). cern consistent performance differences and rejected pay- The suggested “ideal type” description of the “readers first walls as a “solution.” However, she noted that the WSJ and paradigm” may be ascribed a similar epistemological status FT apply paywalls with success and, in our view, correctly for the legacy newspaper industry, as Womack et al. (2007) did identified the superior value of their content from the con- for “physical product” industries when synthesizing the bun- sumer perspective as the likely explanation. Nevertheless, dle of innovations in Japanese automotive industries under the she did not elaborate on possible wider implications. “lean production” systemic umbrella (which later spread glob- Meanwhile, Sjøvaag (2016, p. 14) found that most paywalled ally within automotive and other industries). content relates to some of the most resource-demanding journalistic areas that a newspaper covers—such as politics, social issues, economy, and culture—and saw paywalls as a A New Paradigm Emerges: Without mechanism for protecting editorial investments. This is remi- niscent of a monopolistic mindset, as it focuses on internal Being Suitably Recognized production costs rather than the demand side and reader pref- When newspapers started digital experimentation by pre- erences. Further, Myllylahti (2017b, p. 3) noted that legacy senting some news for free on the web in the 1990s, it was on news increasingly uses audience monitoring tools as part of the backbone of often quite profitable businesses, thriving as editorial decision-making. However, she predominantly local monopolies or oligopolies. The main source of revenue viewed this as a threat to the quality of journalism and not as was usually advertising, whereas subscription and single- an opportunity to enhance quality. Thus, implicitly convey- copy sales were seldom higher than 20% to 40%. In this con- ing the message of allowing reader preferences to exert text, the investor, Warren Buffet, made the following increased influence on journalistic value propositions will comments on the newspaper business: negatively impact the quality of journalism. Additionally, Myllylahti (2017a) also espoused a pessimistic view of jour- When Charlie and I were young, the newspaper business was as nalistic quality in relation to the impact of KPIs. The lack of easy a way to make huge returns as existed in America. As one conceptualizing metrics, KPIs, and paywalls within a sys- not-too-bright publisher famously said, “I owe my fortune to temic framework was still predominant in her latest sum- two great American institutions: monopoly and nepotism.” No mary on paywall research (Myllylahti, 2019). paper in a one-paper city, however bad the product or however Moreover, Anderson et al. (2012) recognized the crisis inept the management, could avoid gushing profits (Cunningham, 2013, p. 89). created by the emerging digital ecosystems in which 4 SAGE Open newspapers are embedded. From the premise that “good high-quality newspapers focusing on business news—to also journalism” was always subsidized, predominantly by adver- fail, as they did not address the weaknesses of journalism tising, they conveyed pessimism about the very possibility of rooted in the Advertising First Paradigm, which was ill served profitable quality newspapers. to deliver on “jobs” that readers were willing to pay for. In this context, Picard (2016) noted that in revenue terms, First movers started innovating as early as 2008 to 2009 the primary business of newspapers in the 20th century was (FT) and 2013 (Amedia), but wider diffusion of the new con- advertising and that newspapers have been unable to develop cepts took time. It is only in the last 1 to 3 years that we have journalism with a commercial value compensating for the seen many newspapers delivering impressive growth based loss of those revenues. Focusing on business models, Villi on the Readers First Paradigm. Moreover, the paradigm and Picard (2019) analyzed a range of innovation initiatives seems applicable across a wide range of newspapers—inter- and concluded that none delivered sufficient results in terms national, national, local, and with both a general focus and of customer and revenue growth. Thurman et al. (2019) more niche players like business newspapers. reflected the broader sentiment in this period with a contribu- These changes in the newspaper industry can be contextu- tion with the telling title “On digital distribution’s failure to alized into a larger cross-industry digital realignment where solve newspapers” existential crisis: symptoms, causes, con- industries that were previously highly analog and insulated sequences, and remedies’, which pessimistically concluded in nature have undergone digital transformations increas- that “newspapers’ online experiments have not reversed their ingly driven by AI and machine learning. This has led to falling fortunes.” A notable exception to this sentiment is broad convergences between industries operating within Schlesinger and Doyle (2015), to which we will revert later. shared digital ecologies, which are intermingled in complex Historically, when competitors challenged the Advertiser competitive and cooperative relations (Iansiti & Lakhani, First paradigm, newspapers innovated by redefining the 2019; McAfee & Brynjolfsson, 2017; Rogers, 2016). For “jobs to be done” (Christensen et al., 2016), thus making legacy newspapers, the larger attention economy, as defined their journalistic product more attractive. However, these by social media in particular, is not only a competitor. Here, innovations did not represent paradigm shifts as they aimed social media giants such as Facebook and Google are simul- to maintain the attractiveness of newspapers as marketplaces taneously important partners as sources of traffic generating for advertising and not in creating journalistic products that new subscriptions and revenue through cooperation agree- generate profits in their own right (Pressman, 2018, 2020). ments. This is a symbiotic relationship, as newspapers gener- However, with the advent of the digital attention economy— ate free content that boosts revenues for the aforementioned with Facebook and Google offering vastly superior platforms players (Cf. Myllylahti, 2020; Venkataraman, 2022). for advertising—the potential of the Advertising First Meanwhile, as a space where cultural and journalistic elites Paradigm dwindled. At this time, when the two-sided mar- communicate and debate, Twitter seems to play an important ketplaces of newspapers struggled, some innovators started role in forming epistemological and cultural biases that may to improve their journalistic products to make readers will- affect the value propositions of newspapers. Specifically, it ing to pay for them. This was enforced upon them as their possibly alienates them from broader parts of the readership protected environments were replaced by global ecosystems (Klein, 2021). To delineate the scope, in the following, we constituting a fully digitized competitive battlefield. More only cursorily discuss how those relations impact the Readers specifically, the innovators of the digital attention economy First Paradigm. offered the advertising-driven model of Google-Facebook- To achieve a better understanding of how the above Fogg and the subscription-driven model of Netflix-Fogg changes took place, we start by proposing a generic theoreti- (Bakke et al., 2020; Zuboff, 2019). Both operationally build cal framework of industrial paradigm shifts, which is also on analytics as well as AI and machine learning algorithms suitable to grasp the changes in the newspaper industry. informed by behavioral sciences (Fogg, 2003), offering pow- erful tools for the prediction and modification of consumer A Framework of Industrial Paradigms behavior. Innovative newspapers embracing the Readers First paradigm have adopted both versions to increase sub- There is a comprehensive tradition within media economics scription revenue (first priority) and defend smaller but still and management (cf. Albarran et al., 2018; Picard, 2017a), important advertising revenue (second priority). yet according to Storsul and Krumsvik (2013), until their On the other hand, several newspapers fighting to main- anthology was published, innovation did not play a major tain the Advertising First Paradigm opted for “click-bait” and role as a perspective within media studies. Storsul and viral strategies to generate traffic attractive to advertisers. Krumsvik (2013) requested more innovation media research Nevertheless, those attempts mostly failed, as they funda- be undertaken but recognized that apart from representing a mentally reproduced an outdated advertising first approach distinct set of industries, there was nothing inherently special by means of better technological tools (Wu, 2016). Further, about innovation in media. Moreover, innovation has been attempts to protect the journalistic product through paywalls studied from different perspectives, varying from philosophy and other innovations tended—with the exception of a few and history of science (Barnes, 1982; Kuhn, 1970; Nickles, Bakke and Barland 5 2003) to economics (Fagerberg et al., 2006; Nelson & Winter, confronted with disruptive innovations, many organiza- 1982; Schumpeter, 1934, 1950) and management sciences tions go out of business as their path dependencies are too (Bower & Christensen, 1995; Christensen et al., 2015, 2016, hard to overcome (Antonelli, 1997). In this context, the 2018; Francis & Bessant, 2005). Our framework merges market, competition, and disruptive innovations provide these perspectives, recognizing their joint conceptual dis- selection mechanisms, explaining why under certain eco- tinctions between incremental and radical innovations while logical conditions, some paradigms are viable, and others simultaneously taking advantage of how they enrich each are not (Baum & Rao, 2004; Lewin et al., 2004). other in other areas. Christensen’s definitions of “sustaining and disruptive The concept of paradigm shifts originates from Kuhn’s innovations,” originating within management sciences, are (1970) study of innovations in science, in which he stipulated built on key provisions of the Schumpeterian tradition, where two modes: “normal science” and “revolutionary science.” disruptive innovations from an innovative challenger may Long periods of conservative, tradition-bound normal science cause paradigmatic shifts within an industry. However, the are punctuated by occasional crises and revolutions. Normal origin of the disruption or the innovation it brings is often science extends and articulates the paradigm, but does not test found outside the industry itself. Pointing to a complex of it, as the paradigm defines the research tradition, shared cog- path dependencies incumbents suffer from “architectural nitive order, accepted tools, legitimate research questions, inertia” that gives disruptive attackers advantages, Christensen and practices of a discipline. Within normal science, a para- predicted that incumbents would struggle to adapt, thereby digm is a reproduced institutional order—including educa- becoming likely victims of negative selection. tional institutions, professional guilds, research journals, Combining these approaches, we propose a three-phase etc.—that productively adds to the growth of knowledge framework for industrial paradigm life cycles. First, in the through small steps. Confronted with a crisis where a growing emerging phase, innovations reap high returns. Second, in body of empirical and theoretical findings does not fit within the declining phase, returns are diminishing, enforcing a the paradigm and the marginal gain of each new finding is higher frequency of and investment in innovations to keep diminishing, a conservative hegemony may be challenged, growing. Third, in the crisis phase, return on innovations and transformative ideas and practices emerge as serious approximates zero, and businesses within the paradigm alternatives. Repeated failures of an established paradigm to experience significant losses. New paradigms are likeliest to handle a crisis, along with the emergence of a promising new emerge in what we call the “zone of increasing crises,” as approach, may trigger a revolution. During the final phase of illustrated in Figure 1. a revolution, practitioners advocating for a new paradigm The outlined innovation perspective serves as an over- succeed in replacing the old paradigm and its supporters, sub- arching reference for understanding the transformation of the sequently rewriting the history of the field to make their para- newspaper industry and fits well with the high-level devel- digm appear to be the only true alternative. opment observed since the early years of this century. In Similarly, the Schumpeterian tradition describes incre- 2010, Picard noted that “innovation efforts in news organiza- mental, gradual improvements adding to an existing order tions are at their highest levels ever but unfortunately spec- consisting of a complex of practices, organizational struc- tacularly unsuccessful in solving the fundamental problems tures, and technologies, which can be understood as a of the enterprise” (Picard, 2017b, Loc. 105). This picture is Kuhnian paradigm that is occasionally replaced by a radi- vivid in the NYT innovation report, which, in 2014, depicted cal innovation, which creatively destructs the old order and an enterprise investing more than ever in innovations, only to signals the emergence of a new paradigm. Here, Schumpeter see them brutally failing (New York Times [NYT], 2014). (1950) understood market-driven capitalism as a process of More specifically, the 2014 report illustrated the Advertising continuous change sometimes leading to “industrial muta- First paradigm in decline, where innovations delivered tion . . . that incessantly revolutionizes the economic struc- diminishing or negative returns, whereas the 2017 report ture from within . . . destroying the old one . . . creating a indicated that a paradigm shift was underway (NYT, 2017). new one” (p. 85). Core to this perspective is the concept of Picard (2018, p. 6) summarized important conditions for this selection of viable innovations within market-driven indus- shift “The market has shifted from oligopoly and monopoly trial ecologies. Nelson and Winter (1982) further developed tendencies to high competition for consumers time, attention the understanding of incremental improvements, emphasiz- and expenditures.” which led to numerous newspapers going ing their programmatic nature based on institutionalized out of business. practices imbued with tacit knowledge. They incorporated Moreover, to gain a deeper understanding of paradigm rationality and planning in the bounded version of March shifts, the conceptual framework needs to account for the and Simon (1993) and viewed businesses as entities that underlying mechanics and transformations of real organiza- operate in open environments but with strong limits on their tions in terms of their systemic properties, as defined by their abilities to fundamentally modify themselves and enact value propositions, operational models, and cognitive orders. change due to the conservational gravity of sunk-cost However, the characterization of a shift as paradigmatic is assets, existing operations, and cognitive orders. However, a judgment call, as new paradigms evolve over time and tend 6 SAGE Open Figure 1. Phases of paradigms and the crisis zone where a shift is likely to occur. to carry stocks of knowledge from the old paradigm while withstanding (i.e., growing or contracting) the selection redefining their meaning, recombining them, and merging pressures of its environment determines whether it is an them with new elements. To make this judgment transparent, emerging or declining paradigm. This analytical frame- we propose a set of criteria to be fulfilled for an innovation to work of paradigm shifts is summarized in Figure 2. be deemed paradigmatic. More specifically, we suggest add- In accordance with the innovation perspectives built on ing concepts from the business model frameworks of here, it can be expected that a paradigm shift within an indus- Osterwalder and Pigneur (2010, 2015), Bland and try and individual organizations takes time, as it is the accu- Osterwalder (2019), Iansiti and Lakhani (2019) jobs theory mulative and transformative systemic effects of a learning as outlined by Christensen et al. (2016) and design thinking process affecting the three dimensions in a way that passes and agile methods (Brown & Katz, 2019) to the merged the viability test. This is well illustrated by the leaked inter- innovation perspective outlined above. nal report on the digital transformation of WSJ, as even Building on and combining the approaches discussed though it is among the most successful examples within the above, we propose the definition of a paradigm shift in new paradigm, it still struggles with its old paper-based leg- business as a viable systemic change, transformatively acy operation and associated culture (Wall Street Journal affecting three main dimensions of the business: (1) the [WSJ], 2020a). A recent account of the change process in FT value proposition bundle and its gravitational profile; (2) by an internal change agent pictures a similarly discontinu- the operational model; and (3) the institutional and cogni- ous and bumpy transformation process (Jones, 2022). tive order of the business. A paradigm entails a particular Moreover, when a paradigm shift occurs, incumbents may configuration of these three dimensions. Since the object not recognize the systemic properties of the new paradigm of study is businesses, the change must produce outcomes and thus imitate individual aspects and make superficial superior in terms of competitiveness—which is measured adaptions in trying to emulate what they falsely believe is the by customer growth, customer satisfaction, revenue, and key concept of the challengers’ new successful approach profitability—as compared to the old paradigm by prov- (Womack et al., 2007). As a new paradigm entails the devel- ing fitter in surviving the selection pressures of the ecol- opment and adoption of a new cognitive order within the ogy in which it is embedded. We term this “the viability business—changing both the tacit and explicit assumptions test” of a paradigm. The likelihood of passing it is decided of the previous paradigm—the cognitive order might be part by the balance of forces between ecological pressure and of the architectural inertia that must be overcome. However, internal change abilities. In contrast to selection in a this cognitive order may be beneficial or obstructive in terms purely Darwinian sense, the ability to survive is thus con- of making the transformation into a new paradigm. Thus, tingent on the creative and transformative capabilities of value- and ideology-driven cognitive orders may trump organizations to enact successful innovations capable of rational business deliberations and cause businesses to cling Bakke and Barland 7 Figure 2. Framework for analysis of a business paradigm and relation to relevant theory. to a doomed paradigm or choose less-than-optimal ways for- FT digital transformation was already a success. Schlesinger ward from a viability perspective. and Doyle (2015) viewed this as the result of a premeditated In this context, it should be noted that it is to be expected management strategy. Furthermore, in January 2013, an that a new paradigm surviving the viability test takes a sig- email memo from Lionel Barber, editor of the FT, to his staff nificant amount of experimentation and trial and error before became public. The memo revealed a strategy “to reshape the a successful configuration emerges. Additionally, adaptions FT for the digital age” and called for a response to the disrup- and broader acceptance within an industry are likely to take tive effects of new entrants such as Google, LinkedIn, and time. Twitter: “. . . our competitors are harnessing technology to revolutionize the news business through aggregation, per- sonalization and social media. Mobile alone, for example, Early Instances and Subsequent accounts for 25 per cent of all the FT’s digital traffic” (Barber, Followers of the Readers First 2013; Giner, 2014). Public reports since 2013 show consis- Paradigm tent growth in digital subscriptions, which passed one mil- lion in 2019 (Mayhew, 2019), and increased profitability As we have not identified earlier cases, FT is likely among despite advertising trending downward. Proving sustainabil- the earliest innovators of the Readers First Paradigm. ity, the FT readership showed increased engagement mea- Through open sources and INMA material, we have recon- sured by frequency and duration of reading the digital structed key elements of the developmental history of FT. As edition, which now comprises about 90% of total subscrip- Amedia was an early follower, we also applied the material tions (De Bono, 2021). Since 2007, FT has gone from being gathered from our study of them. Further, Amedia senior largely a UK print outlet to a global digital product for busi- manager (PN) claimed that “In 2013, FT was the global inno- ness professionals and decision makers, with >80% of the vation leader and inspired us to adopt key features of their approach that was suitable to the local media market in readers being from outside the UK, according to the Global Norway.” Information about FT that gained public attention Capital Markets Survey 2020. in 2012 to 2013 largely confirms the Amedia assessment and Closer examination of the FT case supports the hypothe- fits our stipulated timeline of the innovation trajectory of the sis of a Schumpeterian creative destruction. A starting point new paradigm (Indvik, 2013). is the second paywall in 2007. As important as ensuring Additionally, Schlesinger and Doyle (2015) observed online subscription revenue was that the new paywall pro- major systemic changes in the FT value proposition and vided comprehensive electronic user data informing further operational model. Through a Schumpeterian lens, they product development. These data taught FT indispensable speculated that the time when it was written was the early lessons about how readers engage with their product, which days of a Schumpeterian creative destruction of legacy news- allowed them to develop their journalistic value proposition papers. Whereas digital income in 2000 was negligible, by with a keen awareness of user behavior and preferences. In 2012, with 316,000 digital subscriptions out of 602,000, the this context, an FT executive stated: 8 SAGE Open I can see through our analytics exactly what . . . people are described the decision to focus on subscriptions and readers doing on the site and am actually understanding their behavior first as “a lifesaving strategic move confronted with an exis- and their needs . . . and judge from their behavior as to which tential crisis.” Since then, as measured during 2015 to 2020, parts we can improve, and that leads to product innovation (cited the six newspapers in Norway with the highest growth in in Schlesinger & Doyle, 2015, p. 313). subscriptions and revenue are all from the Amedia Group (Bakke et al., 2021). Since 2015 to 16, numerous other news- Thus, user data from inside the paywall turned out to be papers have also made astonishing progress by emulating the “pure gold” from an advertiser’s point of view, according to approaches of FT and Amedia, Similarly, by embracing this Bob Grimshaw, managing director of FT.com and the archi- approach, INMA has become a key institution, giving the tect of the metered subscription model (Starkman, 2014). It paradigm momentum. Starting around 2020, on a weekly allowed FT to adopt the “Google model” for targeted adver- basis, INMA offers case studies, courses, and workshops tisements. This double value of the data harvested turned teaching key aspects of the Readers First paradigm. The case 2008 into the year when FT, as per Grimshaw, “really accel- studies cover all continents to consistently report on the high erated down” on the digital subscription model (Starkman, yearly growth in digital subscriptions, some of which are 2014). By 2021, FT confirmed that “AI and machine learn- well beyond 100%. INMA recommends the same approach ing become increasingly important . . . those tools open up a to advertising, as behind their walled gardens, newspapers lot of new opportunities” (De Bono, 2021). In this context, can offer highly attractive arenas for targeted advertising in the head of analytics at FT defined three phases on top of the environments with trusted brands, attractive demographics original concept, each of which added new innovations to and high conversion rates (Bakke et al., 2020). Additionally, their Reader First-strategy since 2014 (Seale, 2021): phase 2, in alliance with FT Strategies (The FT consulting arm) and the “quality era,” focused on improving quality for repeat Google, INMA has built a lab with the objective of optimiz- visitors through personification and recruiting subscribers ing strategies, methods, and tools for the legacy newspaper among them; phase 3, the “engagement era” built on the industry with the aim of increasing subscriptions (King, “Recency, Frequency, Volume” concept to increase the use 2021a). In 2020, FT Consulting supported 71 newspapers in of their product; and most lately, phase 4, the “Life Time their endeavors to implement Readers First strategies (De Value” era, which enabled FT to virtually eliminate churn Bono, 2021). Further, FT consulting describes the transfor- with a net retention of approximately 110% as the revenue mation as comprehensive, implying substantial changes in from existing customers has been increasing year-on-year the three dimensions of our paradigm framework (Harding & (De Bono, 2021). Eisenband, 2021). The Amedia case mirrors FT. First, the journalistic prod- Moreover, upon assessing the empirical material, we pro- uct was improved through data harvesting and analytics and pose in Figure 3 a condensed, high-level description of the eventually through AI and machine learning, both of which timeline, the main phases, and key developments of the secured growth in digital subscriptions. Next, the same tools “Readers First Paradigm.” were applied to a targeted advertising operation. In Amedia, this, along with other innovations, led to new priorities in terms of topics to cover and writing stories in alignment with Key Properties and the Systemic user preferences, which enabled the prediction of the number Character of the Readers First of readers per article, reading duration per subscriber, and the Paradigm number of new subscribers elicited as a direct result of an Applying the analytical framework proposed above, this sec- article. tion elaborates on the key components and systemic proper- The first priority of both FT and Amedia is developing ties of the Reader First Paradigm. journalism as a business, with advertising and other products as the second. Regarding advertising, in 2012, FT concluded the following: Value Proposition Bundle and Gravitational Profile of the Readers First Paradigm . . . [advertising is] increasingly subject to competition because of the movement of revenues from print to digital and the strong The idea of systematically developing the value proposition position in the digital space of players such as Google, Apple, of a business can be traced back to the ontological analysis and Amazon. The ambition is to drive up subscription or by Osterwalder (2004), and the succinct observation by Peter “content revenues” so that in the next few years these become Drucker that “the customer rarely buys what the company the main basis of the enterprise’s revenues (Schlesinger & thinks it’s selling him,” which is arguably the starting point Doyle, 2015, p. 311). of Christensen’s “jobs theory” (McGrath, 2017). In recent years, the value proposition concept and associated tool- Amedia came to the same conclusion in 2013 to 14, when boxes have been elevated to a strategic approach across their click-bait and viral reach initiative Buzzit failed to pro- industries (McGrath, 2017; Ulwick, 2017). tect advertising revenue. Senior manager (PN) in Amedia Bakke and Barland 9 Figure 3. Phases in the evolving of the readers first paradigm. More specifically, a value proposition consists of the jobs Pressman (2020), and the interviewees in this study. In the that a product or service aims to support through the related past, newspapers were forced to innovate and improve their customer segments (Osterwalder & Pigneur, 2015). The spe- products from the readers’ point of view whenever reduced cific product or service needs to address pains and possible circulation threatened advertising revenue. Here, Pressman bad outcomes related to those jobs as well as the positive (2018) noted that journalistic ideals of being fact-based, fair, outcomes/gains that they may deliver to specific customer and striving for objectivity in the American press evolved as segments. a commercial response to crises in circulation: Any newspaper may offer a combination of value propo- sitions tailored to different markets, segments, and individu- Although some people think objectivity is the press’ natural als. Therefore, it is important to understand the bundle of mode, for most of American history, newspapers were proudly value propositions and their individual items’ relative impor- partisan. Not until the 1920s did objectivity catch on as a professional ideal. A wave of newspapers mergers and closings tance, which we will term its gravitational profile. [. . .] and the surviving papers had to appeal to a broader swath The key value proposition questions answered differently of the public. Overt partisanship in the news pages would as per the new paradigm are as follows: (1) What is the most alienate large parts of the target audience. important customer segment for the organization? (2) What job is your product undertaking for that segment? Briefly Similarly, journalistic innovations during the 1960s to stated, the answer for question (1) is a shift from advertisers 80s, such as deep diving, critical and opined journalism, (old paradigm) being the most important customer segment and broader coverage of soft topics, are answers to compe- to readers (new paradigm). For question (2), in the old para- tition from TV, which made newspapers inferior in areas digm, the most important job is to provide advertisers with where they used to enjoy semi-monopoly (Pressman, 2020). an attractive marketplace, whereas the role of journalism is However, whereas those innovations aimed to preserve the mainly a supportive function delivering that marketplace. In Advertising First Paradigm, the innovations of the Readers the new paradigm, the primary job is to deliver journalistic First Paradigm represent a disruption. value that the readership is willing to pay for, whereas adver- Osterwalder and Pigneur (2015, p. 12) distinguished three tising remains an add-on and secondary source of revenue. types of jobs that are relevant to the value proposition of Historically, newspapers, with few exceptions, have newspapers. First, “functional jobs” relate to specific problem offered two-sided marketplaces, where the key to success tasks to be solved. Here, newspapers may deliver a broad was mutually reinforcing network effects. However, jour- array of actionable knowledge relevant to functional jobs nalistic quality, as experienced by the readership, was not important to their readership. Second, they perform “social totally insignificant; it had to achieve sufficient circulation jobs,” where the choice of newspaper contributes to social to be an attractive platform for advertising. Thus, in condi- status, belonging, identity, and readers’ cultural capital. tions of monopoly or semi-monopoly, demands placed on Finally, they also perform “personal jobs,” where newspapers journalistic quality, humility, and receptiveness toward user may create emotional value for their readership. In this preferences were modest, according to Picard (2017b), 10 SAGE Open context, the polarized climate of the US and several Western defined by business process, technologies, skill sets, and countries indicates a viable commercial space for newspapers organizational set-up, deliver their value proposition to their appealing to emotions rather than fact-based, actionable customers. knowledge. While the new paradigm gravitates to be more Traditionally, journalism has been an endeavor with sensitive and deferring toward readership preferences, news- humans as the key productive resource that selects the topics, papers have a business choice concerning the segments being conducts research, and frames the narratives by means of focused on and the preferences being prioritized. Further, suc- professional expertise. However, as humans scale poorly cessful newspapers may balance jobs differently depending both in handling large data volumes and broad scales of com- on the segments being targeted. As a recent example, the pub- petencies, the digital attention economy represents major lisher of WSJ indicated a keen awareness of the aforemen- challenges to this “old” model. tioned types of jobs for his newspaper (Latour, 2021; Watford, News media face pressure to build organizational and 2021), with the priority being functional jobs to emphasize cognitive capacities that can process exponentially grow- facts, truth, and trust and deliver actionable knowledge for ing quantities of information within continuous news business as key parts of the value proposition. Nevertheless, cycles. The responses among early innovators combined WSJ also focuses on social jobs by building communities for agile design thinking and the AI factory. Agile design CEOs, CTOs, etc., and ensuring that it enhances the cultural thinking relies heavily on insights into limits on human capital of its readership, while also focusing on undertaking rationality, focusing on continuous learning through personal jobs for each reader through personalization and experimentation in short cycle times (Brown & Katz, insight into particular personal needs. 2019; Harvard Business Review, 2020; Kahneman, 2011; The full power of the value proposition of the Reader First Simon, 1971; The Agile Manifesto, 2001). It is a human- Paradigm is dependent on the AI factory, which is the core of driven concept combining key elements of the philosophy its operational model. The term was introduced by Iansiti and of the Toyota Production System and modern approaches Lakhani (2019, Loc. 940) as a scalable technological and orga- to the development of software. Through this approach, nizational mechanism that “reinvents the core of the modern rapid learning is, as the WP described it, “achieved by firm.” Further, the AI factory enables an organizational deci- hypothesizing, testing, learning, and implementing in sion-making engine capable of overcoming traditional human continuous cycles” (King, 2021b). The power of this and organizational cognitive limitations and boundaries. More approach is multiplied when integrated with the AI fac- specifically, for newspapers, it is key to personalize the prod- tory, which, as an organizational and technological con- uct, enabling every reader to experience a unique version. This struct is part of a cross-industry shift where organizations helped solve a major problem of segmentation, which so- are increasingly built on software as opposed to humans called “market driven journalism” (cf. McManus, 1994, 2009) (cf. Iansiti & Lakhani, 2019). The AI factory exponen- did not solve. In this context, Picard (2017a, Loc. 2014–2018) tially extends the cognitive and learning capabilities of stated the following: “Because audiences are collections of humans and other organizational processes through individuals, it is impossible to assess what each wants,” which AI-driven algorithms for collecting, analyzing, and test- created journalism aiming to serve the “largest audience group ing huge amounts of behavioral and other data. As to the detriment of smaller groups.” Further, he noted that this examples, see NYT (https://www.nytimes.com/privacy/ approach had detrimental effects on the quality of newspapers cookie-policy#what-is-a-tracker) and Der Spiegel (https:// and contributed to their downfall. Here, the AI factory enables www.spiegel.de/how-we-deal-with-your-data) who make a solution by growing audiences through the addressing of their data harvesting policies transparent on their web- multiple overlapping microsegments that can be aggregated to sites. In the Readers First paradigm, mutual learning larger audiences while simultaneously precisely targeting between journalists and readers is increasingly mediated individuals. Through its cognitive capabilities, the AI factory through AI and machine learning. Figure 4 illustrates how allows for value propositions serving a unique product to the systemic combination of the human-driven agile every individual, thus creating a dynamic link between value design (red section) and software-driven learning of the proposition and operational model and consequently enabling AI factory (green section) drive perpetual innovation. rapid, continuous improvement of the former by facilitating Here, it can be seen that both rely heavily on data and use learning among journalists and readers that is mediated by AI raw (input—gray section) and second order data as inter- software. This allows newspapers to identify small segments preted by either machines or humans. that are still large enough to vindicate journalistic attention The AI factory is part of a “learning triangle” where jour- and thus, optimize editorial investments. nalists and readers interact while mediated by AI agents (Figure 5). This scales much better than traditional journalis- tic processes. Consequently, this also introduces a new set of Operational Model of the New Paradigm agents that populate organizational processes, creating The operating model defines the way a firm delivers value to hybrid human–machine combinations. Thus, the trend of their customers—that is, how they, in practical terms, as organizations being increasingly built using software and AI Bakke and Barland 11 Figure 4. The AI factory as a scaling tool enhancing learning by human driven design thinking and agile methodologies.* Figure 5. The AI-driven human-machine learning triangle. agents is likely to intensify (Brynjolfsson et al., 2018). The Cognitive Order and Strategy Alternatives in the field of AI and machine learning is expanding rapidly across Reader First Paradigm industries. If anything, its impact on journalism as a business When value propositions and operational models are trans- is likely to grow. For a better understanding of the technol- formed, it is to be expected that they are accompanied by ogy and its trajectory, see Taulli (2020). 12 SAGE Open changes in the cognitive order of news organizations and the business move to protect this growth potential. On the other institutional superstructure of journalism in which they are hand, NYT has recently experienced challenges to their tradi- embedded (Bjerke et al., 2019; Picard, 2017b). As noted, tional “objective” fact-based approach from a vocal internal those institutions were allowed to develop self-sufficient group of journalists demanding journalism based on “moral quality criteria that were partly insulated from readership clarity” and more journalism like the 1619 Project (NYT, preferences (Shirky, 2008). However, Pressman (2018, 2020) 2019), which has been heavily criticized by professional his- showed that when distribution volumes fell below critical torians for grave factual inaccuracies (Gurri, 2021; Magness, thresholds, newspapers were pressured to innovate and align 2020; Stephens, 2020). The NYT’s internal media critic, their value propositions with reader preferences, which indi- Smith (2021) indicated a possible move in a direction that is rectly reduced the impact of this institutional superstructure. “opposite of its stated broader strategy” and that it, for busi- However, within the Readers First paradigm, protection of ness reasons, may drift toward appealing to an attractive left- the institutional superstructure against market forces ist niche and produce more journalism like the 1619 Project. becomes disrupted, bringing journalism into continuous In this context, Pfister (2021) cited a former senior editor: interaction and dialog with readers. This is both a daily pro- “We cannot afford to give our readers the impression that cess and serves as aggregated input to analytical exercises NYT is going to be a leftist version of Fox” (our translation). aimed at adjusting editorial strategies and directing editorial Here, we are not judging whether NYT is actually going in investments. Senior Manager (PN) at Amedia stated that “we the direction Smith (2021) predicted or whether it would be made dashboards for every journalist, so they could monitor wise from a business perspective, instead we are using it as an reader responses to all their articles, number of readers, example of internal ideological power plays enforcing a responses to the content, etc. When they learn that ‘my arti- potentially hurtful business strategy. The point of these exam- cle generated twenty new subscriptions yesterday’, it is proof ples is given that the Reader First Paradigm is sensitive to that ‘I am making a difference’, which causes enduring reader preferences, there are segments requiring different behavioral changes.” Further, Amedia Publisher (GJ) noted journalistic value propositions to succeed, and commercial that “when I ask for a quantitative analysis of stories doing strategies, journalistic cultures, and internal power plays may well in terms of reader frequency, duration, ranking, etc., and affect value propositions and prioritized reader segments. stories not doing well on those metrics, I apply this to redi- Further, profitable journalistic value propositions appealing rect journalistic resources to topics and ways of framing that to social jobs, personal jobs, and ideology-driven niche seg- are evidently doing well.” ments may lead to recklessness when it comes to adherence to Over time, it is likely that journalism as a practice and facts, balance, and fairness, as the value created for their read- institution will be shaped and transformed by new reader- erships is peripherally related to functional jobs. centric value propositions and AI-based operational models. Here, the outcome in terms of journalistic culture and qual- The Viability Test of the Readers First Paradigm ity, is contingent on strategy choices driven by economic considerations constrained by the size and preferences of the By 2021, a growing number of newspapers adopted the new addressed market segments. paradigm, succeeding independently of segment, global, In this context, the Amedia case points to a culture of less national, local, general, or business news. Figure 6 lists some moralizing and less arrogance replaced by more humility in selected innovators. Those are no exceptions; publishers world- the selection of topics and storytelling accommodating read- wide gained 50% net digital subscribers in 2020, according to ership preferences as well as an increased emphasis on fair- the Piano benchmark of 320 media sites (Silberman, 2021). ness, balance, and inclusiveness in the journalistic strategy. Recent case studies show newcomers to the paradigm This is well tailored to smaller local markets, where huge succeeding rapidly, taking advantage of strategies and tools market shares are required to reach economies of scale developed by the innovators. Several are documented by (Bakke et al., 2020). INMA. For instance, The Telegraph, a British newspaper, Meanwhile, newspapers with a national or global reach adopted the Readers First strategy in 2018 to 2019 and almost have more options to balance the types of jobs they seek to doubled their subscriptions between January 2020 and undertake for their readership. WSJ, for instance, focuses on December 2021, from approximately 400,000 to 800,000 functional aspects, and its news operation enjoys the highest (Taylor, 2022). This indicates that the paradigm has matured credibility in the US market (WSJ, 2020b). However, it into an institutionalized stock of knowledge that is transfer- allows for more biased and less rigorous contributions in the rable to new organizations and capable of supporting signifi- Op-Ed section, apparently appealing to a segment of their cant improvements when skillfully implemented. center-right readership (Trachtenberg, 2020). Nevertheless, By January 2022, these developments caught the attention Latour (2021) estimated a US potential of about 10 million of the community of industrial analysts, when Mather new subscribers based on their facts-driven news operations. employed David Clinch to report on the reader revenue and Here, the news section’s strict organizational independence subscription focus now embraced globally by all types of from the Op-Ed section can be reasonably interpreted as a news media (Clinch, 2022). Bakke and Barland 13 Figure 6. Key figures of selected early readers first innovators. Figure 7. The readers first paradigm and its components. metering, and typically implies offering 1 to 5 free articles The Reader First Paradigm as a Coherent Whole per month. In this context, Seaman and Zohar (2021) reported As indicated above, the value proposition, operational model, that, on average, registered users enact 20 to 30 times more and cognitive order need to be coherently interwoven to be page views than non-registered users, and the likeliness of effective (Figure 7). More specifically, the value proposition conversion to a paying customer is 15 to 20 times higher than must deliver on jobs that readers are willing to pay for. that for non-registered users. The process is continuously Unless this condition is satisfied, paywalls are obviously algorithmically optimized and accompanied by a battery of useless. Within the Readers First Paradigm, paywalls are not KPIs. However, the measurement of clicks and viral reach is simple charging mechanisms; they are part of an elaborate a poor driver of conversion and retention. The WSJ group system of growing subscriptions through conversions and CEO illustrated the significance of this by warning that with- churn reduction. Conversions are achieved by building per- out the machinery of personalization, “great media brands sonalized profiles of visitors on their websites, social media, might not survive” (Tobitt, 2020). etc. before they become paying customers by tracking behav- Digital first is mostly understood as taking distributional ior, reading patterns, etc. Here, the key is offering a few free advantage of the growing market for 24/7 and 365-day digi- articles per month on the condition that users register using tal news, with the paper edition as a snapshotted second their name, email, and cell phone number. This is termed priority. Here, the Reader First Paradigm adds scalable 14 SAGE Open data-harvesting, personalization, and additive micro seg- Overall, these developments make continuous focus on mentation as well as agile continuous product development developing and refining the value proposition a key success and improvement through combining agile organizational factor, entailing a balancing act enshrined with dilemmas. processes and the AI factory. Thus, the AI Factory properly Chief editor (EEH) from Aftenposten illustrated this by stat- combined with agile design thinking offers newspapers an ing: “Relying 100% on automatic personalization is anti- innovation machine that supports improvements in all thetic to editorial driven quality journalism. Our job is also aspects of their offerings (Bakke et al., 2020). to challenge and widen readers’ horizons. We therefore By adapting the new paradigm, newspapers have a strate- combine automatic personalization based on user prefer- gic opportunity to become structurally and operationally mul- ences with push of material reflecting editorial strategy and tisided platforms that are more like Facebook, Google, etc. judgement.” From a business perspective, we note that this Here, the core interaction and value units determining the strategy relies on the assumption that there are sizeable character of the platform are pieces of journalistic work (arti- reader segments that appreciate being challenged. cles, videos), on top of which several new offerings can be built. Further, through the analytic capabilities of the AI fac- Overall Conclusions and Outlook tory, newspapers are put in a position to perform pull-facility- match operations that efficiently filter and match individual We predict that the Readers First Paradigm will continue to profiles with the various offerings on the platform (Choudary, spread, evolve, and improve and propose five preliminary 2015, pp. 121–136). The platform model may serve as an conclusions: innovation enabler through which newspapers continuously improve their core product and offer their own add-on prod- First, the Readers First paradigm seems adaptable to vir- ucts (reader communities, in-depth journalism for special tually all types of digitized newspapers and content in all market segments, etc.), in addition to offering a variety of kinds of format. third-party products, including engaging the readers as con- Second, the Readers First Paradigm offers an innovation tent producers—all of which are optimized for micro seg- platform for newspapers, which enables growth in both ments down to the individual. The most successful example depth (improved journalistic quality) and breadth (launch- of expanding a newspaper into a multisided digital platform is ing of several new products and services based on a plat- probably the NYT, which in the first 6 months of 2020 form model). reported 24.1 million USD as subscription revenue from Third, the Readers First Paradigm challenges the concept of stand-alone products that are vaguely but still related to jour- quality as historically developed by the institutions of jour- nalism such as cooking, games, and others (Perlberg, 2020). nalism, which is weakly linked to reader preferences. In this However, for newspapers fundamentally built on func- context, the Advertising First Paradigm allowed for stan- tional jobs and trust, additional products need to be carefully dards internal to the journalistic institutions, which were evaluated to ensure compatibility with their brand values influenced by enlightenment ideals that considered the read- (Bakke et al., 2020). ership in need of education and moral improvement. Moreover, the Readers First Paradigm is immersed in com- However, as the sole or main guide to quality, it may cause plex digital ecologies. Successful newspapers are likely to the downfall of those adhering to it. However, the Readers both protect their own data and business behind a walled gar- First paradigm productively engages with reader prefer- den, while simultaneously remaining deeply entangled with ences and behavior as sources of quality enhancement, the big platform players that serve as distribution partners and which enables product innovation similar to other competi- sources of new subscriptions (Myllylahti, 2020; van Dijck tive industries. et al., 2019). In this context, newspapers with significant Fourth, there is a sophisticated market for factual and revenues dependent on Facebook and Google are exposed to actionable knowledge to help readers navigate an envi- considerable risk, as minor changes in platform policy and ronment characterized by information overload and fake algorithms may have detrimental effects on their revenues. news that the Readers First Paradigm has the capacity to Amedia is aware of this and, consequently, factors in the risk address. However, when applied without the constraints and opportunities in their choice of strategy: “Facebook can- of core journalistic values of adherence to facts and fair- not be wished away . . . it is about optimization, utilizing ness, this paradigm is a powerful tool that may, by playing advantages and protecting against downsides” (Senior man- on emotions and tribal epistemologies, grow audiences ager, PN). Additionally, Facebook plays a key role in Amedia’s and revenue, even if the realm of the factual is ignored or ecology: “Measured against total traffic, Facebook is very obstructed. This option is available to newspapers along important in the routing of external traffic into our walled gar- the entire ideological spectrum. den” (PN). However, when platforms go in new directions, Fifth, while we expect further bankruptcies, many play- this may affect the strategic options available to the news ers still have significant growth potential, which is due to industry, like the new limitations put on tracking across web- the following but to varying extents: a fully digitized sites for Facebook and others, which may strengthen the value business model with zero marginal cost scales well, thus of the walled garden data of newspapers. opening growth opportunities in terms of geography and Bakke and Barland 15 segments not available in the paper era; the demand - Participation in two so-called master classes related to among elites for actionable knowledge from trusted strategies, tools, etc. for implementation of the Readers sources may grow; the new regulations hampering First paradigm (total of 18 hours) Facebook, Google, and others may be advantageous for - Participation in the 2021 and 2022 subscription sum- newspapers, as the value of their unique datasets may mits (total of 24 hours) increase; if polarization and culture wars increasingly - Participation in weekly organized 1-hour presenta- define the market, there will be profitable positions for tions related to the Readers First paradigm (9 hours) newspapers appealing to segments to the right and left - Full access to INMA’s news and essay archives with less emphasis on functional jobs. Declaration of Conflicting Interests However, we emphasize the tentative character of these The author(s) declared no potential conflicts of interest with respect takeaways. This is because the ecology of the digital atten- to the research, authorship, and/or publication of this article. tion economy, in which newspapers are inextricably inter- mingled, is changing dynamically with an unseen pace of Funding new innovations, consumers changing their preferences, The author(s) disclosed receipt of the following financial support and regulators trying to change the competitive playing for the research, authorship, and/or publication of this article: This field. study is funded by our institution, Kristiania University College. Ethics Statement Appendix 1 Nils Arne Bakke and Jens Barland confirm that all ethical guidelines that apply to interviews of sources and processing of data have been High Level Overview of Primary Data Referred to observed. The sources are resourceful top executives, and they have in the Paper all received written information about the project, about data process- ing, about the right to withdraw their statements, and they have The interviews in Amedia and Schibsted were taped and signed this information document. Other data is in publicly available stored according to GDPR and specific Norwegian laws and documents. The project’s data processing is registered with the regulations related to the storage of sensitive research data. “Norwegian center for research data” with reference number 289059. The interviewed sources (partly cited in the paper) are as follows: ORCID iDs Nils Arne Bakke https://orcid.org/0000-0003-1109-632X - EH, Group Editor, Schibsted Media Group Jens Barland https://orcid.org/0000-0003-4315-159X - PN, VP of Business Development, Amedia - EEH, former Publisher, Aftenposten (Schibsted- References owned national newspaper) 2020 Albarran, A. B., Mierzejewska, B. I., & Jung, J. (Eds.). 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Journal

SAGE OpenSAGE

Published: Apr 28, 2022

Keywords: journalism as a business; paradigm shift; business models; digital attention economy; readers first

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