Notes of the Newsroom Cafes Presentiation at RJI March 16, 2010
Here is a rough transcription by Bill Densmore of the "Newsroom Cafe" presentation at the Center for Digital Globe symposium on March 16, 2010 at the Donald W. Reynolds Journalism Institute, Missouri School of Journalism, Columbia, Mo.
MICHAEL SKOLER: There was a joke circulating on the Internet not long ago circulating, it went something like this: “What do you call an unemployed journalist: A barista!” We’re actually taking that we’re combining the role of barista and journalist in a new concept called Newsroom Café. And we’re going to share in a variety of ways what our basic value proposition is. But fundamentally, this is about building a community around news, around the folks that already go to coffee shops who want a little more than high-priced coffee. And I’m going to introduce David Cohn who is going to talk a little bit about the idea.
DAVID COHN: What we’re trying to do is take coffee shops where now you sit at a computer and you stare and you are alone and isolated and bring back a little bit of community so the idea is building a young community of people who care about their community and the world. I grew up on Cheers, everybody knowsthe name? We’re bringing a sense where people will come for the coffee, but will stay for the atmosphere, the vibe the community of people, a sense of shared values. Maybe it’s because there is an interesting discussion going on that day that they know about or they just follow the blogs of the baristas . . . you can look at what Starbucks did, but we’re taking it one step further by really adding a sense of world value judgement, this is a community of people that want to be engaged in their local communities.
MARIA: Our target consumer, since we are a small company, according to market research, is between the ages of 18 and 34. They are composed of intellectuals, creatives, those that are inspired by political issues and those who are not afraid to speak out and create a platform where their voices can be heard. If you look around the room, the majority of that target community niche is you, so in that special shop it will serve as a public sphere, like the old European tea salons where we can all engage in conversation in a very healthy debate about topics from climate issues, political issues, social issues. So the target market would consist of many of you, university students, liberals, yuppies, creatives, those socially and consciously aware of issues that you want to address openly.
And our value proposition feeds on consumer passion. This is what you are passionate about, yoru goals and issues that you want to open up a platform for. And it’s basically bringing the online audience offline, allowing those who actively blog to actively speak out face to face. So the value statement is we value creativity in public opinion and support those who take the lead, rather than follow from behind. And our mission statement is to engage community in a very healthy and public debate on current issues and to bridge the gap between the news producer and the news consumer.
So great tagline: “An open space for an open conversation.” For those that enjoys brands such as this one, which will extend brand into the valley of the smart, creative, tech savvy, people who enjoy challenges and who like to (unintelligible) and open-minded.
SKOLER: So, we’re talking about a fairly large market. In fact, the major users of coffee houses and doughnut shops are 18-34 year olds. Total market is $13 billion. It took a slight hit – one percent decline this past year. It’s expecting to rise almost four percent next year, so it’s still growing. The 18-34-year olds now make up 32 percent of the population – 72 million people – and our target audience.
So we’re going to go for some venture-capital money; we’re going to scout out some locations. The interesting thing about this is we’re actually going to create some bricks and mortar. Online social communities are doing brilliantly but has been a hunger actually for turning that into bricks and mortar and we’re going to start that. The beauty of this is we don’t need a lot of venture capital, because the average coffee house at this point on average makes a 19-percent profit margin. So, its already an attractive business and as we’re going to be getting to in a minute, we’re going to be franchising this. If any of you have studied business models of Jiffy Lube and others, there’s huge, huge money in franchising, when you’ve got a good business model for an individual who wants to run one of those things. And you provide certain guidelines.
Once we’ve got our first shop we’re going to schedule programs and everything and that will include digital cameras, photo workshops to discussions around specific news events to other ideas, through even collectively watching the Daily Show and laughing together. And we’ll do this kind of every hour so you’ll always know that at a particular hour you can go down to the coffee shop and meet someone like you and do something you want to do. And it’s happening all the time, schedules going on all the time so you can dip in and out as you go and get your coffee, for 15 or 30 minutes or whatever.
We’ll run the program schedule for six months, we’ll figure out what’s working, we’ll make any adjustments we need to open our second location and once we’ve meet the expected revenue goals we’re off and running starting these franchises all over the place and not just one in a city, but the average number of coffee shops per 100,000 people is about three. So in the small town you could have at least two or three coffee shops and in large areas you can have them all throughout the neighborhoods.
We expect that franchising is going to provide – for Starbucks, franchising is eight percent of its money, it owns about 7,000 shops, it franchises another 4,000 or so and they are making eight percent. We figure franchising fee is about five percent. So there is huge money in that. Food and drink, as I mentioned, a 19-percent margin, the average coffee shop gets from half a million to a million dollars per year and that’s a range from Caribou Coffee, which is at the lower end, to Starbucks which is at the higher end. We also expect, so besides just making the food and drink that any coffee shop makes, we’re going to have events which we’ll charge cover charges for, a digital camera workshop event or whatever. We’ll actually bring a lot of incredible talent that now finds themselves free-lancing, in to actually hold events. We’re going to tap this huge pool of journalistic talent that’s out there to share skills and charge a $10 cover charge, we’ll pay the free-lancer for it. We’re going to do all sorts of media products like you sell in a coffee shop, but it needs to be around media. National magazines, media, whatever’s hot.
Finally, we’re actually going to have space in that coffee shop which is going to be cubicles to use for blogging. We’ll invite news organizations to come in, send a couple of reporters from the news organization, to come and hang out in coffee shops so they can get a sense of what people care about, what the issues are, they can test story ideas, they can do crowdsourcing this way. But we’ll rent out cubicles for people to actually work so that they can work in a social environment while they are doing a local blog, or a reporter that’s trying to connect with issues and all that. So you’ve got multiple revenue streams, and the biggest one is the franchise fee which goes wild once you set up the prototype.
ADSF ASDF: If you are opening up something that’s both a café and a newsroom of sorts you are going to need a pretty diverse staff, including the franchise business manager, who would really just oversee all the franchisees and manage the actions they are taking. We also need a coffee shop business manager who has relationships with the coffee sources and manages the products that the stores are producting. And a community-engagement officer – they’re the one organizing the events and the partnerships with community thought leaders and developing relationships with them.
We also need someone who is tied to the journalism community to create initial relationships with them and it should ideally be someone who is well know just to establish the credibility of the business. And finally we need a marketing manager. We really see this business growing from a word-of-mouth, grassroots business strategy, so working with the necessary marketing partners to meet those objectives.
SPEAKER: We identify at least two groups of competitors. Firs and second, (unintelligible) a lot of different things however our Newsroom Café offers a participatory and open environment for coffee drinkers who seek intellectual stimulation and a sense of community. When you go to Starbucks everybody’s individual; here, you are expected to be engaged. Coffee shop right now we have only five stores in this country but we are going to have baristas who blog, participating. (unintelliglble). We are going to offer a great variety of community participation beyond just bake sales and PTAs.
SKOLER: We recognize that the tough part here is we’re entering a crowded market that’s making a ton of money so the competitors are not going to sit by and do nothing. It’s a highly competitive market. But we do think we can offer a distinct value proposition. The difference is instead of going in and sitting alone, as we have mentioned, you come into these coffee shops expecting and in essence the culture is that if you’re sitting in a coffee shop you expect people can come up to you and start talking to you. If you want to sit and work and do you blog in peace, go to Starbucks. If you want to come into an environment where there are people like you and there is constant communication and things happening, that’s what we’re trying to offer.
Partnerships with news outlets? They may resist it. They may see us as competitors. Hard to see. But we’re trying to be realistic about potential risk. We do need people . . . we do need to create a culture of a fun and special place. We do need baristas who blog. And they’re going to be parttime in a cubicle working on a blog and part-time serving up coffee. So we need to find people to create this kind of culture. And fundamentally we need to attract young people around the issue of discussing things that matter to them in their lives and communities. This is a young market and we think it’s a young market that’s hungry to do this and most traditional news outlets don’t provide the kind of content or community that young folks ages 18-34 want and we think this will do that and will help that conundrum – most traditional and mainstream media groups just kind of shake their heads and say ‘Geez, where are the youth, they don’t care about the news and we don’t buy that for a second, we just want to provide the environment so they can get charged up about it and do what they normally do, which is discuss it in a real community.
QUESTIONS AND ANSWERS
(this section is excerpted and paraphrased)
Q: There are other Newscafes around the country, a large one in South Miami Beach. There are Newscafes in New York, Georgetown, Connecticut. How are you going to get around the trademark issue. I’m sure they’ve trademarked the name.
SKOLER: I don’t think we necessarily need to because there are a bunch of them there is one in Minnesota too. And I have a feeling there hasn’t been a trademark grab. Trademarks require certain things. But if not, we’ll find rights and we’ve played with names; we don’t want to get hung up on that, we are going to franchise.
BILL DENSMORE: We are in discussions with the Miami Newscafe.
David Cohn talks about the relationship with legacy news organizations and the sharing of brand and ownership of content.
SKOLER: “I think it’s fundamentally, it’s not creating a news community.” (not sure of context) He says the profit margin on coffee drinks is 79 percent. Discussed the idea of calling it a news saloon.
What about partnering with Starbucks? Why build your own brick and mortar when you can go to an established place? Skoler: The real model is the franchising, not the service. Starbucks is a very different brand.
SKOLER: A 2008 study finds social marketing is the key reason people go to coffee shops.
Could this work in any other venues?
SKOLER: Talked about it. Gathering over food is a cultural norm. You need a certain amount of density. That’s why you have a coffee shop.
BETH POLISH: Why only 18-34?
SKOLER: Not about exclusion. This is the target market that already has a habit of coffee shops. Best way to get started.
“It’s not about drinking coffee, its about community and if you want to come, we have it. We think that moving that habit to a community base will be the initial target market.”
KEY DISCUSSION: How to manage the discussion in the case of physical “trolls.”
“This is an open platform, we don’t want to exclude anyone because of their views or preferences.”