News UK looks to startups to unearth new sources of revenue

News UK has launched a startup incubator to unearth new sources of revenue

After a troubling year for advertising and circulation, News UK is hedging its bets with a startup incubator it hopes will unearth new revenue streams.

The News UK Startup Lab will take up to six small companies and host them in a month-long incubator programme starting in October.

The programme is open to any business - be it travel, finance, or tech-focused - that can leverage the publisher’s journalism, data and expertise to develop new products and find new revenue streams for the News UK business.

The focus for the chosen companies is to work in tandem with News UK to combine assets and generate more value both for the publisher, its audience and the startup itself.

News UK will provide insight as well as hands-on mentoring and expertise, it said. After the incubator is complete, the publisher said it has “no set path” on whether it will invest, or acquire the startups, adding that the startups are not tied into any contracts.

"Our aim is to champion entrepreneurship and innovation," said Christina Scott, chief technology officer at News UK. "We see this as an opportunity to do something different in the corporate accelerator space that's fair for startups and creates value for both parties."

Product innovation company Fluxx, who have experience in setting up corporate start-up accelerators and working with News UK, will run and staff the programme, which will be based at the offices of Unruly, the video adtech company that News UK acquired in 2015.

Sarah Wood, the co-founder and chief executive of Unruly, said she had “seen the benefits” of partnering with News UK, and is looking forward to “helping the next generation do the same".

Despite having the UK's most popular weekday and Sunday newspaper in the Sun, according to the latest ABCs, as well as having various initiatives aimed at diversifying its revenue, News UK was hit hard by a slump in ad spend this year.

Revenue at the publisher declined 19% in the 12 months ending 30 June 2017, while advertising revenues decreased £88.1m - £39.4m of this due to weakness in the print advertising market - and circulation and subscription revenues decreased £85.8m.

Douglas McCabe, chief executive and director of publishing and tech at Enders Analysis, suggested that at a time when news businesses are structurally challenged with revenues certain to decline, tangential innovations are "essential", and that a startup incubator removed from the core business "strikes the right balance of business opportunity and capital risk".

"Publishers also have limited experience of rapid innovation, so an in-house unit would not be the right way to approach it. In any case there is also already too much pressure on the cost base of news operations, and risks being a management distraction," he said.

"We will see more of these structures in the future," he added.

The launch of the News UK Startup Lab follows similar moves from Thomson Reuters, the global news agency that launched an incubator, Thomson Reuters Labs, in July looking for products in big data, advanced analytics, distributed ledgers, artificial intelligence, machine learning and other transformational technologies.

In the UK, broadcaster Channel 4 has a commercial growth fund in which it offers fast-growing startups access to advertising inventory in exchange for equity stakes or revenue share arrangements. The broadcaster sees the fund as a way to convince new advertisers to invest in TV, one of the oldest advertising mediums that is facing similar challenges to that of print advertising.

Guardian Media Group is the exclusive global media partner of accelerator and incubator Founders Factory, which sees the two companies support the growth of five early stage MediaTech start-ups, every year for five years.

This year's accelerator programme kicked off last week (31 August), seeking businesses focused on artificial intelligence tools for journalism, virtual reality and augmented reality models for publishers, natural language processing and translation technologies, new ways of distributing audio and voice content, and technologies that support advertising and marketing.

The Guardian is also taking a unique approach when it comes to hedging its revenue bets, by launching a nonprofit in the US that sees it ask individuals and organisations to fund journalism aimed at tackling social or environmental issues.

It builds on the publisher's existing membership scheme that asks readers to donate to ‘secure its future’, as advertising declines, circulation and subscription slides, and increased competition from online players has left many traditional publishers haemorrhaging revenue.

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Jessica Goodfellow

The Drum's media reporter covering everything from publishing, TV, social media, radio and technology.

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