Beating Up on Old Media

So the latest development in the Old Media vs. New Media war is the Associated Press moving to restrict the use of their content on various web sites, which has of course upset those who believe in "free information sharing" in addition to the owners of the individual web sites themselves. In light of several newspapers having closed over the past year (or being in danger of same), the usual talk from the "tech world" has been around the newspaper industry having "dropped the ball" due to not having embraced technology enough or just going along with the program.

However I think that this viewpoint is too simplistic, because you can't necessarily say that the reason the newspapers are struggling is due to 'copyright wars', lack of demand or not embracing technology.

Just think about it: what is the biggest reason why people aren't spending as much on newspaper subscription as they did in the past? The answer? Not only can you get news online for free, you can get it much faster online to such an extent that by the time the morning paper arrives you may have read all of those stories online the day before. I still receive the paper version of the WS,J but by the time it arrives I've already read everything in it online the day before so it goes right into my recyclable bin. I used to pay for the NY Times, but now that I can read all of their articles online for free there is no point in paying for the physical version of the newspaper.

So the real reason newspapers are disappearing isn't because they don't "get it", it's because in the online world their product effectively has little to no value. A newspaper can embrace everything the techie world wants, put the publication online, allow it to be shared with any web site, etc., but due to the delivery method it's much harder to turn a profit. It's not really an ideological or "embracing technology" argument, it's just basic math: it's much harder to make money when people can get your product for free.

Practically all newspapers have embraced technology and the consumer demand is definitely there, it's just that the digital world hasn't proven to be especially profitable.

The same goes for the music world: 15 years ago listening to one my favorite bands meant spending money for one of their CDs, now I can drop $9.99/month for Real Networks' Rhapsody subscription service and listen to thousands of bands, synch songs with my MP3 player, etc. Needless to say it's much harder for record companies and their artists to make money from a subscription service, than it was from selling CDs 15 years ago.

The old saw about the record companies is that they didn't embrace digital music fast enough so now they're suffering, but can you really say that considering how ubiquitous digital music players are and the overall demand for digital music? In the present era it's not an issue of the record companies not embracing digital music, it's a issue of digital music not being very profitable in comparison to physical media. If the music industry had launched their own iTunes, music subscription services, etc, in 1999 they would still be struggling now, because the digital world just isn't as profitable.

In both cases the problem isn't a lack of demand from consumers or not embracing technology per se, it's a simple case of the online model simply not being as profitable as the offline one. Better yet a lot of the so called "forward thinking" tech companies would be crying if they had to provide their product for free/greatly reduced cost, Google wouldn't be Google if the market decided that the ads on their search engine should be free, same goes for software companies.

So perhaps it's no so much a question of "embracing technology", as it is the real world economics of various delivery methods.

Now does this mean that old media companies in the worlds of music, publishing, movies and television don't need to adapt and innovate? No, it just means that maybe we techies need to get off our high horses a bit. It's rather fatuous to blame a company's demise on not being with the "online program", when you're simultaneously reading the content online for free or listening to music at a fraction of the cost you used to pay. Nor does it make sense to happily jump on the "you blew it", "death to the dinosaurs" bandwagon, while simultaneously complaining about not being able to get the content they produce for free.

If the content producers don't survive, we as content consumers are going to be suffering too. You can't deride a company for going out of business, while simultaneously denying their right to control and profit from the product they produce.

Going back to the initial discussion on the Associated Press, perhaps it's time for a compromise to be reached. Google (GOOG) is a very successful company that rakes in billions of dollars per year, perhaps they should have to pay a fee for leveraging content produced by someone else for their business operations. Would we not say the same thing if Google wanted to use code from another company's software in their search engine? So why not take the same stance for content? Instead of blaming the AP for wanting to control their content, perhaps we should stop thinking of Google as an "innocent" and recognize their true motives for wanting to use the AP's content.

This conversation needs a heavy dose of reality and objectivity. While it is true that the publishing companies need to do a better of job of adapting and innovating, it's high time the tech world backs down a bit and recognizes some of the publishing world's basic rights around controlling their product. Especially since all the tech world has to offer to the conversation is "give us content for free", and has made zero suggestions beyond that as far as helping the publishers leverage their content to turn a profit in the digital media realm.

After all I seriously doubt any of the major tech companies would allow me to use any of their IP property for free based on the idea that "information should be free", or "we both have a copy of it, so what's the harm?" At the end of the day the old media companies paid to produce the content the tech world wants to consume, which means those companies have a right to control that content. Just like the tech companies have a right to control the products and IP that they produce.

As long as the tech world is happily using and consuming old media content, it should view these companies as partners and understand that have a stake in their survival. This means being willing to make compromises, pay for content in certain instances and to stop being so self-righteous.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.

Comments

[jbofen:]

WELL- stated article, and it makes alot of sense.

Apr 09 03:18 PM

[Paper boy:]

You are a doink!
The problems newspapers are having is little to do with subscriptions or circulation that rarley is even break even with the cost to distribute them. The problem is lack of major advertisers. Craigs List took the most lucrative piece of the pie several years ago and now with a major problems in the housing market people are not refinancing for big ticket purchases such as cars and major appliances. Those companies are downsizing, or going out of business.
This is not news, it has been well documented for several years.

Smaller regional and local papers are not hurting in the same way because they have never relied on major advertisers who pay at an open rate or classified ads that are like printing money.

SS

Apr 09 03:28 PM

[Joyful Alte...:]

The physical part of media---buying newsprint, running a printing press, dispatching door-to-door delivery; imprinting CDs, packaging them in jewel cases, wholesaling them, retailing them in bricks-and-mortar stores; etc.---is very expensive, more so than actually creating content. The content creators ought to be able to make a profit in a digital world with such lower costs.

Jeff Jarvis today has good ideas on how newspapers can get paid for their original content online. It has to do with getting links for the original source, not for the most recent homogenized rewrite.

Newspapers still have income areas where they rule. Craig's List has job ads, but half of them are fakes, there to harvest email addresses for male enhancement spam or there to sell get-rich-quick schemes; newspapers' job ads are reliable. Obituaries are popular with subscribers, and the deceased person's estate has to pay a goodly sum to have them published; under what category would Craig's List put funeral parlor ads?

Which brings up another point: Physical media is still important to the most lucrative segment of the market, late adopters. Seniors still like their hard-copy newspapers, not the fine print in the confusing online world, and the middle-aged still cherish their CD players. They make the media exit from the tangible a delicate process.

Apr 10 09:13 AM

[Howard Stevens:]

It’s not that newspapers haven’t “embraced technology” it’s that they've failed to see the monumental shifts—in both technology and consumer behaviors--impacting their industry. Newspapers failed to recognize that consumers and advertisers now have an abundance of choice—free or not, the majority of news content between papers if often recycled—their product has been commoditized. Ironically, the Associated Press is the biggest culprit of commoditizing news; but now that they no longer have the monopoly on distributing information globally, they’re crying foul rather than attempting to adapt.

You state, “So the real reason newspapers are disappearing isn't because they don't "get it", it's because in the online world their product effectively has little to no value.” While this may be true with the majority of the content that the AP commoditizes, many newspapers provide invaluable investigative journalism and insightful editorials that are of tremendous value. Monetizing this value requires that the industry acknowledge the economy of new media and focus on the true value that they bring to consumers. Clinging to old models just won’t cut it.

Two other quick points: 1) the music industry clung to old business models for too long—they remained focused on producing ‘the next big hit’ instead of acknowledging diverse consumer interests. They finally seem to be getting it, but their initial resistance opened the door to a mass market of music piracy—a genie that’s very hard to put back into the bottle. 2) Regarding using tech companies IP property for free, you have heard of open source (ie, OpenOffice, mySQL, etc.), right?

Apr 10 09:53 AM

[chuckl:]

do the math. for every dollar newspapers can raise from print advertising, they earn 5 cents for an online ad. The problem is not that their content is freely available but that they allowed the value of advertising online to be devalued. that's why newspapers continue to earn 90% of their revenues in print. while much of the content on the internet is redundant, local papers are still the best source of information for their local communities. By focusing on the local news, which they do better than anyone else, and on their local advertisers, newspapers are beginning to turn this around, albeit slowly. It's just a matter of restoring value to online advertising by maximizing the capabilities of the medium rather than simply plaster static newspaper display ads on a web page. the internet can help bring together local shoppers and local advertisers (96% of purchasers are ultimately made locally) and the newspaper can be the link. Once revenues from advertising online come into closer alignment with print, newspapers should be healthier, though not the media monopolies they had grown to be.

Apr 12 01:48 PM

[dharrison:]

The Internet gives a person access to all content everywhere...if you can find it.

In a world of infinite supply, the value of data (even news content) will be driven to zero. This is Micro Economics 101. Restraint-of-access won't change the underlying economic forces.

In such an economic environment, only meta-data will have value. The news article is just another piece of data with no intrinsic value. The value will be in:

1) Finding the content of interest with minimal Type-I & Type-ll errors (which is why Google is so powerful)

2) Assembling just the news I want to see (just for me) in one place without me having to exert too much effort. (sites such as Google News and Newser are experimenting with early ideas in this direction).


Both of these meta-data activities will have long-term persistent value to the consumer and neither have been well exploited. Paper+Distribution was the vehicle to achieve just such "meta-data activities" back in the 19th & 20th Century...they will fail us in the 21st Century.

The 3-way value-chain between content-producers, readers and advertisers is what makes the "news business" economically viable. The Internet allows this to be exploited a new and truly creative ways...ways that are still to be fully explored and put into action!

The traditional print publishers have approached these problems from the standpoint of protecting the print piece...along with it's high-value ad inventory.

The solution is to recognize that online ads have significantly higher ROI for most advertisers and, in the long-term, dollars will flow from low-value options to high-value options.

Business management needs to face the task of restructuring their business models around this reality. These new business models will need to re-think much of the old business structures...including the overall cost-structure of content creation, ad account management and ad-ops and bring these costs into alignment with the reveue streams that are available online.

They need to be willing to make the hard decision to cannabilize the old revenue streams and create new media business models...because if they don't others will do it to them. The historical track record would indicate that such bold restructuring is a very low-probability event.

----------------------...

I'm in the early stages of a startup designed to exploit such weaknesses in the controlled-curculation publication (trade magazine) business...specifically in the biotech niche.

I'm certainly interested in pursuing these ideas with anyone interested. (dharrison.subscriptio...

Apr 21 02:16 PM