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I'm a (for now anonymous) manager of a long-short fund which is not open to external investors. I have extensive experience on Wall Street and in the technology industry. I look for strong trends and reasonable valuations (GARP?), particularly in the technology and media sectors. Recently, for... More
  • Google, the Newspapers and the Emperor's New Clothes 2 comments
    Apr 15, 2009 08:53 PM | about stocks: GOOG, NWS, NYT, LEE, GCI, MNI, GHS

    In an article discussing the conflict between Google and the newspapers, Scott Karp identifies the source of the conflict:

    Google isn’t stealing content from newspapers and other media companies. It’s stealing their control over distribution, which has always been the engine of profits in media. Google makes more money than any other media company on the web because it has near monopoly control over content distribution (i.e. like a metro newspaper in the pre web era).

    True -- but only half the picture. You see, for decades the newspapers published commodity content -- the same news story was published by hundreds of newspapers with little differentiation or value added. But because the newspapers had a lock on local distribution, their commodity content was unique. (Well, almost -- there was usually one other newspaper in town with the same stories.) So they could charge steep fees for subscriptions and advertising.

    Then along came the Internet and Google, and revealed that hundreds of newspapers were rewriting AP stories and each others' stories and adding almost no value themselves. So it made little difference which of the newspapers' websites you, the reader, visited. Underneath their brand names, expensive newsrooms and self-important endorsements and editorials, the newspapers had nothing unique. They were naked! Just like the emperor's new clothes.

    And sure enough, in a transparent market, suppliers of an undifferentiated commodity have no market power. So the power shifted to the provider of transparency, Google.

    The newspapers' complaints about loss of distribution are bogus. If the newspapers published unique and valuable articles, they'd welcome distribution from Google. It's only because they publish lame rewrites of the same stories that it matters so much that they lost their stranglehold on distribution.

    In which case the newspapers' remedy isn't to fight Google's control of distribution. It's to:

    1. Get out of the business of rehashing wire stories with lame rewrites, and focus on breaking real news stories that generate their own distribution.
    2. Stop rewriting each others' scoops, and instead give proper credit to the sites that break stories. 

    One thing is clear: the problem -- and the solution -- lies with the newspapers, not with Google. Google simply shone the spotlight on the newspapers' clothes, and they were see-through.

    Will the newspaper succeed in getting out of the business of rewriting stories, and find a way to give credit to sites that break news stories?

    What do you think?

    Themes: newspapers Stocks: GOOG, NWS, NYT, LEE, GCI, MNI, GHS
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This post has 2 comments:

  •  
    Just noticed that Nick Carr comes to a similar conclusion:

    "As I've written before, the essential problem facing the online news business is oversupply. The cure isn't pretty. It requires, first, a massive reduction of production capacity - ie, the consolidation or disappearance of lots of news outlets. Second, and dependent on that reduction of production capacity, it requires news organizations to begin to impose controls on their content. By that, I don't mean preventing bloggers from posting fair-use snippets of articles. I mean curbing the rampant syndication, authorized or not, of full-text articles. Syndication makes sense when articles remain on the paper they were printed on. It doesn't make sense when articles float freely across the global web. (Take note, AP.)

    Once the news business reduces supply, it can begin to consolidate traffic, which in turn consolidates ad revenues and, not least, opens opportunities to charge subscription fees of one sort or another - opportunities that today, given the structure of the industry, seem impossible. With less supply, the supplier gains market power at the expense of the middleman.

    The fundamental problem facing the news business today does not lie in Google's search engine. It lies in the structure of the news business itself."

    www.roughtype.com/arch...
    Apr 15 09:23 PM | Link | Reply
  •  
    this is interesting. i suppose with everyone twittering the world (eyes everywhere), that the new model will be based more on consolidation of massive, effectively random, but not meaningless, information sources, rather than the current AP/UPI central authority/editor model.

    it may end up with the same problems that youtube has though, lots of random, but not meaningless stuff, but no meaningful way to sort through it all... just like the 'net' was before altavista and google...

    great tidbit - tnx.

    --ikk
    Apr 19 06:55 AM | Link | Reply
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