Beating Up on Old Media

by: Markham Lee

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 (NASDAQ: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.