One thing we know for certain about the web is that it has made people LESS likely to to pay for That Which Can Be Had For Free (see music, movies, tv shows, and of course news). So why why does Rupert Murdoch of News Corp seem to to believe that the pay model is the journalistic business model for the future?
Murdoch is right on one count. The current journalistic business model is not sustainable. Paper subscriptions are down, classifieds and ads are down, and people get more and more of their news from the Web. For free.
So what's an ailing news empire to do? Recent revelations that News Corp was in talks with Microsoft to delist its content from Google, in exchange for Bing's exclusive rights to all News Corp material, have fallen through. This proves that not only do subscribers and advertisers fail to see value in a traditional newspaper, a major tech player fails to see value in a newspapers' online counterpart.
Murdoch is not the only one. Billionaire Sam Zell recently had his acquisition of the Tribune Co (LA Times, Chicago Tribune, etc) go bad, and ever the sagely Warren Buffett has stated flatly that he would not buy a newspaper company "at any price," citing "unending losses."
The upshot is that News Corp and other old media companies seem to value their product more highly than many of their customers value it. And just like so many other things on the national consciousness, this is a highly unsustainable position to hold.
A major factor in play is the commoditization of news. There is no way to charge for what your customer can go next door and the door after that to get for free. From an average person's perspective, there is little difference whether they get their news from broadcast TV, the New York Times Home Edition, or the Wall Street Journal Online. Same goes for NYTimes Online vs WSJ Online vs AP Online, etc.
Lowering differentiation is death for subscription numbers, and therefore profits. With the exception of the Wall Street Journal, all the major dailies have taken a dive over the last several years (WSJ counts its paying online subscribers, and likely double counts a few). This forces major cuts in hard news, as it is more profitable (sadly) to cover a Gaggle of Gosselins than events that have actual import.
It is these declining revenues that are the primary impetus behind Murdoch and Co's recent petulant comments blaming Google for their loss in revenue. Murdoch and old media should be running scared, but it is not Google or ungrateful consumers that are killing them. As the record industry is proving, there is no long term survival for companies that treat their customers like dirt (hear that Comcast, Verizon?). Eventually someone comes along and eats your lunch, and in the case of old media, that someone is shaping up to be - well - new media.
During the Iranian presidential elections of 2009, the government succeeded in almost completely blocking traditional media from covering the horrendous violence perpetrated by the government and "militias" against peaceful demonstrators. Most of what made it outside the country came from Iranians in the streets, providing data points that were picked up and combined into narratives by bloggers in near real time. Only then were the stories picked up by traditional news.
The recent US presidential elections were also covered by all kinds of new media journalists using blogs, cell phones, twitter, and even facebook. They succeeded in capturing in rich detail all the various facets of political campaigns that were invisible even four years ago.
These outlets vastly increase the number of inputs into the national consciousness, capturing in higher resolution every aspect our lives. Traditional media is a bottleneck that is beholden to ratings, advertisers, and the political/economic agendas of their owners. Minor stories that may appeal to segments of the population smaller than an advertiser's target audience are often eliminated from coverage.
These stories still resonate with large numbers of people however. Independent news outlets can afford to pick up these stories and even thrive on them, as the numbers necessary to drive blog traffic is generally much smaller than that necessary for traditional coverage.
The aforementioned record industry implosion over the last ten years provides a parallel example that should serve as a cautionary tale to Murdoch. In face of slipping sales and declining profits the more the record industry tried to pursue absurd lawsuits against its customers and force consumer compliance, the more users drifted toward alternate methods of distribution. The same thing is happening in the news world.
Murdoch is absolutely right, the journalistic model needs to change. It already is. He should pay attention.
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Aaron, you are right: the newspaper industry has changed, the music industry has changed, and the real estate industry has changed and even the cellphone software industry (iphone apps>>>android apps>>>>windows mobile) has changed. I will add another paragon to the list: the car industry. The common theme all these industries face is the failure to adapt, change, evolve, not because but in spite of high profits. The key is revitalization through innovation. Exhibit A: McDonalds. I detest McDonalds fast food by the way. Google "McDonalds successful business model" and understand why the fast food chain is not only surviving("Super Size Me", healthy food movement could not kill it) but thriving.
ReplyDelete"The common theme all these industries face is the failure to adapt, change, evolve, not because but in spite of high profits."
ReplyDeleteSometimes I wonder if it is not indeed high profits that can drive a company to ossification. The worst market position for any company that prides itself on innovation is the top slot.