New technology is mucking up the media, and newspapers seem to be taking the brunt of it. Craigslist and eBay took away classified ad sales, direct advertisers are allocating budgets to search engines and circulation is receding faster than Bruce Willis's hairline. Investors seem to prefer the safety of television broadcasters and cable companies, with their nice, government-mandated franchises and pipes that reach directly into homes.
Media, after all, is about owning a pipe -- some conduit between the creation of news or entertainment and the eyeballs that consume it. Media companies sell the owners of those eyeballs lots of things we weren't even sure we needed. The higher the ad rates, the better the business. The pipe reaches the consumer directly, keeping competition at bay. The tighter the pipe, the less the competition.
For broadcasters, the pipe is spectrum given or bought from the Federal Communications Commission under the guise that spectrum is scarce. For cable operators, it is often the sole cable franchise in a town. For phone companies, it's those regulated copper wires, some of which are so old they have Alexander Graham Bell's teeth marks in the insulation.
And newspapers? Where's the pipe? What conduit to readers do they control? Well, there is the guy that drives up and somehow misses your driveway every morning. Or the sidewalk newspaper dispenser where the homeless man buys one copy and steals the rest so he can peddle them on street corners. So unless you are the only paper in town (ask Warren Buffett how much he makes on monopoly papers like the Buffalo News), there is not much of a pipe to control. Instead, reputation, quality news gathering, trust and credibility maintain the franchise, something The Wall Street Journal and the New York Times enjoy on a national level and the Washington Post and others have locally.
But so what, it's all over, right? The Internet has destroyed newspapers' business model. If Google News doesn't kill them, blogs certainly will. Hmm, maybe not so fast.
Last I checked, the Star Trek Holodeck, despite a Wikipedia entry, is still fiction. No one is teleporting a newspaper to your home anytime soon. Unlike music which can be copied once and stolen a million times, newspapers live in the material world. Thankfully, as an author, it's the same for books. Even a 30-inch screen can't match the readability of what cheaply spits out of a printing press. I really believe that the copy protection mechanism for newspapers is their consumer interface, in the form of ink spurted on newsprint. Newspapers are scrambling to embrace the Web. Paid subscriptions, blogs, it's all a grand experiment on how to monetize their expensive news-gathering organization. But thanks to a form that's hard to duplicate, newspapers still have time.
In the meantime, rather than just charge for content, I'd be licensing every type of newfangled software and Web service until I could come up with a tight community of interest around my newspaper, local or national. Don't just start the discussion, keep it. This means comments, reviews, personalized newsfeeds, social networks of like-minded readers, whatever. Give advertisers a little "link love" so they don't stray to generic search engines. Google, Microsoft and others dropped over $10 billion to buy online ad-delivery companies in the last few weeks alone. The value is there: Newspapers aren't in the printing business, they're in the ad business.
Technology is making things even more difficult for television and video as well. As technology advances, broadcast pipes leak like a sieve. TV these days, like it or not, is like music. The good news is that it's delivered electronically. The bad news is that it's, well, delivered electronically. Six megabit broadband and 250 gigabyte hard drives are wresting control from those who think they have it. Broadcast is about central control: pumping out signals from giant antennas in the middle of town or from cable "head ends." The Internet is about moving packets around from hop to hop until it gets where it needs to go. No central control.
The real dark cloud is technology known as peer-to-peer (P2P) bubbling up from the underground that leverages this architecture. Here's how it works: I might have a copy of this week's "American Idol" on my hard drive. You want a copy, you stream it from my PC, not FOX. Then you share it with five or six people that are close to you geographically so it gets to them quickly. They share as well, and on and on. Live video streams like a virus, which means once started you can't stop it.
Cable may be the first to get flushed. The industry pays bribes in the form of franchise fees to local municipalities to be the only game in town. Telcos like Verizon and AT&T have lobbied hard to change video franchising rules. Verizon has had some success in Texas and, on March 1, the California Public Utilities Commission streamlined the rules to open up video distribution to competition. New services like Verizon's FiOS fiber to the home may finally become a reality. Another pipe in town! Add to that the proliferation of municipal Wi-Fi rollouts and other entrants like Craig McCaw's ClearWire. Price war anyone? The fact that Comcast and TimeWarner are carrying more debt than a condo-owning subprime borrower means this could get ugly in a hurry.
But what about guys who own networks and create shows? Are they safe? Well, if they decide to harness technology, they can license channels like ESPN and/or shows like "Grey's Anatomy" to all comers on the distribution side. But this is easier said than done. Network affiliates still think in 10 p.m. time slots and cable operators insist on exclusives. P2P -- the same stuff Skype uses to bypass the old phone network -- may change the definition of a TV network.
BitTorrent and eDonkey are the top P2P networks and half the usage is for TV shows. P2P hogs something like 35% or more of all Internet traffic. Thirty-five percent! But to replace cable, it has to be real time, and there are tons of real time P2P players, especially out of China: TVU, SopCast, PPMate. As I write this, I'm watching ESPN on my PC, denying Disney another outrageous $2.30 per month they charge me via Comcast. Just as the iPod opened up stolen music to the masses, devices like Apple TV mean I can stream to my wide screen. Is this Napster redux? It might well be. TV is no longer the safe cuddly business it once was.
Lots of painful restructuring is still ahead. But it's worth noting that Rupert Murdoch would bid to expand his newspaper empire. Perhaps he sees the same pipe-busting in the future of TV.
Mr. Kessler is the author of "The End of Medicine" (HarperCollins, 2006).
No one is teleporting a newspaper into my house? Wha...? I read about ten papers a day on the Internet regardless of where I am- instantly. That sure looks like teleporting to me.
Not sure I get this piece- maybe I'm missing something. The pipe the newspapers used to own was 'the only game in town for daily news'. They're so far from the only game in town now that I do not believe there is a way to return to prominence. Past the tipping pint, nada, toast.
Posted by: martin Edic | May 24, 2007 at 11:47 AM
Newspapers deliver local news. Paper is the medium, not the message.
The largest newspaper organization in Australia (Fairfax) has just started publishing in Brisbane for the first time.
Paper? No, just a web site - www.brisbanetimes.com.au
Posted by: Me | May 24, 2007 at 10:29 PM
Andy: I think you are right on with the idea of media experimenting to discover where the real value is.
My take is that if media executives focus on some of the following ideas, they can create new value:
* Make current content more accessible and more convenient for consumers.
* Blast through the cost structures that restrict access or make niche audiences non-economic.
More details and examples:
http://www.ondisruption.com/my_weblog/2007/05/news_tv_execs_l.html
Mike
www.OnDisruption.com
Posted by: Michael Urlocker | May 25, 2007 at 05:36 AM
The real value for newspapers is trusted local content. Unfortunately that was one of the things cut out when budgets started shrinking.
Posted by: newsgirl | May 25, 2007 at 10:47 AM
I agree that the reason newspapers aren't going to disappear overnight is that most readers still prefer newsprint to the computer screen. But I'm not sure this is going to be permanent.
I'm 30 years old, and I've never really gotten the hang of folding and unfolding a printed newspaper. Even bi-fold tabloids and magazines feel clunky to me. For the past 10 yeas or so I've been getting most of my news online, and I prefer the ability to quickly scan something on a computer screen, download it to my PDA, or save it as an HTML file if I need to archive it.
If I need to write notes on an article, I'm still not happy with my digital options, but I've got this handy thing called a printer plugged into my computer. The occasional 8.5 x 11 printout is a lot cheaper than a newspaper subscription.
As a journalist, I do feel a little guilty that I don't subscribe to the local paper, but as long as they're giving away their product for free, I'm going to take advantage of it. Hopefully they'll find new revenue streams besides advertising and subscriptions as they move online. As you point suggest, licensing their technologies may be one way to go.
Posted by: Brad Linder | May 25, 2007 at 11:57 AM
From where I sit, newspapers are not in the same league as books or even magazines. Newspapers are full of time sensitive, short articles of information that is important today but useless tomorrow. Perfectly suited for online IMHO.
Magazines I read for news that goes more in depth and books are another beast altogether. As you say, the touch and feel of paper is important there. But to apply the same love for paper to newspapers I disagree with. Books are meant to be read over and over while newspapers go straight to the recycle bin the next day. Books also aren't full of advertising. The list goes on and on.
Newspapers have to decide if they want to be more like websites (more breaking news, less editorial oversight, get faster and shorter) or more like magazines (cover stories in more depth, more editorializing, less fluff).
Posted by: Webomatica | May 25, 2007 at 01:49 PM
There are two media business models:
1) make good content and sell it to eyeballs (the traditional model)
2) make good content and give it away, then sell the eyeballs that look at it to advertisers (the new model)
Audience fragmentation means that it's harder to recoup the cost of decent content because under model 1 there are fewer eyeballs interested in paying for each piece of content, and under model 2 advertisers are unwilling to pay enough to reach a small audience.
Big media doesn't really seem to know what to do about this, and I'm not sure the answer is out there...yet.
Posted by: Thomas | June 12, 2007 at 02:49 AM
It’s true that the value of time sensitive content will be hurt by the proliferation of advanced delivery systems. I myself am waiting for the day when I can get a personalized newspaper tailored to my interests (Healthcare Tech. & Cornell Hockey), delivered via my in-home newspaper printer. What I find fascinating is the unlimited scale created by advanced delivery systems on non-time sensitive content. More content (TV, Movies, Books, Songs) will be created today, then I’ll be able to enjoy over a lifetime. And this content is a permanent asset that we will all have access to anywhere, anytime. The demand for such products will generally increase with population growth, yet the supply never diminishes, grows daily, and has virtually zero marginal cost. With such economic conditions will content have any value in the future? Granted I’m not your typical TV consumer, but my Seinfeld and Simpsons DVDs have enough content to last me the rest of my life. If I owned a portfolio of content, I’d be looking to sell, fast.
Posted by: Jared Goodman | June 19, 2007 at 03:07 PM
Always enjoy your comments--please write more often
Too many years ago now there was an excellent book on some of these issues, Information Rules. At that time, as I recall, there was no little discussion about what would matter was reaching the point of being a trusted navigator. Over simplified, trusted navigators would survive--all others would perish. It seems to me that we watch this with our local paper, daily. It maintains a readership solely because it is a pipeline---no one trusts its writing. Ultimately, it will disappear, once its ad base is gone.
I worked a great deal on distance education for universities a few years ago. That experience convinced me that a university should hire class room teachers based on their ability to teach at a distance, sign up large numbers of students at low prices, and invest the rewards in ever better programing, which would include investing in research, supporting texts, etc.
It seems to me the same model should be applied to newspapers. If someone would invest in vigorous, intellectually honest reporting---not driven by advertising---over time I believe that would prevail on a subscription basis.
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