Originally published March 25, 2013
The news is going digital. But electronic delivery is still dependent on content. And while the content of the news has evolved in the internet age, traditional brands – from NBC News to the Wall Street Journal and The New York Times – all remain popular. The trick is keeping them profitable, which job may fall to the big media companies.
Traditional media meet the digital age
At the dawn of the internet revolution, a friend of mine moved from Los Angeles to the Bay Area to take a job with Silicon Valley a start-up. You can imagine how that ended. His parting words were that Hollywood was an old, dying industry and that the internet was the future. My thought at the time was that those internet start-ups wouldn’t have much to broadcast – or at least much of what people wanted to see – without licensing from traditional content providers.
So the following seems a common sense finding in the Pew Center’s newly released report on American Journalism: “On mobile devices, news consumers also are more likely to go directly to a news site or use an app, rather than to rely on search – strengthening the bond with traditional news brands.” And this finding may help explain why in 2012 the increase in share price of some of the biggest media companies bested that of the S & P 500, including Comcast (up 57.6%), Time Warner Cable (up 32%), New Corporation (up 43%) and Viacom (up 16.1%).
News consumers continue to seek out traditional brands because they are the most reliable and trustworthy. One knows that a New Yorker column has been double, and maybe even triple, fact-checked, but one cannot same the same of – or have anything close to the same level of confidence in – a blog entry or small, specialty website.
The challenge for journalism is to properly monetize the web. And a pay wall is not the answer, because it decreases, rather than increases, the number of eyeballs on a page of web content. Again according to the Pew report,
In 2011, losses in print advertising dollars outpaced gains in digital revenue by a factor of roughly 10 to 1, a ratio even worse than in 2010. When circulation and advertising revenue are combined, the newspaper industry has shrunk 43% since 2000.
So while the Pew report shows that 10% of surviving U.S. dailies launched some sort of digital subscription plan or pay wall last year, the trend of losing 15% of those dailies annually continues unabated. In other words, as fast as old line newspapers have moved to replace print advertising with pay wall income, their gains in digital revenue has not kept pace.
This movement away from print journalism is taking place at the same time that news websites are seeing tremendous growth (up over 17% last year!) – so there is an opportunity. Indeed, the extremely low cost of electronic distribution on the web offers journalists the most reachable and diverse group of viewers they have ever had.
The answer in journalism, as in politics, is to follow the money.
In 2011, five technology giants generated 68% of all digital ad revenue. . . . By 2015, roughly one out of every five display ad dollars is expected to go to Facebook. . . .
Without original content, there would be nothing for these technology giants (Google, Facebook, Microsoft, etc.) to provide. There is a need for a royalty-based system for the authors of this content – the journalists, editors and news companies, to get their fair share of digital ad revenue.
The larger media companies are already taking steps to acquire traditional content providers: AOL bought the Huffington Post; News Corporation the Wall Street Journal; Comcast NBC Universal; and Time Warner Disney.
According to David Carr, writing in The New York Times, “. . . [D]igital enterprises were supposed to be trouncing media companies; not only is that not happening, but they are writing checks to buy content.” As he further explains,
“. . . [M]ost of the big media companies are, in one way or another, cable content companies with lots of leverage in negotiations when it comes to distribution. . . . New players have opened windows to sell content without cannibalizing the retransmission and affiliate fees that have turned into a gold mine for media companies”
Accordingly, these somewhat traditional media companies – now cast in the role of content providers – may have the corporate power, and lobbying bankroll, to gain market share on the technology giants that are now eating all the spoils of the internet revolution. Not very egalitarian, but at least it’s movement in the right direction.