Big media is using big tech to distract from their own strategic blunders
News companies are in a mess of their own making, according to Henry Innis. Facebook and Google aren't to blame for publishers' unsuccessful attempt to replicate their success online.
In the 90s, we lived in the heyday of ‘media empires’. Big conglomerates like News Corp, EMAP, IPC, Hearst all battled it out for circulation, distribution and ad dollars. Flash forward to today and the media landscape is very, very different.
There were four components to a successful publication in the 90s (and I am generalising): cover price, distribution, content, and advertising.
Each of these components worked together to generate an attractive product that was read by people and commercially viable. Ultimately, they created the operating rhythms for media to exist, deliver returns to shareholders and to keep quality staff well paid.
But in the 2000s, something changed. That something was the internet.
Everybody knows that the internet fundamentally changed publishing. But not many people talk about the ‘why’ of that, other than blaming big tech for stealing all the money.
The reality is somewhat different. Publishers in the 2000s were complacent about digital. Whilst they knew it was important, not many gave consideration as to how to do much more than display their content online.
What followed was a strange imitation of ‘digital transformation’:
- Cover price: most publishers put their content online for free
- Distribution: most publishers relied on platforms to distribute and ignored subscription bases or lists online
- Content: most publishers copied content from print magazines onto the internet
- Advertising: most publishers used display inventory, vastly inferior to glossy print pages, to monetise their space
The result was an inferior product with less revenue and less direct lines to motivating consumers to come back. These weren’t choices made by Facebook and Google — they were conscious strategic failures of publishers to innovate and adapt the skills that made them successful offline to the online environment.
In short, publishers, in their rush for digital audiences, forgot what made them successful in the first place.
It seems easy now to blame big tech for all their woes. Reality shows, though, that publishers who charge for content are beginning to build sustainable businesses. People used to pay for content offline. They will do so again.
Don’t believe me?
Here are some examples: The New York Times generated $285m subscription revenue in a recent quarter. News Corp currently boasts over 600,000 digital subscribers. The Economist (admittedly still a heavy print reliance) gets well over 50% of its business from subscriptions.
In short, businesses that charge for content are working (no surprise — they charged pre-internet). Businesses that give away content for free to chase audiences are bleeding money and position to big tech.
And they’ve failed to innovate in key areas that they dominated in pre-internet: Subscription products to the customer directly, new revenue streams (e-commerce, affiliates), and new advertising products (that aren’t display).
Some are catching on and doing things differently. They’re late to the party, but you’d hope they do well.
And the debate regarding Google and Facebook will continue to rage. But don’t let publishers get away with telling you big tech created all of these problems. Mostly, publishers are in a mess of their own making.
Henry Innis is co-founder of, and partner at, Mutiny
Yes.
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Well said, Henry.
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Nailed it. “Failed to innovate” is the key phrase here.
Doesn’t mean intervention is not warranted to support a community good. But characterising FB and Google’s behaviour as theft is ridiculous. Market forces simply filled a gap that opened up because of the complacency of media organisations 20 years ago.
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I don’t disagree with the main argument here, but would offer some additions:
1. NYT and the Economist aren’t fair comparisons to the breadth of the Australian media. They’re both global brands. Same goes for the New Yorker and the Guardian. Yes, revenue is possible behind a paywall, but only at volume surely?
2. Regardless of the strategic failures upfront while the internet was rolling out – the fact remains that the local publishers are still paying to create the content that keeps Facebook’s DAV% healthy. There can/should be some kind of symbiosis here, we keep discussing this as a zero sum game and I’m personally not sure it needs to be.
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Facebook and Google support News publishers by driving traffic to their sites. BUT the draft legislation from the government values this at zero. There is a symbiotic relationship but the current legislation has an inflated value of one side of it.
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NewsCorp are one big strategic failure and a prime model of a business who have failed to innovate
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FB doesn’t need publishers. Sure they help, but really it’s not that material. Their power comes from the aggregate, and this is the exact same reason why when big advertisers started boycotting them their bottom line was basically unaffected, as their revenue is diversified across millions of advertisers, many very small who don’t use media agencies/browse mumbrella. This is the exact same dynamic publishers are finding out and it would be ignorant to think everyone will stop using Facebook because some local news is unavailable there.
Forcing FB/Google to pay for content they don’t need on their platform is unfair. They 100% have their issues, but purely from a business and economic market perspective it’s completely wrong. That’s the primary issue with this code.
Journalism and publishers clearly need help as what they offer to the public is of great value in any democracy. But first and foremost we need to accept that their traditional business model has been heavily affected. Then the the Govt. can step in to offer solutions, such as taxing these tech giants and using that to subsidise journalism in Australia. The ACCC is a competition regulator. It should not be used to fix strategic business mistakes, that’s on the business.
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Betoota said it best
“Welfare is disgusting unless you have an outdated business model” say News and Nine.
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Cherry picking a few examples of subscription models that have worked doesn’t prove much at all. In fact on the NYT example their digital sub revenue is not even close to replacing what they lost in traditional print- they are just taking share from a smaller pie
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So all Fairfax and News have to do is charge subscriptions? Obviously NY Times and Economist are the exceptions, not the rule.
They both publish the same content online as offline so not sure your theory applies here either?
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Well said Henry. I was in a room about 15 years ago when a very high ranking News Corp person said, “I don’t really care that digital platforms can potentially personalise news and I am very confident no one will ever pay for the privilege”. Yup missed that boat. Now they are trying to do creative and production without any clue on how a brand works or how integrated thinking is truly developed outside of their platforms. That’s not the fault of Google or FB either.
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What’s really crazy-sad about News Corp’s decline, is that this ‘crisis’ didn’t just materialise over the breakfast table one morning, it’s been building for the last 15-20 years. They had time aplenty to steer the ship away from the iceberg. But didn’t.
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Correct. NYT and The Economist are global brands so have the sort of (subscriptions) scale local publishers can’t hope to achieve. And while NYT digital sub numbers are indeed impressive, it’s worth noting their total revenue (ie dollars from subscriptions and advertising across all platforms) is a lot lower than it was 15 years ago. Other examples of publishers with successful digital subscription models include Wall St Journal and Financial Times. They – along with The Economist – are not only global brands, they offer high-value specialist content (business/finance). Small (ie local), general news brands will find it difficult to build a substantial digital subscription business.
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And there’s old Gerry Harvey after a bumper year saying that the retail equivalent is a “con” and ecommerce is for ninnies or something like that.
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That exec was right. No one is paying for news to be personalised.
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