Media companies "can't get there from here..."

Media companies "can't get there from here..."

Summary: Can media companies transition to a digital business model? Most won't be able to...

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TOPICS: CXO
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The demise of the old media appears to have slowed but it hasn't gone away as the transition towards a digital business model continues to hold many challenges.

We still haven't figured out how to transfer high quality old media to the digital platform. And that's an astounding position. You would think that by now we would have come up with a solution to this problem.

We still haven't figured out how to produce high quality journalism on the economics of the digital business model. You really can't get there from here, based on the economics of the digital platform.

Fairly successful new media sites such as Huffington Post still rely on the old media for much of their content, topped up with plenty of user generated content, and content bought in for very low payments.

That's is not a sustainable business model that can be widely adopted by others, especially since it relies heavily on online advertising, which is a poor revenue generator.

I've long been an advocate of what I call the "Heinz 57" revenue model for media - multi-revenue streams that include advertising, subscriptions, lead generation, virtual currency, virtual goods, paywalls, etc. Except that managing a Heinz 57 business model is a huge headache. Publishers would rather go out for lunch with their top advertisers.

Frédéric Filloux, an experienced senior media executive, writing in Monday Note, Expanding Into New Territories documents the challenges for media companies such as newspapers.

...the most difficult part is finding the right combination of revenue streams. Advertising, pay-per-view, flat fee… All are part of the new spectrum media companies now have to deal with.

The gamut looks like this:

As an example of the huge challenges media companies face in moving to a digital business model, Mr Filloux estimates that revenues per reader fall by at least 60%.

His advice to media companies? Move into adjacent terratories:

... big media outlets endowed with strong brands should go into commodity news and participatory/social contents.

... news outlets retain large editorial staffs that could be harnessed to produce high value digital books

... the “Events” item, on the list/graph above, is more questionable, but it remains a significant source of potential income tied to the brand’s notoriety.

... close down a large part of the unsold inventory instead of sticking to the current method of dumping the dregs at a fraction of the prices achieved by premium space.

He also advises media companies to build paywalls but to be prepared for a large drop in readers, "The Times of London is said to have lost 90% of its audience."

It is all good advice but in my experience, established companies have great difficulty in switching business models. As Mr Filloux notes:

Expanding in new business territories doesn’t happen by itself. It will collide with management cultures that remain often ignorant of the technology and mores of the digital world. Money-losing media companies won’t be prone to invest in technologies needed for the turnaround...

Which is why for many media companies, "you can't get there from here."

- - -

From 2006 SVW: You can't get there from here -- a phrase that helps define disruption - SVW


Topic: CXO

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5 comments
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  • Media spends a lot of time blaming others

    Many media companies spend a lot of time blaming others for their troubles, like cheap internet outlets. The truth is more complicated. A lot of businesses have been riding a gravy train that should have collapsed long ago, but was staved off by artificial actions. The massive extension of copyright terms, the emergence of the megacorps like NewsCorp, Disney, and Time-Warner; all of these were in essence anti-competitive tactics trying to prevent the inevitable. Even as the moguls like Murdoch bribe Congress for more restrictive laws, technology finally allows the common citizens to get around the barriers and avail themselves of more choices than ever before.

    One of the most intractable problems for old media is how to connect content to payment. Most of them stick to ridiculous methods requiring separate subscriptions and credentials, never understanding how unwieldy it becomes, like carrying around 20 lbs. of keys in your pocket. The successful ones who beat this model are Apple, Amazon, and Google. Apple and Amazon are both distributors and banks, managing the flow of information and money between buyer and seller. Google took an alternate route, choosing to get paid in information as well as selling it. Their currency is in the personal details collected from their users, sold on the commercial market as a valued commodity all its own. The old guard won a temporary victory by engaging in price-fixing, but the benefit is mostly negated because it encouraged users to switch to alternate free choices.

    The author laments that "high quality journalism" can't survive on the "new economics", but that is just nonsense because they haven't really tried. Want a clue? Move out of NYC and LA, two of the most expensive venues in the world. Quit pining for the days when doing a mediocre job still drew a moderate wage, those days are over for all white-collar workers, not just journalists. And realize that you are in one of the more difficult professions, because as a true knowledge worker you compete not only with those currently surrounding you but also with those who have gone before you, whose works still endure.
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  • RE: Media companies

    One option I see missing is micropayments. I would be willing to register and pay per article with most news sources. I will never do a monthly subscription for an out of town paper since the local news, classifieds, entertainment, sports and reprints of AP and Reuters articles are of no interest. Since I don't care much what most anybody else thinks, op ed isn't something I would pay for even in a local paper. I would be willing to pay a nickel or dime per article, even a quarter (for something like each Watergate article) for content that catches my eye at a news aggregation site and causes me to link over for details.
    I would prefer to use someone like PayPal to handle payments rather than have my credit card information out with 20 or so news outlets. Whether I pay real time or am invoiced monthly makes no difference to me.
    Just my 2 cents.
    don3605
    • RE: Media companies

      You haven't earnt your dinner that easily - I get how the media is affected, being amidst that change myself. But how are other companies' processes affected by the read/write web? you can't trackback a payroll or a supply chain... can you?<br><a href="http://www.massagechairsolutions.com">Massage chair on sale</a>
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  • RE: Media companies

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