I recently read “Pay Walls: Content Needs to Be Fee” by Mark Evans and there were a few things that caught my attention. I actually agree with Mark’s overall thesis that everything is not going to be free but there are a few statements that stuck out:
- how else will newspapers be able to pay the journalists who collect, synthesize and write the news that more people than ever are reading?
- it’s time for consumers to realize that the free all-you-can-read buffet is going to disappear because it makes no economic sense.
- the economic model in which newspapers give away all of their online content doesn’t work…It is becoming obvious newspapers must start charging for their online content
Let’s breakdown the “news ecosystem” to the simple parts.
- Create Content
- Distribute/Publish Content
- Consume Content
Now let’s think about this system in the context of past and present and specifically look at competitive advantage, barriers to entry:
- Create Content
- People: If you think about journalists and talent then things haven’t changed much from past to present. One of the greatest resources of any company that is inimitable are its people. Sure, things like how Newspapers source stories or carry out their work have changed but at the end of the
day you need talented people to write good content.
- Trust: Newspapers still maintain a competitive advantage in terms of content quality because many people trust traditional media (I use the word trust loosely) over new media. There are signs that this is changing but as it stands today the barrier to overcome this is pretty high.
- Publish/Distribute Content
- Past: This was a major competitive advantage and barrier to entry. First you needed the facilities and equipment to pump out a physical paper each day and then you needed a way to distribute that paper out to a large number of locations.
- Present: People still read physical copies of the newspaper but when people talk about the problems with newspapers today they’re talking about the transition to the online world. This is pretty obvious, but the barrier to entry for publishing content online is basically zero, and distribution is equally as easy and therefore no longer a competitive advantage (for static content).
- Consume Content
- Past: Subscription fee or newsstand purchase. Limited window to access.
- Present: Still have traditional subscription and newsstand but many people read content online. Easy 24/7 access.
The problems currently experienced by the Newspaper industry are not unique. We’re talking about a business that has enjoyed a profitable “physical” existence for quite some time and is now having a difficult time maintaining revenues/margins as more and more of their customers consume news online. There is no reason why Newspapers can’t charge for content, and there is no special business model that is going to make them the profits they once had. Consumers have choice, and unfortunately most of the stories newspapers distribute are not original. Go to Google News right now and look at the top stories, there will be hundreds, if not thousands of sites that offer you the same news story.
#1 – It’s all about content, trust…and less money
Things have changed and if you believe my “news ecosystem” breakdown then the only real place for newspapers to differentiate themselves is content (I know, this is pretty
obvious) and trust. The problem is that only a fraction of most newspaper content is unique (read Clay Shirky’s post on created vs acquired content) which greatly diminishes the value they provide. The competitive advantage does lie with the content creator and as Mark suggests in #1 these journalists need to be paid. But will people pay for content? Sure they will, but only a small portion of them. The rest will go somewhere else for their content needs. Unfortunately the reality for Newspapers is that as daily paper subscriptions decrease their online subs won’t increase at the same rate because there is an abundance of choice. Yes, people will pay for content but just like anything else in the real world they will only pay if they feel it provides enough value at that price. If a paper reports the same news as the free guy, why pay for it? Papers need to use content and trust to their advantage in order to get people to pay. Competition is tough, isn’t it?
#2 – But I like the free all-you-can-read buffet
I don’t think consumers need to “realize” anything. This isn’t how the world works. People don’t make conscious decisions about whether they should give money to corporations to ensure their survival. If free content exists and it is the same as paid content then people will take the free content. Market forces such as competition, supply/demand, etc. will determine what the price is, who survives and who dies. Set a price and let the market decide. This is what scares the hell out of most papers…and of course government regulation can change all of that.
#3 – No Money Mo Problems
As of late there has been a lot of talk about charging for content. I’m waiting for someone to just pull the trigger and get it over with. If you have the best content then you should be able to charge for it. If the revenues are enough to sustain a profitable business then great, if not then welcome to the world of competitive business.
The harsh reality is that in many cases Newspapers will not be able to maintain the revenues/profits that they once knew. How can they? Differentiation through distribution is difficult in the online world and as everybody knows, once the barriers to entry drop and competition increases, competitive differentiation is going to have to come from somewhere else to fight off the downward pressure on prices, margins, etc. You can choose to embrace and adapt to market changes or you can fight them. In many cases fighting them is a losing battle since healthy competition and minimal government intervention always leads to victory for the market.
Assuming the government doesn’t get involved what we’re going to see is a lot of papers close their doors, consolidation, fat-cutting. I don’t foresee people paying for daily news content but there is obviously a business around premium content. New businesses will emerge that are structured to survive in the “new world”, older businesses will need to change to do the same.
So in the end we have the same old story:
- Don’t fight the market…you will lose
- Don’t fight consumer behaviour…you will lose
- Differentiate, provide value and people will pay…whether they pay enough to make you happy is a different story