I was disappointed by the commentary that greeted this announcement by New Zealand’s National Business Review publisher Barry Colman to start (again) charging for some content. Comment ranged from the reasoned to the vitriolic (see article comments) but fell almost entirely into the “stupid publisher” category.
The “stupid publisher” notion has gained wide currency. It stems from the view that the internet is very different and “old media” publishers are set on bringing old media thinking to it. But the main piece of old thinking that publishers like Colman are trying to bring to the internet is the idea that publishers should be able to pay people real wages to create content.
The fact is, it’s not stupidity at play here. The internet is actually broken. Here’s why.
Media, for the most part, rely on two sources of income: what people pay to read/view/listen, and what advertisers pay to reach those readers/viewers/listeners. Some media, such as books, have little or no advertising. Others such as newpapers and magazines have a combination. And some, such as free-to-air TV or radio, rely almost entirely on advertising.
Let’s look for a moment at the business that Colman is in: news. In the virtuous circle that characterises “old media”, publishers pay for writers to write stories that appeal to a market that advertisers want to reach, then sell advertisers access to it via paid ads. Readers usually, but not always, pay for their newspaper (free community newspapers and free trade publications are common exceptions as 100% ad-supported publications). There are many differet models. But markets have developed with economics that make this equation work in anything from a large, mass circulating national newspaper to a small community newspaper or niche trade journal. The point is that both large and small scale enterprises can thrive, and content creators are paid living wages.
Compare this to the “free” internet. Contrary to popular belief, people already pay for content. The trouble is, they mostly pay their ISP who presently remits almost nothing to the content creators. Advertisers are piling into the internet but as most site operators can tell you – even successful ones – the rates publishers get for online advertising are extremely low and seldom cover the real cost of doing business.
There are three reasons for this.
First, there is a vast amount of advertising inventory available (ie places you can run ads) and this drives down the cost. You’re not just competing with your home market. Because of geographic targeting, if you’re a New Zealand publisher, you’re competing with sites all around the world that attract New Zealand visitors. It means typically that you need very big traffic to make even a modest income. And it means that carefully targeted, niche content, or local interest content, doesn’t get the premium for ads that it needs to cover its higher unit costs.
The second, related problem is that most of today’s online advertising falls into what advertisers call “response” advertising rather than “brand” advertising. Brand advertisers care about the environment in which their ads run. But response advertisers care about clicks and cost-per-click and don’t much care about where the ad runs as long as the right people see it and respond. This means advertisers care little about the difference between their ad running in a quality online news site or on a Facebook page, an online shop, or an email inbox. They have to compete with a much wider range of “media” so, again, better content – the main way that media have competed in the past and a big benefit to consumers – doesn’t always lead to a better price for your advertising.
The third problem is that most of the online advertising today doesn’t even go to the media companies that create content. The world’s most successful “media” company, Google, takes almost half of online advertising and doesn’t create any content at all. This disconnect between advertising and content creation has broken another strand of the virtuous circle that has paid for media in the past.
Which leads back to the question: how do you actually do business if you’re an “old media” company like The National Business Review that’s trying to pay people properly to create content, as opposed to a “new media” company like Google syphoning off close to half of the online advertising dollars, running ads in anything from online newspapers to shopping sites and email accounts with little differentiation between them, and sharing very little of the advertising income generated.
The proffered solutions seem to fall into the following camps:
1. “We don’t know either but just go and find a way.” This argument is probably the most common. It is fuelled by optimism that the unfettered internet will solve these problems, and is usually supported by examples of ‘successful’ new media companies. There are a relatively small number of these successes, certainly not enough to make a big dent on a trillion dollar worldwide industry. And because there are so few, the same examples keep coming up. In New Zealand, Bernard Hickey’s interest.co.nz site is frequently cited. But Hickey, of course, had the advantage of targeting a niche that he knew would work in this environment. You might find it a bit harder to cover court news, local councils, or other important but less advertiser-friendly beats.
Interestingly, this argument is used by author Chris Anderson in defending his new book Free from attack by the New Yorker’s Malcolm Gladwell. And the example he cites of why we shouldn’t worry — that the internet can sort it out somehow — demonstrates one of the very problems I’ve highlighted. A parenting site that Anderson started, which by most measures has become very successful with a million page views a month, can pay just one part-time wage for its editor and makes almost no payments to its volunteer contributors. Anderson seems to think this is OK but if this is the best that the economics of the internet can manage, it worries me.
2. “You’ll just have to lower your costs and downsize.” Related to this is the belief that, in this lean revenue environment, resources can be fleshed out with the free labour of volunteers — Wikipedia is a commonly cited example — or the cheap labour of underpaid part-timers who must keep their day jobs. Again, Anderson makes this case when he suggests that “the ability to participate in journalism extends beyond the credentialed halls of traditional media. But they may be paid far less, and for many it won’t be a full time job at all.” But even if this is true, isn’t there something wrong with accepting this model? No-one would question the value of bringing more voices to the public arena, but should we really be paying for essential information services this way? Should we encourage the use of free labour to drive down the cost of paid labour?
3. “We don’t care.” While there’s a lot of merit in the Darwinian approach that will see many old-style businesses collapse and be replaced by something completely new, a professional media and news capability is too important to most societies’ effective functioning to see it weakened.
The fact is that we need to care about the media and not think of it as just another industry to sweep aside. We need to think carefully about what replaces it and whether it’s what we want. Wishful thinking and blind faith just won’t cut it because it’s too important to leave it to a free — as in, unfettered — market to sort out. More than 15 years on from the emergence of the world wide web, this still hasn’t been sorted out. No-one has found a way to pay fully for an effective professional online media. It’s still subsidised by a dwindling “old media”, or staffed heavily by volunteers, underpaid and under-resourced part-timers. And when a million pages a month won’t pay an editor’s wage, let alone writers, how will smaller markets cope – small countries, small communities, small and advertiser-unpopular issues?
Publishers that struggle with these issues are not stupid. That these problems haven’t been solved after so many years isn’t just because of a lack brain power and creative risk-taking.
We need a bigger discussion here. When someone like Barry Colman takes a shot at trying to bring some sanity to this dysfuctional business model, whether we think his particular solution will succeed or not, we should cheer him on, give him some credit for trying and maybe some pointers to help.
The good news is that technology itself might overcome some of this dysfunction as the first generation of the world wide web, driven by the PC, is replaced by the mobile web and better broadband. Among other things, this transition might make it easier to charge users their share for content and encourage more brand advertisers who will pay a premium for the right environment.
But we might also need to consider some regulation — especially against the internet’s propensity to create enormous global powerhouses. It’s time to start debating not just the way the internet is, but the way we want it to be.
So to Barry Colman, I’d say this. I don’t know whether what you’re doing will work — I suspect it won’t without some changes — but good on you for giving it a go. And if you learn anything from your past failure, it should be that you gave up too soon. Keep trying, keep testing, and keep sharing your experience with the rest of us. We need you to get there in the end.