Posted by Tom Foremski - December 15, 2008
Since leaving the Financial Times more than four years ago I've been able to observe the demise of the media industry from an excellent vantage point.
Coming from "old" world and then becoming an online publisher I quickly saw that the economics of the new media world would not be able to support mainstream media business models. There is no way that online advertising can pay for a professional media organization with its army of journalists, editors, sub-editors, production editors, photographers, administrators, etc.
The reason for the demise is because the cost of online advertising is far lower than for traditional advertising. The cost of online advertising set by biggest companies such as Google, Yahoo, Microsoft, etc. They place ads around other peoples content, or around their own content which is "harvested" from the Internet, or placed around their services such as search, and email. It is a highly automated system that produces content through computers and algorithms, rather than people.
However, If you are a traditional media company that produces its content using journalists, editors, sub-editors, photographers, etc, then you have a problem because online ad rates are not going to cover your operational costs. And as ad buyers have grown more comfortable with online advertising, and long term contracts began to expire, the move to online advertising has accelerated.
This has left media companies in a very tough spot. As their traditional sources of revenue have been disappearing their new sources of revenue are unable to cover their costs. And the current economic crisis is magnifying this trend to an ever greater degree.
The media death spiral has become steeper and faster...
This is a huge problem because as a society, we need media professionals -- citizen journalists cannot fill the breach.
We need journalists, editors, sub-editors, photographers, etc, to help maintain high quality standards, to prevent misinformation, and to counter the spin of corporations and governments. We need these vital services as a society, so that we can make decisions about important things, such as the economy, the environment, healthcare, education, war.
The quality of our decisions as a society is directly related to the quality of our information, to the quality of our media. Bad information leads to bad decisions. That's why figuring out a viable business model that can support professional media has become an extremely important issue.
Since online advertising revenues can only support companies such as Google and a host of others, that "create" their content with computers and algorithms, traditional media companies such as newspapers will have to move to a subscription model.
No future in free...
News is not free, and it is not a commodity. News has been made available for free, and it has been made into a commodity but that is not its future because there is no future in that model. You will have to pay for it.
That means the end of the news aggregators. That means the end to arguments that the news aggregators send high volumes of traffic to the online publishers. What is the use of more traffic when it cannot be monetized to support the work of the news organizations?
The only "news" that will remain free will be press releases--but there is little value in that type of unfiltered "news" source.In the future you will have to pay for news and other high quality content. Online advertising, affiliate marketing revenues, and lead generation income will moderate the subscription fees but not eliminate them. There is no other solution.
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