oftwominds-Charles Hugh Smith

Media Models Failing

February 11, 2009

The media is finding that merely cutting staff is not saving their business model.

For those who see a strong, skeptical media as a key bulwark of democracy and liberty, these are perilous times. I have been accused of taking perverse delight in the travails of the mainstream media; I have responded that it is not delight, but more a sober recognition that the old business models of the print media, network/broadcast television, radio, recording industry and Hollywood are already irreconcilably broken, and we are all participants and observers of the next iteration of media.

No dinosaur pondered the collapse of the "dinosaur model" of domination until the sky had already darkened. Now, long after the Internet/Web doomed the business models underlying all mainstream media, the dinosaurs are struggling to adapt as quickly and successfully as the smaller, easily dismissed mammals which scurried around underfoot.

Let's take a quick overview. Recent headlines in Los Angeles: local TV stations' revenues drop by 10%, Disney lays off 700 in Burbank, major studios slash the number of feature films scheduled for production in 2009.

Headlines everywhere: newspaper staffs reduced via buyouts, early retirement and/or layoffs, CD sales are falling off a cliff, pirated DVDs are available the day films open at theaters, most recorded music and digitized films are available on "free" peer-to-peer servers on the Web, etc.

As noted here in "conversation with Richard Metzger": the meteor which has struck the Media at 100,000 miles an hour is the Web, and its enabling of "free" everything: news, content, books, films, music, dialog, commentary, data, photos, videos, either posted in violation of copyright or posted for free by media companies seeking to retain audiences, or created and posted by creators previously locked out of the Mainstream Media (MSM).

The secondary effect of the Web's impact is generational: few under the age of 40 desire a physical newspaper or book enough to shell out significant money for either product. The fact is that newspaper readership is dropping precipitously among the younger citizenry.

As noted here by readers, the Web holds major advantages over a product produced hours, days or even weeks behind the present news (newspapers, weeklies and monthlies). In addition to this time advantage, it enables a variety of commentary/opinion that users seem to value as much as "paid punditry" that dominates the fee MSM editorial pages. Lastly, the Web creates opportunities for dialog and exchange (however low-value much of that exchange might be) which are simply impossible to match with a handful of "letters to the editor" or "man/woman on the street" video clips.

The weakness of the unedited Web is also its strength. Without any editorial filters, then much of what is posted on the Web fails to attract an audience. But it also allows us unknowns who have largely been filtered out by the MSM gatekeepers as insufficiently credentialed to be worthy of precious column inches or seconds of broadcast time a nearly-perfect Darwinian forum: access to the Web is virtually unlimited, so the competition is about as unfettered as possible.

In such a Darwinian world, the value of any content is constantly under comparison to millions of alternative voices, creations and sources which are available for free.

One way to address this competition is to raise the price of your product. That is the path being chosen by my hometown newspaper that has published dozens of my free-lance articles: the San Francisco Chronicle. The Chronicle, which has been losing millions of dollars a year, has shed staff like most other newspapers, but they also have a strategy for survival: charge those who want and value physical newspapers enough to support their business.

The Chronicle recently raised its rate for 365-days a year home delivery by $100 to about $400. It also raised its Sunday-only delivery $100 to $208 and its 5-day limited delivery by $100 as well. The paper also moved its most popular features sections (Home, Food, Wine, etc.) to Sunday, boosting the appeal and heft of the Sunday product. In announcing the changes, the Managing Editor noted that producing the Sunday paper cost about $10 each. With a street price of $2, that means the paper has to generate well over $8 of advertising revenue to cover its costs and make a profit.

In a world in which Web advertising strategies and options are exploding, that is a tall order--especially if the you're losing the key under-40 demographic. Not that declining advertising revenues are unique to newspapers; as noted here recently, local and network TV are also losing viewers and ad revenue--eroded by the Web. the same is also true of radio ad revenues.

I sincerely hope the Chronicle's strategy succeeds. If it costs $200 to print and deliver a Sunday paper even when it is largely supported by adverts, then customers who want a Sunday paper will simply have to pony up that sum.

Alternatively, home delivery of a printed paper will go the way of the dodo, and the production staff of newspapers will no longer have jobs. The content-side (the newsroom) will have to be sized to match the revenues generated by the adverts on the newspaper website, podcasts and other Web content.

In other words, the print media will enter a flat landscape shared by broadcast and radio in which few viewers/listeners/readers are paying directly for content; instead they pay only for the "pipe" which delivers their "free" content.

With the proliferation of shows and video content available to those with fast Internet connections, then the stranglehold cable and broadcast TV has had on video content is eroding fast.

A number of teens I know no longer bug their parents for a cable TV connection; they watch whatever programs they desire on thier laptops via the Web. Thus the stranglehold on the TV "pipe" (cable TV) is also endangered by the Web, which is fast becoming ubiquitous via fast wireless connections shared by many.

There is no small irony in the possibility that the enduring model of media may well be PBS. Perhaps as in Renaissance Europe, creators (and even networks/media channels) will seek wealthy patrons who front their cost of living, production and server costs. It is worth recalling that Leonardo Da Vinci was supported by wealthy patrons, and was in service to one such personage in France when he died. In the PBS model, the patronage of the wealthy is augmented by the voluntary support of many non-wealthy but willing patrons.

The current alternative media model--"free" content supported by adverts--is now entering waters roiled by recession and perhaps Depression. As you notice, this very site runs adverts in an attempt to offset some of the costs of producing this content (which is "free", heh). This site also gratefully accepts patronage by a "Remnant"-sized slice of the readership--a patronage which is financially and spiritually far more important than adverts.

This model of many patrons voluntarily providing financial support may well be a model a variety of media which could support or enable Web-based radio, commentary, video, original music, and perhaps even film production without a subscription-based model. Is such a voluntary model viable across a broad spectrum of media? No one knows; all we do know is that the gatekeepers who once limited access to the media has lost their stranglehold, and the new price of all media is "free."

NOTE: I will be hard-pressed to respond to email for the next day or so--my apologies to all correspondents.

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