Media companies have been wrestling with this conundrum for
some time – and we have seen Warren Buffet famously dismiss newspapers as a
dead industry only a few years ago. However, it is unlikely that news will
disappear altogether – it is simply a change in the distribution that will
determine the next stage of this industry.
It is clear that the status quo cannot be maintained – one
look at the falling profits of Fairfax will provide all the evidence that is
necessary. Undoubtedly some people will continue to buy newspapers, primarily
the Baby Boomer generation, as they are (mostly) far too entrenched as
newspaper readers to move to other methods of distribution. However, the truth
is, newspapers are expensive to print and distribute – this is a relatively
fixed cost, one that will need to be spread among those who purchase the paper,
as the number of clients declines, the cost per paper will invariably rise. It
does appear that there are people that will pay for exclusivity – if there is
nowhere else that the news can be found, individuals will be more likely to pay
for access. The primary examples of this are the Australian Financial Review
and the Wall Street Journal – they have some limited free access to their
articles online, but most of the content requires a paid subscription.
The question is whether people will be willing to pay for
their general news again – they have been given access for free online for a
decade, it will require some change in attitudes to convert a high proportion
of readers to “paid client status”. There is substantial upside to the modern
technological capacity however, in that text, audio and video mediums can be
combined. One of the outcomes that I see as more likely is that individual
content producers will develop a following, and people will tend to pay for
their material.
Media companies such as Fairfax may become more of an
aggregator of content, with selective subscription options. They will need to
pay a premium for the rights to the content produced by a given journalist, and
both the journalist and media group will have an interest in promoting the
journalists personal brand. Between the company website, twitter, youtube and
the myriad of other mediums of distribution, people will follow individual producers
of content, and invariably pay more for the better journalists.
By leveraging access to smartphones, tablets, computers and
smart TVs – media companies will be in a position to enable individuals to
produce their own experiences – tailored to their interests, and this is
something that will be worth paying for.
Imagine a scenario where a journalist Joe Citizen is a very
experienced and well regarded finance journalist – people would be able to
login to NewMediaCompany.com.au and see his content on the front page, just as
they prefer. Over to the side, there will be a list of other journalists that
are experts in the same or similar fields, with sneak peeks at their own
content, and the option to sign up to their feeds, perhaps at a discount. Access
to a new up and coming journalist would be cheaper, until they have built a
larger following in their own right, at which point the price of following them
will rise in line with their influence.
Obviously, there are many different ways that the access
packages could be designed – however, I find it unlikely that many people will
be willing to pay for access to smh.com.au or news.com.au in their present
layout, given the fact that so much of their websites are filler material,
material that may be well read when it’s free – and bored office workers have
easy access, but not of the quality that paying customers demand.
There are a number of steps that will need to take place for
the above outcome to be realised, however I think the most likely “next step”
is some sort of cross platform amalgamation – instead of a television channel
owning/producing the news, A company like Fairfax may produce a nightly TV
program which is scheduled and managed like any other. This would drive
synergies in production, by syndicating content across TV, Web and possibly
even radio, the same news is reproduced at a lower total cost.
Of course, none of this may come to pass – but from my
perspective, it seems to be the primary viable option for newspaper companies
to ensure their continued survival into the next decade.
Cheers,
The Lonely Analyst
