Exploring the future of news media, an interview with prof. Robert Picard

The written news media have a hard time maintaining their solvability in this era of free online news. The number of subscribers dwindles, as well as the number of advertisers. News media have enhanced this trend themselves, by offering all the news that’s fit to click on their sites. For free. Adding news aggregators like Google News or Yahoo News and you’ve got a recipe for educating users that access to news is worth exactly, well, nothing.

Lately, some news media try to reverse this trend by limiting the amount of freely accessible news on their sites, allowing full access only to paying subscribers. Rupert Murdoch, owner of the News Corporation, especially favours this approach. Wall Street Journal, one of the News Corp’s stable, already uses such a model.

In this interview, we ask prof. Robert Picard, leading academic expert on the economics of media and advisor to many governments dealing with media policy issues, about his thoughts on the future of news media and copyright in online environments. Before starting with exploring the issues that the media are facing, a brief glance at the historical context sets the stage.

Introduction

Picard explains that the supply of media, over the course of the 20th century, has outgrown demand. The number of pages in newspapers has tripled in the last century. Today, there are four times as many magazine titles available then 25 years ago. On a yearly basis, over 300 million hours of radio and 120 million hours of TV are broadcasted annually. One thousand books and 1,5 million web pages are published every single day.

All these media compete for the attention of users and advertisers. As the size of the audience has grown not nearly as fast, increasingly huge amounts of content aim to grasp the attention of audiences and advertisers.

This abundance in media offerings has shifted the media market from a market driven by supply to one driven by demand. Media space is increasingly controlled by consumers rather than by media companies. New technology favours user generated content and interactivity in the form of blogs, comments and sharing on social networks. Online, news consumers are no longer dependent on the traditional format and choose to move away from its constraints. The abundant supply of free news has provided much of the public with a sense that their money is better spent on other things. Newspapers subscription declines and willingness to pay for news online is low. At the same time, advertisers are withdrawing money from media advertising in favour of narrowcasting, sponsorship and personal marketing.

Abundant content supply, reduced advertisement income and consumers preferring free news, mean that the written news media face the need to innovate and change their business. Still, change comes very hard. Why is that?

"The biggest problem is that most innovations promise both lower costs and lower income, producing less return than today. Many would rather just milk the current cow than run the risk of sending it to the butcher too soon. A second issue is that from a business perspective, newspapers are primarily an advertising delivery system and retail advertising doesn’t work very well in electronic form. Retail advertisers are sticking to newspapers and advertising sheets for the foreseeable future, so why give that up?”

Still, many newspapers feel the squeeze. They operate in a market with a low or even negative growth and often see their share in that market decline. This calls for innovation and new product development, or failing that, the creation of exit strategies. Despite this outlook, we see few experiments with new formats.

Does the media sector lack a culture supportive of innovation?

“The print industry has never had to go through regular and constant change, so this is a new situation for them. The news business consists of few well-established institutions with deeply embedded organisational structures and routines. This makes them efficient at operating the way they do, but provides an obstacle to change. Business intelligence, strategy functions and capabilities for change are absent; the capability for developing new products is limited,”

 

Obviously, in innovating there are hits and misses. What are your favourite best practices or worst practices?

“All practices I have seen so far have been pretty bad. As far as innovation is concerned, they rely on suppliers and outside persons to guide them. That seems to be bad practice to me. No one has dazzled me with a particularly good practice, but better practice is at least trying new things, dropping them when they don’t work and pursuing them when they show promise.”

So the biggest challenges are perhaps not technological change and change in user behaviour but rather the lack of a business culture that supports innovation. There are ample opportunities but the organisational structure prevents firms from capitalising on them. Does the sector have any chances of survival under the current constellation of free online news offerings, illegal file sharing and the lack of enforcement of copyrights in the online environment?

“Yes. It has to provide alternative offering itself, changing the types and emphasis of content offered on different platforms. Newspapers should start using technologies to limit aggregation and caching. Online operators are increasingly making financial deals with traditional media for content and advertising services.”

Speaking of the online environment, how do you see the copyright issue? Enforcing intellectual property is for the news business perhaps less a precarious subject than it is for the entertainment industries. Still, it is an issue that affects them as well. Are changes needed in how copyright is used and enforced?

“The online environment, left unchecked, would destroy copyright. However, we are already seeing a swing in the other direction through licensing arrangements with other players – often the result of lawsuits and criminal action. It is likely that in the future, more governments will seek some sort of compulsory licensing payment through ISPs and collecting societies much as many have done for radio, TV, bars, web radio etc.”

Prof. Robert Picard holds the Hamrin Chair of Media Economics and director of the Media Management and Transformation Centre at Jönköping University, Sweden. He is also on the faculties of the Institute of Media and Entertainment in New York and the School of Media Management, Communication University of China (Beijing).

Picard is considered one of the leading academic experts in the fields of media economics and government media policies. Click here to reach his blog on this topic.

24 March 2010