Stand by for the next round of publishing industry versus Internet platform wars. At its heart might be the viability of journalism.
I read this week that the News Media Alliance in the United States is seeking permission to negotiate collectively with Google and Facebook to carve out a new journalism business model. The media outlets want to avoid antitrust rules that might prevent the industry from working together to take on what they call a digital duopoly. They believe Google and Facebook have too much control of online advertising. Around 75% of online ads are placed through these two platforms. And that number is growing.
This brings back memories of the Press-Radio wars. During the 1930’s, newspapers fought hard to prevent radio from stealing their advertising. The main force behind the Press-Radio Wars was the American Newspaper Publisher’s Association. Founded in 1887, ANPA is also the main organization behind the creation of the more modern News Media Alliance, which was formed in 1992. You can read my article about the Press-Radio Wars and the difficulties the newspaper industry ran into when it tried something similar.
Many legacy business models have been destroyed by the Internet. These include almost all of the entertainment publishing industry and now much of the broadcast/cable industries.
Journalism Business Model Challenges
Here’s the heart of the problem. Consumers view news as free. But journalism costs money.
For much of its history, the cost of journalism was just part of the cost of mass media. Mass media has never really had a consumer price. Most of its costs were covered by advertising, which in turn was baked into the price of retail sales. For example, when I managed radio stations, we knew that about 0.8% of retail sales in any market would be spent on radio advertising. By the way, that has dropped to around 0.4% today. And, therein lies the problem. More and more advertising dollars are just bypassing traditional media and going straight to Google, Facebook and other platforms.
There are two other forms of revenue for journalism. One is subscription, such as the price you pay for a specialty news channel on cable TV or for a magazine. However, subscription fees rarely cover more than a small portion of costs. A few of the major players like the New York Times can get big subscriber revenues, but most media can’t. The other form of revenue is taxation, either for state owned or subsidized publications. Not sure how well quality journalism can survive political control, though.