Media industry lifecycles

   

This is a really nice chart from The Economist, Dec 8, 2012. It nicely shows the overarching life cycles of major media concepts.

We can speak of a media industry from the end of the 18th century when print slowly became a mass market. Media was dominated by newspapers for a long time (although it took time for the modern newspaper to emerge) and advertising represented increasingly large revenues. The newspaper has been challenged by the concept of "broadcasting" in the 1920s starting with the radio industry. Television, of course emerged as the ultimate broadcasting medium after WWII, in fact launched by the dominant radio broadcaster RCA. From 1950 to the end of the century TV broadcasting takes over the newspaper (and advertising with it). In the last couple of years Cable TV drives growth but the concept of a broadcast medium is maintained. All this changes at the start of the new millennium with the birth of "mass interactivity" over the Internet. It starts with computers and websites and now mobile but we are really talking about the same thing. And my bet is that broadcasting will fold naturally into mass-interactivity where we'll reach major TV channels through the Internet on demand. 

Google News in Europe

It seems that European legislators really want to go after Google, especially Google News. Recently, Germany has introduced a proposal that would force Google to pay a fee when showing a snippet of a news story among the results. This move comes after the similar French proposal mentioned by Miklos in a previous post.

Going after aggregators is the latest attempt of the news industry to stay afloat after suffering losses in the online world. But is this really the solution? Would this kind of legislation even help publishers? Their argument is that if an aggregator makes money from advertising using the publisher's content, the aggregator should pay for it, otherwise it is like stealing. But this argument fails to take into account that aggregators and publishers live in a symbiosis. This ecosystem is not trivial, therefore requires careful examination. This is what we do in a paper with Chris Dellarocas and Bill Rand, that has been just accepted to Management Science. We show using an elaborate model that while aggregators, such as Google, do benefit from the content created by third party publishers, aggregators have important positive effects on both consumers and content creators.

First of all, aggregators drive traffic to the content. What is great content worth without people finding it. Think about the Internet before and after the wide-spread use of search engines. That is, while aggregators may appropriate some of the value created by the original content, aggregators create demand for the content. A second more subtle effect of aggregators is that they make publishers compete harder. If consumers can easily find the best content out there, publishers have to invest more in creating high quality content. While this may decrease publishers' profits, it definitely benefits consumers.

It is clear that regulators should be careful and look at both sides of the equation. Of course, we cannot forget that European goverments want to protect their national publishers against the evil American giant. And the latest allegations that Google managed to essentially aviod paying taxes on profits made in Europe don't help its case.

Traditional media and user-generated content

 

Traditional media outlets started to regulaly publish content form the web. CNN's so-called  "distraction page" is shown below...

 

Why is this happening? Clearly, even serious national media outlets cannot afford to lose out on the huge amount of user-generated content that is available every day. Importantly, some of this content becomes major news (e.g. the famous "gangnam style" song that has been seen by over half a billion users and generated a lot of debates beyond simple entertainment). In this domain, however, it is not clear that traditional media outlets have advantage over websites that are specialized on monitoring the Web for emerging stories. Barriers to entry are low and whether one hits the right stories largely depends on luck at least for now.

It is interesting to see what will be the long-term result of this competition? Will traditional, "serious" news, generated by professional reporters survive the era of user-generated content? Maybe yes. If competition between online news sites doesn't manage to reduce the noise or creates even more of it, then there will definitely remain some place for, what people call, "serious news". Under another scenario however, competition may lead to a much better selection of relevant stuff from the noise in which case it is going to be difficult for professionals to compete with user-generated content. Suspense!

Google and France (and Europe)

Today, the French government announced that it will introduce legislation requiring Google to pay a fee to French media sites for listing their content pages. Google promptly responded that in this case it will stop listing French media sites in his search queries. CNN's report on the conflict can be read here: http://money.cnn.com/2012/10/21/technology/google-french-links/index.html?iid=obinsite.

The proposed French government policy is completely stupid and extremely risky not just for the French media industry but for the whole country's image and relevance in the world. It is hard to understand the logic driving the policy - other than "let's grab cash wherever it is". Not surprisingly, Germany - another country with a strong statist tradition - is considering the introduction of similar laws. Google actually generates value to French media sites by driving interested browsers to them. If these potential consumers click on the French sites' pages, presumably, they will view relevant content and, along the way, generate advertising revenues. Why should Google pay the sites for listing them in the search queries? One could even argue that the opposite should happen....

One way to evaluate the likely outcome of the conflict is to ask: "who will lose more (Google or the site) if Google stopped listing the latter?" The answer depends on how exclusive and relevant the site's content is? If it is unimportant or non-exclusive (as is the case for most French or other continental media sites) then, clearly, the site loses more. The searcher will just go to the next item on the search list to find the same content, be it a blog, a competing site or another source. It is only when the site's content is unique and important that Google loses credibility by not listing it. But in this case, does the site really need a tax from Google? Clearly not. Google will accelerate the audience's reach to the site, which will generate more advertising revenue.

The broader question in this conflict is France's credibility and influence. For about a century the country has been steadily losing influence in the world partly because it refuses to endorse key features of modern civilization. Ideas such as "the market economy", "English as the language of international exchange", "Globalization and free trade", etc. are concepts that France is forced to adopt (usually after putting up a pointless fight) rather than enthusiastically endorsing them as drivers of progress. The current fight with Google - one of the first marvels of the 21st century's progress - is a similar pointless and embarassing move that has for only effect the setting back of France to the last century.