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!