13 Feb 2018 19:32 IST

Turmoil in the media industry is getting worse

Los Angeles Times was sold to a cancer-researcher billionaire Patrick Soon-Shiong | Reuters bloncampus

Company valuations may go lower and individuals with deep financial pockets will have to rescue them

The last few years have been terrible for media properties worldwide, and especially in the US.

This week, the legendary Los Angeles Times was sold to a brilliant cancer-researcher, billionaire Chinese American doctor called Patrick Soon-Shiong. Some of the new owner’s business dealings have been reported as controversial, but more importantly, he has no experience in running a large media powerhouse like the LA Times.

A few years ago, the even more iconic Washington Post — of All The President’s Men fame — was rescued from bankruptcy by Jeff Bezos, Amazon’s founder. He used his private funds when he paid $250 million for the company.

Newspapers, TV and radio stations are facing turmoil unlike anything they have seen in decades. Faced by an extremely fast news cycle, they are forced to report on their websites at near-instant speed, with text, video and even commentary. Then they promote their stories on various social media sites such as Facebook, Twitter and Instagram, all the while hoping that they get things right.

Except that they often get things wrong. CNN, ABC News, NBC News and Fox News have all had to retract stories, some on multiple occasions, in the last few months. The Washington Post, the Wall Street Journal, Bloomberg and The New York Times have all printed corrections just in the month of December.

For generations, newspapers have hewed to a vaunted principle of separating fact from opinion. News appeared throughout the paper, and editorials, opinion columns and letters appeared in a dedicated section of the paper. The firewall between news and the editorial was solid and unbreakable.

Hater turns saviour?

But facing basic issues of survival, media outlets have increasingly turned partisan, catering to the needs of their paying customers. Both The New York Times and the Washington Post have made Trump-bashing essential not only to the opinion columns but news as well.

CNN and MSNBC exploit public anxiety and air anti-Trump news and commentary on a 24x7 basis. Viewers and readers are drawn to these outlets because they find something that they like to watch or read. Hard news has slowly become infotainment, with fake stories included as bonus.

Hated and reviled by mainstream media outlets, Trump is actually serving to be their saviour. The Post’s tagline, ‘Democracy dies in the darkness’, is helping it enrol online subscribers and keeping it alive.

The New York Times, while reporting a fourth quarter loss as print revenue falls to abysmal lows, said that its online subscription revenues are driving the paper’s rebirth. Take away Trump from the equation and the Times will likely teeter close to bankruptcy.

Free vs. paid

Adding to the turmoil are new entrants as previous barriers to entry are no longer relevant. With the advent of citizen journalism, blog posts and YouTube channels, anyone with a $20 video camera and a laptop can become famous. Julie Borowski, a private citizen, has over 90,000 YouTube subscribers, to whom she delivers her political commentary to. How can paid media compete with free?

This brings us to another aspect of free. Ever since the beginnings of the internet, people have associated the world wide web with ‘free’. Apart from e-commerce sites, almost everything else on the internet has been available at no cost.

Product cannibalisation

Newspapers realised they had to have a presence online because not doing so would mean losing readers forever. Gone are the days when news was consumed only once, during morning coffee. Newspapers then started offering digital updates throughout the day.

But charging subscribers for online news was a risky proposition — who would want to pay twice for the same content? So newspapers began opening up their news articles and editorial pages to the world for free. This amounted to the biggest case of product cannibalisation in the history of modern business. How can your paid print newspaper compete with your own digital publication that is instantly available on multiple devices, archives-searchable, rich with video content and external links — and most importantly, free?

The holy grail was supposed to be online advertising — or so the thinking went. Offer your best content online but mix it with a rich collection of ads — display and text. Online ads bring in two revenue streams: when an ad is seen and when an ad is clicked. The world’s largest media outlets — including almost all of the big names in India — have a robust online presence hoping to exploit these online clicks.

But the average consumer has been well trained to only accept free content and not look through an ad, let alone click it. When media sites experimented with pop-up ads, tech companies brought out pop-up blockers. When media sites flooded their pages with display ads, technology companies released free ad-block browser add ons. With so many blogger sites screaming for revenue from the ads, the cost price per thousand impressions has been driven woefully down. It is so low that no site can survive on ad revenue alone.

The story of paywalls

This is why The Wall Street Journal, The New York Times and even the Washington Post introduced paywall. The Journal’s website is extremely strict. Access to the site is blocked to all those who do not have a subscription. The risk with this approach is that link referrals — that is, when a subscriber posts an article link to social media or shares it with friends — do not work. Because the person clicking on the link is also expected to be a subscriber.

In the analogue world, this is akin to shutting off ‘pass-through’ readership when the same newspaper is shared by everyone in a household, neighbours included.

Also, link referrals are important because news aggregator sites like Google and Bing feed readers to media sites. By shutting them out altogether, it is hard to attract new readers. Without new readers, subscription revenues cannot grow. Without new revenues, media sites cannot attract talented journalists and columnists, or even improve user experiences. This is a horrible spiral from which there is no easy escape.

News and ads

Finally, there’s Facebook. Its success depends upon people being logged in all the time. This is why the social media giant is aggressively courting media companies to post articles which can be read on a person’s newsfeed within Facebook.

But if articles appear on Facebook, what happens to the media company’s website? Who would visit it to click through ads? As I said nearly two years ago, Facebook envisions a world in which media companies will become subservient to it and provide it with content in the hope that ad revenues that Facebook shares with them is large enough to survive.

No one has yet solved the conundrum that media companies are in. Until then, company valuations are bound to go lower and individuals with deep financial pockets — Bloomberg, Bezos and Dr Patrick Soon-Shiong — will have to step in to rescue them as trophies. Many were not quite as fortunate. About 160-odd newspapers in the US have closed down entirely — a prospect no one had predicted when the Netscape browser was launched just 22 years ago.