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Summary:

As the recent report from the FCC on the future of media makes clear, describing the industry’s problems is a lot easier than coming up with solutions. Washington Post managing editor Raju Narisetti doesn’t have any answers either, but says now isn’t the time for incrementalism.

In a recent piece for Forbes magazine, Washington Post managing editor Raju Narisetti looks at the challenges that mainstream media of all kinds are facing — falling circulation, the gap between traditional print advertising and the smaller revenues from online advertising, and the difficulties of trying to be digital while still running a legacy business. So what are his solutions for what he calls the “broken business model of quality journalism?” Narisetti doesn’t really have any, which isn’t surprising: as the recent report from the FCC on the future of media showed, it’s a lot easier to describe the problems facing the media industry than it is to come up with answers. But one thing is becoming clear: incremental changes are not enough.

Narisetti says in his piece that while many media companies such as the Washington Post are growing their online audiences, that doesn’t even come close to making up for the loss of print subscribers, because one generates revenue and the other doesn’t:

The print subscribers we lose are typically loyal readers who spent 40-plus minutes with The Post each day and have done so for years. The majority of online readers — both new and old — are promiscuous, read tiny morsels in under five minutes per visit and think the same Post content that others pay for in print is not worth paying for online.

Paywalls and apps aren’t the answer

The WaPo editor also notes that while many mainstream media companies have gotten good at cutting costs, they have “consistently failed to imagine and then incubate a Craigslist, a Groupon [or] a Monster.com… nor are they any closer today than they were last year in fixing the broken business model of quality journalism.” And while charging readers may seem like the right solution, whether via paywalls or iPad apps, Narisetti argues (correctly, I think) that there are some serious issues with those answers as well, including:

  • A metered model makes your business susceptible to the will of a few readers — those who consume the most articles/pages. Often, less than 5% of these kinds of visitors account for nearly 50% of your page views. And they have very little barriers to exit.
  • (and)

  • Aggregators like Huffington Post will still find ways to deliver your content for free and often with more engaging technologies since they don’t have to invest much in content creation.

Narisetti also makes a point that I think many newspaper and magazine publishers miss, which is that media companies are trying to charge readers for what amounts to a traditional website-reading experience (or an even more crippled one, given the “walled garden” nature of many iPad apps) at the same time that new display and distribution models such as Flipboard and Zite and TweetMag are offering something much more appealing, and free.

Scrolling on Web sites has always been a poor experience for consuming news. Now, just as new devices and digital experiences — none invented by major news brands — create richer engagement outside our sites, we are talking about charging readers for sub-optimal Web site consumption.

Arianna Huffington by World Economic Forum

When it comes to solutions, Narisetti suggests a couple of potential answers, including some kind of licensing scheme that would take advantage of the aggregation of mainstream media content by outlets such as The Huffington Post. But he admits that there’s no guarantee any of these will work — which is good, because trying to license content to web aggregators seems like a losing proposition to me, or at least not the kind of business that is going to produce a huge amount of income for traditional publishers.

An imagination deficit

In terms of what media companies can do, I think the Washington Post editor is right when he says that the biggest challenge facing the industry is what he calls “an imagination deficit.” Instead of just trying to charge for existing content, he says more organizations need to take risks with their business model.

The problem is that most mainstream media entities are not designed for experimentation, and in many cases the way they function hasn’t changed noticeably in decades. Few have taken as dramatic a step as the Journal-Register Co., where CEO John Paton has reversed the traditional structure of a paper and put digital staff in charge of the entire operation. And only a few have set up the kind of “skunk works” labs or spinoff units that can experiment freely or come up with things like News.me, as Anil Dash of Activate Media recommends in a presentation I wrote about recently.

It’s true that some media companies are making small efforts to change the way they do things, or trying new tools or ways of reaching users — the way that Brian Stelter is with Tumblr at the New York Times, or the way that his colleague Nick Kristof does with his use of Facebook (ironically, Narisetti himself caused a minor firestorm on Twitter in 2009 when he made some critical comments about the Washington Post‘s new social-media policy, and later briefly cancelled his account).

But these kinds of experiments, however worthwhile, are largely incremental changes. And as Narisetti correctly points out in his piece, during times of significant disruptive change, “there isn’t time or room for incrementalism.” Does that mean the Washington Post is planning some ambitious online moves? Let’s hope so — someone has to.

Post and thumbnail photos courtesy of Flickr user David Reece

  1. The key message in John O’Donovan’s ( pressassociation.com ) keynote presentation at Semtech Conf last week in SF was “if you value content, you will manage it semantically.”

    Doing this will address Narisetti’s key point “during times of significant disruptive change, there isn’t time or room for incrementalism.”

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    1. Thanks for the comment, Steve — but I’m not sure what you mean, or how managing content semantically will address Narisetti’s comments about incrementalism.

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      1. Matt let me elaborate a bit more to show you what I quoted applies to Narisetti’s comment about incrementalism.

        My notes from John O’Donovan’s excellent preso.
        – Get org to understand content strategy
        – Media content is messy
        – complex relationships between text, images, video
        – semantic models are simple and elegant
        – need to analyze and link content in more intelligent ( and cost effective ) way using semantics
        – need to coalesce different content and data models
        – integrate existing systems but with right context
        – concept extraction is key with semantic tagging tool + linking of content + annotation + more
        – content and metadata ( abstraction model ) should be separated
        useful content metadata model
        – Reduce costs ( no need for data mining or analytics ) with higher value roles

        Net Net: if you value content, you will manage it semantically

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    2. Steve,
      Managing content semantically is helpful, but it doesn’t solve the root causes of the old media crisis.
      I run a semantic news platform company. It’s an enabler, not a savior. I’m with Mathew on this one.

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    3. The most elaborate metadata effort I’ve seen is the NY Times and it hasn’t seem to help them much. They would have probably been much better off with a basic RDF implementation.

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  2. To be honest, I think you’re on the wrong track here. There are some very good reasons for incrementalism: employees, consumers and advertisers.

    It’s easy to say, “hey, let’s go for radical change,” but they usually fail (although that fact is often lost in the excitement of a few runaway successes).

    It’s also important to remember that given the scale of traditional media business vs digital business, almost anything you do online, short of creating a new Google or Facebook, will be incremental.

    There are many ways to cope with a rapidly changing context and a big CEO led transformation like the one Bill Gates did in 95 is only one of them.

    You can make acquisitions (look at Publicis in the marketing world), spin off a skunk works (like IBM did with the PC), or just take partnerships and minority stakes (like in the pharma industry).

    The point is, it’s easy to say “I’m tired of swatting at flies…” let’s do something big! However, as recent history has shown, that can lead to real disaster.

    – Greg

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    1. Thanks for the comment, Greg — but I would argue that lack of change and/or incrementalism are at least as dangerous to employees and others as any radical change, and possibly even more so. Besides, we haven’t seen much radical change in the media industry in recent memory, so it’s difficult to judge :-)

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  3. + 1 for Greg. Besides, the problem is the news came online as free, not that the reading experience is so horrible. If it’s great content, it’s great content. It doesn’t matter how you read it. Now, if you want to say you’re going to start charging on these new platforms because people aren’t used to them yet and you want to set the stage right away for paid content, by all means. That’s very smart and a great strategy. But to say it’s about a sub-optimal vs an optimal reading experience is ridiculous. We need to pay for great content or it will go away. Simple as that.

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  4. Mathew,
    Good that you’re bringing-up this topic again, because this crisis is not over. The “old” media has to change: 1) people, 2) processes, 3) technology. Barely tinkering with one or the other is not enough. All 3 have to be rocked at the core, otherwise, it’s never enough and will look like incrementalism.

    Also, the whole market segmentation is changing. The local vs. National / international players landscape is getting re-shuffled & the outcome is not finalized. If each focused on their strengths & let go of other parts, then the industry would emerge stronger.

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    1. Agreed, William — thanks for the comment.

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      1. Hold on, there! You can’t just throw this stuff out there without looking at the actual businesses and the truth is that most “old” media companies are still healthy, growing businesses with good margins.

        I was writing a lot about this stuff last year when it was a bit more of an issue and did a lot of of research. Three salient points come to mind:

        1. Most of the red ink during the crises was due to write-downs of investments rather than a drop in operating earnings (yes, this one surprised me too).

        http://www.digitaltonto.com/2010/the-winners-curse-why-media-companies-really-underperform/

        2. The traditional media companies that do well in digital seem to do it quietly by building skills and improving their online businesses over a period of years. Think about Time-Warner: Radical AOL acquisition – disaster! Old media brands online – success!

        http://www.digitaltonto.com/2010/digital-strategy-vs-digital-skills/

        3. On the marketing side, digital media has had remarkably little impact outside of direct response advertising (which is why almost all of digital media’s share gains have come from newspapers).

        http://www.digitaltonto.com/2011/why-almost-everything-you-hear-about-digital-media-is-wrong/

        So it’s actually very hard to make the business case for radical change (even in the newspaper sector, free newspapers have grown exponentially over the past 15 years and I’ve heard that the major newspapers have been doing much better, although haven’t really looked into it).

        So, if you’re running a media company and your core business is growing a bit slower but that growth is still worth more than the growth in digital, radical change doesn’t look so attractive.

        Finally, regarding radical change, didn’t WaPo just royally screw up their “radical” redesign? Didn’t Pepsi drop to third place (behind Diet Coke) after their radical social media strategy?

        You can’t just look at one side of the equation.

        – Greg

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  5. Since the big telco pipe-delivery guys gouge and gouge for access to “their” networks (the ones they charged us for, and keep charging us for on land line and wireless ‘subsidy charges’) why aren’t they an income model? After all, without content, their pipes are pretty much useless. Since they benefit from all the traffic through their “content delivery system” I find it interesting that no one’s asking them for money.

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  6. It’s as much a culture issue as it is a financial, technological and operational issue. Big resources and new talent can be allotted to face down oncoming issues like the one identified above, however large ships sometimes turn slow. It’s hard to say which rate of change and adaptation are the right ones for all kinds of media companies, but the ones who do inevitably shift in time and remain profitable or above water will come out on top. Great, thought provoking post Mathew.

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    1. Thanks, JR — appreciate the comment.

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  7. Hi Mathew, Raju Narisetti’s article was originally written for Forbes India edition – its 2nd anniversary special.

    Check out http://business.in.com/article/defining-debates-of-2011/raju-narisetti-news-and-world-wide-web/25312/1

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  8. While looking at some files from 1994, I was taken aback by the proposals I saw then and media today. It is truly mindblowing that the definition of greatness for media has changed so little in the past 15 years. The multimedia prototypes that Roger Black created for @Home could be dropped into today’s iPad prototypes.

    For the most part, the media world has continued to operate in a reactive mode, meekly taking what the world gives them and hurling stones at those that would upset the status quo.

    I believe that if the 20th Century was about learning to scale the production of stuff, the 21st Century is going to be about scaling our ambition. Forget tepid imitations of Flipbook, Pointcast, Facebook, etc…kneejerk aggregation isn’t even working for libraries. Instead, media must rethink how they collaborate and coordinate with their network of advertisers and sources, and use that as the platform and API for tomorrow’s world of immediate gratification.

    For a look at tomorrow, today, one would do well to visit Vail Resort and check into their Epic Mix program. Each ski pass acts as a gateway to a sidebar experience that complements the snow sports lifestyle. Every jump, every run and every fellow sports enthusiast you meet is no longer predictable, as this sidebar experience opens up new vistas that far exceed the average experiences we’ve all seen before.

    That is the media experience we’ve known before, but redefined: a trusted friend and advisor, always ready to help make sense of an increasingly complex world.

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