Ad Kingpin Has Advice For Media, But He’s Mostly Wrong

In the media industry, Sir Martin Sorrell qualifies as a genuine titan — not only has he been knighted, but he founded and runs the global advertising colossus known as WPP Group, one of three conglomerates that control the bulk of the advertising, marketing and public relations industry worldwide. Sir Martin was recently asked by BusinessWeek what the media industry needs in order to survive in these difficult times, but unfortunately for anyone hoping to be enlightened, the advertising kingpin’s advice is almost completely wrong.

Sir Martin begins by damning fellow British media player Rupert Murdoch’s new iPad app The Daily with faint praise, saying that charging readers for content is “the way to go,” but suggesting that the app doesn’t really work for him (Sorrell is apparently a big fan of Flipboard on his iPad). And what about the New York Times and its new subscription plan? Sir Martin says that he hopes it will work, but admits that:

There are plenty of other newspapers around the world, and even in America, which have sites … which are equally good — or can be less good and still be effective.

That’s a fairly perceptive remark, because it recognizes a key economic concept that paywalls and other subscription plans fail to acknowledge: namely, that your real competition isn’t the content provider that is better than you, but the provider whose content is good enough. Sir Martin also notes that the problem with the Internet is that “there’s so much of it. It’s highly fragmented, and most of it’s for free.” And he correctly argues that an advertising-only model is not going to work over the longer term for most content companies, since “there isn’t enough advertising to go around. Period.”

After that, unfortunately, Sir Martin’s analysis goes off the rails fairly rapidly. When asked what media companies should do to combat these problems, he says that they should begin by charging for content — even though he just finished making a fairly compelling case for why most paywalls and subscription plans likely won’t work. He also says that media companies should merge or be shut down if they can’t adapt. And what if that still doesn’t do the trick? Sorrell’s solution: government subsidies.

Really? The government should prop up media companies that fail to adapt to the online world? Apparently so. The global ad agency CEO says that more countries should take their cue from the BBC and other government-funded news outlets, and subsidize media companies such as newspapers. “The three things together: paywalls, consolidation, subsidy,” he says. “To keep you in business as a journalist, it’s probably necessary.”

And what about trying new models, or experimenting with new revenue sources, or looking for digital opportunities that go beyond just trying to recreate the scarcity that traditional media entities used to enjoy or putting up walls? What about looking to new services such as iPad apps that actually enhance the experience of reading, the way Zite does, instead of replicating an old model the way The Daily does? Nothing about that from Sir Martin — just a call for paywalls “because people should pay for content,” and for subsidies.

The reality is that for all his understanding of the advertising world, Sir Martin is just as much a part of the past as the newspapers and magazines and other content companies his agency is used to dealing with. And therefore he understands just as little about what they need to do to survive.

Post and thumbnail photos courtesy of Flickr users World Economic Forum and Giuseppe Bognanni