Blog Post

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

7 Responses to “Ad Kingpin Has Advice For Media, But He’s Mostly Wrong”

  1. This argument is just getting so old. Every bit of news on the web (notice, not commentary, not opinion, NEWS) is generated by a reporter. Most reporters are supported by the traditional media that bloggers so love to denigrate. You can’t help but not see the irony that this interview was done by Business Week, a traditional media outlet.

    These men and women cannot work for free. With the arguments above, we are hurtling towards a future where news is dead, and along with it, the information that paves the information superhighway.

  2. Sorry to disagree. Sir Martin is totally correct when he says 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.” The world has gotten use to the Internet providing “Free” content, and no doubt that will continue. But much of it has become ‘crap’ (not all, as there is some amazing stuff) but much of it is trite garbage. Paying for content (if you choose to do so) may just provide you with ‘better’ content, or at least the content you ‘want’ to see, rather than having to navigate through all the banal, trivial stuff. Though I sometimes find the BBC news reporting one-sided, and misinformed, their programming is amongst the best in the world. In Canada, the same can be said for the CBC national TV. And the content by out TV Ontario station, paid for by public donations and by government funding is superb – if not brilliant at times. Money can buy happiness.
    While you say that “Sir Martin is just as much a part of the past as the newspapers and magazines…. And therefore he understands just as little about what they need to do to survive”, I don’t see your article giving any smart advice on how newspapers and magazines can survive? But then again, what businesses have you built? It’s easy to slag off what someone says, but if you wish to do so, give me some content I can sink my teeth into.

    • What you (and Sorrell) seem to miss is that all of that “content” is provided by people who are seeking profit (And, btw. I have built both digital and print businesses)

      Moreover, the comment “Sir Martin is just as much a part of the past as the newspapers and magazines…. And therefore he understands just as little about what they need to do to survive” is not off the mark. WPP has been left in the dust in digital by Publicis

      (Disclosure: I used to work for a Publicis agency and still maintain close ties there).

      – Greg

  3. kwyjibo

    He’s looking at this from a UK centric view – ask what UK readers and viewers what they think of the BBC, and the feedback is highly positive. Ask them whether they’d prefer the publicly (TV license) funded model or the divisive entertainment-news of the US, and they’ll pick the BBC.

    A functioning democracy requires an informed populace which requires a strong press. If the the market destroys this, then democracy is eroded, and we end up with an echo chamber of propaganda that merely reinforces misplaced opinions rather than challenging them.

    Sure, there’s the argument that if we remove the subsidies/BBC – then that means even greater chances for the remaining market players. But we’ve already seen what this produces, and what it produces is not as strong as what it is replacing.

    There is a place for subsidy in our press.

  4. Government subsidies? Newspapers barely went against the Government in the Wikileaks case. I can’t imagine how they’d act in such situations if they were actually subsidized by the Government. Isn’t the purpose of “free press” to actually be free from the Government?

  5. Mathew,

    Good post, but I actually don’t think you go far enough.

    There’s a persistent myth that media companies used to charge for content and somehow got hoodwinked into “giving it away” on the net. Nothing could be further from the truth.

    Broadcast companies certainly have a long history of being advertising supported and print companies, while seemingly charging for “content” actually greatly subsidize print and distribution. In reality, “free” is a huge step up for them (especially magazines)because advertising is supporting their huge cover price deficits. Free Newspapers, of course, have been one of the big media success stories of the last decade.

    Why? Because consumers are worth more to advertisers than content is worth to consumers (in most cases). Anybody who ignores that fact will be undercut by someone else.

    Of course people would be willing to pay for content that they enjoy and is valuable, but why should they? It is both supply and demand that determine price, you can’t just look at one side of the equation.

    Is advertising a sustainable business model? Well, it’s done pretty well for the last 100 years or so and there seems to be no shortage content in sight.

    – Greg

    • Thanks for the comment, Greg — I agree with you about the myth that content companies are somehow “giving it away” now when they used to charge for it. The reality is that advertising has carried the freight for content for a century or so. There’s just a lot more content now :-)