Internet Challenges for Media Businesses

Media businesses have been slow to react to change, and for good reason: they have seen innovations and technological revolutions, from the birth of the printing press to the rise of the Internet, and while public consumption of some media has declined, it has been a very slow decline over a long period of time.

Even so, the emergence of the Internet has led to major changes in the structure, culture, business models, and content of other forms of media, who have begun to utilize the medium to support their operations in other media. This chapter explores the history and the present, and considers the future of the media industry's relationship to the Internet.

Early Efforts: Print Media

Even before the Internet went commercial, major media companies were publishing via online services (AOL, Compuserve). However, in this early model, there was a clear method of earning revenue -as a fee from the service for republishing their content, or a charge to the individual reader for accessing it.

When the Internet came along, the revenue for content disappeared, and newspapers moved to an advertising model (a surcharge to advertisers in their printed publication to also have their ads appear online), which kept them afloat for some time.

However, the newspapers were very clumsy - a nice analogy is that they were "like Lawrence Welk trying to dance at a rap concert." However, by the end of 1995, at least 60 newspapers had their own Internet sites.

In most instances, their Web sites were "shovelware," republishing the content of their print publications. The one noticeable exception was the Raleigh News and Observer (nando.net), which augmented their text content with interactive features.

Early Efforts: Broadcast Media

In the early days of the internet, bandwidth was insufficient to serve broadcast media content.

Technology advanced to the point that, in 1994, it became possible for radio stations to do low-quality simulcasts online, but were largely limited by interference from the music industry, which eventually intervened to demand royalties on online broadcasts (in spite of the fact they receive none from radio broadcasts), so all but the largest radio stations shut down their Webcasts.

The first online video from major media was a collaborative effort of Microsoft and NBC, but at that time, it was restricted to brief, low-quality clips.

Niche for Mass Media Online

Most mass media outlets serve largely identical content to geographic markets - in some cases, exactly identical (in the case of local television stations in the same network). Even between the various media, the primary differentiation is in the physical medium through which they are delivered.

Said another way, it is not sufficient for existing media merely to dump their content online. Not only is this woefully inappropriate (like creating a television broadcast that was a picture of a newspaper), there would be no significant difference between them. To survive online, media would have to adapt to the medium - its capabilities, and the needs and desires of its audience. The degree to which traditional media can adapt to serve the Internet as a niche market, would determine their success.

Online Media Users Grow, Off-line Media Recede

Consumption of traditional media was on the decline even before the advent of the Internet: subscriptions to newspapers and magazines, the size of radio and television audiences, all have been declining slowly. The Internet is not sole to blame for this decline, but the decline has been more dramatic since its advent.

Statistics are provided to show the decline, quite a lot of them, in case further proof is needed.

Organizational Transformation

"Old media" organizations have been attempting to follow their audiences online, and doing so has required some organizational change.

Media organizations attempted to leverage their existing resources: writers, photographers, layout artists, advertising sales, etc. to repurpose content for the Web. Others augmented their staffs, creating a separate digital division to approach the Web as a green-field venture, with some intermigration of staff among the various channels.

In addition to the structural changes, the new media requires a distinctly different culture, which is emerging as dominant. "For an entire year, I just couldn't remember [the man's name]. Now, the online guy is the most important guy in the room."

Bullet points about the difference in culture are mentioned: a 24/7 publishing cycle, managing distribution though multiple channels, employees who identify more with the channel than the business, direct and immediate feedback from the audience, ethical conflicts, speed versus accuracy, etc.

Business Models Affected

Taking on the Web required traditional media outlets to adjust from a cyclical business (producing a product that is released daily, weekly, or monthly) to one that requires constant feeding.

On the revenue side, online subscriptions to media sites are virtually unheard of, and the advertising rates are variable (based on a click-model rather than a flat fee) and lower than in their traditional media.

The Internet also breaks from traditional segmentation strategies - a newspaper no longer serves a specific geographic audience, and a magazine no longer has a specific fixed readership.

The downward trend in readership and revenue did not spur senior managers in traditional media to react, and the problem was largely ignored by them until the second-largest newspaper publisher, Knight-Ridder, put itself up for sale in 2005, and the Tribune company had a reverse-IPO (going back to a private company rather than a public one) two years later.

In many instances, the Internet was seen as "the enemy" of traditional media, though comments from industry giants seem to believe that it was a battle that would be fought in the future rather than the present - i.e., they would retain their traditional readership for traditional media, and younger audiences would turn to the Internet.

Others regarded it as a different animal altogether, and just as a newspaper does not feel the need to compete for readers with a television statement, so did they feel that the audiences were not mutually exclusive: just because a person chose the Web channel for certain kinds of information and entertainment did not mean they would abandon traditional channels.

Now that they are attempting to transition their business, at least in part, to the new media, they are struggling to do so. They simply don't know how to turn a profit (or even cover their costs) online. Four basic strategies have been attempted:

None have been entirely successful. Even in the present day, traditional media have yet to find a profitable business model for their online services. These operations are generally run in the red - or if they are not losing money on their own books, it is because the cost of content development is attributed to the traditional channels.

Experimentation is also underway example, the television industry, which largely used the Web to promote viewership for their broadcast, is now productizing its content, selling episodes of programs through iTunes, though they remain concerned that delivering video online (in a "national" format) may be detrimental to their existing audiences (and the ability to deliver local content) - and that it may enable production companies that produce serialized entertainment to bypass them as a distributor.

The Wall Street Journal seems to be an isolated success story. It has been able to provide a subscription-based site that generates substantial income, and has drawn sufficient readership to remain appealing to advertisers.

Observable Content and Format Changes

When mass media wandered onto the net, there was not much change in their content. Their stories, photos, and media were merely reformatted for the new medium ad shoveled online. Competition from other sources is causing a change in this approach, as content must be developed specifically for the medium in order to succeed against the Web-native content.

Additionally, the barrier to entry in the new medium is extremely low: anyone (even individuals) can produce content without the significant investment in infrastructure that is required in traditional mass media channels. The "citizen journalist" has been a formidable force and citizen journalists as a whole have provided much broader and immediate coverage than traditional media.

Traditional media scoff at amateur efforts, feeling that amateur reporters lack the credibility of mass media - but a 2005 Gallup poll found that only 28% of Americans have confidence in television news or newspapers. Also, the Internet is dissimilar to traditional media in that it is not a one-way broadcast, but a multi-party conversation, so an amateur journalist has many editors and collaborators to support (or discredit) his story.

The resistance, even hostility, traditional media have shown to audience participation is, in that way, an obstacle to their success, an a detriment to their credibility. In recognition of this, more and more media outlets are open to including reader comments and reactions, but generally in a way that's removed from the "real" story. As such, it remains a sideshow rather than an integral part, which differentiates traditional media from Web media.

Traditional media remain strong in the entertainment sphere, and there have been few attempts to date of amateurs attempting to create the equivalent of a feature-length film or television series. However, the popularity of the Blogosphere and media-sharing sites such as YouTube are analogous to reality television programs, and their audiences continue to swell.

And yet, the media seem dismissive of such phenomena, dismissing them as a "youth space" of interest only to adolescents. However, this echoes their disdain for the medium in general, and exemplifies the same short-sightedness: as these "youth" mature, will they grow out of their preference for the online medium, or will traditional media find that they have missed their opportunity to engage their future audience.

What's Next

The question remains: will traditional media executives continue to stand by and watch their audience and authority dwindle? To date, they have not shown an earnest effort in gaining a foothold online, and it is suspected that they may never become "true digital natives."

At best, one pundit suggests that the two might combine to overcome each of their weaknesses, though there is no evidence that they are willing to do so, nor any sign of progress in that direction.