Monday, September 14, 2009

Malcolm Turnbull On Death Of Newspapers

Turnbull writing on the fall of newspapers, and the controversy over mainstream media charging readers for news content, in The National Times :

It was Rupert Murdoch who shrewdly, if gloomily, predicted: "The internet will destroy more profitable businesses than it will create."

And there are few businesses more vulnerable to the internet than newspapers, especially those dependent on revenues from classified advertisements.

It is hard to imagine many people poring through hard copy classifieds if they have access, as most do, to the speed, functionality and comprehensiveness of online classified sites.

While the demise of newspapers has been greatly exaggerated, the trend is certainly against them.

As an avid consumer of news, I can say that I only buy hard copy newspapers nowadays out of habit.

The vast bulk of the news and opinion I read I have received electronically – much of it before the newspaper itself actually finds itself to my front door.

We all understand that the circulation revenue of most publications, and certainly all newspapers, was always woefully inadequate. The newspaper was a cheap, on occasions free, platform upon which to sell advertisements both display and classified.

A similar observation could be made of free to air television, although there the oligopoly was a function of regulation.

The internet has changed all that. As broadband, especially wireless broadband, becomes more and more ubiquitous the barriers to entry to compete against free to air television, newspapers and magazines are evaporating.

From the consumer's viewpoint there is the prospect of almost infinite abundance of information and opinion. Our son in Hong Kong reads the Australian media online with the same ease as he, and we, are able to read the New York Times, the Financial Times, Wall Street Journal - not to speak of the South China Morning Post.

And the access to opinion is not limited to those big names. Increasingly opinion leaders have their own online blogs. If you want to get an expert, often contrarian, insight into the Chinese economy for example you can go to a specialist blog by a professor at Peking University and enjoy not just Michael Pettis' views but also a vigorous debate and commentary on every post.

The days when only a handful of media companies controlled access to the media megaphone are fading from view.

There are four main players in this game and it is interesting to consider each of their positions in the old and new worlds.

The author of the content – the journalist for example – faces the challenge of news organisations with diminishing revenues. But he or she still has a valuable and important contribution to offer. People want to read Annabel Crabb or listen to Alan Jones. But what about the humble news reporter whose byline is less memorable or compelling? The advertiser has it made. The avenues for spruiking their wares gets wider and cheaper all the time. The internet offers the opportunity of very precise targeting too – so its all upside for the advertiser.

The consumer too has it made – content is becoming more and more diverse and almost all of it is free. Those sites which try to charge big money run the risk that they drive down traffic which then reduces their attractiveness to advertisers who after all are only interested in eyeballs.

The publisher, the big, established media company, has the most to lose. It is all downside. The reason the Sydney Morning Herald could charge a premium for its classifieds (or indeed its display advertising) was because it had a large number of dedicated readers for whom there was no, or very few, alternative mediums – now there is an enormous range of alternatives most of them offering vastly superior functionality.

Many traditional hard copy publishers have sought to move into online publishing, but in doing so they have arguably only hastened their own demise. Because they assumed the hard copy publication was paying for the content, the marginal cost of repurposing it for the internet was negligible. Hence access to online newspaper websites is almost invariably free. They therefore offered advertisers the opportunity to access the readers who were interested in the content offered in hard copy for a tiny fraction of the price of an advertisement in the newspaper itself.

And you can see this decline in the share price of Fairfax. When the Tourang consortium took over Fairfax in 1992 the shares listed at $1.20. Today – seventeen years later – the stock price is $1.64.

So who wins out of all this? Certainly the advertisers and the consumers, that's a no brainer.

The established newspaper companies will struggle to build enough additional value in their online businesses to offset the loss of value in their declining hard copy businesses.

But what about the writers and journalists? Are they to face an anarchic brave new world where they have to try to sell their wares on line as Alan Kohler and Bob Gottliebsen are trying to do?

And what happens to investigative journalism?

Opinion is relatively cheap to acquire or produce. But who now can pay for a team of reporters to work diligently away at government or corporate misconduct?

This era of profitless abundance should give us cause for concern – it raises real issues for our democracy. Will newsrooms deprived of the resources to do their own sleuthing become more and more dependent on packages of information prepared and presented to them by the growing army of government media advisers and spinmeisters?

How independent can the media be if it lacks the financial resources to do its work?

Good question.

The answer will become clear over the next two years.