One of the big debates over Wikileaks in the last few months was whether or not Wikileaks really was a media organization. Of course, as some people are finally realizing: it doesn't matter. The First Amendment should protect the organization no matter what kind of organization it is:
That's one argument in an article that appeared Wednesday in the Harvard Law and Policy Review by Jonathan Peters, a lawyer and research fellow at the Missouri School of Journalism. The First Amendment, Peters argues, protects both free speech and freedom of the press, and neither of those protections is any more or less powerful in protecting an organization that publishes classified documents. The amendment, after all, reads "Congress shall make no law... abridging the freedom of speech, nor of the press," and doesn't make a distinction between the level of protection on either one of those two clauses.
"The First Amendment does not belong to the press," Peters writes. "It protects the expressive rights of all speakers, sometimes on the basis of the Speech Clause and sometimes on the basis of the Press Clause. To argue that the First Amendment would protect Assange and WikiLeaks only if they are part of the press is to assume (1) that the Speech Clause would not protect them, and (2) that there is a major difference between the Speech and Press Clauses."
This seems like an important reminder for those still arguing over how to classify Wikileaks.
There was plenty of concern earlier this year, as Hungary took over the EU Presidency just at the same time it had passed a worrying new internet censorship law that lets the government fine any content provider that it judges to not be sufficiently "balanced." The European Commission apparently had planned to criticize the law... but somehow chickened out at the last minute. Glyn Moody points us to a (slightly confusing) account of what happened, where minutes before a vote was to be taken, some sort of "deal" was struck that appears to let Hungary continue to censor the media. Among the "concessions," it appears that the "balanced" part won't apply to internet-only media, but will still apply to other media. Online publications, though, still have to register with the government, and can face fines or get "dropped" from the register -- barring them from continuing to publish -- if they violate certain rules. As the report notes, this still seems like it goes against the basic concepts of freedom of expression and freedom of the press.
For years, we've spoken about why metered broadband stifles innovation, by adding serious additional mental transaction costs and limits to anything you do online. If you look at the history of various online services, you know that AOL didn't really catch on until it went to a flat-rate plan from an older metered (by time) plan. It makes a huge difference in how people use the internet, and putting gates and fences around them doesn't just keep the bandwidth down, but it limits all sorts of innovative services that rely on the fact that end users have no limits on their bandwidth. In the end, metered broadband always appears to be a way for ISPs to squeeze more and more money out of people.
However, as Canadian regulators seem prepared to let Bell Canada force all DSL providers into offering metered broadband, some are pointing out another reason for metered broadband. Not only does it stifle basic innovation, but it also protects the legacy media/entertainment industry and their business models. If downloading becomes more "expensive," then, in theory, fewer people will use services that require higher bandwidth. And this isn't just file sharing services either, but things like Netflix, which many studios still wish to limit and control when it comes to its online streaming plans. None of this is about "bandwidth hogs," at all. It's all about putting up barriers to anything that might be disruptive to legacy industries.
Right before the iPad launched, we warned media companies that expected iPad apps to be their savior that they were making a mistake. Specifically, it seemed that this was all wishful thinking from publishers, who were hoping to go back to a gated system that they had used for many years. They were betting on restrictions, which is never a good bet. Of course, the early numbers actually sounded good, with many magazines trumpeting how many iPad subscribers they got in the first few months. But, it appears that many people tested out iPad magazines, and then decided they just weren't worth it. Again, this is not a huge surprise. Just a few weeks ago, we again discussed how iPad magazines generally suck, and it was unlikely they were going to have lasting success.
Even so, it's still surprising to see just how dramatic the dropoff has been -- especially in a platform that is apparently still selling like hotcakes. Wired Magazine, which initially appeared to drink the Kool-Aid big time on using iPad apps, now sees less than a quarter the number of buyers that it had when it put out its first iPad issue. Vanity Fair, Glamour, GQ and some others have all seen big declines.
Hopefully this will kill off the dream of just recreating magazines for the iPad, and content providers can focus on creating tools that are actually useful, rather than just on replicating the structure of a magazine in a digital format.
I spent last week at the Monaco Media Forum, which was quite an event overall. Of course, as with many such events, many of the most interesting and valuable parts happen outside of the main sessions in the conversations and meetings you have with people separate from the scheduled topics. The good thing that I took away from the event was a pretty wide sense of optimism about the vast media world that we're heading into. Having attended plenty of entertainment industry conferences lately, which seem to be surrounded by doom & gloom predictions, this event was blissfully full of a pretty optimistic viewpoint, which was refreshing and a bit encouraging. Of course, as a caveat on that, there really weren't that many actual media people at the event. Instead, there were lots of technology/infrastructure companies as well as ad and marketing firms -- and all of those have plenty of incentives to be as optimistic as possible. Perhaps it's the media folks who are depressed... but they stayed away.
One exception was James Murdoch, who was actually a "co-chair" of the event, and he gave an interview discussing a wide range of things that are happening around News Corp. The entire video is about 37 minutes, but it's quite interesting:
Having questioned many of James Murdoch's recent statements on paywalls and copyright, I have to say that my initial impression was actually to be impressed. Here's a guy who -- without much experience -- is running a huge swath of the media industry around the world, and seems to have a very strong working knowledge of what's going on across the board, and can speak knowledgeably about them all. Many people I spoke with at the event felt the same way. On top of that, I actually agreed with many of the larger points he made about innovation, and the need to make bets on innovating, rather than just protecting their businesses and milking them for cash.
However, when he got down to the specifics, I went back to questioning many of his assumptions, and thinking that his world view may, in fact, be a bit skewed by his previous success (after, it should be noted... a string of failures, not mentioned at the interview) at BSkyB, a satellite TV provider in the UK. The more the interview went on, the more I realized that Murdoch appears to view much of the media world through that lens, and seems to saying that, in the end, the media world will end up like a giant pay TV system, with a big subscription. I think this is more wishful thinking, rather than where the internet is actually heading, and treating the internet that way will almost certainly result in failure -- such as with his paywall experiments.
He talks up the various successes with pay television (satellite and cable) around the globe, including Italy, Germany and India, and again that seems to influence his views. He points out, repeatedly, that no one really thought that going into those markets would work, but News Corp. proved all the doubters wrong -- as he no doubt believes the doubters on the internet will also be proven wrong. He gets into the discussion with the following statement, which got most of the attention (and a bunch of Twitter messages of support from those in the audience):
I think there's a lot of talk about monetizing content and there was hand-wringing and for years and years... I remember in the late 90s I was in Singapore, and people were talking about mobile media and what is it going to be and what are the killer apps and all that sorta stuff... And I guess, I just look at it more simply. I think the first rule of is if you're going to monetize something is that you should probably not give it away for free.
This is at 14:25 in the video, and you really have to see the sarcastic eye rolls when he says that last line. And, you can immediately hear the laughter in the audience (which was much louder). But here's the thing: he's wrong. And he must know that he's wrong. Media businesses have made tons of money for years while giving away stuff for free. The very, very successful network television business (of which News Corp. owns one), for example, was always based on giving stuff away for free, but selling the attention of viewers. The newspaper business (which is where News Corp. originated) wasn't based on giving away stuff for "free" totally, but on subscriptions that never even covered the cost of printing and delivery.
No, this doesn't mean everything should be given away for free, but as the CEO of a large chunk of News Corp's media business, and supposedly being thought of as the guy at the company who "gets" new media and new media economics, it seems troubling that he so flippantly ignores the basic economics of non-excludable, non-rivalrous content, and how it can be utilized as part of a larger business model, by making other things more valuable and selling them.
So if you think about it and you're investing in things and you say 'I'm trying to figure out how to make money for this,' and then you give it away, it doesn't seem to work.
James might want to check out a little company called Google, which has done rather well giving away lots of things for free.
From there, he talks about "fair" pricing, and how they want to invest in content and price it fairly knowing that not everyone will consume it. But, of course, that's not really the issue. It's not about "fair" pricing. It's about market pricing. And if everyone else is offering market pricing and you're focused on "fair" pricing -- and your so-called "fair" pricing is above the market pricing, it's not that "not everyone" will consume it, but almost no one will consume it. And that's where you run into problems. Hell, I put a ton of work into this site. Let's say I think a "fair" price for anyone reading this site is a dollar a day. But, the market says otherwise, so my job, as someone running a business, is to figure out a way to get that money by offering something of value that can be priced not fairly, but competitively that the market will want to buy. That's what business is about. It's not about "fairness." It's about understanding the market.
Now, that said -- the point he makes following this is one I agree with wholeheartedly -- which is that if someone is not willing to pay, then it doesn't mean that it's the users' fault, but that as the content producer/copyright holder/etc. It's News Corp's job to innovate and convince people that there's something worth paying for. That's the whole basis of my "reason to buy" concept. But, the problem here is that simply designating a "fair price" when it's way above market price, is usually not a reason to buy, especially when your product is in a highly competitive and dynamic market, as is the case with news.
It's the next bit where you realize how much he's still focused on the pay TV business. He notes that, in Europe and Asia, 70% of the company's revenue is from subscriptions -- rather than advertising. He uses this to suggest that people online were so focused on reach and audience share, that they weren't focused on actually making money. Again... he's right on the facts, but wrong on where that leads him. It's true that many in the online world did not focus on making money, and that was a huge mistake. But that doesn't mean that putting up a paywall is a good strategy to make money. And that's where I think the major disconnect comes in.
He then makes the specific statement that the online news business will become like the cable business, with bundles and affiliate revenue. Here he's making the classic pay TV industry error of being so infatuated with the fees that are being passed around to carry channels, that they're hoping to recreate such a world online. But, this ignores the reason those setups have developed (limited competition and scarcity of access -- both of which don't apply in the online world) as well as the incredible frustration this has created with consumers, who are fleeing in droves (something Murdoch more or less tries to dismiss during the Q&A by saying many of the cord cutters in the US are doing so because the "deals" to get people to switch from analog to digital TV are up).
It's a bit amusing to hear him note that iPad apps for newspapers are much more cannibalistic than news websites. Again, I believe that point is absolutely true, but he seems to ignore the implicit other point he's making here: which is that web pages really weren't all that cannibalistic of newspapers.
Of course, the other funny thing is that you can see pretty clearly throughout the interview that one of his key talking points is this idea that "News Corp." isn't that big. Towards the beginning he starts to call it a big media company, but then corrects himself and says "mid-size." Later, he makes sure to note that Apple is ten times the size of News Corp., and that a company like BT is making much more money in the UK. The banker interviewing him mentions Amazon as a larger company. But that's all smoke and mirrors. News Corp. is the third largest media company in the world, only behind Disney and Time Warner, has over $30 billion in revenue and $54 billion in assets. Sorry, James, you're not a mid-sized business. You're a big, big business.
Towards the end, in response to an audience question about cord cutting and how it will impact News Corps.' business, Murdoch again brings up how they'll just make it like cable to some extent, and then falls back on the "but content is really expensive to make" line, by pointing out that, while other industries may find that things get cheaper thanks to technology, that's not true in content production. He pops out this lovely line:
There is no new technology that makes athletes not greedy.... And I think that's really something that the telco industry and a lot of the tech industry hasn't really understood -- that there's (chuckle) a whole economy behind this...
It gets a laugh, and afterwards I heard a lot of people say they agreed and it was a good point. But, I think it's a line that sounds good and masks that he's discussing two separate things. The first question is the cost of producing content. The other question is how do you make money. But those two are not the same question. No one has said that you don't make money. Saying that your business model has to change is not the same thing as saying you don't make any money. If your content is expensive to produce, then yes, of course, you need to figure out a way to have it make money, but that doesn't mean that simply charging for it is the way to do that. You can get away with charging for ancillary things (convenience being a big one), but it's important to recognize what people are really paying for, or you risk alienating them quite a bit, and driving them to alternative means of content consumption.
On the whole, I actually came out of this more impressed with Murdoch than when I went in. However, I still think that he's making some pretty serious mistakes in his assumptions, and it's going to come back to haunt him and News Corp. in the long run. The failure of the paywall for The Times is just the early warning sign.
Lots of talk today about the fact that Newsweek, the struggling magazine that's been around for 77 years, has merged with two-year old website The Daily Beast, which never really picked up all that much traffic considering its ambitions. But in an odd move, reports now are saying that the plan is to shut down the Newsweek site and to keep The Daily Beast running. If that's the case... um... why merge at all? Newsweek has the more well known brand and much more traffic. This sounds like an ego merger, where the idea is just to promote the fact that The Daily Beast devoured Newsweek. And that gets you, what, the attention of a tiny group of media business insiders for a couple weeks?
Earlier this year, we wrote about Vision Media TV, a company that appeared to be participating in a questionable game of convincing non-profit organizations to pay tens of thousands of dollars to be featured in a television program with broadcaster Hugh Downs that would appear on "public television." The implication is that these shows will air on PBS, but that's not the case. In fact, PBS has a warning on its website telling people it's not associated with these offerings at all. We've even been approached by similar offerings (though, not involving Hugh Downs -- and the one where we were approached involved getting an "award" for "best small business" or something similar). About a year and a half ago, the NY Times wrote an article trashing Vision Media TV. The company insisted that the article was false and defamatory but, tellingly, chose not to sue.
Instead, it later sued the small site 800notes.com, because some people there had written negatively about Vision Media TV in explaining who was calling from Vision Media's phone number. Paul Alan Levy, from Public Citizen, who is defending 800Notes, also found himself targeted, after Vision Media sought to bar him from posting public documents about the case on Public Citizen's website -- an attempt that failed. Of course, it did help Levy find more info about the company, including that similar pitches have come from differently named companies, using the same address as Vision Media TV, that pitched (instead of Hugh Downs), Walter Cronkite and Mike Douglas -- both of whom ended up suing the company, claiming they were misled by the company.
"They are selling something that they generally cannot deliver," says Garry Denny, program director of Wisconsin Public Television and a past president of the professional association of programming officials for PBS member stations. "In fact, they are probably not carried by any public television station around the country."
Officials at PBS and at PBS member stations in California, Colorado, Kentucky, New York, South Carolina and Virginia were all aware of the Hugh Downs spots. Yet not one knew of a concrete instance in which the spots featuring Downs appeared on their stations or those of others. PBS and its member stations say they adhere to guidelines banning marketing programming paid for by subjects of the programs.
To be fair, the article and Vision Media point out that the videos can be useful as marketing materials or infomercials even if they don't appear on public television -- but the whole pitch involving Hugh Downs is where things get questionable. His contract only lets him be involved if the stuff is on public television, and the marketing focuses on Downs involvement, even if that's unlikely to happen for most organizations who pay up -- which certainly suggests misleading marketing:
According to both Downs' agent and Vision Media's Miller, the retired anchor's contract limits his involvement to public television. Yet for many people approached by Vision Media's cold-calling pitchmen, he's by far the strongest selling point.
One of the firms recently pitched is Portland, Maine-based Putney Inc., which develops generic drugs for pets. "Hugh Downs! I know that name," said Jean Hoffman, Putney's CEO. "We were of course pretty excited, pretty interested, and pretty eager to cooperate."
It seemed like a splendid opportunity, until Hoffman and her colleagues started to bore in on the details. "They send the signal that they're doing a story" as journalists, Hoffman said. "Then, they try to sell us what under questioning was revealed to be advertising."
Others, who did buy into the videos, claim that the pitch about public television was what got them interested in the first place:
Robert Biggins is past president of the funeral director trade group and owner of a funeral home in Rockland, Mass. He said Vision Media's promise of a presence on public television and the involvement of Downs were crucial.
"He brings a credibility in reporting," Biggins said. "I felt that dealing with an organization that he's so intimately involved in gave us the opportunity to share our message, and to do so in a warm and gracious manner."
If their spots did not air on public television, Biggins said, "That would be a serious concern."
The National Funeral Directors Association provided NPR with a copy of the contract it signed with Vision Media. The association paid $22,900 in 2007 for the production of different versions of the spot, plus an additional $3,000 as a "location fee" -- presumably for travel costs. The contract and additional material from Patrick Wilson of American Artists, the segments' distributor, stated the "estimated reach is over 40 million households" on public television stations. The brochure also suggests the spots will reach 84 million households nationwide on cable -- the overwhelming majority of all homes subscribing to cable television.
So, if Vision Media's lawyer said he wished he had sued the NY Times over a very similar article from a couple years ago, will he now sue NPR? Or is it easier to focus on small sites with much smaller budgets?
Someone anonymously submitted a decent writeup by John A. Byrne, the former editor-in-chief at Business Week who recently left (amid the shakeup due to Bloomberg buying the magazine) to start a new media effort called C-Change Media. In this blog post, Byrne argues that the media complaining about Google sending them traffic is biting the hand that feeds them. There's really not much new in the writeup, which runs over the same ground we've covered for a few years now, but it's a nice succinct summary of the situation:
Rupert Murdoch's protestations aside, there is no doubt that Google is driving vast amounts of traffic to websites run by traditional media companies. In recent years, most of BusinessWeek.com's growth came from search optimization and direct traffic. Up until only three years ago, the number one referring domain at BusinessWeek was always a portal until Google's popularity replaced Yahoo Finance and MSN Money as the top referrer. Search--largely Google--now accounts for some 45% of the traffic at BW.com, up from less than 20% in 2006. That simple little box is driving vast amounts of advertising inventory (and therefore revenue) to the site. It's a similar story everywhere else.
In the war between the traditional media brands and Google, the old cliche about biting the hand that feeds you is certainly in play. Some of the complaints from media can be attributed to sour grapes. Many incumbents resent that most efforts to find information on the Web no longer starts with a brand. It starts with Google which is largely brand agnostic. So, in effect, Google has become this massive transaction machine, and as everyone knows, transactions are the antithesis of relationships. If a brand wants a relationship with its audience, Google is getting in the way. It's how Google was able to siphon nearly $22 billion last year in advertising from traditional media. And it's the most obvious proof that media brands have diminished in value. People are more routinely turning to Google to get information, rather than a brand known for its expertise in a given area. They'll google (yes, I'm using Google as a verb) leadership before going to The Wall Street Journal, Fortune, BusinessWeek, or Harvard Business Review. They'll google President Clinton before going to The New York Times, Time, or Newsweek. Why? Because they trust Google to serve up unbiased results; because they want to see what is generally available out there and not tied to a brand, and because most brands no longer wield the power and influence they did years ago.
Instead of complaining about this and threatening to block Google from crawling a site, media companies would do well to step back and more fully understand what they really need to do: rebuild the relationships they have with their readers, viewers, users. To offset the massive transaction machine that Google is, media brands need to focus on restoring relationships with users. That's why "user engagement" is not an idle phrase to throw around but is essential to making a brand successful online. Original content isn't enough. Gee-whiz tech tricks aren't enough. Neither is a fancy design or a search trap gimmick. You need an audience that is deeply and meaningfully engaged in the content of a site, so engaged in fact that many of those users become collaborators, and that requires tremendous amounts of work and editorial involvement with the audience.
Indeed. It's the point we've been trying to make for ages. Newspapers were always in the community building business. They would bring together a community of folks and then sell their attention to advertisers. That was the business. But they thought they were in the news delivery business, and that's confusing them -- leading them to do things that are anti-community and anti-relationship (registration walls, paywalls, etc.) that actually harm the value of the community and limit that. Thus, people are going elsewhere for community -- whether it's other media publications or social network sites -- and newspapers are lashing out at the wrong party: the one who sends them traffic.
For many years, we've been quite skeptical of any business model in virtual worlds/social networks that rely on "buying virtual goods." That's because these are all based on artificial scarcities, and as we all know (hopefully, by now), relying on artificial scarcities for a business model is incredibly risky, especially once people realize the scarcities are artificial. And yet, over the past few years, a number of businesses have been built on this very premise. In fact, Silicon Valley is crawling these days with businesses built on selling virtual goods, and if you talk to many VCs about it, you'll quickly note that they're positively giddy over the fact that people are paying for this stuff. What they don't seem to realize is that it's unlikely to last.
In the last couple weeks, Mike Arrington, over at TechCrunch, did an amazing job calling attention to the widely known, but rarely discussed in polite company, dark underbelly to most of those business models: quite a large part of their revenue is based on scammy offers that effectively trick unsophisticated purchasers (often kids) into signing up for expensive subscriptions to things they don't want. I was at an investor "roundtable" a couple months ago, which was mostly bankers in suits, and they were laughing about just how gullible people are on these things, and it's great to see TechCrunch exposing them, and pushing the worst abusers to clean up their act. Of course, even when some, like Zynga, claim to be cleaning up their act, Arrington was able to dig up a video where Zynga's CEO proudly talked about the scammy tactics he used -- and then noted that these same scammy tactics showed right back up on Zynga, after the company promised they were gone. Those who use these kinds of tactics may find that while they "bring revenue now," it may be short-lived. Companies that focus on such abusive tactics live to regret it (just ask RealNetworks).
So: they walked into this shit-storm and somehow, by some miracle, managed not to notice the fecal matter flying all around them. It's like covering a football game that took place in the middle of the blizzard and neglecting to mention the weather.
Now, maybe they did all the reporting before Arrington's stuff broke. In which case they should have gone back and updated their info. Or maybe, just maybe, Zynga's PR people teed up a Times story as a kind of rebuttal to what Arrington was reporting. Either way, that's what ended up happening: Zynga used the Times to deflect the bad shit flying at them from Arrington. They need good press because they're hoping to cash out by going public next year. That story in the Times will be worth millions. Many millions.
Meanwhile, Arrington, still digging, blasted again on Saturday night, reporting that sleazy ads had popped up again on Zynga, despite promises that they would be taken down.
Um, New York Times? If you guys are still wondering why people are dropping their subscriptions and getting their news from blogs instead of you -- this is why.
After which, Lyons/FSJ notes:
And to all those people who go around wringing their hands and saying what are we going to do when the "real newspapers" all die and we have to get our news from Gawker and HuffPo and TechCrunch? Friends, I think we're going to be just fine.... What really cracks me up is how often I still hear people say that bloggers are mere "aggregators" and the "real journalism" gets done at places like the Times. Because time after time, blogs are simply beating the shit out of the newspapers. They're the ones who still dare to go for the throat, while their counterparts at big newspapers just keep reaching for the shrimp cocktail.
Of course, there's just a bit of irony in noting that Dan Lyons wrote one of the quintessential blog bashing articles four years ago, when he was writing for Forbes, at one point suggesting that blogger "journalists" were no different than notorious (NY Times) maker-up-of-stories, Jayson Blair. Nice to see he's coming around to recognizing things perhaps aren't so bad in the blog world.
One of the key points we've raised in the past about the futility of newspapers putting up paywalls is that doing so would only open up a huge opportunity for other, smarter journalism organizations to take their market share by remaining free. And, indeed, more and more organizations are starting to point out that's exactly what they would do. Reader Jamie writes in to let us know about a speech by the managing director of ABC in Australia (not the Disney owned ABC in America), Mark Scott, taking on the "old media" thinking around such things as paywalls:
Scott's most virulent words were saved for News Corporation (owner of The Australian) chairman Rupert Murdoch and CEO Europe and Asia, James Murdoch.
He called Rupert Murdoch's recent call for content providers to charge online distributors for content as "a classic play of old empire, of empire in decline. Believing that because you once controlled the world you can continue to do so."
"When you have been so powerful and dominant for so long, it is hard to believe that empire is slipping away," he said.
Scott argued traditional media companies had been out-thought by technology companies in strategy.
And... oh yeah, if Murdoch goes paywall, Scott promises to do the opposite:
He reiterated the ABC would continue to provide free online news content and said the ABC must remain audience-focused
Not just that, but he seems to be recognizing that the way people interact with news has changed, and they want to be much more involved:
... he noted the only media organisations to survive will be those that: know and accept that all the rules have changed; are endlessly inquisitive about the new; empower their audiences to contribute, to create and share media....
Nice to see some news business execs who seem to recognize what's happening.