It’s been an unhappy week for Fairfax shareholders. And a disconcerting one for traditional media proprietors.
While it was Gina Rinehart’s sudden entry into media ownership last June followed by her equally sudden attempt at a departure last week that caused the freefall in Fairfax’s share price on Friday, no-one can deny that something bigger is at play.
Fairfax’s shareprice reached its all-time lowest close, at 45.5 cents, and, while rival coverage might once have brimmed with schadenfreude, even News Ltd’s analysis has been uncharacteristically coy. Some might say, sullen.
According to News Ltd’s The Herald Sun, direct competitor of Fairfax’s The Age, the slide was was caused by investor concerns over “[Fairfax’s] inability to arrest a slide in revenue and blow-out in costs.” Is that it?
When seeking the heart of an issue, it sometimes pays to observe what’s not being said.
At this point in the evolution of media, could it be that the sensible News Ltd journalist is unlikely to mention that the emperor might possibly be walking around sans pants?
The beginning of the end… 2008?
Most people assume that the birth of the internet was the beginning of traditional media’s current dilemmas. Others pinpoint the dotcom boom.
While these big developments most definitely created our modern media landscape, the first heavy knock actually took place, much later, in 2008.
At least, that was my experience, speaking as someone who’s first business — who’s entry into media ownership — was a traditional print magazine, called Australian Anthill, launched in 2003, after the early noughties’ tech-wreck.
Here’s how ABC TV covered our story way back in 2006.
Then… the GFC hit
The year 2008 was memorable for many reasons. Former Prime Minister Kevin Rudd delivered a formal apology to the Stolen Generation, Cyprus and Malta adopted the Euro and I personally spent three months recovering from spinal surgery.
But the significance of 2008, for most businesses, was obviously because, in this year, the GFC hit.
And while Australia fared well in comparison to many of our trading partners, its impact on media was profound.
Not only were ‘discretionary’ budgets, like advertising, the first to be cut but the GFC also created new expectations among marketers and media buyers that changed the way advertising is managed and marketing budgets are spent.
The growing popularity of Google’s pay-per-click advertising product AdWords had shown marketers that new forms of advertising could be measurable. Previously, it could be said with humuor, “I know that half my advertising works. I just don’t know which half.” However, the GFC had quickly turned this ‘novel’ thing, called ROI in advertising, into a marketing staple.
Newspaper advertising was slashed, as a result of tightening budgets, from which the newsprint industry has never quite recovered. Advertisers were forced to find more ROI driven alternatives. And, for better or worse, it is advertising revenue that actually pays for your daily newspaper, not you or me.
Readers did not kill the newspaper industry
Whether you enjoy reading news in print (or not) actually has very little to do with the future survival of print media, like newspapers. I hate to break the news but your reading habits are almost inconsequential.
When you spend your two dollars at the newsagent, you are not paying for news. Your small investment might barely cover the cost of the paper, the ink and its distribution to your corner store.
No. News is paid for with advertising dollars.
And, when ads go, so does the quality of journalism.
Traditionally, it’s been then (and only then) that you would become important. Because a declining readership means less ads and, therefore, less quality journalism. And, therefore, less readership. And the spiral continues.
The difference today is that the advertisers, who actually pay for the news, are departing for different reasons.
No matter how many consumers are willing to spend their two dollars (or four dollars or six dollars) on a newspaper, without the advertisers it’s unlikely to ever be enough.
I can speak on this point with authority because it was in 2008/2009 when my senior management team and I decided to abandon our print roots.
The decision was made for several reasons. And not all of them were obvious.
The decision was partly made out of necessity. In October 2009, in just one month, we lost 25% of our following year’s annual advertising revenue, when several of our larger 2009 advertisers cancelled. Things looked bleak.
But it also seemed a logical decision.
We too had known that digital publishing was the natural evolution of our medium but, until then, times had been good for print media. There had been no hurry.
But the most compelling reason came in 2009, only months before we ceased printing, triggered by a candid conversation between myself and a prospective advertising client, overheard by one of our editorial staff.
“Who will own the future of news?”
Like many moments of inspiration (at least, in the media industry), one of the most compelling reasons for our change was unintentionally raised during an afternoon gathering at the local pub.
The print magazine game can be stressful, particularly as print deadlines near. Afterward, many people appreciate an opportunity to wind down and “shoot the shit” about what worked and what didn’t. (I know that’s how I often feel after deadline.)
Inevitably, as afternoons wear on, conversations meander from work to other things and back to work again, in slowly widening circles.
Anthill stalwart, former editor and my closest confident for six years Paul Ryan had earlier overheard a conversation I’d had with a prospective advertiser.
I had focused my pitch on how online mediums (the new focus of our evolving model) were better at generating leads than print mediums. This particular advertiser, which I later learned was already spending close to half a million dollars annually on weekend TV and radio advertising, surprised me by saying, “That’s one thing we don’t need. Leads.”
This prospective advertiser, a solar panel company exploring the option of targeting businesses, already had a vibrant blog on the topic of cleantechnology and, via a clever widget (a calculator that could tell a visitor whether they should invest on a solar panel installation or not), was also collecting hundreds of leads. My big pitch had fallen flat.
As editor, Paul was impartial to these things. He appreciated that advertising paid his salary but would otherwise prefer to not concern himself with that side of the business (as is only appropriate).
But something about this conversation had struck a chord. Paul simply said, “If you could spend half a million on quality journalism, you could own your niche online and you wouldn’t need to advertise.”
And he was right. In the case of this solar panel company, just one cleantech journalist would make it the best resourced cleantech news outlet in Australia. No other media outlet had (or has) a full-time cleantech writer.
“News will always be owned by the party that can profit the most from owning it.”
In this instance, the solar panel company had a greater commercial interest in funding cleantech journalism than traditional media outlets because it could make more money from funding cleantech journalism than traditional media outlets.
It had organically stumbled upon the greatest threat to traditional media and the final reason why Anthill ditched its print roots.
It’s also the reason why mainstream media is scared and, dare I say, treats the analysis of the woes that are befalling it with little more than vague declarations. (Fairfax’s shareprice fall was caused by its “inability to arrest a slide in revenue and blow-out in costs.”. Seriously, is that it?)
This solar panel company had unwittingly realised that in the age of the Internet almost anyone can ‘own the eyeballs’ rather than simply ‘rent’ them.
This is significant on several levels.
Firstly, ownership can come in many forms, including something as simple as ownership of a Twitter account. That’s right. If you have a Twitter account with, say, 100 followers that is an audience of 100 (or 200 ‘eyeballs’) that you didn’t own before.
Once you ‘own’ your audience, you rely less and less on ‘renting’ the attention of audiences owned by other organisations.
As another example, if you own a ‘marketing asset’ like 10,000 email addresses you have less need to run an ad in a newspaper with a readership of 100,000. This is because no-one reads an entire newspaper and people are only likely to subscribe to your email newsletter if they are interested in the market you serve.
The second reason is that humans (and businesses) are far more likely to treat something that they ‘own’ with greater care and respect than something that they ‘rent’.
An advertiser buying advertising slots during the tennis, for example, doesn’t care if the annoying frequency of their message sends people clicking to another channel, so long as the message is played enough times to be remembered. Plus, the same ad is also probably running on the channel the viewer is flicking to.
However, if an organisation has worked hard to foster, say, a Facebook fanpage of 10,000 fans, that organisation will always be respectful of its audience and take measures not to annoy and, then, lose its ‘fans’.
This way of thinking is something that most media organisations will find it almost impossible to adopt because most rely on keeping their advertisers happy and advertisers don’t care about an audience that is ‘rented’.
Who will be the last “ice-baron”?
It’s become plain to me that many news organisations will not survive the next 10 or so years.
Why so short a time frame?
Well, very few businesses last 10 years, irrespective of industry. (How many companies currently on the Australian Stock Exchange were there a decade ago?)
Watching the smiling face of this ice-factory worker clip crystalised my thinking. The following footage was taken during a recent trip to Thailand. My wife and I found it ‘quaint’ that such a seemingly obsolete industry still exists in some parts of the world, including otherwise modern economies like Thailand.
So, what do this video and the fate of vast empires, like News Ltd and Fairfax, have in common?
Well, at the turn of the last century, the world was dependent on ice. And industrial dynasties emerged around its collection and dissemination. And these industries had taken generations to form.
This is because these organisations were expensive to run. They were logistical giants. They were dependent on the ownership of shipping, freight and other properties that, in some cases, began with harvesting ice-bergs in Alaska and concluded with your friendly neighbourhood ice-truck delivery guy dropping off your family ice-block to your kitchen ice-box at your suburban home.
Yet, by the middle of the 20th century, these barons — these captains of industry — were already being forced to watch the spoils of their toils quite rapidly disappear.
The domestic refrigerator had made generations of capital acquisition meaningless in a few decades. For those involved, it would have seemed astonishingly fast and brutal.
Today, a new product, like an iPhone, can ship over a million units in less than a month and achieve global domination in less than a year. Change happens fast in what is already being called ‘The Post-Digital Age’.
Ice barons, media magnates and you
It seems hard to comprehend (especially for the media magnates) but this is the reality.
However, with every new disruption there is opportunity.
And the opportunity could be yours if you choose to take it.
Earlier, I asked, “Who will own the future of news?”
I also provided an answer; “Those most able to profit from its ownership.”
As shareholders continue to lose confidence in traditional media and as the main players continue to offer up only the vaguest of explanations as to why, what will be your reaction?
Will you simply lament the loss of a pleasant habit? Will you rail against what might seem like an affront to the natural order of things? Or will you take a cold hard look at the industry you represent and ask, “Who is serving my audience?”
Could it be… should it be… you?
James Tuckerman is the founder and publisher of Anthill Magazine. In September, he will be holding two auditorium workshops in Brisbane and Sydney, called Conquer The Web, where he will share the lessons he has learnt and the techniques he uses building and running vibrant and profitable websites. More: http://conquertheweb.com.au.