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Why Gina Rinehart's forays at Fairfax could actually be good news for small business owners in Australia


In 2009, I was interviewed by Tim Burrowes for mumbrella and asked to share some of my ‘contentious’ views about the future of media.

Tim and I had shared a panel discussion at a networking event with two other ‘industry commentators’ a fortnight earlier. The room had been packed with journalists from the major news houses.

My ‘two cents’ had caused a ruckus far beyond anything that I could have predicted during what, I suspect, was intended to be a lighthearted ‘hypothetical’ about the migration of Fairfax papers online.

I’ve been heckled at events before (often and willingly) but I’ve never felt physically threatened, like I felt that night. I had accidentally made some already anxious people very angry.

Of course, no-one likes to think that their industry could be ripe for disruptive change — even those who are happy to predict doom and gloom for everyone else.

Tim invited me onto the Mumbo Report after the fact, I assume because the guy likes to court controversy. Much to our joint surprise, the video interview (albeit highly trimmed) prompted little more than an eerie silence.

Four years later, what initially caused ire, only to be immediately dismissed as science fiction, is now making headlines… for real.

Here’s what I said.

As part of the hypothetical, I made the observation that if your average printed newspaper costs about $20 to produce, a $2 retail price accounts for only 10% of the revenue required to put it together.

It’s important that you take this in: Between 70% and 90% of your average newspaper is paid for by the ads within it.

The misconception: “I prefer reading print newspapers and most people I know also prefer reading print newspapers. Therefore, there will be demand for print newspapers for a long time to come.”

The reality: “Consumer preferences have less influence than you think. The future of print media has very little to do with the demand of newspaper consumers, except to the extent that this demand influences its effectiveness for advertisers.”

So, what happens when 10% of advertisers decide to explore other advertising channels — digital options, perhaps?

Well, someone somewhere must cover the shortfall.

Either, the consumer must pay more (maybe even double what they were paying before) or the paper must shrink in size or fall in quality or a combo of these things must occur. Any of these outcomes are likely to reduce the number of people willing to buy ‘the paper’.

The outcomes needed by the advertisers are likely to then be undermined and, as a result, more advertisers begin to explore alternative options, and the cycle starts again… but faster. (Another 10% of advertisers leave, the rrp goes up, exodus of paying readers, advertising becomes less effective, another 10% of advertisers leave, the rrp goes up, exodus of paying readers, advertising becomes less effective, another 10% of advertisers leave etc etc etc.)

In the case of Fairfax, a third option emerged. Year after year, the company instead has elected to take massive losses and, of course, no one can argue that this is sustainable — unless your agenda is something other than profit. (Enter Rinehart?)

So, let’s look at the purpose and the role of journalism.

Many of our modern newspapers once held nothing other than advertisements.

Of course, clever proprietors began to realise that an interesting story or two might entice more readers… to look at the ads.

As a consequence, modern journalism was born:

A device to get more people to look at the ads.

This is a slightly cynical observation and, of course, the model has never been that simple. Some media products do exist on a pure subscription, user-pays model.

There are also vanity publishers — people who are happy to publish media at a loss, to pursue a social cause or personal agenda. (More on that in a moment.)

But these are usually the exceptions to the rule and most definitely not the case with most contemporary, commercial newspapers — the ones in so much strife. These were largely built on classified advertising sales (one of the first types of advertising to make the shift online).

This begs the following extended question:

If journalism exists to support advertisers and if these advertisers find more cost effective alternatives to reach their markets, what is the purpose of a journalist?

The conventional wisdom (usually the least accurate type of wisdom) is that the purpose of the journalist is to inform and educate and ask hard questions that need to be asked. Sadly, it’s never been that simple.

Without undermining the important role of journalists, what I have described above is a ‘job description’. (And it’s a bloody important job, at that.) However, the commercial purpose of journalism has not changed… much.

Its purpose is still to sell ads in most cases (i.e. attract the attention of consumers in online environments). But, in many new situations, it is now also to attract traffic and get more people to notice a company’s call-to-action. (Can you see where I’m heading?)

To me, the future of journalism can be found within the answer to another question.

Who profits most from owning the news?

In the media and marketing landscape we are now familiar with (and have grown accustomed to over our lifetimes), the media industry obviously has the most to gain from owning the news and, therefore, the eyeballs of consumers.

This is because, for the last hundred years, extraordinarily large amounts of profit could be made from selling advertising space due to the limited number of ways that were available for advertisers to reach their audiences.

The model was simple:

Acquire the attention of consumers. Then rent it.

Over the past decade, however, a seemingly limitless number of ways have evolved to reach a prospective customer or communicate a specific message to a pre-defined audience.

The money to be made by media companies from owning the news and renting the attention of consumers has just about dried up. It’s no longer the cash cow it once was.

So, if media companies no longer have so much to gain from owning the news, who does?

Advertisers as Renters

The answer reverts back to the concept of advertisers as ‘renters’.

In the past, a marketer could prepare an advertising campaign and be quite confident of reaching possibly millions of largely undistracted eyeballs.

The shot-gun marketing approach was an efficient marketing mechanism for the best part of a century because the value generated would exceed the cost of the exercise (we can only assume).

Nowadays, the same sort of blanket approach is, firstly, not going to reach as many undistracted eyeballs but, secondly, the target market may in fact resent the advertiser for employing a style of advertising often now referred to as ‘interruption’ marketing (thanks to the wit and wisdom of Seth Godin and others).

Further, the ‘renter’ mindset can often undermine the quality of marketing, in terms of the message and approach.

If you rent a car, you often don’t worry too much about its re-sale value. If you rent an apartment, the same type of thinking usually also applies.

If you ‘rent’ access to another organisation’s audience, you might not think too deeply about the repercussions of the exercise on the audience’s perception of you or the media outlet – you might not mind playing the same advertisement ad nauseam during every end change of a televised tennis match, even if your commercial drives most viewers to tears.

You’re probably just happy to get your message across (again and again).

But what happens when you buy that car or that house? Suddenly, you’re likely to apply a great deal more thought to your actions, to the future value of your ‘asset’. Renters abuse. Owners respect.

So, how does this relate to the media? Well, we all know it’s better to own. So, why rent?

Business as Eyeball Owners (Not Renters)

The cost of establishing a media outlet is diminishing.

In fact, all you need these days is set up a Twitter account, launch a Facebook fanpage, a LinkedIn Group or start a blog.

But what if you are a medium or large organisation that actually has an established advertising budget? Let’s say that you’re accustomed to spending $500k (or more) a year on advertising?

For example, what if you were responsible for running a hypothetical company created to sell… say…  solar panels and you already have a half million dollar budget to spend?

You could consider these two options:

  1. Place advertising in targeted magazines, on television, billboards and radio… as you always have.
  2. Employ and place one journalist in Canberra, one at your HQ and one to roam the globe to cover… cleantech.

Arguably, you will soon find yourself the owner of the most heavily resourced media outlet for news on the environment and clean technology in Australia.

No other Australian media outlet invests this much talent to cover either of these topics over the course of a year. The ABC doesn’t have a full time cleantech writer. The Australian doesn’t have a full-time cleantech writer.

You would have three. And with resources comes quality.

If you play your cards right, who is not to say that your news outlet will not dominate its target market – be cited, quoted, aggregated – and attract far more goodwill and customers to your website (or business the outlet was created to support in the first place) than any traditional spend on TV, radio or print media advertising?

Of course, I know what you’re thinking. “Real businesses don’t do that, do they?”

Exhibit A: Bloggers get more leads

I have to thank one of my online marketing workshop buddies, Biagio LaRossa, CEO of communication technology outfit generation-e, for bringing this amazing piece of content to my attention.

It comes from an organisation called Hubspot — an exceptional example of ‘news and content creation’ for the purpose of customer acquisition, rather than for the purpose of courting advertisers.

This slide deck demonstrates — over 24 slides — how companies that blog not only generate more traffic but also generate more leads (and, by extension, sales).

Hubspot content marketing analysis

If you have time, download and read this report. Based on the activities of over 4,000 businesses, it found that businesses that blog get two times more traffic and three times more leads than business websites that don’t.

This is because organisations that create content which is compelling to their target audience (not compelling to the world at large) are more likely than others to attract the interest of search engines and are more likely to exploit the ‘sharable’ nature of social media.

It is also an example of an organisation that has shifted gear — from eyeball owner to eyeball renter.

But this also raises questions about journalistic independence and bias, right?

Can a privately owned company really be expected to present news without interference from management? Is the news organisation likely to report information that would have a negative effect on the parent company’s products or services?

Firstly, you’d be a mug to think that this sort of interference doesn’t already happen now – that company policies and the views of management don’t already influence reporting (even in the context of public broadcasters such as the ABC).

(As an aside, I’d  also like to make the bold claim that news outlets hosted on the internet are held to an even higher level of accountability than traditional media outlets, simply due to the low tolerance for poorly reported or overly biased opinion on the web combined with the mechanisms available to quickly unearth a lie or hidden motive and then share the discovery. It’s often said: Online… nothing is wrong for long.)

A private company, however, that is seeking to present itself as a ‘new media’ news outlet has a vested interest in providing news that aspires to the standards set by ‘old media’ or risk losing the goodwill and the audience that it created the news outlet to attract in the first place.

An abuse of trust on the internet has far greater reach and longevity than on any other medium – now, in the future and at any other time in the history of news and marketing.

And, of course, channels that ‘own’ an audience (rather than ‘rent’) are far more likely to treat that audience with respect, when it comes to marketing to that audience and keeping the boundaries between editorial and advertising clear.

So, who will own the media?

Media will always be run by the organisations with the greatest amount to gain. Traditional media organisations are losing their reason for being, as advertisers find other ways to engage with their target audiences.

If you were the solar panel company offered as an example above, do you think that you could attract more customers from buying ads or becoming Australia’s leading source of cleantech news?

The likely next evolution in media ownership will occur when marketers realise that audience attention is not just for renting – when a shift in thinking takes place that compels marketers to aspire to ‘own’ access to their target audiences.

The commercial purpose of journalists will still be the same (to get people to look at ads or, perhaps more accurately, to get people to respond to the call-to-action). Their job description will, thankfully, also not change (to ask the hard questions that need to be asked). The same high standards will be pursued, poor journalism will be challenged and abuses of trust will be punished.

But a greater level of respect will emerge, for the reader and for the marketer. Because renters might be content to treat their ‘rentals’ with disrespect. Owners aren’t.

So, what about Gina Rinehart’s foray into Fairfax?

Rinehart has voiced surprise that her desire to become an influential participant on the Fairfax board has been met by opposition.

Rinehart correctly points out that the business is in trouble. She is an accomplished business person and has offered to lend her skills.

Fairfax staff and existing board members want Rinehart to adhere to Fairfax Media’s charter on editorial independence. Rinehart has argued that lack of editorial interference is partially what has caused the organisation’s poor financial position.

And everyone agrees that Rinehart is determined to use whatever mediums are available to her to steer her own agendas.

Is this bad news? Rinehart’s greatest critics argue that her growing influence in the Australian print and broadcast media will reduce the diversity of opinions and news (particularly those who traditionally regard Fairfax as a counter-point to News Ltd’s conservative bias).

And here’s why this is a golden opportunity for Australian business builders.

Two outcomes are likely to emerge.

One: Things will largely stay the same, except maybe Fairfax’s online publications will move behind a paywall. Rinehart’s personal agendas will not influence the editorial focus. The media company will prosper, just survive or fail.

Two: Things will change dramatically, Fairfax will adopt paywalls and Rinehart’s personal agendas will appear across its pages, subtly or gratuitously. The media company will prosper, just survive or fail.

Yet, at the same time, one thing most certainly will not change.

Large brands, including media, will continue to lose their influence to the social web, as this graph demonstrates.

Put simply, customers once cared about the source. Now, they don’t.

They care more about what Google serves up (because Google has created a meritocracy of information) and they care more about what their mates and business contacts share with them (because the social web is more influential than any media baron’s masthead).

So, for me, I’m not worried about whether Rinehart will ‘corrupt’ Fairfax. I know that online quality endures and bias is quickly outed.

And why is this great for business owners?

Readers will always respect integrity. And news creators will always be rewarded for great journalism.

But what creates great journalism? Well, it starts with resources — and resources come from the organisations most able to profit from owning the news. And who is likely to profit the most from owning the news? Grab a mirror. It could be you.