The “rivers” of gold that used to flow from classified ads have dried up. Print display and broadcast advertisements are also falling in volume and rate as mass audiences break down into micro-audiences and information consumers graze the Internet.
Observers and commentators are unable to resist the “I warned you so” response, even though warning signs of transformational change in media consumption and production have been apparent for some time. Rupert Murdoch acknowledged in 2005, in an address given to the American Society of Newspaper Editors in New York, that his media empire was slow to recognize the importance of the Internet. In the 2009 A.N. In the 2009 A.N.
The 1990s and 2000s approach of burying your head in the sand and pointing the finger at others is no better than a 20/20 hindsight. What business model will sustain commercial media in the future? This is a multi-billion dollar question. This question is not only in the minds of media owners and shareholders but also the careers of many journalists who have a love-hate relationship with advertising.
What will the future business model be for commercial media?
There’s no way to be sure that everything will go back to normal. Media is a sector undergoing structural changes. Even though reducing costs will be a good step, the traditional media organizations’ problems won’t be solved by Fairfax cutting 1,900 jobs in the next three year and closing two printing plants. A 2009 PriceWaterhouseCoopers study noted that newspaper publishers have responded to economic downturn by focusing on cost reduction. But the PriceWaterhouseCoopers (PWC) report titled Moving into Multiple Business Models: Outlook for Newspaper Publishing in the Digital Age concluded that “many have still to fully review their existing business models to take full advantage of the innovation in the marketplace and the demands of consumers.”
Advertising 2.0
Advertising is still an important revenue source for commercial media, despite the current crisis. Advertising is expected to continue to be a part of the commercial media business model for some time, even if it’s down from “the golden age” of mass-media.
Advertising is also evolving, especially online. Advertising has evolved since the first crude attempts with banners at the top of Web sites and “pop-ups” that prevented content from being viewed.
Advertising will continue to evolve with the evolution of Web 3.0. Search engines are being replaced with “recommendation engine” that captures users’ clickstreams and profile data to target relevant advertising. These developments are a concern for privacy advocates and social scientists, but advertisers will benefit from them and consumers may welcome it, since they limit the exposure of irrelevant content.
The push for paywalls
Charging for content is the gorilla in a room. It’s potentially enormous, but also unpredictable and dangerous. In January 2010, the New York Times publisher Arthur Sulzberger Jr. announced that the most prestigious American newspaper would begin charging for certain content in January 2011. Rupert Murdoch said that News Corporation will gradually charge for the access to its content worldwide.
News Corporation’s Wall Street Journal started charging for content in the U.K. and Australia Financial Review and Financial Times since 1996. Sceptics, however, argue that the model has been successful for financial and business media. They question, however, whether consumers will pay for general content. Many analysts and leaders in the industry believe that only premium content should be behind a paid wall. This view is based on the experiences with a number U.S., U.K., and New Zealand titles who have implemented paywalls only to see their circulation drop even more as audiences switched to free internet content.
The challenge is greater in Australia and the U.K. because there are large publicly-funded media, such as ABC and BBC, which don’t charge and will most likely never charge for their content. Mark Scott stated in his A. N. Smith Memorial Lecture on Journalism in 2009 that the commercial media paywalls may only drive traffic to the BBC or ABC.
Studies by PriceWaterhouseCoopers and the Boston Consulting Group suggest that paywalls will increasingly be part of the business model for commercial media, but that they will work only for some in-demand and specialist content. Research also indicates that paywalls are likely to generate only micro-payments, rather than the “rivers” of gold of the past. John Rose, the head of Boston Consulting Group’s media group, stated that the BCG study revealed “consumers will pay for meaningful content”. The bad news is they’re not willing to spend much.
The following are other potential business models that have been discussed and recommended
What business model will save our media and journalism quality? Research shows that while all of these and other approaches offer some opportunities, none is a panacea. The most likely future scenario is a hybrid approach, which includes a variety of methods. Diversification is a smart business strategy that has existed for a long time. The problem may be the absence of it.