The Law of Conservation of Attractive profits states that
When a product starts to become a commodity, a decommoditization process is often triggered somewhere else in the value chain. Managers might therefore be able to predict which activities will generate the most attractive profits in the future.
You might be thinking, How this is related to Journalism?.
Let me explain.
The first newspapers were designed to popularise sensational content for the public. This produced a commodity which slowly emerged to be one of the biggest industries in the years that followed. Competitors fought between each other to bring the best quality content to gain trust from the subscribers. The birth of Journalism Industry began right there. Journalism grew to shape the first profitable media industry in the world producing billionaires like Michael Bloomberg and David Thomson. With the newfound soaring profits, Journalism went out to question the world’s very architecture with a sense of independence.
With the inception of Internet, Aggregators liked Google merged content from different news providers at the same time producing the best user experience by conserving the attractive profits (i.e not caring about the sources).
Let me break down this business model adopted by the Aggregators by adding some Ben Thompson flavor.
According to this model, content published by news agencies are shown in the aggregator’s platform (say Google News). The aggregator in turn develops trust of the users, produces footfall and eventually revenue out of the content provided by news agencies.
This is proven to be a very successful model adopted by almost all leading tech giants from Facebook to Netflix. But in their own respective niche markets this seems to be an acceptable approach because the aggregators either remunerate the content creators or just provide them with the dopamine punch they were looking for….
For us consumers this is great! Now we get news content from different sources under the same platform that too free off cost. What we are not seeing in this frame is how news agencies are trying to cope up with this situation. Not only are they losing their trusted subscribers which they gained with years of quality journalism but most importantly a huge margin of their profit by selling ads (which they once controlled independently) is taken away by these aggregators. Eventually forcing news and media companies to resort to secondary sources for income which can question the ethics of the industry.
The Australian Government recently amended a law that forced aggregators like Facebook and Google to pay for the news they are displaying on their platforms from independent news agencies. Google replied by saying that proposed laws would result in “dramatically worse Google Search and YouTube,” put free services at risk and could lead to users’ data “being handed over to big news businesses.” . Facebook indicated that they rather block Australian news altogether than pay for that feed. Read more here.
The most common strategy almost every news content providers are trying to adopt is to provide content based on a subscription basis. The subscription model promises 2 benefits, An increased user retention as consumers rather read from the subscribed platform than any other and Second, it promises a stable form of income for them.. just like how Netflix works. But hey, I hope you can see the lack of practicality in this approach yea. The subscription model will build an unwanted competition between providers which will eventually kill off some of the niche players in the industry. Most importantly if news agencies adopt this pattern, one might have to make a choice between the aggregator that provides news from different sources for free and an independent provider. We all know who will win that one.
Subscription model also takes away the user experience of the reader by large. We all must have come across popups that prevent us from reading that interesting article just because it is a premium content.
Subscription model will also pose a challenge to provide the consumers a better bundle to create value for price they are paying. For example, check out the Times Prime bundle that provides the subscriber with 33 different benefits under the same bundle.
Without credible income sources this will prove to be the imminent death of Independent Journalism in the future. My aim as a Product Guy was to come up with a solution to this dilemma that will help sustain news publishers by coming up with better monetisation strategies that will not risk the User Experience of the reader.
Predominantly, News Papers were the first space to provide proven reach for ads to the public. Even today small and medium local businesses continue to use the same newspapers to post ads. With Google Ads and their bid based advertising strategy, which rewards the highest bidder a better start in their rat race to get their brands noticed, I felt a huge hidden market lying untouched. A market which specifically can be utilised by News and Media companies. What the aggregators don't have is it’s dominion towards the local businesses and subsequently the ads they produce.
Here I am talking about a $240 Billion market which is controlled by a few huge players. A whooping 97% of Facebook’s revenue comes from internet advertisements alone.
“The business model for newspapers — based on ads and subscription revenue — has been evolving for more than a century as audiences have turned to other sources for news, including radio, television and later, the proliferation of cable television and satellite radio,” wrote Pichai. “The internet has been the latest shift, and it certainly won’t be the last. Alongside other companies, governments and civic societies, we want to play our part by helping journalism in the 21st century not just survive, but thrive.”
In Part 2 of this article, I would be explaining more about the product I am building to solve the problem in hand and the business model it will adopt. I will also introduce some products that are already thinking outside the subscription model box. Stay Tuned.
UPDATE (2nd October 2020) : Google decided to pay news publishers for the content they are using. The new platform will be called Google News Showcase and will be rolling out the experimental product in Brazil and Germany this year. Google has allocated around $1 Billion in total for this project.