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An article in today’s Portfolio.com restates in rather stark terms why the internet is killing newspapers. The Publisher and CEO of the Dallas Morning News exposed the deal his paper was offered by Amazon.com to allow the paper to be distributed over the Kindle system. According to the article, James Moroney, the publisher, told a Congressional panel Amazon wants seventy percent of all subscription revenue and unlimited, exclusive rights to distribute the newspaper’s content to other digital outlets.

In some detail (I encourage you to read the article on Portfolio.com) Moroney outlines why this monetary distribution cannot work for his newspaper. Though the figures he uses are gross aggregates, they nonetheless paint an interesting picture.

That newspapers may prove to be a dying cultural icon is growing more apparent everyday. This is really very old news. Almost as old as the news you get in your daily paper, which is the crux of the entire problem. Whether Amazon is being too greedy or Google, in its ongoing fracas with Rupert Murdoch, too stuborn or the failure of the New York Times to have a clue as to how to go forward is the question of the day, it is really the same story over and over again. Print publishers are wedded to a production and distribution methodology that requires them to accept content limitations, consume massive amounts of expensive commodities, employ expensive skilled, blue collar labor and a host of other costs that make the printed product’s operating costs prohibitive, in comparison to Web-based news and entertainment outlets. On top of that, print publication demands capital expenditures far beyond that required by digital competitors.

The message that screams from Moroney’s testimony is not that Amazon is unfairly greedy, maybe they are and maybe they aren’t. The central message is simply that print publishing is a non-competitive production model. Once truly portable and egonomically workable devices were developed, the days of newspaper print publishing and book print publishing became numbered.

The service newspapers provide will go on. Likewise, the service book publishers provide will go on. The service will morph in several directions, some of which I have discussed previously, but the service will find a profitable business model, probably several, and it will carry on. What may not survive are the major, general news dailies that have chronicled our lives and have been such an important part of our culture for a couple of centuries. However, if they go away, they won’t go away because Jeff Bezos is a bad guy or Google is stealing content. They will go away because they are too capital intense to make the transition. They will go away due to the failure of the leading professionals in the industry to imagine a new way forward. They will go away because, like Lot’s wife, those industry and professional leaders are looking back in longing for a life already gone and they have, proverbially speaking, been turned to pillars of salt.

OK, nothing new here. More interesting is the question of who’s next? What will be the next industry to crash and burn in the internet age? I have a few candidates.

1. Major network television is headed out the door. At least, as the networks are currently constituted, the game is all but over. Will a future Tina Fey need a network television system to reach her audience? There is no doubt that, given advances in the streaming technology available in 3G and 4G and WiMax systems, she will not need the networks to deliver her product to her consumers. There is no doubt that she will make more money if the dead hand of the network gatekeepers is removed from her pocket. How about a college football team with a loyal following? Why does Notre dame need a network? The short answer is it doesn’t. Ditto, Alabama, Florida, Southern Cal, Texas and so forth. The same can be said for newscasts and any other form of entertainment and/or information now being delivered by network television. Anybody with an audience and something to say can go directly to the consumer. Any such person can set up his or her own virtual network with very little, by comparison, capital outlay.

2. National political parties constitute another potential dinosaur. Politics is becoming far more ideologically based. There is nothing to stop the fragmentation of the two primary political parties into much narrower contingents of like-minded politicos. No one needs the national parties for money or technical support anymore. If a candidate, or a particular ideology, has a constituency, they can reach them via the net and raise all the money required to take the message to the electorate.

3. Higher education and continuing education will also feel the power of the net. Already more people in the United States attend post secondary schools that are decidedly non-traditional. It is increasingly impossible for a person to remove him or herself from society and “retreat” to an academic community for four or more years to “educate” himself. Increasingly, education requires continuous learning. The bucolic campus, whether in the country or in the city, operated along that medieval model is a losing business model. That, more than any other reason, is why traditional higher education is so outrageously expensive. More and more higher education has to be taken to the consumer in order for the consumer to have access. The change in distance education being wrought by the internet is progressive and gathering velocity. It is already possible to have remote learning where two-way audio and two-way video from the professor to the home of the student is easily established.

There are many other entire industries that will feel this surge for change. The single most important thing the industries most affected have in common is much of their market value has always been based on being a gatekeeper. Their value has been based more upon standing between information or services of the providers and the consumers.

Another primary trait of dinosaur status is the intense demand for capital to create an environment in which the information or service is delivered. When an industry has traditionally been very capital intensive and that capital investment is rendered redundant by the internet, any such industry will suffer severe near-term restructuring.

There are other indicators that will determine the violence of the restructuring a specific industry and company will suffer. However, gatekeepers and capital intense production and delivery environments are the two most important.

So, Rupert, Moroney and Keller can wail and gnash their teeth. They can order the tide to turn. They can curse Google, Amazon and, even, God. None of it will do any good. In the end, they must step outside their current field of vision and decide what it is about what they do that has value in an internet age. They must ruthlessly slash those things that will have no value and directly market those that do to a defined consumer, who knows the value of the information/service, and, finally, push on into the future without looking back. It is going to be fun.

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3 Responses to “Dinosaurs or Pillars of Salt?”

1. Tom Baxter says:

   December 1, 2009 at 9:56 am

   – If newspapers had been more nimble in jumping on the Kimble idea, it could have been their salvation and not another nail in their coffin.
   – The internet is indeed having a revolutionary effect on the economy, but there’s something inherently backwards about an industry which used to fret about the decline of literacy, blaming the biggest spur to literacy in a century for its decline.
   – The crisis of the media is the crisis of advertising, which began to take shape a good decade before the advent of the internet. This cannot be said too often or too emphatically.

   Reply
2. mike cox says:

   December 4, 2009 at 3:45 pm

   If the newspapers go away who pays the reporters to find, write, and verify the stories that everyone wants to read?

   Reply
3. Mike Copeland says:

   December 4, 2009 at 4:18 pm

   Mr. Cox asks an awfully important question. Lots of very smart people are working to answer it. There is no doubt that the service newspapers provide is one people want, need and will pay for. So, I am very hopefully expectant.

   The essential problem is summed up in a question Jason Jones asked the Editor of the New York Times, I think Bill Keller, when Jones interviewed him for a segment on the Daily Show, “Show me something in this paper (here Jones picked up the newspaper from that day and handed it to the Editor) that happened today.”

   The essential problem is that by the time something is published in the newspaper it is no longer news. At lest it is no longer useful news to anyone dependent upon it.

   There are other problems with the current newspaper business model but none that can’t be over come if the essential one could be. It can’t, not in newspapers’ printed form. There are those who will develop digital delivery systems and will be paid to do so.

   The newspaper industry has a very painful migration in front of it, to get from here to there, but it will get there. Many, if not most, of the newspapers we grew up with may not be around. They may be too culturally attuned to the past to accept the future. Never the less, there will be journalists who figure it out. It could be you and I, Mr. Cox, are communicating on the platform of just some of those journalists right now.

   Whoever runs the “DEW” hasn’t, I don’t think, figured out how to fully monetize this platform and they may never do so. But, you know what, they might. When and if that happens they’ll have taken “newspapers” and journals of opinion to the next level. I hope they make it.

   Reply

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