WHODUNNIT- OLD MEDIA DEATH: MURDER OR SUICIDE?

Big media had it all: the money, the sources, the technology and the audience. How could the pros get their pants whipped off by ‘an army of Davids’ (to use Glenn Reynolds’ evocative book title)?

Short answer: greed, arrogance and fear.

This is a longish post, but I’ve been chewing on it for a while, so bear with me.

First, some background: I’ve worked in a variety of capacities at magazines and newspapers, large and small, across Canada for over 25 years. Currently work for a ‘small’ paper owned by a ‘large’ organization, hence the pseudonym.

For decades, old media made a LOT of money. Truth was, they had to. To banks and investors, newspapers and broadcast outlets ran unconventional businesses. There weren’t a lot of hard assets for security and revenue was almost exclusively derived from advertising. Banks and investors demanded, and generally got (from the better-run outfits) investment returns of between 15-20%.

But risks were high. Advertising revenues depended on reader/listener/viewership and that depended on three things: ‘relevance’, ‘credibility’ and ‘market reach’─in short, the collective goodwill of the audience and advertisers they served.. It could be gone in a heartbeat.

I worked for one paper with a track record of close to half a century in a small town. A couple of years after I left they published a story highlighting the laziness and greed of local merchants. As it happens, they were right, but advertiser outrage drove business to the newer competitors. One month after the story appeared, they closed their doors.

That was a judgement call that went bad, but it illustrates the tenuous nature of media profitability.

Towards the end of the 20th Century, successful media companies with their high returns became attractive to a class of investors who leveraged purchases, applied the benefits organizational efficiencies, and managed to both service increasing debt loads and crank out profits.

At around the same time, the media tail began to wag the audience dog. The Cold War, Vietnam and Watergate allowed a new type of iconoclastic journalism to craft an evolving narrative of cover-ups and conspiracies that had nothing to do with the ‘truth’ and everything to do with injecting increasing paranoia in the audience, culminating in Walter Cronkite’s pronouncement that the Vietnam War was unwinnable.

The truth was that the Tet Offensive Cronkite witnessed was a huge defeat for the enemy, but that didn’t matter.

Why? Because it fit the evolving narrative and was VERY good for the media’s bottom line. A frightened audience was desperate for information on the latest crisis of the day and news consumption skyrocketed.

The media’s own success created an environment where investments in media became increasingly attractive. If you couldn’t buy in, you started your own.

Journalistic arrogance reached new heights as reporters elevated themselves to the position of high priests of the American First Amendment and guardians of ‘the people’s right to know.’ Media everywhere followed suit.

It didn’t matter if they got stories wrong, which they did all the time in an effort to out-scoop each other and hold or increase audience numbers. Their ‘greater truth’ was bigger than any inconvenient actual facts on the ground and the profits rolled in.

With the resulting explosion of media outlets and the advent of cable, new sources of information began to appear and the leaking began. Audiences and advertisers alike were presented with a cornucopia of options that increasingly allowed them to select their information providers based on individual interest or specific marketing goals.

At the same time, media profitability and mergers and acquisitions continued, usually with escalating debt-loads. Nobody looked much beyond the next quarter. Bottom-line performance became increasingly paramount as media companies struggled to satisfy both their shareholders and the banks.

Dismissed as a fad at first, cable operations became absorbed into traditional media powerhouses to try to manage the changing landscape and keep a piece of the action. Those that couldn’t buy in started their own cable divisions.

It all limped along.

The lines between news and entertainment began to blur as desperation for audience share grew. Want to find the roots of ‘Eating Horse-colon with the Stars’? They lie here. The advertising rates had to be at least maintained, if not increased, to pay for the decisions and the debt of head offices.

Risks increased and corporate decision-making became increasingly reactive. Big media was now as bureaucratic as big government and a mind-set evolved: it was better to do nothing than do the wrong thing.

Then, the Internet. A bunch of guys at home in their pajamas. The timing couldn’t have been worse for the big boys─or better for the new kids.

Having painted themselves into financial corners with massive borrowing, old media compounded their woes by falling in love with their new ‘elevated’ status and getting confused about their own core business.

Their fundamental product, information, was a natural fit for the Internet but they didn’t see it. The messengers decided they were more important than the message. Online information delivery didn’t need telegenic presenters or sonorous announcers. How could the show possibly go on without them?

Making a successful online transition required a single simple step away from their conventional delivery platform. Their core product remained the same, it was just one more delivery option. All they had to do was take off their TV/radio/Newspaper hats and add one more stream.

Making a buck would come with time as new applications and ideas evolved, but the prospect of giving away something they produced at such a high (self-inflicted) cost caused endless dithering.

They couldn’t move fast enough. The in-house bureaucrats controlled the speed and, as noted, they’d rather do nothing than do the wrong thing.

Except in this case, nothing was exactly the wrong thing to do.

Hobbled by greed and blinded by arrogance, fear of losing, rather than determination to win, became the media’s defining emotional environment.

Half-hearted attempts to make the new media fit the old model (fire-walls, subscription fees, teaser pieces) failed, one after another, as information seekers simply went elsewhere.

Taking a page out of the established media playbook, AOL bought Time/Warner in 2000 in (at the time) the largest corporate deal in history. It was a good move for both sides, giving AOL tons of content and Time/Warner (at the time) the world’s number-one online service provider.

Hardcore traditionalists were outraged that the upstarts had captured their sacred institutions and worked hard internally against change.

When the tech bubble burst, the old guard pointed fingers: ‘See? See? It’s just a fad’. Fear crept in as AOL’s value began to drop. The ‘pros’ regained control of the boardroom and returned to established old media practices.

As a result, AOL’s value eventually declined to about $20 billion, its subscriber base reduced by two-thirds to just over 10 million and its effective market share shrank from about 60% of the online service market in 2000 (according to Stan Liebowitz and Stephen E. Margolis in the September 11, 2000 Wall Street Journal) to a mere 5.5% in 2006 (according to Nielsen/Netratings). Analysts blamed ‘an outdated business model’.

AOL Time/Warner may have had it and lost it. We’ll never know.

Clinging to their privileges, old media became increasingly shrill in both their attacks on new media and in their general coverage of news. Talk of recession is rampant in mainstream news, largely because, for them, the economy is truly worsening and unlikely to ever return to vigor.

The Minneapolis Star Tribune is on the brink of bankruptcy and at the New York Times, Mr. Sulzberger is riding the old gray mare all the way to the glue factory. At the Davos conference a few years back he said he didn’t know if they’d still be producing a print product in five years time. He may have been more correct than he knew, but not for the same reasons.

I have spent several fruitless years trying to convince our command structure that we have the tools and the people to make the shift, but to no avail. Our ‘new’ website, delivered from on high, has lots of great content but the format and access points are impenetrable and there is no ‘wow’ factor. Top down applications are meaningless in a bottom-up world.

The online formula is identify, adopt, test, modify and repeat. Better to risk a thousand ideas and let the best rise to the top than apply a mediocre, committee-driven ‘solution’ that fits ‘an outdated business model’.

Traditional media are on their knees now. The coming of the Grid, with its increased speed, power and potential for undreamed-of applications, will likely be the coup de grace.