Will coronavirus kill the news media?
In an article titled “COVID-19 is quietly threatening the future of Nigeria’s news media”, TechCabal, a technology news platform, blamed the ravaging pandemic, COVID-19 for the current woes faced by news media across the world, especially in Nigeria. It hypothesized that there has been cut down on advertising (the lifeline for news media) thereby causing a dip in revenues for media companies. The writer asserted that even seemingly model digital companies, such as The Atlantic, an American magazine, and multi-platform publishers have been forced to cut jobs. Vice, Quartz, The Economist, and Conde Nast have also whittled staff numbers in response to the coronavirus.
TechCabal also blamed the migration of readers online as “the most devastating challenge for the Nigerian media industry in recent memory” which has impacted the revenue of print publications and caused a slash in the number of pages by almost 50% reduction. The news media sector has had to respond to the business uncertainties with furloughs, salary reduction, and job cuts, which may still not be enough as many Nigerian companies struggle to stay afloat in the short term.
This, unfortunately, may result in long-term systemic erosion of the standards of journalism as more journalists are less incentivized to do investigative work, says TechCabal.
TechCabal is not the first to voice this thinking. Between 2002 and 2010, articles with titles such as “Who Killed the Newspaper?” (The Economist, 2006) and “Mourning Old Media’s Decline (The New York Times, 2008) echoed a dirge for print. New titles such as “Why our newspapers might not survive the contagion of coronavirus” (The Guardian, April 2020), “Coronavirus May Spell the End for Many of Africa’s Print Newspapers” (Global Investigative Journalism Network, April 2020) and “Newspapers owners slash salaries by 50%, reduce print pagination by 45%” (Nairametrics, May 2020) reflect a resurgence of these mourners.
Under the media hood
If the focus of media companies was on ‘quality content’ as a product, making it better, charging for it, and emulating the best practice of others, it is easy to predict media doom by looking at depleting media revenues from advertising. But when the obsession shifts from isolated immediate triggers of sales and circulation, to recognizing the conditions that drive user networks and the opportunities that lie beneath the death or disruption of traditional content, many threats can be embraced for larger payoffs and new revenue lines.
Coronavirus, internet, TV and a long list of scapegoats
Possibly to respond to the perception that the internet killed newspapers, Hal Varian, Chief Economist at Google, published a 2010 report titled “Newspaper Economics”, that showed how newspaper circulation had steadily declined since the 1950s.
Newspaper decline began with the introduction of the telegraph in 1845, radio during the 1950s, continued with the launch of TV broadcast networks in the 60s, was exacerbated by cable TV and 24/7 news channels during the 1980s, and over the last two decades, by internet penetration. But in the past few weeks, coronavirus disease has hastened the decline.
The real problem with media revenues
To find success in any market, you need to offer a product that’s both compelling and differentiated. A compelling product adds value to the consumer as it offers a functional benefit and/or emotional stimulation that they place a premium on. A differentiated product is something they cannot get elsewhere (the brand, connections, community, technology, the focus, or whatever else is unique). Entrepreneurs have a product when it is both compelling and differentiated enough for customers to want to pay for it. Only then can the business determine its “product-market-fit”.
Unfortunately, most media companies, especially in Nigeria have not found product-market-fit. They produce compelling content (i.e there’s an audience) but it is not differentiated (i.e no one is willing to pay for it). News today is no longer relevant, at least for people to pay for. In a digital world of abundance, the bar of relevant and acceptable news is higher. This forces media owners to double down on advertising to monetize their audiences. But this moves them out of the media business and into the advertising business – where the Facebook and Google duopoly collect over 73% of digital ad revenue and account for 83% of market growth – starting a rabbit hole race focused on clickable headlines and views.
For most media landscapes, it is a “winner-takes-all” print market. In his book ‘The Content Trap’, Bharat Anand, writes about the fixed costs of newspapers, “Most of a newspaper’s costs are what economists call “fixed costs” – borne regardless of the number of readers. These are the costs of staff journalists, printing facilities, and administrative and distribution overhead – all the things needed to write, print, and deliver the paper to your door. Fixed costs are terrific during periods of growth – increase your readership by a few thousand, and revenue goes up while fixed costs remain the same so you can spread these costs over more users. For the same reason, they are devasting during periods of decline – lose just 3 percent of your readers, and the revenue drop goes directly to your bottom line.”
The Classifieds conundrum
Given how many print businesses have turned into roadkill on the digital superhighway, the success of classified advertising, especially for digital mediapreneurs reveals the importance of innovation. Classifieds succeeded largely because they are a classic “pull” medium: customers seek out the classifieds when they need something unlike the “push” approach of news. Classifieds are also not as time-sensitive as news. A classified post, especially online, is open for as long as the advertised offer is valid; news is only valid on the day (and on Twitter, the hour) when it is published.
While classified ads boomed on the internet, they reduced significantly in newspapers. Between 2000 and 2007, major US newspapers lost more than $5 billion of classified advertising to Craigslist. The loss of classified advertising revenue led to a decline in the value of the paper to its consumers, which impacted copy sales and subscription levels. When newspapers responded by raising subscription rates to replace lost earnings, they had a further decline in circulation, further declining display ad rates.
This simple difference in the platform has profound implications. While the economics of newspapers depends on attracting readers one by one, online classifieds center around the network established between buyers and sellers. These are a result of network effects: the more listings a platform has, the more buyers it attracts, which attracts more listings. So, while the decision to read print or online news is made by one reader at a time, the decision to check a classified site or platform is determined by many. Network effects ultimately generate better market share for leaders until they eventually win the market.
Product vs Connections
This intransigence around content – specializing, making it better, charging from it, and learning from others – has informed the ‘super content’ craze. Media houses that compete on news and platforms now have to provide bolder headlines, faster and more entertaining stories, quicker websites with thousands of blogger journalists.
Another content trap is the media’s focus on the threats of disruption, rather than the opportunities beneath it. Smart strategy requires companies to look at tomorrow’s benefit instead of today’s hurt. Sustainable businesses are those who can accept low or no prices to capture a bigger market. As organizations narrow focus on their core products, they tend to exert more effort to create content, define existing businesses in terms of current revenue lines and often protect that existing revenue at the expense of new opportunities.
After creating its retailing platform, Marketplace, where everyone can sell, Amazon’s eCommerce sales grew by 25 percent to 30 percent annually between 2004 and 2008. Facebook’s Platform and Connect grew users from 50m to over a billion between 2007 and 2015. Within a week of Apple’s App Store launch, iPhone users downloaded more than 1m apps. Uber’s active driver base grew from zero in mid-2012 to over 160,000 at the end of 2014, with the number of new drivers doubling every six months since it launched UberX service and allowed drivers to use their own cars. The contrast between ‘product vs networks’ was summarized in a tweet by Airbnb CEO in 2014 “Marriott wants to add 30,000 rooms this year. We will add that in the next 2 weeks.”
Apple and its <2% PC market share
After its 1984 launch of the Mac, Apple had a running battle with Microsoft over PCs running Windows. Macs were better designed, easier to use, and more stable than PCs from IBM, HP, and Dell and pioneered the graphical interface. Apple also had the most memorable advertising: its 1984 “Big Brother” commercial on Superbowl is one of the most-watched ads on television and started the Superbowl craze of companies trying to create the most memorable ads. Yet, for two decades after the introduction of this revolutionary product, Apple’s market share in PCs declined to about 1.9 percent while Microsoft had over 97 percent.
A user’s willingness to buy a device depends on its ease of communication and shareability with others and its compatibility with software applications. Microsoft’s dominant advantage came from network effects. For every new user, the value of PC dominated the Mac because the number of existing PC users was higher; allowing new users to communicate with more people. The winner-takes-all “network effect” has made companies like Facebook, Amazon, and Google natural monopolies because the more users they have, the more attractive they become to other users.
Apple lost the early PC wars because it was focused on creating the best product, while Microsoft won because it sought to quickly attain market leadership. The importance of networks is reinforced by Amazon spending years to create a competitive advantage in eCommerce with massive warehousing and logistics efficiencies and then giving it away by opening its fulfillment network to every third-party retailer.
Businesses that understand network effects focus on building platforms that exploit connections. Netflix turning a blind eye to multiple users on every paid account has earned them several individual users, because they understand the power of network effects. An unpaid Netflix user is one less person watching Cable TV. They are willing to sacrifice immediate profit on the altar of fast growth. free models and rapid prototyping- all the natural monopolies also understand this.
Media owners must figure out what to offer customers in a way that uniquely matches their capabilities to customer wants. To attempt a broad brush, I suggest three things:
Offer unique and premium content in print
While having a managed online website is a significant improvement, newspapers need to stop treating their websites as a dumping ground for print stories and treat each somewhat independently, carefully selecting the stories better suited for each media. Physical newspapers should focus on less time-sensitive news and instead on more analytical stories and interviews, similar to an Economist. Print papers are an amazingly sophisticated technology for showing what’s important and showing a lot of it. Physical papers are expensive and should focus on journalism that people want to pay to read e.g insight into the lives of Tech CEOs or a detailed investigation into corruption. Online is cheap or free and should focus on reporting of already available news.
Intensify focus on user-generated content
An issue for print media houses is fixed cost which includes staff costs, printing facilities, and administrative and distribution overhead. These costs may have been necessary two decades ago, but in a landscape filled with eyewitness accounts, user-generated content (UGC), and increasing internet penetration, some costs are not required. For instance, investigative interviewers/journalists can be assigned to print papers, while citizen journalists can curate online content. The advantage of UGC is democratized reporting, speed, access, and implementation in newsrooms and will begin the legitimization of participatory or citizen journalism, at minimal costs to news houses. Citizen-journalism puts the cost of news content on users, rather than news houses. This improves the network connections of news media as users now actively promote their content, and draw attention to the news media themselves. Commending citizen journalism, Sunday Dare, Nigeria’s serving Minister of Youths and Sports wrote this in a Reuters Institute Fellowship Paper titled The Rise of Citizen Journalism in Nigeria – A Case Study of Sahara Reporters “During political crises like those in Kenya and Iran, natural disasters like the tsunami and earthquake in Haiti, terrorist attacks such as the September 11 attacks on America and the July 2005 London attacks, we saw citizen journalism or “accidental journalism” as many would regard it at work. Ordinary citizens at the wrong place at the right time have risen to the challenge and have committed “acts” of journalism by using new communication “toolkit” to capture footage of these important developments as they unfolded adding depth, timeliness, and comprehensiveness. These random acts have enriched our world of information and journalism and in the same breath re-defined the relationship between the traditional media and the audience.” Mediapreneurs can choose to explore platform-agnostic journalists or stipended eye-witness reports as practiced by Galaxy Television.
Build better African-focused brands
Finally, many African-owned media companies have little differentiation from others from a brand perspective. Do a blind test of three top Nigerian papers, and you most definitely may not know which is which. Media houses need to build differentiated African brands. A successful brand can extend itself into other, sometimes unrelated spheres and thrive (take a look at our technology companies). African media houses must shift from being publishers to connected platforms. Globally, there is an increased grey area between being a media company and a consumer brand and Nigerian platforms should take advantage of this. African publishers must also not sacrifice staff welfare and sustainable growth on the altar of Banana Island houses and private jets. Fortunately, some Nigerian media companies are flying the brand flag high; Techpoint is one of the few companies that has leveraged social credibility and sponsor trust to quickly expand across Africa. The platform has also tinkered with alternative revenue sources; industry reports, events and even branded merchandise. BusinessDay also leveraged its brand to pioneer industry events and reports, though its expansion across Africa seems to have been stunted.
Similar to many industries impacted, Covid-19 only worsened underlying issues for media companies. Media organisations have continued to operate by a centuries-old playbook and should not blame the internet, or COVID-19 or other apparent symptoms as reasons for their demise.
The focus of media companies has remained the productizing of content, which in an era of free content, holds little appeal. Media companies need to innovate out of a reliance on content and explore new ways to generate revenue.
Original piece written by Temitope Osunrinde
Osunrinde is a senior marketing executive committed to protecting organizations, businesses, people, and ideas from reputational risks. He can be contacted via me@temiosunrinde.com
