News consumers are mainly interested in news coverage, not content. Coverage is a service that promises to keep its users "in the loop" about what is relevant to them and their peer groups. It is delivered by selecting content on readers' behalf – i.e. through aggregation and curation – and while it relies on content it is more than that. Because it is an ongoing, day-to-day service, coverage is all about loyalty: once consumers find a provider they like, they come back to it. And because of hyperlinks, in the web coverage providers need not be content providers (and vice-versa). This means that media brands' power – including their pricing power – will increasingly be a matter of how well they aggregate content – whatever its source – and not just how good their content is.
Note one more thing about this. As the split between publishing and aggregating gathers force, the focus moves from those whose craft is to make the core product (content), and towards those who can understand their audiences exquisitely and bring them exactly what is right for them, wherever it may come from (think the Drudge Report). By analogy with other industries, this is the classic move from an engineering/product focus towards a marketing/customer focus.
This analogy goes a long way. In his seminal study of disruption in technology industries (see the books The Innovator's Dilemma and The Innovator's Solution), Clayton Christensen asked whether firms should integrate vertically and own the entire value chain involved in a product, or just concentrate on what they do best and let others build the final thing that consumers pay for. The answer depends on how evolved a given industry is.
In the early days of car manufacturing, car makers made most of their core components – the engines, the radiators, etc. But as the industry matured, firms emerged that specialized in making these components and sold them to a variety of car makers. Eventually, success in the car business became a matter not of technical performance (since any manufacturer could buy the same components at the same price) but of how well car makers could respond to their consumers' changing demands – in terms of lifestyle-fit, look-and-feel, brand associations, values, distribution, etc. According to Christensen, the catalyst for this shift is always the emergence of industry standards for the interfaces between components and finished products. Today, any car maker can say that it wants a radiator of X and Y characteristics (where X and Y are specified in a standard way) and find a variety of suppliers ready to sell it exactly what it needs.
If you were an integrated car manufacturer when the industry was going through this change, you had to tread carefully. If you chose to stay in the car business you needed to make sure you had what it takes to succeed there – and your prowess in making engines may not be an advantage anymore. Rather, you needed marketing excellence – a good brand, a good understanding of your customers, a good distribution network, etc. If your strengths were in engine-making and not in marketing, you would have struggled to create value and make any money as a car maker: your competitors would make cars that consumers prefer over yours, with lower costs and without the distractions of running an engine operation. So a better option could be to leave the car business altogether and become an engine supplier to car makers. The moral: concentrate on the area where you have a unique competitive strength and leave the rest to others.
Now back to publishing. Here the engine is the content, the engineer is the journalist, and the car maker is whoever can give consumers the coverage they need. In order to be a coverage provider you need to offer an ongoing selection of content - an aggregation. And while of course you need content to aggregate, this is only in the sense that car-makers need engines.
Of course this separation of content and aggregation is not strictly new. Newspapers have been paying for the right to use news-wires' content for a long time (this is what the industry calls syndication). But Tim Berners Lee's invention of the hyperlink is gradually rendering that arrangement obsolete. Now simply by referencing someone else's content you are also bringing that content straight to your reader's screen, without you ever having held a copy of it - or had to pay for it.
This is the perfect frictionless interface between two formerly integrated industries: publishing and aggregation. It does not matter that it did not come about in the gradual way that Christensen describes (i.e. through a slow process of industry evolution) but as a quantum leap, before the industry was ready. The fact is that the interface is here, with all the consequences that Christensen studied.
Suddenly, being in publishing and aggregation at the same time looks dubious. If anybody can aggregate the best content there is, any publisher's reluctance to link to other people's content may be self-defeating (like a car maker insisting on using its own sub-standard over-priced engines). But even if you do start aggregating the best content, that is not enough: the challenge is not to offer good content (since that is a given) but to be the best at finding timely content that is hand-picked to suit your target audience's interests, worldview and concerns.
It is telling that in this new ecosystem, while integrated publisher-aggregators (i.e. newspapers) are struggling, pure-play content (e.g. Reuters) and aggregation (i.e. Drudge) players are
thriving. The key question is how can the old integrated players survive – what I have called the publisher's dilemma. Murdoch seems to be trying to stop the clock, choosing to focus on loyal customers who get their content and their aggregation in the same place and refusing to accept readers who use other aggregations. But if the industries that Christensen studied are a guide, this effort may be doomed (see also my earlier post for some specific reasons why publishers may not be able to beat aggregators).
The challenge is clear, even if the solution is not. And as they look for answers, publishers would be well advised to listen to Judy Sims' advice on where to look (hint: it's not content):
It's time to break the cult of the editor and publisher and bring in product development expertise. Not just someone from advertising or editorial or a committee of cross-departmental managers, but honest to goodness professional product people. Product people who will examine the market data, study the demographics, lifestyles, challenges and habits of potential readers and then bring together editorial, advertising, technology and marketing to create digital products that serve users and advertisers and do so profitably.