In a widely noted Monday Note post, Frédéric Filloux wonders if the solution to print publishers' new-media woes may be to stop delaying the inevitable and just jump into the abyss:
[...] very few publishers of money-losing dailies can elude the following question: Wouldn’t it be smarter to accelerate the downward spiral of their print activity in order to feed more oxygen and nutrients to the emerging online business? Each time I’m testing the idea with my fellow European publishers, I’m getting a straight answer: “No f**** way, pal. Print is still where the revenue is!” I politely refrain from saying “so are your losses, pal “. Beyond this thin-skinned reaction lies a more rational fear: brand dissolution into the digital maelstrom. And there is no successful example of the kind of bold move I recommend.
The title of Frédéric's post, "The Publisher's Dilemma", is a reference to The Innovator's Dilemma, Clayton Christensen's seminal study of how firms that fail to embrace disruptive change risk being killed by new players who are nimbler and leaner. Frédéric offers some high-level thoughts on what a radical solution might look like here: relying less on advertising, moving towards smaller newsrooms, and abandoning the daily news cycle. But bold as these steps may be, I feel they fall short of the self-cannibalizing poison pill that Christensen might prescribe.
For Christensen, old firms that try to "incrementally" change their ways while fundamentally staying the same are almost always doomed to fail. The reasons are many, but two key ones are that:
- The new businesses lines usually have lower margins ("digital dimes vs print dollars") which, when push comes to shove, forces old-firm executives to prioritize the old products and clients when assigning resources.
- Their culture, values, professional networks, salaries, customer and supplier relationships are all undermined by (and thus bound to reject) a new set-up in which their work and products would be "cheapened". Think of some journalists' contempt for aggregators and "content farms", or some publishers' views of "value-destroying" ad networks.
Even if firms adopt all the right technologies and processes, their organizational fabric is strained to the limit. And, if the technology in question (here, the internet) is truly disruptive, the new industries will slowly but surely improve their products until one day they can compete with the old ones - at lower costs and prices. All the money then quickly flows to the new guys, who get even better, and suddenly the old industry is relegated to a high-end niche.
So what is to be done? The solution, says Christensen, is to set up your own disruptive start-up - i.e. a new business unit with its own P&L - and let it run with it. Let it undercut the older units' products and cannibalize their income. Let it kill them if need be. "A business unit isn’t designed to evolve. But a company can evolve if it has many business units within it" (via Lostremote). What remains may be smaller than what you once had, but then the alternative might be nothing at all.
Of course, media companies have been experimenting with variants of this since the web's beginnings (Christensen's book was first published in 1997, and it drew on older, less well-known work by others). Many magazines' websites have their own journalists and content and carry only part of their print output. Newspapers used to do something similar (although the trend is now towards integration of newsrooms). And of course The Daily is a bold experiment, without an umbrella brand or subsidised content from a print mothership.
But I think there's room for far more radical experimentation along Christensen's lines. If the prescription is to act like a real startup, then some of the current attitudes feel misplaced. For example:
- Advertising: Many publishers refuse to sell remnant inventory to "value-destroying" ad networks, hoping that their rivals will do the same and keep prices from eroding. But such gentlemanly, almost cartel-like conduct would be unthinkable for a starving startup alone in the world.
- Multi-platform: Almost all publishers and many TV companies have tried to re-invent themselves as platform-agnostic content (or "journalism") operations. But this means treating the internet as just a change in how you do (or distribute) what you do, and not as demanding a deeper transformation. From Christensen's point of view this might be an ostrich-and-sand situation.
- Aggregation: Print publishers' websites almost never promote their rivals' content alongside their own. Of course this is sensibly motivated by profit - you want your own content to generate ad impressions. Yet link-based aggregation is central to many of today's successful web-only journalistic startups. Could the old players be missing a trick here?
The aggregation point may be key. Sending traffic to your rivals' content when your print colleagues have already written articles on the same subjects sounds absurd (the content costs are already sunk). Yet if you are serious about acting like a startup, perhaps you should be less loyal top your print colleagues and care less about their sunk costs. This is not to say that you should be completely separate; surely there should be an advantage from shared ownership. The questions is what is the right level of alignment, and how to implement it.
On that, just a few tentative thoughts. The idea that a web editor should always link to his print colleagues' content is reminiscent of (or a case of?) problems in corporate strategy where a division is getting its inputs from an internal supplier at sub-market prices, which encourages inefficiency. A common solution there is to set up an internal market with prices dictated by external conditions and adjust incentives accordingly. Could something similar work here? Who should be selling what to whom? Should the print people sell content to the web people, or should the web people sell click-throughs to the content people?
I will have a go at discussing this in another post. In the meantime, if you've read this far you might also want to read two old posts by your humble blogger: "The publisher's dilemma" and "Publishing, aggregation and 'The Innovator’s Dilemma'".