Perhaps The Real Problem With Newspapers Is All That Extra Overhead...

from the cut-the-fat dept

We keep hearing from newspaper execs about how important it is to keep newspapers alive to fund all that important "investigative reporting." The problem, of course, is that most newspapers don't really do all that much investigative reporting. Hell, they don't really do that much reporting at all. A few months back, we noted that a quick look at a variety of local newspapers all showed a very small number of locally produced stories (usually under 10) each day. All the rest were wire stories and other stuff -- not much actual local reporting at all. As a whole bunch of you are sending in, Clay Shirky recently did a similar experiment, taking apart his local hometown newspaper, slicing the paper up into "news" and "other" categories, and finding that news was a small fraction. And most of the news was wire service. Actual locally produced news involved only six reporter bylines. In investigating further, he discovered that the paper only had six reporters -- despite a staff of 59 people. And, yes, obviously many of those other roles are important -- the editors, the printers, etc. But, at some point you have to question the claim that the "reporting" is so expensive. It certainly looks like there's an awful lot of overhead and inefficiency built into the system. And that's why newer news startups are able to succeed -- because they don't have that extra legacy layer of fat to deal with.

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The Psychology Of Externalities: Only I Can Benefit

from the welcome-to-the-world-of-entitlement dept

To understand the economics of the digital era, at some point or another you need to dig pretty deep into the issue of externalities -- a topic on which there's been a lot of recent research. However, the traditional view of externalities is that these are economic "spillovers" that either benefit (positive externalities) or harm (negative externalities) third parties. The traditional view is that too many externalities can lead to too much or too little of a good being produced, because all of the costs and benefits are not properly accounted for by those making the production decisions. Some recent research begins to question that assumption. And this becomes more and more important in a digital era, where externalities are less "spillover" and can, in some cases, be a major result of the good. For example, the ability to make a perfect copy of a song for free may be seen as an externality.

Either way, though, Clay Shirky recently brought up a point that touches on the psychology associated with externalities. He was talking about the silliness of Mannie Garcia claiming copyright on Shepard Fairey's iconic poster, and noted that people seem to view externalities quite differently, depending on how they impact them. For example, nearly the entire benefit of the photo that is being fought over was added by Fairey. That is, the only reason that the photo has any significant value these days is because of Fairey's poster. It's an externality from the poster. And yet, rather than recognizing that it has received a free benefit, both the AP and Garcia want to demand money from Fairey for causing the externality.

But, at the same time, the AP of course has no trouble profiting off the externalities of others. The fact that people make news that allows the AP to report on it, is an externality. The fact that tons of people are willing to talk to reporters and give them quotes and educate them is an externality. The fact that the AP learns about some stories from other news sources or researchers its stories via Google or any internet technology is an externality. And it has no problem benefiting from every one of those externalities, and would be quite upset at the thought that someone would come back later and try to charge them for it.

And, yet, when it comes to the other direction, suddenly the AP says that no one else might benefit from externalities. Only it may benefit from externalities.

Of course, this is not just limited to the AP. It's a common psychological problem when it comes to externalities. Look at almost any dispute that's being caused by the modern internet and you can find someone who's upset about some externality not being "fair." We see it with the blame being put by the entertainment industry on "piracy." We see it with the blame being placed on aggregators and Craigslist by newspapers. We see it in trademark, copyright and patent disputes. And it's always psychological. Recent behavioral economics studies have shown that rationality gets tossed out the window the second someone thinks that someone else is benefiting too much. Even if you would benefit more yourself, seeing someone else apparently benefit more seems unfair.

This thinking is both pervasive and dangerous -- even if it's natural. It leads to a destruction of value (or, at the very least, a hindrance of it). It focuses on pulling others down, rather than looking at how we can all, individually, be better off. Both Mannie Garcia and the AP benefited greatly from Shepard Fairey's externalities. But because they feel he benefited too much, they want to sue him. And all that does is prevent them from benefiting from similar externalities in the future. The same is true in pretty much every industry that we talk about. It's as if people don't realize how much they benefit from externalities. They assume that benefiting themselves is "normal." But the second anyone else benefits, it's "theft" or a massive problem that needs intervention. And that's a problem.

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Amazon: A Search Engine With A Warehouse

from the rethinking-commerce dept

Clay Shirky made an offhand comment on Twitter recently that's way too good to leave to just the Twitterverse and not expand upon (hopefully Shirky himself will expand upon it -- but in the meantime, you're stuck with me). In commenting on a chart showing how Amazon seems to be growing while the rest of retail is shrinking, Shirky notes "AMZN's growth happens because its not a retailer with a web presence, its a search engine with a warehouse."

This needs to be unpacked in a few ways, but it's such a unique insight that it deserves lots of attention. Many people look at Amazon and think that it's just an "online store," but the reason that Amazon works is not because it took the concept of a store and put it online, but because it has always done things that only the internet allows it to do. That is, from its very early days, Amazon was never just about about being a store in a web browser, but in using the web to do interesting and unique things built on top of a commerce core. Things like online user reviews and recommendations may now seem commonplace, but Amazon revolutionized them. And it added so much convenience that many people now use Amazon product pages as default info pages on a product -- I know I do. To me, Amazon isn't just a store, but it's a database of products and reviews -- and that's what Shirky's getting at in saying it's a "search engine with a warehouse." Of course, the cool thing is that when you start thinking about Amazon in those terms is you realize how much more it can do. Those who think they're retailers are going to keep missing where Amazon is heading unless they start thinking the same way.

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Another Attempt At Rescuing Newspapers And Magazines

from the but-where's-the-value dept

A few friends have sent over Jason Pontin's "manifesto" for saving newspapers and magazines, where he supposedly slams "new media" thinkers like Clay Shirky for "folly and ignorance" and "[knowing] nothing about the business of media." That's a bit harsh. I'm fans of both Pontin and Shirky, both of whom I tend to think are dead on right a lot more often than they're wrong -- so it's quite interesting to try to find the points where they disagree. Unfortunately, I don't think they actually disagree very much. I think the Shirky that Pontin describes isn't the actual Clay Shirky. Pontin claims:

"Shirky believes that the coming decades will see a variety of nonprofit experiments whose funding sources will be similar to those that have sustained him as an academic, such as endowments, sponsorships, and grants."

Really? He's discussing the same Shirky analysis that many of us discussed a couple months back, and I don't see anywhere that Shirky claims that journalism will be a bunch of nonprofit experiments involving endowments. At the very end he says that one experiment of many would likely include "sponsorship or grants or endowments" but he doesn't say that's all of the experiments at all. And I don't think anyone denies that there will be such experiments (and nowhere does Shirky claim they'll be nonprofit). In fact, even Pontin admits in his article that sponsorships are big revenue drivers these days. So he seems to first be dismissing Shirky, but what he's dismissing isn't what Pontin is talking about... and later he basically admits that one of the business models Shirky mentions is a good one. So why bash Shirky?

Pontin then makes a second mistake in tossing aside the idea that "amateurs" have a place in the modern journalistic endeavor, stating:

The comparative advantage of mainstream media is not the ownership of presses, but the collaboration of professionals. The creation of good journalism is a tremendously laborious process, requiring an infrastructure more expensive than any press. The illustration and design of stories has an infrastructure, too. Developing an audience that will attract particular advertisers requires another infrastructure. Selling advertising requires yet another. These structures, which allow publications to reach large, coherent audiences, can exist only within complex organizations, mostly businesses.

He's right that it is a laborious process that requires quite a lot of infrastructure, but Pontin offers no support for the final sentence, claiming that these structures can only exist within businesses. Hell, ten years ago, I'm sure people would say the same thing about the creation of an online encyclopedia. Or the ability to market and distribute popular music.

Finally, Pontin seems to confuse the idea that everyone can participate in the media-making business with the idea that professionals aren't needed. No one that I know says that editors and professional journalists go away. It's just that their role changes, and the wider community participates in the overall process.

That said... if Pontin had simply skipped over the opening half of his discussion and jumped straight to his recommendations on what publications should do, I'd agree with almost everything (and, oddly, I'd bet Shirky would agree with most of them too, despite his "folly and ignorance.") The recommendations are mostly common sense, along the lines of what Shirky and other media commentators have been saying for a while. Give customers what they want. Don't try to charge for stuff that no one will pay for. Cut back on the excess and overlap. Focus on more interesting and creative ways to connect those who want to reach your community to that community, while being careful to not let it impact editorial. That's all good advice, but nothing particularly new. The problem is that it's not what most publications have been doing. Also, I'd argue that Pontin still misses the biggest point, which isn't a surprise given his earlier dismissal of participatory media: many people want to be more involved in the media process, whether it's commenting, sharing or even helping to report on the story. Any modern publication is going to need to enable those activities. Otherwise people will go elsewhere. But, of course, I speak from a position of folly and ignorance, so take that for what it's worth.

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Fascinating To See How Journalists React To Clay Shirky's Thoughts On Journalism

from the microcosm dept

There's still a ton of buzz going on around Clay Shirky's wonderful discussion on business models and changing markets that we discussed earlier in the week. If you haven't read Shirky's post yet, do yourself a favor and read it. It applies to so many industries beyond just journalism. Unfortunately, as we saw in our own comments here, there are still some folks who are having difficulty understanding the key points to Shirky's argument: that business models evolve, but during the upheaval, it's rarely clear how that evolution will shake out.

A few people have sent in journalist Tom Watson's response to Shirky, and it's somewhat surprising. It's as if we read two different things -- even though the links are to the same Shirky writeup. I read Shirky's analysis as a huge burst of optimism. It's a "hey, things are crazy now, but check out what's coming next." Watson read it as an obituary for journalism, apparently assuming that Shirky's tone was to say that journalism is over. He reads Shirky's explanation of why bad newspaper business models failed (they all tried to recreate the old inefficient market) to mean that nothing will succeed. It's as if he skipped over most of Shirky's analysis.

Then, there's venerable TV newsman Charlie Gibson, who apparently was asked about Shirky's analysis (without it being clear if he'd read it) and responded that Shirky is "full of crap." He then proceeded to go back and try to re-inflate every discarded and failed idea in newspaper business models, falsely claiming the Seattle Post-Intelligencer is "gone" (it lives on online) and blaming "young people" for reading the news for free online as well as Google for bringing about the downfall of newspapers.

When asked what to do, he fell back on the idea of charging for news -- but never answered any of the important questions such a plan needs to address. Instead, he just seemed to think that the only way to pay for news is if the consumers each pay for it.

Remember, this is Charlie Gibson. The anchor of ABC World News Tonight. On ABC. Which is free. To consumers. It's supported by advertising. But, according to Charlie Gibson... that's impossible. I guess it's his viewers' fault for watching him for free or something... You want to know why people are turning to alternative sources? Perhaps it's because they're smart enough to realize that when Charlie Gibson -- whose face and voice beams into millions of peoples' homes for free every night -- says that people who get their news for free are destroying an industry, perhaps there are better sources from which to get their news.

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You Can't Wait For The Perfect Business Model

from the what-comes-next:-everything-and-everyone dept

Markets change. Businesses -- and business models -- die. That's often what we're talking about here, with a focus on all of the good (sometimes wonderful) things that come about in their place. But, the process of creative destruction is a messy one at times, and every time we write about an industry going through upheaval, be it the recording industry or the newspaper industry, someone angrily demands in the comments for us to explain "what will replace it." I've spent over a decade trying to answer those questions pretty much every day here -- showing example after example of things that are actually replacing those old models, but they're all experiments. They're new, they're different and they all start small. People always look to explain why that's the exception rather than the rule. People insist that no record label can offer music for free until a new models' been "proven." They insist that newspapers shouldn't adapt until someone explains how they can make the same revenue and the same margins they used to make.

That's not how it works.

Clay Shirky has written up a wonderful and compelling response, to all those people, that should be read in its entirety, over and over again by pretty much everyone, whether you believe in the new models or if you are the skeptic, demanding "proof" before you'll jump off the ledge. Shirky's piece focuses on the newspaper industry (really, the journalism industry), but it applies to pretty much any industry going through a bout of massive creative destruction.

During the wrenching transition to print, experiments were only revealed in retrospect to be turning points. Aldus Manutius, the Venetian printer and publisher, invented the smaller octavo volume along with italic type. What seemed like a minor change -- take a book and shrink it -- was in retrospect a key innovation in the democratization of the printed word, as books became cheaper, more portable, and therefore more desirable, expanding the market for all publishers, which heightened the value of literacy still further.

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn't apparent at the moment it appears; big changes stall, small changes spread. Even the revolutionaries can't predict what will happen. Agreements on all sides that core institutions must be protected are rendered meaningless by the very people doing the agreeing. (Luther and the Church both insisted, for years, that whatever else happened, no one was talking about a schism.) Ancient social bargains, once disrupted, can neither be mended nor quickly replaced, since any such bargain takes decades to solidify.

And so it is today. When someone demands to know how we are going to replace newspapers, they are really demanding to be told that we are not living through a revolution. They are demanding to be told that old systems won't break before new systems are in place. They are demanding to be told that ancient social bargains aren't in peril, that core institutions will be spared, that new methods of spreading information will improve previous practice rather than upending it. They are demanding to be lied to.

The point is that there isn't necessarily one model that works. And there isn't necesarily a single answer, but what we do know is the economics at play, and the massive changes that will bring to an industry. You can't pretend that a "newspaper" is a scarce resource any more, just as you can't pretend that a song, a movie or even a piece of software is a scarce resource. You can erect new barriers, call for new legislation, initiate lawsuits and call those who love your work the most "thieves," but it doesn't change reality.

But one thing that has been true throughout history, is that even as new technologies come about, and old business models die out, what comes next is better. It's more powerful, more compelling, more efficient and more wonderful than what was in the past -- even if those who came before can't necessarily see the business models that will dominate. We talk here about basic economic principles, and show those who are applying them to new business models (successfully!). I talk about "connecting with fans" and giving them a "reason to buy," while admitting that everyone who does so currently needs to do so in a slightly different way. And we keep seeing that work, and we have faith that the economics at work hold true, and that the new opportunities that we see every day only increase and expand, just as the old models falter and collapse.

The newspaper people often note that newspapers benefit society as a whole. This is true, but irrelevant to the problem at hand; "You're gonna miss us when we're gone!" has never been much of a business model. So who covers all that news if some significant fraction of the currently employed newspaper people lose their jobs?

I don't know. Nobody knows. We're collectively living through 1500, when it's easier to see what's broken than what will replace it. The internet turns 40 this fall. Access by the general public is less than half that age. Web use, as a normal part of life for a majority of the developed world, is less than half that age. We just got here. Even the revolutionaries can't predict what will happen.

Imagine, in 1996, asking some net-savvy soul to expound on the potential of craigslist, then a year old and not yet incorporated. The answer you'd almost certainly have gotten would be extrapolation: "Mailing lists can be powerful tools", "Social effects are intertwining with digital networks", "This points to future ways of managing local information", and so on. What no one would have told you, could have told you, was what actually happened: craiglist became a critical piece of infrastructure. Not the idea of craigslist, or the business model, or even the software driving it. Craigslist itself spread to cover hundreds of cities and has become a part of public consciousness about what is now possible. Experiments are only revealed in retrospect to be turning points.

Everything is an extrapolation at this point. Even the most visionary folks out there can only see so far, and can only build on what they've experienced so far and where they believe things are going. No one knows what will be the exact end result, but many of us know that the end result will be more powerful and, indeed, more wonderful than what came before.

Society doesn't need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable. That's been a fine accident to have, but when that accident stops, as it is stopping before our eyes, we're going to need lots of other ways to strengthen journalism instead.

When we shift our attention from 'save newspapers' to 'save society', the imperative changes from 'preserve the current institutions' to 'do whatever works.' And what works today isn't the same as what used to work.

We don't know who the Aldus Manutius of the current age is. It could be Craig Newmark, or Caterina Fake. It could be Martin Nisenholtz, or Emily Bell. It could be some 19 year old kid few of us have heard of, working on something we won't recognize as vital until a decade hence. Any experiment, though, designed to provide new models for journalism is going to be an improvement over hiding from the real, especially in a year when, for many papers, the unthinkable future is already in the past.

This is not just true of newspapers. It's certainly true for music (which may even be ahead of newspapers in some regards). It will be true for all forms of entertainment soon enough. We're seeing the beginnings of it in software as well. But that's just the beginning. It's going to happen soon in energy and healthcare, and potentially in many other industries as well.

Sometimes people complain that we focus too much on the music industry or copyright or patents around here. But, from my perspective, that's because those are the leading indicators today of what's about to happen in many different industries that are being fundamentally disrupted from the inside -- as the very fundamental facts on which they based their models are being upended, as what used to be scarce is suddenly infinite (or, at the least, massively abundant). New scarcities are always created along with new abundance, but it's incredibly difficult to see at the time. When people say things like the fact that "music has always been paid for" or that we need to pay for music because "that's what's valuable," they're not just missing the point, they're missing the opportunity.

The economics of the old model have changed in fundamental ways. There is no way to go back, nor any desire to go back. What comes next is exciting and wonderful -- but it will always be fought by those who lived off of the old inefficiencies and hope that they can continue to do so. But for everyone else, we should be embracing the experiments. We should be embracing what's new and marvelling at the innovation and creativitiy we witness everyday that goes beyond just an extrapolation of what happened before, but is an actual embodiment of what comes next.

Shirky started his piece off by noting a story in the 90s from a newspaper guy who discovered that kids were reposting ("pirating") Dave Barry columns on Usenet, where the guy said:

"When a 14 year old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem."

Yes, you do have a problem, if you're running that old business. But for the rest of the world, you don't have a problem. You have a revolution and a tremendous opportunity.

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How Do People Find The Time To Watch Television?

from the social-surplus dept

One of the most common reactions when people first learn about Wikipedia is to wonder where people find the time to write millions of articles for free. That's precisely the reaction Clay Shirky got (thanks to Luis Villa) from, ironically enough, a television producer. Shirky points out the obvious answer: people spend a lot more time watching dumb television shows than they do contributing to Wikipedia. Shirky estimates that Wikipedia represents about 100 million hours of collective effort by Wikipedia's editors. In contrast, Americans spend something like 200 billion hours watching television each year. And however pathetic people might find it that someone would spend their evenings having edit wars with people on Wikipedia, it's surely more pathetic to spend your evenings on the couch watching re-runs of Gilligan's Island. Even an online game like World of Warcraft, which many people deride as nerdy and anti-social, at least involves interacting with other people. Indeed Shirky argues, correctly in my view, that the transformation of our social lives from passive to active forms of entertainment is just beginning. People still spend a huge amount of time consuming passive media like television. If even a small fraction of that mental energy was diverted to more active pursuits, it could lead to the production of dozens of socially-beneficial efforts like Wikipedia. The problem isn't finding people with time on their hands; we've got tens of millions of those. The challenge is finding socially-beneficial projects that they'll enjoy participating in more than re-runs of Seinfeld.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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