How disrupted is the news media? The answer might surprise you

How disrupted is the news media? 
Most people in the industry would immediately, not even feeling the need to pause for thought, say “very”. 
But attending a course last month at Cambridge University’s Judge Business School called Dealing with Disruption: Strategies and Business Models, I was struck when one of the lecturers said it was “amazing how little the news industry had been disrupted”. 

He pointed in particular to nightly news broadcasts on TV, which are “basically the same as they’ve always been”, and to other customer offerings and business models that haven’t really changed much. 

Sure, digital competitors have swooped on newspapers’ classified advertising revenues and most news companies disrupted themselves when they gave their content away for free online. Like everyone else, we have lost revenue to the duopoly of Google and Facebook in the wider disruption of the advertising industry. Working on the digital side of the news industry for the past decade it has certainly felt like we were being disrupted.

But we have been relatively unscathed compared with other sectors. Just ask hoteliers and travel agents, coping with Airbnb and to name but two disruptors to their businesses. Or car manufacturers (and its associated industries), who see Tesla accelerating into the distance. Or airlines, where Ryanair became Europe’s largest airline almost out of nowhere. Not forgetting poor, defunct Kodak, the salutary lesson to end all salutary lessons. 

The news industry still, by and large, produces content, hopes to find an audience for it and either charges them or seeks to sell this audience to advertisers, or do both. The model is broadly the same, even if other players have whittled away some of its constituent parts. 

So what can we expect from a bigger disruption when it inevitably comes?

The Cambridge academics defined disruption as anything that attacks the basis of your competitive advantage. The case studies were all about finding value where others hadn’t seen it. Airbnb found value in people’s spare rooms or empty properties; Ryanair and Easyjet found that the value for travellers was in getting from A to B quickly and cheaply, not in the creature comforts of the in-flight meal and drinks service; Netflix found value in being able to make data-driven recommendations to its subscribers of what to watch.

I think the key here is that they made a significant step away from the traditional business they were disrupting in order to find new value. And when you look at news media that hasn’t really happened yet. When Google and Facebook disrupted the advertising model – the most obvious counterexample to the no-disruption-to-the-news-media thesis – they really weren’t thinking about news at all. Indeed, I think the only reason they do is because we are so noisy, forever assailing them with stories about how they have slipped up.

Another key lesson was that disruption is never disruptive for the consumer. They simply move on to the new thing without a backwards glance. Who now laments the demise of the VCR? Do you miss fiddling around with CDs and those annoying trays that seemed to have a life of their own? How much easier is carrying a smartphone than both a phone and a digital camera? Anyone miss the whirr of the fax machine?

An observation I had of all these disruptions was that they were rooted in finding out what the customer really wants and then giving it to them. It feels like the internet and the accompanying data it produces allow companies to see a wider world of consumers and consequently opportunities. Now you can really understand your customers, often in microscopic detail, rather than simply make informed guesses about what they want.

Who in the news media could honestly say they significantly changed what they do to take advantage of these insights? 

Instead we have been guilty of forever optimising our traditional offering and model. We comfort ourselves that we are increasing the “quality” of our output, but of course that is no protection. Tesla, arguably the prime disruptor of them all, famously produces cars with more faults than anyone else in the automotive industry. It hasn’t hurt their share price because that’s not what people are buying. And let’s not even begin on the “quality” of Ryanair’s service.

In fairness, it is really difficult for people within businesses to think about their brands or industry from an outsider’s perspective. The “muscle memory” and received wisdom of how things have always been done weigh very heavily. It takes a real leap in imagination to think of a novel way to extract value from an ecosystem. A technique is to think about where the real value lies in it and focus on that. 

One thing is certain though is that you have to change while you still have the means to do so. The best time to repair your roof is while the sun is shining – it’s a cliché because it’s true. If you wait too late it is incredibly difficult to turn things around. 

Kodak had a 50% market share and a 70% margin when digital cameras were launched at scale. As film sales started to drop their per unit cost went up and every day saw the situation get worse. They were then in a tailspin from which it proved impossible to recover.

The news industry has to avoid this. We can’t wait for print circulation and advertising to finally fall off a cliff, or for some other crisis to strike – the looming increase in newsprint prices in Europe could be just such an issue. It could be that local news providers in the US have waited too late to act, with consequences that unfold almost on a weekly basis. We have to be aware that the digital giants are now fishing in our pond for news subscriptions and, more generally, to be a primary source of news, albeit as aggregators.

I believe news providers need to think less about the products they give their customers and more about the service they are providing them. News is everywhere and users can jump between non-paywalled products at will. What is it that makes your service unique and unmissable? How can you make it valuable enough for people to pay for it? And how will that fit within the wider news ecosystem, which now heavily involves the likes of Apple, Amazon, Google and Facebook? 

The questions are urgent and important, and publishers need to treat them as such. I remember when Apple News launched it’s Plus subscription service. Publishers were unimpressed with the user experience and didn’t really see the threat. Now Apple has a million subscribers worldwide after just three years. That is hugely impressive and a touch ominous for the news industry.

These are huge challenges, but not insuperable ones. One of our missions as a consultancy is to help publishers find the right answers to these questions for them. It promises to be exciting.

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