Of media typhoons and media tycoons

By Jack Shafer
September 20, 2013

In the 1993 debut issue of Wired magazine, founding editor Louis Rossetto predicted that the media and other industries would be whipped like a “Bengali typhoon” by digital change. As it turns out, Rossetto underestimated the impending mayhem. The ruins of the newspaper industry, music business, and the book trade smolder beneath us, with newspaper companies selling for pennies on the dollar they commanded when Rossetto wrote. Madison Avenue and the retail industry stagger about like cattle just shot to the head with a stun bolt. If re-writing his manifesto today, Rossetto might want to compare the coming gale not to a typhoon but to the solar super-storm of 1859, which made telegraph machines spit fire, turned night into aurora-lit day, and encouraged some to think the end times had arrived.

The digital revolution has yet to turn our skies crimson, but Moore’s law and its codicils have not finished with the news media business. If you seek to identify the future victims of the digital typhoon, do what Rossetto did, and point your finger at the current incumbents. The organizations at the top — heavily invested in older technology, wedded to waning ideas, beholden to existing revenue streams, haunted by yesterday’s successes, and possessed by fantasies of invulnerability — are always the best targets.

My incumbents list includes but is not limited to the Huffington Post, Politico, Atlantic Wire (and its sister-site, Quartz), Business Insider, Bleacher Report, BuzzFeed, The Verge, and Gawker Media. All of these organizations raced from almost nothing to something big in a relative hurry. HuffPo was just six years old when it sold to AOL for $315 million in 2011. Bleacher Report, born in 2007, sold to Turner Broadcasting System for almost $200 million in 2012. As a point of comparison, the Washington Post, first published in 1877, just went to Jeff Bezos for $250 million.

Bear in mind, of course, that the Washington Post earned 25 percent margin profits for many of the 25 years it ruled news and advertising in its metropolitan market, a dominance that none of the digital outlets just mentioned will ever enjoy. Traditional media companies — newspapers, music, movies, magazines, cable, TV, radio, and even games — once resided inside “unique, noncompetitive” analog silos, as W. Russell Neuman wrote in his essential 1991 book, The Future of the Mass Audience. (I own two copies of this book, one for work and one for home, and have drawn on its wisdom again and again.) The analog nature of media made the translation of content from one format to another “an expensive, labor-intensive endeavor.” Once all media — music, movies, print, and broadcasting — started speaking the same digital language, the costs of translation and production fell, bringing down the silo barriers. For example, in the old days print, newswire, radio, and TV journalists competed indirectly across content silos, battling for the audience’s attention but largely sticking to their native mediums. But for almost two decades now, those distinctions have become arbitrary. All journalists have become digital journalists, producing text, video, and audio. You’re as likely to encounter a written story on the CBS News website as you are a video report on the Wall Street Journal‘s.

In addition to hammering the content silos, digital technology has also hammered both the barriers to and the costs of entry. In the old days, mobile TV news was gathered on film stock, developed in chemical baths, edited in a cutting room, and then projected before it could be transmitted over the air, a time-consuming, expensive proposition requiring trained technicians. No more. A modern smartphone can do all that in a flash, making any owner a potential recorder of visual news. A high school student sitting at his laptop can call down a universe of information compared to what the best New York Times reporter from 1975 could command. Cheap digital technology has also eroded the federal government’s power to regulate and license the producers of video news, a power it has long used over broadcasters. But no regulator stands between an aspiring journalist and YouTube or Vimeo or his own website because no federal agency can ration Internet bandwidth the way the Federal Communications Commission still rations the airwaves.

All this barrier-lowering of the Bengali typhoon hasn’t destroyed legacy media, but it has attenuated every established media property’s position. If anything the Bengali typhoon is even less respectful of digital companies than of analog enterprises, as the evolution from the marginal Makeoutclub to Friendster to MySpace to Facebook proves. With every passing year, it becomes easier and cheaper, not harder and more expensive, for a newcomer to challenge and potentially displace an entrenched media property. As Marc Andreessen wrote two years ago in a widely quoted Wall Street Journaessay (paid), “Why Software Is Eating the World,” the cost of running a basic Internet application in 2000 was about $150,000 a month. “Running that same application today in Amazon’s cloud costs about $1,500 a month.” Plus, the Web services are more reliable and more high-performance than those of 2000. All this “continuous productivity” of the tech sector (to pinch a phrase from Steven Sinofsky) has created “technology stacks” (to pinch another) that not only invite but compel the introduction of new competitors.

(One proviso: it remains harder to directly challenge media properties protected by government regulators, such as the broadcasters. But even broadcasters must now compete with video delivered over the heads of regulators via the Internet, such as movies from Netflix and Amazon, so that proviso is shriveling.)

The best recent illustration of this nobody’s-bacon-is-safe thesis is BuzzFeed, the one-time side-project of Jonah Peretti, one of the key architects behind the Huffington Post. Drawing on $46 million in venture capital, Peretti started bulking up BuzzFeed with real journalists in late 2011 by hiring Ben Smith as editor-in-chief. Today BuzzFeed, “a super-big ad tech company with a journalism veneer,” ranks as America’s 61st most popular website in the Alexa chart. (HuffPo is the 21st most popular.) Peretti’s lesson seems to be, don’t start small and build big over time. Turn down that diet of house sparrows and city rats that the bootstrappers subsist on. Instead, get yourself some venture capital money to start big and get bigger as fast as you can. NSFWCORP founder Paul Carr summarizes this technique in these words: “Advice for journalism startups: Take the money. Take it all. Ask for more.” And if it behooves you, sell your successful site to an established corporation and start over.

Better still, consider the valuation of Twitter, soon to go public, as charted by Business Insider. Started in mid-20082006, Twitter had an estimated value of $1 billion by mid-2009, $8 billion by mid-2011, and is now worth about $14 billion. Twitter didn’t succeed by directly stealing Google or Facebook and anybody else’s bacon. It succeeded by making its own kind of bacon. (I’ve gotten this far in my piece without using the words “disruptive” or “creative destruction,” and I’m not uncorking them now.)

New media entrants, such as MediumBeaconNSFWCORP, Circa and Bustle (whose knucklehead founder boasts of having raised $6.5 million), have on their side the increasing volatility of the media market, a shifting preference for mobile over PC, changing tastes (a.k.a. fashion and fickleness), and the eternal creativity of youth. (Yes, more of the new auteurs are younger than older, and for that reason they’re less sentimental about tossing over old ways for new.)

Technological change has always driven media and media entrepreneurs: The steam-driven press, the telegraph, wireless, the motion picture, television, computer typesetting, cable TV, satellite distribution, portable video cameras, desktop publishing, the Web, blogging software, podcasts, the smartphone — all germinating new media forms, formats and fortunes. The unique thing about our times is that the technological life cycle has accelerated to the point that media outlets can barely assimilate the last new wrinkle before the next one (or ones!) emerge. This hasn’t made living on the top of the media heap any sort of burden, but it has diminished the power of the status quo. There has never been a better time to start your startup.

******

Send technological weather reports to Shafer.Reuters@gmail.com. My Twitter feed will soon be 3D against a blue screen. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

PHOTO: Super Typhoon Usagi is seen heading west-northwest between the Philippines and Taiwan through the Luzon Strait in this 0730 GMT September 20, 2013 handout satellite image by the National Oceanic and Atmospheric Administration (NOAA). REUTERS/NOAA/Handout via Reuters

4 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

When using the term “digital”, should we assume that really means online or InterNet-based?

Newspapers have been authored and published “digitally” or electronically – i.e with computers – for decades.

These inaccurate terms in this article make it seem like the ramblings of dinosaurs who still lament the passing of newsprint. Get over it.

Let’s discuss globalization and how to stop that as well.

Posted by ptiffany | Report as abusive

Yes, yes, yes, the digital tsunami has provided some amusing sideshows in journalism. It can be endlessly entertaining to slum among the blogs and websites created by 20-somethings who can provide droll, arch, or ironic commentary of the day’s events. And of course the web has provided easy access to global voices and specialized sources. But where do you go when you need REAL information and solid analysis? To the few “old media” players who have withstood the howling gales of technology, globalization, and fickle fashion and still remain reliable and credible. For example, Reuters or the BBC. Or the FT or Wall Street Journal. Of course they are kept on their tops by new competitors like Bloomberg, etc. and the icons of old media are perpetually threatened by the blast of global competition. For me, for example, the once “essential” New York TImes has become less compelling because I can easily access and compare its news coverage and editorial analysis with that from a rich variety of other American, European or Asian media. “Gatekeepers” of opinion are now dead but you still need organizations that can afford to send a GOOD correspondent somewhere. And to enjoy that, consumers of quality news do have to pay.

Posted by bluepanther | Report as abusive

Did it really take you this long Jack, to see that Rossetto was right? Or did you fear the reprisals of such an article? No matter, at least you finally voiced what has been apparent for years.

In a way !@bluepanther is right. With the vast mix of available information on the internet, much of it just regeritated from other sources, who took it form others, who probably took it from an old main stream media outlet, we internet news junkies long for them to embrace the new world order. I troll Reuters for exactly that reason. Real reporting by real investigative reporters and professional journalist. And luckily most of the Joe and Jose six-packs don’t know it exists, so these comment sections can be very interesting. Sometimes rivaling the articles themselves. I hope that more of the older news outlets realize that they just need to drop the old business model, not the business. There is still demand for real, quality news. Just like before. But the model changed. Don’t throw the baby out with the bath water. Keep your real journalist. Get technology people to help them deliver their product. Get new business and marketing folks to help compete in the new world. Your market has grown from how far you can ship the papers to how many languages can you quickly translate to. Get rid of the old manufacturing plant. I won’t pay for it anymore. Don’t try to make me pay for that old beast by making me pay to read your site. There are to many out there and I need to compare yours with others. I can’t afford to pay for all of the sites, so I’ll just skip those that demand it. You need to learn how to make your money on advertising. Remember how you used to do that? Don’t let scroogle steal all your advertising and metadata. Sell it to them instead.

Posted by tmc | Report as abusive

Greatest victim of new technology is not media – maybe established corps will go the dinosaur road, but there will always be demand for reliable, _verified_ information – but attention span of general populace.
We are literally buried under mountains of news and opinions thus greatest strength of old-fashioned media is underappreciated – i mean follow-ups of news.
Basically stories which affect us for years to came are pushed off the newsfeeds by newest events and gigs – and not as important ones. Reuters is also guilty of that – look at frontpage and try to locate recent multi-part article about illegal kid exchange ring, this story which is textbook example of good investigative journalism is “old news” so you basically must resort to “search” option to find it.
Another result of this informational avalanche is fragmentation of information field – if something is not current breaking news and outside of one’s specific area of interest, then usually it’s totally outside of one’ self-imposed information ghetto. This problem existed for generations (“i only read sports and necrologs(tm)”) but now while any kind of unclassified data is literally two clicks away – most people are just uninterested, and nobody have enough time to be really informed.

Posted by chyron | Report as abusive