“The art of prophecy is very difficult, especially with respect to the future.”
— Mark Twain
As investors, we are continually trying to identify trends from fads and facts from promotions. If you can identify a trend early enough, you can do extremely well. For example, Sequoia’s initial investment (couple of million dollars) into Cisco, would have been worth nearly $170B at the peak of the bubble. Of course, they had long ago distributed shares, but it shows the power of compounding within a long-term trend.
However, the future doesn’t like to reveal itself to you as an investor. It has a rather random characteristic going forward and an annoyingly linear and obvious one going back into the past. One of the topics much discussed in paper and online is the future of printed media. Furthermore, what should traditional offline media companies be thinking about doing?
To get a better feel for these issues, I queries a host of friends in the online media world including Al Warms (Participate Media and RealClearPolitics) and a variety of folks at various magazine back east. Here is where I came out: the future trends for newspapers and general news magazines is not hopeful should they focus on proprietary content models. Open models and focused publications (Economist, etc) tend to have a much brighter future.
There currently is a natural tension between the papers, AP and the internet properties. It does not cost a great deal to get a feed from AP. It provides content (from papers) for sites that papers might view as competition. That said, it does greatly expand the reach of the paper’s content. Also, since most of the sites generally refer back with a link to the original paper’s site, it actually leads to traffic coming back to the paper. Some sites don’t do this and post entire text…which is clearly an issue from the paper’s perspective.
If the papers were to stop feeding content to the AP, then I assume the resulting business model would be either a) the paper would sell directly to the sites or b) the paper would keep its content in a walled garden. If it is the former, the paper would get incrementally more money as the AP cut would come out, but it would have the hassle of dealing with all of the sites. If it is the latter, then most of the sites would find other sources. There are a lot of reporters/publications covering the White House, Cubs, etc. So, I don’t know how much leverage the paper would gain. However, it would lose all of the traffic potentially coming in from those sites. Seems like a lose/lose. I am probably missing some obvious factors here.
The industry dynamics seem to be that content sources are exploding (traditional sources, user-generated, new virtual publications, etc). This is ratcheting up the noise level in the marketplace. So, brand and information filtering will be increasingly more important. This clearly plays to the papers’ strengths. However, consumers also want the most relevant & interesting information, so they want it from a broad array of sources. This does not play to the strength of a proprietary content model.
So, it seems that the model of the future is going to be a federated model. Users will most likely want to have a place(s) they go that pulls all relevant information to one location. Furthermore, it filters and prioritizes it according to the users preferences. Today, the AP editors (or paper editors) determine what is core and important. The communal filtering algorithms seem to work well here. Probably a stronger indicator is number of links to a given article or topic from various other sites (blogs, feeds, etc). It indicates that the topic was important enough for someone to link it to their own content (this is sort of how Google does its search algorithm).
I don’t know what this means for the print world. Specialized and non-traditional magazines (some of them) are growing in subscribers, but the newspapers and general news magazines are losing subscribers. This trend continues year after year. With the high fixed costs of the business, I don’t know how long it takes before the model breaks. Furthermore, I figure as advertisers get better at targeting ads online, there will ongoing erosion of offline ad rates (exacerbated by declining subscriber numbers).
Readers seem to want information around a topic, not necessarily a source. So, if a paper was able to aggregate its own content along with the best from other sources (including user-generated which is a heresy…) and provide an effective filtering mechanism that learns from past behavior, it seems like it would be ahead of the curve. However, if it goes deeper into its proprietary information/content model, I have to believe that it will accelerate the poor trends.
To get a rough sense of what is going on, go to www.alexaholic.com (a traffic tool…has sampling issues and comscore analysis can give you better #’s) and enter www.digg.com, www.memeorandum.com, www.chicagotribune.com, www.nyt.com, www.topix.net. You will see that Digg is closing in on the NY Times’ volume and just spiked (could be noise). Also, Topix and its partial parent, Tribune, seem to be converging in terms of numbers.
I don’t think this is the end of the branded media publications. They have brand, subscribers and presence. However, how they decide to move forward from this point will determine a great deal about their position in the media world.
