The ongoing revolution in the media economy


The revolutions transforming the media economy continue apace. In the year since I published my five part series on these changes (beginning here and ending here) we have seen more evidence of the overall direction of change. Reviewing my notes from 2010 here are some of the standout developments to date:

1. Things remain grim for traditional newspapers

Global newspaper circulation continued its downward trend, declining by 0.8% in 2009. A survey covering 223 countries by the World Association of Newspapers and Newspaper Publishers showed that newspaper circulation significantly declined in Europe and North America, although it increased marginally in Asia.

2. Advertising revenue continues to plummet

Advertising revenue is the core of the traditional newspapers business model, and it is falling globally too. Ad spend declined in most of the regions – North America (25 per cent), Western Europe (13.7 per cent), Central and East Europe (18.7 per cent), Asia (9.6 per cent) and South America (2.9 per cent), but remained fairly stable in the Middle East and Africa. In the United States, newspaper advertising revenues are likely to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005.

Online advertising is becoming much more important, with the web poised to overtake newspapers as the second largest US advertising medium by revenue behind television. While there is some absolute growth – and the Guardian has reportedly seen a 100% annual increase in digital revenue – this change in relative status is also a function of the collapse of print advertising.

3. Paid content strategies show few signs of success

At the beginning of this year a US survey showed that amongst the handful of domestic newspapers that had erected paywalls, only a tiny proportion (2.4%) of print subscribers were willing to hand over money for access. In the UK, the decision of The Times to go behind a paywall has led to the loss of 90% of the site’s users and scared off advertisers – meaning that any additional revenue from the small number who sign up will easily be offset by lost advertising. The experience of the Belfast-based Irish Times, which attracted only 1,215 paid subscriptions from its 45,000 circulation, suggests the limits of paywalls are apparent in a variety of markets.

4. The disruptive power of the Internet continues to grow

The decline of legacy media has been underway for a very long time and predates the Internet and the web. However, the expansion of a technology that collapses the cost of distribution means industries predicated on the control of distribution are losing their base.

In June this year Cisco forecast that global Internet traffic would increase more than fourfold by 2014. This amount is the equivalent of 10 times all the traffic traversing Internet Protocol networks in 2008. Driving the growth is the expansion of online video, which will make up 91 percent of global consumer IP traffic by 2014.

For an example of what this means in practice, consider the recent observations from the online video rental firm Netflix. Founder Reed Hastings revealed the economics of digital distribution: “It costs us about a dollar, round-trip, to send DVDs by mail. It costs us less than a nickel to deliver by streaming.” That means a switch to video streaming – which is coming – would reduce distribution costs by 95%. Given that Netflix spends $600 million a year on the postal service and pays for hourly labor checking DVD quality, that is a considerable saving (except for those working in the postal service or checking the DVDs). This means, as Ken Doctor explained, that “in the new world the costs evaporate — and quality and timeliness improve. For news publishers, the switch to digital media offers huge savings, at least 60% and probably more.”

However, it’s vital to remember that the Internet is not a universal facility. The number of global users has expanded dramatically in the last decade to 2 billion, but global penetration covers only 29% of the world’s population.

5. The end of print is now conceivable

Publishers and editors of major newspapers are now speaking about a time when their publications will no longer be printed. Last month Arthur Sulzberger told a seminar that “we will stop printing the New York Times sometime in the future, date TBD.” Both the Guardian and Times editors think their current printing facilities will be their last, and that the life-span of these is “telescoping quite dramatically,” while the Financial Times is already reducing some print output.

6. There are no game changers leading to a shiny new business model

Many responses to the revolutions in the media economy have been framed by the desire to find the ‘game changer’ that will ‘save journalism,’ with the iPad being the device that in 2010 has most often borne these hopes. As a proud new owner of said device, I can see the appeal of some the better apps. I think it opens up new possibilities for the creative presentation and distribution of information, and I’m looking forward to more and better efforts to produce compelling multimedia for this format. But a number of available studies suggest that even if the revenue from magazine apps on the iPad exceeds a billion dollars, that will not resuscitate an entire industry given that is what Time Inc. (of which Time magazine is just a small part) made in a little over one quarter.

More importantly, though, we have to see devices like the iPad as another mode of distribution among the many channels for information now available. And we need to understand how the ecology of the iPad is one of a closed economy, cut off from the open web where things are easily linked and always searchable. There is little doubt the app economy is significant, and Chris Anderson and Michael Wolff (not to mention Jeff Jarvis) are right to call attention to the way it differs from the browser-accessible web, though it is just a bit early to proclaim the death of the open web.

Those who want to place the future of their entire industry in the iPad’s basket are surely heading for a fall. To get a better return from publisher’s apps, a group of twenty US-based photo agencies recently formed an alliance to press for higher fees based on additional usage. That’s not an unreasonable notion in principle, but the logic behind their position was stunning for its ignorance of the dynamics of the contemporary media economy. One of the agency bosses behind this alliance told Press Gazette:

We all strongly believe that this platform as a walled garden could be the saviour of declining legacy print publications. A lot of the publishers think so too…we see this as a way to work with the publishers to work on a business model that works for both parties.

In a nutshell you have an example of the thinking that has perpetuated a large part of the contemporary crisis – defend declining outlets, have faith in a walled garden that limits accessibility, and think about business models is in terms of a single business model tied to an established mode of distribution. But – the disruptive power of the Internet continues to grow because of the way it has solved the problem of distribution, so no business model predicated on control over a mode of distribution can succeed.

7. The future is bright

Despite the downturn and the persistence of legacy thinking, the future for the production and distribution of compelling stories and important information is bright. The creative possibilities enabled by digital technologies, the open web and the app economy – in association with those legacy publications now looking to a future beyond print – are being continually enlarged. If we pursue multiple modes of distribution and make them serve the modes of information, then, in conjunction with new ways of thinking about business models, we are in for an exciting if bumpy ride.

Featured photo: Bsivad/Flickr, used under a Creative Commons license

9 Responses to “The ongoing revolution in the media economy”

  1. Melissa Caskey

    Mr. Campbell-
    I enjoyed reading your analysis on the growth (or lack thereof) in the media economy. As a student currently studying print and digital journalism, I am interested in these aspects of the business since I will soon be out of school and searching for tools to succeed in a profession currently clouded with confusion.
    The statistics on advertising revenue you present are incredible to read. In this age of Craigslist, however, I am not surprised at the lack of advertising spending in print publications. Do you think digital revenue can make up for the losses in print revenue?
    Now that The New York Times announced the future use of a paywall for their website, it will be interesting to see reactions from their users. The fact that The Times in the UK lost 90% of online readers is unbelievable. I would think, though, that The New York Times will have less trouble convincing advertisers to continue doing business with the renowned publication, even when they begin charging readers for online content.
    In reading and hearing thoughts from various journalists, I have heard many besides yourself admit that print journalism will die out in my lifetime. This is a discouraging though, yet I must agree and am slowly coming to terms with the reality of the situation. If this becomes the case, where print media no longer exists, what might the repercussions be for the 71% of the global population without direct access to the internet? Will it drastically affect the sort of news spread throughout various regions?
    I also like the point you make in encouraging journalists to embrace new devices like the iPad. I look forward to hearing more on innovations to help advance the industry from its currently disappointing business model. Thank you for this thought-provoking entry.

    • David Campbell

      Melissa – thanks for reading and the thoughtful comment. For the established media industries the current situation is grim, but for those working with the forces of change (be they companies or individuals) then there are exciting prospects. I do think it is a revolutionary moment where, as Clay Shirkey has observed, the old is broken but the new is not yet known. What role advertising will play in the new is not clear – its unlikely revenues will ever return to the heights of the print era, and while online advertising can be a good revenue source for some, most think it will only ever provide about 10% of the previous print revenues.

      Will print die completely? I don’t think so. Its interesting that major papers now envisage the end of print for themselves, but remember these are papers in locations where the Internet’s disruptive power has been felt most. For those regions still without Internet access – the majority of the population – then print and other forms of distribution will remain vital.

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  3. iamnotasuperstarphotographer

    Forgive me for saying but 1 to 6 are nothing new and re-affirment in existing trends?

    I was being told all this during my photojournalism masters in 2005 before I went back into business. The problems are all very obvious to the economic minds out there. It is not a revolution but darwinistic evolution.

    Talk of multiple modes of distribution is too abstract and nothing new as all you are advocating is what business has done since it capitalism was created – You need to diversify your income stream. That is not anything that any healthy company does not already try to do and that happened way before the internet.

    German car makers earn revenues from car parts, servicing, posters of cars, toy cars, sports, trump cards etc etc.

    Investment banks grew from a specialism in say debt capital markets to doing derivatives, currencies and equity offerings too.

    I think the problem of the “media revolution” is the classical problem retailers had where old clashes with the new. One could argue that Amazon works because it did not have the old way fighting internally to survive scrutiny from the new ways. Dixons in the UK struggled to adapt. This is a complication of the facts as all Amazon did was leverage cheaper ways of delivering the same service to greater amounts of people. It stripped the costs of business down to the bare social function. Ryanair did the same and delivered.

    eBay has taken out many local papers selling small ads as its costs were much lower. These are simple forms of business logic that are as relevant to the media industry as they are to any other forms of business.

    The costs of defending what you have has prevented investment and R&D into what you can be.

    Photojournalism is more guilty of that than any business I have encountered in my time working in the global markets. It is culturally, politically and product wise way out of date so your example of the US agencies is a great one. (I note Photojournalism is the biggest word in the word cloud so forgive me for using this example!).

    It all comes down to this: Have a social function and you will generate value. Invent something that improves the quality of life of others and you will generate value if you cost manage effectively. This is what new media has done better than the old media. It does not have to be just about financial value. Intangibles have social value too.

    It is really that simple. Where do we go for information? The Web. Where do we go for entertainment? Increasingly the web. Why? Because it is cheaper for us to access and it delivers more variety.

    So to say that “the disruptive power of the Internet continues to grow because of the way it has solved the problem of distribution, so no business model predicated on control over a mode of distribution can succeed” is not fair as eBay dominates because it did it better than the competition. It is effectively a distribution platform for second hand goods. Same with Amazon, it is a distribution platform for new goods.

    What they did is make the infinite spaces of the web manageable and therefore give themselves a social function. Same with Facebook and Youtube. They all make profit.

    Simply put, the social function of new media is the same as media has always been. It has just leveraged new technologies to make it cheaper so more people can access it. It really is not different from Henry T Ford making mass produced cars just like Tata are doing in India today. Print is relatively expensive but will exist as long as it has a social function because it can be read without a gadget and can be disposable on travels. I prefer a book to an iPad of I am on a long travel because it functions better and is cheaper.

    Using the example of photojournalism again – the old ways are expensive and nobody has had the humility to have investment and R&D built into their business models knowing they have to take risks. Nobody has come up with ideas because it is dominated and run by people full of the history, politics, ideological baggage and the sheer costs of engaging a small and exclusive audience of self appointed industry leaders or some high net worth individual buyers. Even worse, it decided a long time ago to manage itself thinking being a great artist equalled a great income.

    They see each others work in each others openings drinking each others wine. Call up a contact and fight for some magazine space that few people see. They might go and see a talk given by someone they want to be like in order to learn how they made it 20 years ago or be charged for portfolio reviews or enter photography competitions at £100’s of pounds a go thus generating value from its own poorest demographic.

    Where is the social function in all of that naked self interest?

    That sounds rather like “Find out where you can benefit through your work, make it scarce and raise the value of it by limiting its abundance artificially”.

    That is economic disaster. Photography is infinitely reproducible from the same negative or file so why limited edition it artificially as it can only serve the minority and limits its social function.

    This is often the confusion when people say “new business models” as it presumes the industry people have the required humility. It is all about execution execution execution as in new media, the methods are different because of advances in technology but the business logic is really simple. The old business rules are just as valid as any new rules. I would say:-

    “Find out how you can benefit others through your work and leverage new technologies to do it cheaper and better than other people who might be doing it already.”

    Forgive me but all this talk of the new is the unknown is an excuse for the current incumbents to delay and profit from the ever decreasing pie.

    • David Campbell

      @iamnotasuperstarphotographer: I’m currently teaching a multimedia workshop at the International Orange Photography Festival in Changsha, China and we have a diverse international group of professionals and aspiring photographers who want to tell interesting stories. Understanding how to do this involves ranging across conceptual and practical issues from the nature of the media economy to the details of production. They are comfortable with critical reflection and seeking to analyze the current context to see how they can best contribute socially. Given that, its rather odd to read your long comments across three posts on this site over the last couple of days. There are so many issues and questions in your broad ranging response that its impossible to respond in detail. But I am struck by the fact you are generally confident there is nothing new going on, that business operates according to a set of universal and timeless principles that are unchanged, and therefore analyses like the ones on this site are of no value. As such, there is not much I can add beyond the fact I obviously disagree.

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