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media economy photography

The new media landscape (3): community, transactions and value

 

The disruptive power of the internet has produced a new ecology of information. As outlined in the first post of this series, this is the inescapable big picture for anyone engaged in creative practice.

This new ecology of information incorporates some hard realities for those of us seeking to support creative practice. In the second post of this series, I argued that community is now an essential concept in the new media landscape.

Throughout I have drawn inferences from what is happening to large media organisations in this revolutionary environment so that independent photographers and visual journalists can understand the challenges they face.

In this third and last post of the series, I want to discuss how some media companies are pursuing different sources of revenue. While their strategies are not easily replicable, they show how the dynamics of the new media landscape are playing out when it comes to the nitty-gritty of business models.

The end of distribution supporting scarcity

The past profitability of many media companies was based on controlling the mode of distribution so that scarcity prices could be charged. What the disintermediation, disruption and disaggregation of the media economy exposes is that this control was unique to a particular historical moment, resulting in prices that were artificially high.

As Google argued in a submission to the US Federal Trade Commission, this certainly applied to newspapers:

The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers. With the Internet, that scarcity has been taken away and replaced by abundance. No policy proposal will be able to restore newspaper revenues to what they were before the emergence of online news. It is not a question of analog dollars versus digital dimes, but rather a realistic assessment of how to make money in a world of abundant competitors and consumer choice.

It also applies to television, movies and music, because “the very model of the traditional entertainment industry is predicated on the inefficiency of distribution” – that is, control over broadcast networks, cinema chains and record companies. Once that content has been digitised and streamed, centralised control and high prices is much harder to maintain.

The hard reality, then, is that business models have to be decoupled from modes of distribution. In a context where publication and broadcasting have become easier and cheaper, running printing presses and managing TV networks are no longer licenses to print money. No business model predicated solely on control over a mode of distribution can succeed in the long-term.

Of course, existing media corporations can go on for some time. Legacy industries don’t grind to an instantaneous halt just because the central principles of their operating environment unravel. But if they fail to innovate, they tend to decline slowly before becoming unsustainable.

Diverse and indirect approaches

If a business model predicated solely on control over a mode of distribution cannot succeed in the long-term, another casualty will be the idea of the single business model behind visual journalism. The new approach will be a series of diverse models producing revenue indirectly.

As John Temple, the last editor of the Rocky Mountain News declared, news organisations do not make money from news; news is the ‘brand’ for the organisation and the money comes from relationships and services only indirectly related to journalism.

There is nothing new in this. Advertising has been the main source of revenue for mainstream media, with a contingent and indirect relationship to the journalism we (mistakenly) assume is the raison d’etre of media companies.

While it seems shocking to say news is a ‘brand’, that is how it has functioned. Oliviero Toscani, who was behind the controversial Benetton campaigns of the 1990s once remarked that we should understand that in a capitalist media economy “editorial was always the advertising of advertising.”

Although advertising will remain important for media companies, and new ways of garnering subscriptions might offer small revenue streams, what are these indirect approaches going to comprise?

The community that pays

That is where the idea of community comes in. Those engaged and loyal people – readers, viewers, listeners, fans – who identify with and congregate around their chosen content streams are where revenue comes from.

It’s fashionable to say nobody wants to pay for anything anymore, and there a plenty of online comment threads that can be mined for anecdotal evidence to support this rather glib generalisation. But if we think about the hundreds of millions of TV episodes, 10 billion songs and 10 billion apps sold via iTunes, or the 23 million Netflix subscribers in North America, or Spotify’s 1 million subscribers in Europe, plenty of people reach into their pocket for quality content. If providers offer availability and ease of use, direct payment for something that is not fungible is forthcoming.

If we look at indirect revenue from communities, then transactions are key. Fairfax (publishers of the Melbourne Age and the Sydney Morning Herald, and the largest media company in Australasia) has seen digital grow into its second largest revenue stream. 60% of their digital revenue comes from transactions, with readers using companies that Fairfax purchased, including a dating service called RSVP and a holiday home rental service, Stayz.com.

Transactions are one way that social networks can be leveraged for revenue, with social recommendations leading to commissions. As one Deloitte analyst predicted,

the next phase of social commerce is about extracting commissions from products which are sold directly as a result of recommendations made…So rather than selling advertising, what you’re doing is taking a commission against a product sold.

A 2011 report by the Columbia University Graduate School of Journalism on the business of digital journalism pointed to a number of indirect transactions supporting editorial content, such as The Atlantic magazine’s events business with $6 million/year in revenue. In a similar vein the Washington Post is running online courses and The Guardian is organising weekend masterclasses.

None of these constitute the holy grail that will replace the unending decline in print advertising revenue. But they are good examples of creative approaches that don’t fight the disruption of the internet and work with the contours of the new media landscape.

Can an indirect approach work for photography? When I reviewed the New York Times paid content scheme at the end of March, I painted a different scenario using transactions rather than subscriptions:

The Lens blog is a high profile site with some 750,000 users visiting each month. Instead of raising money by hoping some of those subscribe on their 21st visit each month, consider the monthly visitors as a community of interest around photojournalism and offer goods and services to that community. There could be Lens-sponsored master classes, special events and workshops for both professionals and the general public; print sales; discounted equipment and photographic services via business affiliates; photo tours and themed travel; equipment, medical and travel insurance for practitioners; logistics and visa services for photographers having to travel at short notice…you name it, anything that interests a broad photographic community, amateur and professional, could be offered by negotiated deals where Lens’s earns a percentage on each transaction.

This strategy would leverage the Lens blog Twitter feeds and referrals providing unlimited free access. It would be based on growing the community that comes to the site, thereby underscoring the value of having quality photojournalism distributed globally and the benefit of having it accessible to as many as possible. It could raise more revenue than subscriptions could achieve, and the revenue could go directly to photojournalism.

This is the emerging logic for media companies. Might it work for independent documentary photographers and photojournalists? Even if the scale is different, why not? This logic comes from the dynamics in the new media landscape affecting everybody.

Paul Melcher claims “photographers, photo agencies and related have no experience in building value around their images.” That has to change. Value will be created indirectly more than directly. It begins with the six steps towards building your own community.

Photo credit: Enol/Flickr, used under a Creative Commons license

 

Categories
media economy

The new media landscape (1): contours of change

Change in the media landscape is constant. Everyone involved in the production of creative content – photographers, journalists, writers, and musicians, as well as those who deal in those products – knows that nothing is as it was.

Too much of the current debate about how creative practitioners can cope with these upheavals proceeds without an understanding of the big picture and historical context. There are some hard realities that have to be properly understood before new strategies can be devised.

In this series of three posts, I want to lay down an understanding of what is happening, how some are responding, and what others can learn from them. Many of the elements I discuss are well known, and many of the examples I cite show that people are already positioning themselves to prosper from these changes. But for those who are still unsure about what is happening and what to do I think it is important to take this step back in order to plan where to go.

These posts are based on a presentation I gave at the CEPIC New Media Conference 2 in Istanbul on 21 May, and I would like to thank Marco Oonk of Fast Media Magazine for the invitation. For that event I knew I could not compete visually with speakers from the stock photography industry, so I selected key words that named the main themes.

In this first post, I will cover the concepts of disintermediation, disruption, ecology, disaggregation and free, including the importance of the relationship between scarcity, abundance and fungibility in the new media landscape. In part two I will unpack the concept of community and its importance, and in part three I will review how some are thinking about business models in this context. As one of my concerns is how documentary photographers and independent photojournalists can work better, I will outline some practical steps they can take to incorporate some of the lessons from this review.

So what are the contours of change in the new media landscape?

The internet has changed everything. That is obvious, but the question is how? ‘Disintermediation’ is one ugly word, but an important handle on the change wrought by the internet. Made popular by Dave Winer, the idea comes from economics and points to the removal of intermediaries in a supply chain. It highlights the way you can cut out the “middle man” and deal directly with your audience or customer.

The internet ‘disintermediates’ because it collapses the cost of publishing, broadcasting and distributing, removes obstacles to the creation of new social groups, and eliminates barriers to the formation of distributed networks.

All of this means we live in a remarkable time where our ability to communicate, share, collaborate and act has been expanded beyond the limits of traditional institutions, distributors and gatekeepers.

None of this means the internet is the single cause of all change or that we have a perfectly open world. And we have to remember that for all its potential universality, the internet currently only reaches one-third of the world’s population. But it does mean the internet is an important enabler of change that challenges or routes around many of the barriers and gates in our world.


Through disintermediation the internet is disrupting many walks of life, especially information industries. When we consider that global internet traffic is predicted to increase fourfold by 2014 its easy to see how many areas are being affected by the internet.

The disruption that follows from disintermediation can be understood as resulting in what Richard Stacey describes as “the separation of information from its means of distribution.” This means that all those modes of information distribution we have taken to be natural – the newspaper, magazine, radio station, album-length CD, television broadcaster, cinema and the like – are being challenged by new means of producing and circulating content. As one analyst remarked recently:

The very model of the traditional entertainment industry is predicated on the inefficiency of distribution…Films, TV, music are all produced and distributed in a tightly controlled way. The internet blows the doors off that concept because it’s an environment where everyone can distribute with maximum efficiency to everyone else.

Netflix is showing what this means in practice. It now accounts for one-quarter of North America’s aggregate internet traffic because streaming video is so much more efficient than mailing DVDs. It costs Netflix $1 to send out a DVD, but just 5 cents to stream the same movie. As a streaming service they will eliminate the $600 million they currently spend on labour for checking discs and the postal service, with obvious negative impacts for both those sectors.

The lesson from this is clear – in Richard Stacey’s words, “hitch your fortunes to the information and you will prosper, chain yourself to means of distribution and you will die.”


The web, built on top of the internet, has created a new ecology of information, both literally and figuratively. ‘Ecology’ is the study of organisms in relationship to each other and their environment. As a new ecology of information, the web exists as much more than a competitor to existing infrastructures. It is not a new market side by side with traditional markets – it is reshaping both the infrastructures and the markets for everyone.

Yet many information industries treat the web as a competitor rather than an ecosystem. For example, a recent debate about the difficulty of linking from many newspapers stories to supporting information revealed the print-centric nature of media company workflows and CMS’s, and showed how far they were from a digital-first strategy.


In this new ecology – where disruption is powered by disintermediation – we are seeing a change in the structure and process of information.

It is changing what have been called the “atomic units” of established modes of information, and unbundling traditional modes of distribution. We are seeing the disaggregation of forms and formats we have taken to be natural:

  • the disaggregation of albums to individual downloads in music
  • the disaggregation of newspapers and magazines to stories that can be circulated or linked to individually
  • the disaggregation of broadcast stations and fixed schedules to personal streams that can be consumed anywhere and anytime

The idea of the ‘stream’ is significant here. It emphasizes process rather than product, because once disaggregated, things can be updated.

Even when thinks look like fixed commodities we should think in terms of streams. iTunes downloads and Kindle ebooks are sold as though they are fixed units, yet they are parts of a stream leased for use on particular devices. With ebooks your edition can be updated or removed by the organization that controls the stream.

Disaggregation does not mean things dissolve into a formless universe. They are re-aggregated, but that is increasingly done through social networks. For example, a study for CNN found that social media was used to share nearly half of all news.

Disaggregation, therefore, leads to the importance of information that is social, modular and mobile. As Mathew Ingram has observed,

the future of media consumption is going to look a lot more like a smorgasbord of sources and content, personalized and recommended by friends and our social graph, and a lot less like that megaphone traditional media outlets used to have and control.


Few words rile creative producers more than the idea of free. But it is a concept that has to be confronted. We have to move beyond the competing ‘theological assumptions’ that either content should be free or that people should pay. ‘Should’ cannot be the basis for a rational response to the hard realities of the new ecology of information.

There is no escaping the fact that free is part of the intrinsic architecture of the internet. Tim Berners-Lee, who is credited with inventing the web, was recently asked why he put the web into the public domain as a free facility rather than a private enterprise. “Because otherwise it would not have worked,” he said. (Just watch the first two minutes of this video interview with Berners-Lee to appreciate this core value).

The problem is that the web’s essential characteristic makes earning revenue hard. As Frederic Filoux notes, “the social web’s economics are paradoxical: the more it blossoms, the more it destroys value.”

Filoux’s statement renders value only as price or revenue, thereby overlooking the cultural and social value that flow from free circulation and distribution. Nonetheless, the web’s architecture of free intersects with a basic economic formula.  As Chris Anderson argues in his book Free (p. 173), “if ‘price falls to the marginal cost’ is the law, then free is not just an option, it’s the inevitable endpoint.”

That does not mean that everything is given away for nothing. Despite claims to the contrary – for details see my review of his book – Anderson is very clear that (a) free is not a business model and (b) that it is always linked with paid.

The ability to leverage the web’s architecture for paid content depends on the relationship between scarcity and abundance. Most content producers have priced their work on the assumption that it is scarce, and inefficient modes of distribution have supported that. But because the web has made many things abundant, charging scarcity prices is not easily sustainable.

Here I want to introduce one more concept – fungibility.  Something is fungible if it can be substituted by something else. A breaking news story is fungible because there are a number of credible sources that can be substituted for each other. A music track or a specific photograph is not fungible because if you are a fan who wants only a track from a particular band, or an image by a particular artist, they cannot be replaced by music or images from others.

Scare items are not fungible. Abundant items are fungible. If you produce something that is unique and not found elsewhere, you can resist the inevitable free endpoint. If you produce something that is abundant and can be replaced by something else, then you will not be able to directly charge scarcity prices for it (although, as I will argue in the third post, there will be other ways of using that content to produce revenue to support its production).

Conclusion

These are the dynamics that I think drive the changes in the new media landscape. They are the hard realities creating the new ecology we all operate in, producing a landscape marked by disaggregation in which traditional forms and formats of distribution are being unbundled, and content is increasingly social, modular and mobile. Content producers and distributors have to face up to these dynamics, and try and work with these developments in order to achieve their goals. In the second post in this series, I will argue that the concept of community is an essential part of that process.

 

Related posts

The new media landscape (2)

The new media landscape (3)

 

Photo credit: laihui/Flickr, used under a Creative Commons license