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The Darker Side to New Media Business Models

Information inequality a rising threat as traditional media fails and costly alternatives thrive.

By Paul Willcocks 31 Oct 2016 | TheTyee.ca

Paul Willcocks is a journalist and former publisher of newspapers, and now an editor with The Tyee.

As traditional news media fade to black, one promising business model is built on providing high-value, exclusive information at premium prices.

Good news on one level. Operations like Politico Pro and Blacklock’s Reporter can keep journalists working, focus on stories that matter and shed light in dark corners.

Not so good on another. Because only people who can pay can get the carefully guarded information.

Politico is a good example. The nine-year-old journalism experiment combines print products in Washington, D.C. and New York with a magazine, audio and video products and website. The online news is free.

But, for an annual fee starting at US$8,000 and soaring up to $300,000, you can subscribe to Politico Pro. The company describes it as “the indispensable resource for professionals who create, influence or are affected by policy.”

It’s likely a good investment for a pipeline lobbyist who wants to know who to approach and what might persuade them to vote yes when the time comes. But it’s a lot of money for someone worried about a pipeline outside their town, or a citizen who just wants to understand how decisions are being made.

Traditional news media relied on advertising revenue to pay the reporters, editors and photographers. They provided content that readers considered worth buying — at a heavily subsidized price — and advertisers paid to reach the readers.

That’s over. Postmedia, Canada’s dominant newspaper company, released its results for the last fiscal year this month, reporting the latest failure to find a way to halt the company’s march toward oblivion.

Comparing results is a little tricky, as this is the first full year the 170-plus Sun Media publications that Postmedia bought from Quebecor in 2015 are included in the financial reports.

Strip them out, and the news is dismal. Print ad revenue was down 19 per cent, circulation revenue down eight per cent, digital revenue — once touted as the company’s future — down 2.2 per cent. With the Sun Media papers included, revenues are up 17 per cent — but expenses are up even more, at 25 per cent.

The problem is not one year’s results. In 2011, Postmedia’s first year of running the newspapers bought from near-bankrupt Canwest, it had $900 million in revenue. In five years, revenue from those newspapers has fallen to $580 million — about 35 per cent. And there is no bottom in sight.

Postmedia’s response has been to cut spending, setting out in the newest round of “transformation” initiatives to reduce its already shrunken workforce by a further 20 per cent. The result is lower quality and poorer service, which leads to more revenue losses, which bring more cuts.

The goal now is to extract what value is left from the business as it winds down.

The point being that traditional news media are doomed. And high-value information — at a price — is emerging as a leading alternative.

It’s hardly new. I ran newspapers for the Thomson Corp. in the mid-1990s as the corporation took one last try at reviving the business — which at one point included 250 newspapers in Britain and North America — that had built the Thomson family fortune. The effort failed, and Thomson sold the papers (except the Globe and Mail). The corporation took the cash and invested in its information services division, which sold high-value, specialized information to lawyers, investors and businesses around the world.

Glacier Media, which owns about 20 newspapers in British Columbia, sees a similar future, looking to “harvest the cash flow” from its newspapers and invest in its information services division serving specialized markets like real estate, agriculture and energy and mining.

Traditional news media have been so cheap as to be almost free. They were hardly perfect, but provided information on a broad basis.

And before the paywalls that limited access to newspaper websites, the information they gathered was available for anyone with computer access. (Even after paywalls, it wasn’t hard to get — the New York Times deliberately chose a “porous” approach to its paywall.) And pre-computers, you could usually find a paper around the office or a coffee shop if you didn’t want to buy one.

That’s not true for the information companies operating under the new model. They rely on readers’ payments to survive, and can’t give content away.

Ottawa-based Blacklock’s Reporter covers the federal government and promises to provide “the facts needed by business, labour and associations” to paying subscribers. It aggressively launches legal actions against people who use the content without paying.

Blacklock’s is a bargain compared to Politico Pro, at $314 a year. Globe Unlimited, the Globe and Mail’s top offering, is almost identically priced at $312 a year.

Which, on one level, might not seem too costly. (Certainly not from the perspective of many journalists.) After all, the average Canadian’s cable bill is almost $800 a year.

But the current reality is that the client base for those services is relatively small. The cost is significant — especially if people decide they need several sources. And consumers have become accustomed to free, or almost free, news and commentary and are reluctant to pay.

Stewart Brand inadvertently highlighted the problem at the first Hackers Conference in 1984.

“On the one hand information wants to be expensive, because it’s so valuable,” said Brand, the founder of the Whole Earth Catalog. “The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

That flawed construct still hangs over news media. Yes, the cost of distributing information has declined to the point that is almost insignificant. Instead of a printing press or TV station, you just need a website. But gathering information, and making sense of it, requires expertise and dedicated staff and remains expensive.

Brand was right on a key point. Information is valuable, as he noted more than three decades ago, and can “just change your life.”

And we are heading into a media landscape in which people who can or will pay get guaranteed access to that information, and the opportunity to use it to advance their interests. While most citizens are left on the outside.

Other models are emerging of course, and might change the landscape.

But our discussion of the future of news and information media needs a much sharper, more urgent focus.

We’ve allowed economic and social inequality to grow and become increasingly entrenched, despite its fundamental unfairness and corrosive effects.

Information inequality can only produce deeper, more destructive divisions. The issue needs to addressed now, before it too becomes entrenched and accepted.  [Tyee]

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