The future of media business

We invited technology analyst and founder of Stratechery, Ben Thompson, to discuss the future of media business.

Is the future of the media and technology business a few centralized monopolies? Why do some companies fight the Internet? And is the price to pay for increased competition numerous ethical collapses? These are some of the questions Thompson was asked by Kjersti Løken Stavrum, the CEO of the Tinius Trust, when he visited Oslo in October.

The Tinius Trust recorded a podcast with Ben Thompson as well as an in-depth interview, with more questions and answers, at the Oslo City Hall. Here is a teaser from the interview, when Stavrum asked if Thompson could look into the glass bowl and predict what’s next for media businesses.

The future business model of publishers was one the core issue during the interesting conversation.

– Economic power used to come from controlling supply. But on the Internet, it comes from controlling demand. This change in paradigm took away the linchpin of the business model for media entities, which was distribution, Ben Thompson says.

Stavrum ask Thompson if he is positive towards on behalf of media entities going forward.

– I do think it’s very easy to associate journalism with newspapers. And it may be that newspapers may not be long for this world. But that doesn’t mean journalists are doomed. It just may be in a different model, he says.

You can watch the entire video interview with Ben Thompson, by Kjersti Løken Stavrum here:

If you prefer to read, here follows the full conversation on the future of media business:

Stavrum: Ben Thompson. You are the man behind a very famous, acknowledged and well-known blog on media development called, Stratechery. You used to work both in Apple and Microsoft. But it strikes me, are you the new version of the journalist?

Thompson: I’m very hesitant to go there. I do think there is a strong future for journalism of some types to be more specialists, subscription-based. There is such a powerful alignment that comes when, my goal, I’m successful if I make my readers happy and they think it’s worth paying for. You know, not for advertisers or large customers or anything in those lines. Will that work for all types of journalism? I don’t know. That remains to be seen.

Stavrum: Do you think that the newsroom has to rethink the way they are delivering that message: we are generalists, but the sources and even the readers are more into their special interests?

Thompson: I think it’s not enough to say that journalists are generalists. You need to go a step beyond and say, why are journalists generalists? And the reason is we needed lots of journalists in lots of cities, because one physical paper could only go so far. And when you back up and think about, wait, one article could be read by anyone, anywhere in the world. That totally changes how you think about it.

To my mind, I think the future, and I’m not sure how we get there and how long it will take, will be lots and lots of specialists in lots and lots of areas, where you can build your own sort of newspaper. That is a generalist’s newspaper, because it covers a lot of things, but the actual the level of skill and knowledge covering those things is even deeper than it was before. It’s a better world as far as journalism goes.

Stavrum: Where does that leave the traditional newspaper? I mean those who live on the internet with their logos and bundled package covering everything that happened the last 24-hours, and by the way we also have some advertising here. Where does that development leave that kind of solution for bringing out the news?

Thompson: Well. It’s funny you said the last 24 hours, and you kind of laughed. Because obviously, covering the last 24 hours, in a world where I can pull up my phone and find out what happened 24 minutes ago, doesn’t make much sense anymore. And there is going to be an issue where newspapers in that model, it doesn’t make sense, and there is going to be a bit of a shakeout. And again, that’s why I mentioned I can see a future that’s a great world for, not just journalists, but for people that are consuming journalism. But the path there I think is going to be a very difficult and challenging one.

The internet, from that perspective, was tremendously effective. And journalism today is arguably more impactful than in any other time, because it spreads so quickly and could be read anywhere.

The challenge, as you mentioned, is figuring out the business model. There is always a thought about separating the two. Separating the business side and separating the editorial side. But actually, they need to work together.

And maybe that means that your journalism may not spread that far, because it needs to work in conjunction with the business model. Or maybe you figure out, actually we are going to take advantage of that it spreads far, and we are going to monetize in a different sort of way. But what need to happen, is they need to work together. And not just work together on a day to day basis, but from a backing it up, big picture: where are we going as a company and what choices are we going to make? And choices are hard. Because if it was an obvious choice, and there was no trade off, and there was no downside, it’s not really a choice then.

Stavrum: And to follow the subscription model and to follow the advertising model, is sort of two different paths?

Thompson: I think they are totally different. And it’s not just different from how you make money. It totally changes what you write and how you write it.

If you are writing for advertising, all that matters is reach. So, you want to get a lot of articles, and you want the articles to spread very widely, because you get paid based on how many people see the ads. Whereas if you are charging for subscription, no one wants a million articles a day. How can they consume all of that?

They don’t want stuff that was written in 20 minutes. If you pay for something, it is because it’s unique, it’s different. It is likely in depth, there’s likely a lot of research that goes into it. I my case I have a subscription publication, and I write four pieces a week. That’s very different than an advertising-based publication, that would want to write 400 articles a week.

That’s why I mean the editorial and the business side has to be on the same page. And that’s going to be hard for newspapers in particular, because they built their entire operation from having generalists to their advertising around covering everything and spreading it widely. And a shift to a world where you cover fewer things, but more in depth and with more knowledge that is inaccessible otherwise, that’s going to be a very difficult shift.

Stavrum: When you say this about aligning the business model. Where do you place the ideal of being independent and free, which I also think was the core ideal of journalism?

Thompson: Well. I think, first of all, independence comes from being a financially viable business. If you are desperate for money, that’s a great way to quickly not be independent. Whether explicitly or implicitly. I do wonder about the value… There is value in being free, and having an informed populist, and having everyone having a common basis of truth. That’s frankly something I don’t have the answer to. I do think about it a lot, and I do worry about it when I write about journalism. It is very easy to write about. You can invision where it should go. A model that make sense. Primarily a subscription-based model, but maybe built around other things. But the intel on that is sort of the separation of the people who are willing to pay and be even better informed than they were previously.

But the implication is that the people who are not willing to pay are actually even less informed. Or arguably misinformed, because they’re only informed on things that care about clicks, and not about the truth. I think it is one of the most pressuring questions that we haven’t figured out yet.

Stavrum: It seems that the world is becoming even more unfair, if I can put it that way. The newsroom is trying to inform the public, we try to keep power responsible for what they do, so we do good things. The newsrooms do good things. But then we have all these challenges, from Facebook and Google that are taking the revenue, and making a lot of complicated circumstances.

Thompson: First you mentioned it’s increasingly unfair. And I think there is an aspect where if you think about the population as a whole: is it fair that those who are not willing or unable to pay, may be less informed than those who are? That is a problem internally to a country.

But if you look at it globally, the amount of people that can actually be well-informed in increasing. It’s almost the same story of globalization applied to the media.

This means a few centralized tech companies. Because they sit at the nexus where everyone kind of flows to, and thats the smoothest sort of way to connect and the smoothest way to find things, are tremendously powerful. But it’s not like our phones only look at Facebook. Our phones can go to a web page. Our phones can go to a profile. Our phones can go wherever we tell it to go. And, there is not like there’s only one telephone line, and the telephone line only goes to one place. It is actually ultimately up to the user, or the reader, to read what they want to see. And this has it owns problems. That means demagogic politicians are perhaps easier to break through, because people can find them and go to them, and they can be loud, and certainly we have seen examples of this in lots of countries.

Stavrum: I used the childish word “unfair”. But let’s mention an old thing that’s also unfair. And that is, Norwegian companies, tech companies, media companies, they pay tax to the national state of course. And we have tried to get attention to the fact that Facebook or Google they don’t tax to Norway, even though their presence among the Norwegian audience should say that they should pay some tax here, but they don’t.

Thompson: The tax issue. I can understand this feeling of unfairness. I think though, it’s a bit of a zero-sum question. I know Europe has talked a lot about this as a whole.

I think there is going to be a bit of a push back. Because any taxes that Facebook pays to a European country (or in the case of Apple, with the big settlement in Ireland and the EU), those are taxes that are not going to be paid to the US where they actually have their companies. Where they actually have most of their employees. Where they benefit from roads and the US military protecting them, and all those sorts of things.

I can understand the sentiment, because our income is gone, and that income isn’t even coming back to our country. But it feels a little bit more like a rhetorical tool. Whereas if you actually think through the logic of it, it’s actually very logical that Facebook pays taxes to the United States and doesn’t pay taxes here. And, are there ways around that? Like consumption taxes or sales taxes. Perhaps. But I think it’s important to approach those from a position of thinking about how the money actually flows. As opposed to a sense of indignation and unfairness.

Because, not only am I not only sure that it’s not right, but I think it has a chance of provoking a strong reaction that hasn’t really come from the US government yet. But the more Europe pushes for to take money, the more it’s setting up an awezero relationship. Not with Facebook, but with the US itself.

Stavrum: If you chose a bird’s perspective on this, it’s obvious that Europe tries to maybe bring in the old system, as you mentioned, by believing in regulation. I mean we have Margrethe Vestager in the Commission, trying to do it in the competition way. You see Germany that is really trying to do something with the spread of propaganda and false news from Facebook. You can choose a perspective on this, like Europe is doing things the US should have done? But we do the work for the US. But now you say that this will probably turn out to be a conflict between us?

Thompson: Well. I don’t know that there will be a conflict. I think once you come down to money, it’s a very good way to engager conflict.

Just to follow up that point. Where Facebook based in Europe, and the US where insisting that all of Facebook’s revenues in the United States be taxed in the US and not go to Europe, I think Europe would have a problem with that. If it went the opposite direction. I think it’s very easy to get stuck in the world as it is, and not look at the actual principles underlying it.

As far as competition. The reality is that Europe thinks about regulation and competition different than the US does. Perhaps Europeans feel that the US is not doing enough or is insufficient, and a lot of Americans may think that as well. But at the end of the day, that Europe is doing that, that’s a choice made in Europe.

Frankly, as far as the European Commission goes, I am in general more in favor of sort of antitrust regulations in general because I do think it’s inherently pro competition. Whereas I’m more concerned with things like GDPR, along those lines. That are more rules-based sort of regulation. In part just because I think it makes them come in stronger. They’re better able to handle it. Better able to deal with it. I think it deters new companies coming along. I would just point out that distinction.

Stavrum: We got this far with product development within technology without GDPR or any cookie regulation law. Some product developers get frustrated because they think that we need flexibility of access to data, to be able to develop these very nice digital products that people will have use for. Do you share that view? Do you think we should be very cautious about going into regulating, because then we are making obstacles to the digital development that is not effective?

Thompson: I am very concerned about rules-regulations, because they tend to be written for Facebook and Google. Which they will grubble, but then they will go along with it. But it’s very difficult then for competitors to arise. Whereas the sort of regulation I’m more in favor of, and there are parts of GDPR that I think are actually very good, are more on transparency. Like for example, the GDPR has very strong rules around data breaches. And you have to say what happened, who’s affected, you have to tell the user, you have to pay fines. I think that is much more in line with what makes sense. It’s a reasonable burden. The level of burden on a small company compared to a large company is roughly equitable. It makes users want to question the platforms.

If you want to check Facebook’s power, if you want to change Facebook, the ones that Facebook cares about are it’s users. Because if the users leave, Facebook don’t have anything. Much as opposed to figuring out a bunch of rules.

So, that would be my generalist hope and view on regulations. And those go hand in hand. If you want the users to leave Facebook, you need a place for them to go. Which means you need new companies to come along.

The truth is, I think the bigger issue with privacy… And this may be a very American perspective to be clear. I know that the European view is generally different.

But my view on privacy is that I’m less concerned about the practices per se, but more concerned that users don’t know what going on. If users know what’s going on, and they still chose to proceed, then they decided. The marked decided. And that’s ok. That’s a good thing.

And I think GDPR in spirit goes for this, you have to do the click through and stuff. But the way it’s implemented results in it’s just a hassle, and everyone just clicks, clicks, clicks. Whereas, if there’s a breach for example, that is kind of broadcast in a way that catches people’s attention, like just happened with Facebook. I think that’s a slightly different way to think about transparency, and visibility. As opposed to try to make it very narrow and were going to figure this out on your behalf. We’ll just tell users, and let them decide, and go from there.

Stavrum: All this talk about GDPR and privacy, at least it raises the awareness of how my data are being treated. I should be aware of my data, and by the way I should also think a little bit about my e-privacy. And this leaves us with the question of trust, I guess. And trust has become this issue that everyone does agree that is important. But still it’s difficult to see the price of distrust. Why is that?

Thompson: Well. I think you and I are very aware of the questions of privacy, and GDPR has made a distinct about that. But it would go back to the sort of inequality of information that we talked about before. Is the general user, who does not follow the European parliament or it’s directives or whatever it might be, are they any more aware of privacy because they clicked on something on a web-page then they were previously? I don’t think so.

Frankly, what made people aware of privacy was the Cambridge Analytica-scandal. And that was not because of click throughs, it was because of news stories. Like the news is still a very powerful tool for shaping public opinion. And that’s why I’m so pro transparency.

Because I actually want more news stories. Journalists are actually, in some respects, more powerful than what they appreciate because of the way the internet allows information to spread sort of broadly. And that is where trust comes in. You know. If stuff just shows up when you’re sitting at the bus stop and flicking through Facebook, I’d give users more credit.

At least in western countries where there is pretorage of information sources. In developing countries where all they have is Facebook, it is probably a different question. But here, I don’t think anyone: “Oh, it’s on Facebook, it must be true”. They know what they’re getting exactly what they are paying for. And they are paying zero, so they probably getting … who knows. But that’s a good thing. Because that’s means there is an opportunity to be a place that people do go to. And trust can vary. It can be: I’m paying money. It can be: I’m typing in an URL. Which is harder than just clicking through Facebook. Why would you ever type an URL if the stuff is on Facebook? Because you know the stuff on Facebook is not everything you need, and you actually want to know something.

If something happens in the news, I don’t go to Facebook. I go, and I type in the NYT, or I type in whatever my news source that I trust might be. And I go there directly. Trust, I think, is a tremendous opportunity for journalistic entities particularly on the Internet.

Stavrum: Another concern maybe, is that we are living in huge, fast changing times. News digital devices. New digital software everyday actually. How do you think that is dividing the society? Do we bring sufficient people on board the development, or are there too many people lagging behind with their old watches and their home phones?

Thompson: I would say the opposite.

I think the changes that are happening in the media are being driven by users. So, I don’t think the media is somehow raising ahead, and then users are failing to keep up. If anything, the users have raised ahead and it’s the media organizations that are struggling to keep up.

Certainly, there are examples where things are only available on mobile. And this is the case in China, where they have examples of, you know stores only accepting WeChat Pay and then the old man comes in with his cash and can’t pay. But I don’t see that generally being the challenge in western countries. So, if anything I would say it’s sort of the opposite situation.

Stavrum: Are you saying then that while the news media were very eager, and throwing all their content over to the Internet, but now they’re more conservative?

Thompson: Again. It’s the business model question. I think they were very aggressive in their content and have been conservative in their figuring out the business model going forward. And trying to do the same business model as before, but just do it digital. When the reality is the change in paradigm took away the key. The linchpin of their business model. Which is distribution. Which was actually printing newspapers.

And when you are not printing newspapers anymore, it turns out the whole thing doesn’t really make sense. What does make sense? Well. Again, it could be subscriptions for example. Because now an Oslo-based newspaper isn’t only serving Oslo-based readers. It can serve readers anywhere in Norway, or Norwegians anywhere in the world. Or if you have an English edition, basically almost anyone. So, that changes the economics of subscriptions for example. And the New York Times is not the best example, because the NYT is its own sort of… It’s the New York Times.

Stavrum: It’s an institution.

Thompson: But they have millions of subscribers, a huge number of which are not in New York. And that’s a very different subscriber base they had previously. And so you can say: well, you had subscriptions fifty years ago and you have subscriptions today. What’s different? Everything is different, because the market is totally different.

Stavrum: I find it interesting to look at the music industry of course. Because then you not only have the disruption, you also have a complete change of the value chain. But that hasn’t reached the media business yet?

Thompson: I love the music industry as an example, because for so long they were people’s go to example of an industry that was “disrupted” by the Internet. When the secret truth is the music industry is doing fantastic. I mean. And the reason they are doing so well, is previously they fought the Internet. They tried to stop downloads. And the problem is that MP3. It’s not actually costing anyone anything to spread it around. Yes, maybe someone did buy a CD they would have bought, but that connection is a lot more flimsy than music companies would have admitted. But if a music file can go anywhere, well then you can stream it. And now, instead of getting people to every time they buy a new cd, pull up a credit card. You set up a recurring payment, you get money from them every month.

Their revenue is actually shooting back up. And in a not too distant future, it’s going to be better than it ever was i the CD area. And why? Because they have a business model that’s predicated on the internet. As opposed to one that’s trying to fight the Internet.

Stavrum: So, don’t fight the Internet. That’s the message?

Thompson: It is. And you know. It’s sound cliché to say no, your business needs to be about the Internet. But I think it’s just not on a surface level. It’s actually thinking all the way through the business model, to your cost structure, to all aspects of your business. And they all need to be working together, and in alignment, and it means you need to say no.

One of the most dangerous situations is to be a former monopoly. Because when you are a monopoly, you don’t have to make choices. Because you are a monopoly. And the reality is, newspapers complain about Google and Facebook. Newspapers were monopolies for ages.

They were very small monopolies in their cities, but they were there to operate as monopolies. And they didn’t have to make hard business choices because people were going to get the newspaper no matter what. And, the big shift is to go from a world where you didn’t have to make choices to a world of, the Internet, is nothing but competition. Because you can reach anyone anywhere. But that entails making hard choices, making them with a point of view and then aligning your whole business around that choice. Saying yes, and also saying no, and then living with the consequences.

Stavrum: So, that is the question now. What to do with the cash cow? At what time do you treat it not as holy as it was?

Thompson: I think it’s a difficult question. If there is a viable route to a new business model. And not just viable route from a monetization perspective. But can we change our entire company? Can we align around this? Can we change our editorial strategy to this new model? Then probably more aggressive than less. Better to go for it.

And there will be other entities, where you know what? Our business is such that we can’t succeed in that world, so we should optimize for the old world and do it as long as we can. And, that’s ok.

The world changes and business models become obsolete. Companies go away. But the people don’t go away. The knowledge doesn’t go away. It’s almost a liberating event.

Stavrum: A cleansing moment.

Thompson: You can see a future where if a lot of these doomed businesses would go away, we could get to the future more quickly. Where actually the journalists don’t go away. They are just reconstituted with business models that actually make sense.

Again, I don’t want to see someone cheering the doom of companies. But I do think it’s very easy to associate journalism with newspapers. And it may be that newspapers may not be long for this world. But that doesn’t mean journalists are doomed. It just may be in a different model.

Stavrum: Thank you very much. I think that was a great final statement.

Thompson: Thank you.

 


You can also listen to the podcast we recorded with Ben Thompson here, or on iTunes, Spotify or Soundcloud.

The video is produced by Mari Torvanger Knap for the Tinius Trust. All pictures are credited: Hansine Korslien/Tinius Trust.