News Industry Can Survive In The Digital Age

Not everybody is fretting over the fate of the news business. Online comments on a recent FT analysis of US newspapers' troubles bid "good riddance" to the "regime apologists" writing "Leninist propaganda" for what they dubbed the American equivalents of Tass or Pravda.

Such views are not unusual among America's polarised media consumers, but at institutions pondering the future of news, measured fretting remains the more common tone. This week, the (non-partisan) Pew Research Center's Project for Excellence in Journalism published a sober annual report into the state of the US news media.

Taking in everything from Fox News to Native American radio, it weighs the hopeful finding that people consume more news in the mobile era with the concern that news organisations are falling further behind big technology intermediaries on which they increasingly depend for traffic.

Its analysis is familiar for any content company awed by Apple's $100bn cash hoard or Facebook's possible $80bn IPO valuation: that the news industry has little control over its digital destiny.

Google, Amazon, Facebook, Apple and a few others control the devices, operating systems, browsers, email services, social networks and web platforms on which consumers consume content, Pew noted. They have become useful new distributors for content companies, but also potent new rivals for revenues.

Five tech companies, led by Google, Facebook and Yahoo, soak up two-thirds of all online advertising revenue, Apple and Amazon dominate media downloads to mobile devices, and no content producer can rival their data-driven ability to sell valuable targeted advertising, Pew added.

Faced with such challenges, its authors mused, how long would it be before a technology behemoth such as Facebook bought a legacy media brand such as the Washington Post to ensure the survival of a content supplier its users value?

Don't hold your breath. Such arguments have an echo in the music industry, where spirits would occasionally be lifted by wishful rumours that Apple was about to buy a label owner. Yet nobody made a convincing case for why iTunes would benefit from owning Lady Gaga's recordings but not those of Adele.

Such deals look equally unlikely in news, where it is similarly unclear what Facebook would gain from having a lock on any one content source. Yet recent partnerships serve as a reminder that news brands still have alternatives other than hoping for a wealthy suitor.

Facebook's Social Reader tool has been adopted by newspapers from the Washington Post to the Guardian, Google's YouTube video site is funding shows from Reuters, and Yahoo is taking news videos from ABC News. Revenues are modest, but such initiatives are sensible efforts to widen news companies' sources of income. Behind their journalistic missions, most news organisations have always been commercial operations that sell audiences to advertisers. That is little different from what Facebook or Google do, but there are three important distinctions that should give the news industry hope.

First, they have skills in creating the content digital newcomers like to aggregate. In an era of content overload, this alone is no assurance of profit. News brands must focus on ensuring that their content is both valuable to their customers and distinctive from the mass of free content available elsewhere. Equally, they need to ensure that they are compensated fairly for its reuse on others' sites.

Second, they have long relationships with advertisers, from the local car dealer to big brands such as Ford. But sales teams must rethink the idea that they are selling print or TV ads, and realise they are in the same business as Google or Facebook.

Last year, Pew noted, newspapers' digital advertising rose just 6.8 per cent as the market grew 23 per cent, and their websites made little use of high-priced, targeted advertising. News brands need to do a better job of competing for digital revenue, playing up the cross-platform value of their legacy print or TV outlets. Third, many media owners – even struggling newspapers – have one often-overlooked advantage: a business model with a dual revenue stream including circulation or subscription income. They should take advantage of it.

The debate about charging for news remains a polarising one (disclosure: the FT was among the early champions of digital subscriptions), but so does the rise of targeted advertising. If those consumers who want news to survive are queasy about accepting more targeted commercial intrusions, they will have little choice but to pay up. Those who want content to be free will pay a different price, surrendering more of their privacy online.

Andrew Edgecliffe-Johnson is the FT's Media Editor

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