[A later, edited version of this appeared in the Wall Street Journal, 26 October 2016 under the title “Newspapers are social media”]
Digitization exposes weak links. Then it breaks them. So much so that it makes you wonder what people were thinking in the first place. And, according to Harvard Business School professor, Bharat Anand in his latest book, The Content Trap, the weakest link is between producing content and everything else.
To see why, consider the news. The master plan for a newspaper was something like this: Step 1: Produce great journalism. Step 2: Win Pulitzers. Step 3: Use that reputation to get subscribers. Step 4: Offer the readers up to classifieds advertisers. Step 5: Market the weekend edition to non-subscribers. And finally Step 6: Use the virtuous circles (readers beget advertisers beget more advertisers) to charge high ad prices.
With so many steps between content and returns, this reads like an evil plan of a superhero movie villain. Superheroes save the day by fighting the final step. Digital technologies break the plan somewhere between steps 3 and 4. In the case of newspapers, the Internet stopped the subscriber flow and then laid waste to step 4 by offering advertisers other ways to read consumers.
It is easy to rail against media company executives for not seeing weak links. But when the plan works well for decades and the real business job focusses on steps 1 and 2, it is hardly surprising that the immediate reaction is to sure up the severed links. The problem, as Anand points out, is that at this point they have already fallen into the trap of thinking that content is king. To be sure, content is important. But it is the connection between that content and the rest of the master plan that matters more. And the firms who realized that sooner or were never relying on the plan in the first place faired better.
A case in point for Anand is Schibsted, the Norwegian-based media powerhouse. It realized the weak link as early as 1999 and also that this was pervasive to all newspapers. So it looked to moved to delink the classifieds business with the newspaper brand. In other words, it completely abandoned Step 3 and it did so prior to moving that business online. Importantly, Schibsted took its past fortuitous circle, abandoned it, and moved to concentrate ‘down plan’ on securing the newly de-coupled virtuous circle in Step 6.
Where Schibsted realized weak links early, the exception that proves the rule in this business is The Economist. The Economist never took to online. Instead, it understood that its readers were actually reading the news (as opposed to consuming it over their Weeties). Digitization had unbundled the new articles from media outlets but for The Economist, their readers wanted the bundle. They just didn’t need it from a newspaper but instead from an oldspaper; the news of the last week presented in a calmer fashion. They had never relied on steps beyond 3 and so when that link was severed elsewhere, The Economist was able to stay put and profitable.
Anand argues that focus on steps 1 and 2 can blind you to ways of getting to step 6. For instance, the modus operandi of news outlets is to inform readers. But apart from financial news and the weather, this information does not seem to play a direct role in everyday life. At best, it is in the same category as entertainment. Instead, Anand emphasizes that news is a social good. You want to know what is happening so you can socialize around the water cooler. This is why Facebook has found its entree into our lives and why apps such as The Skimm that involve a light but regular daily news dose are doing so well with the youth. As I wrote in my 2012 book, Information Wants to be Shared. Indeed, it is hard to find an area of content provision where the real consumer value arises independent of a social element. If you believe you are in the business of information, you are blind to the fact that you are in the more lucrative business of socialization.
Still not convinced. Let’s consider the old master plan for book publishing. In that case, Steps 1, 2 and 3 follow the newspaper model except with the goal of getting books into stores. Step 4 would be fine if consumers were just buying books to read them. But that isn’t the case. Instead, Step 4 involves getting consumers buy books even if they can’t read them right away by choosing covers and sizing to make them look good on shelves (that is, not to sell them as scrolls). Following this, Step 5 encourages them to leave the books on the shelves and not lend them out. All this culminates in Step 6 of being able to charge three times the price for books that look good on shelves compared to those that do not.
Digitization hit the industry right between steps 3 and 4 by bypassing stores and then bypassing shelves. The conceit comes because the industry focussed on Steps 1 and 2 thinking that providing books that people wanted to read would get them the rest. Instead, that only worked in providing books that people wanted to read rather than shelve. And if you are just going to read a book, you do not pay as much for it. That is why the romance genre which was all about reading flourished under the digital onslaught but for others the world had to wait until bookstores reconstituted themselves as gift shops. Don’t believe me. Pop into a Barnes and Noble and examine the floor space devoted to books.
The Content Trap is a book with a ton of content. It is filled with stories of businesses that missed connections and could never escape the narrow views that had brought them past success. But it is also filled with stories of those who brought a number of strategic choices into coherence to strengthen the links between content and returns in their new master plans. Anand puts this into a framework but I suspect the framework itself cannot be taken easily off the shelf. Instead, the book is a call to clear thinking and challenging why things are the way they are. Just because we tell ourselves what we are producing is good and for a good purpose does not mean it is or ever will achieve that. The connection between content and profits is tenuous.