U.S. newspapers are increasing their use of co-opetition practices, that is, cooperating with competitors to reduce costs, create synergies, or reduce risk in new markets. Such activities are permissible if they are not designed to create cartels or control prices for advertising or circulation.
The latest example occurred this week when the Boston Herald announced an agreement with the Boston Globe for its competitor to print and deliver the Herald. The move creates cost savings for the Herald by allow it to cut printing, trucks, and delivery perronnel, while simultaneously creating production and distribution economies and an additional revenue stream for the Globe--a win-win for both companies.
Such service agreements do not violate antitrust laws because the papers remain independent, set their own prices, and create their own content. If papers were to engage in such actions they would have to apply for an antitrust exemption under the Newspaper Preservation Act (see John C. Busterna and Robert G. Picard, Joint Operating Agreements: The Newspaper Preservation Act and its Application. Ablex, 1993), but those agreements have not proven successful in the long run.
The Boston agreement comes on the heels of numerous printing agreements, including that of the Chicago Tribune and Chicago Sun-Times, that have been made among publishers in the last couple of years.
Another example of co-opetition is seen in the 59 newspaper and information companies—including New York Times Co., McClatchy Co., Washington Post Co., E.W. Scripps Co., A.H. Belo, and Associated Press—that have now banded together to create NewsRight to track use of digital content and ease its licensing. By cooperating with each other, the companies have brought more than 800 content sites into the operation and created a significant player in the digital industry.
Daily newspaper companies have historically disliked cooperation unless it was absolutely necessary—as in the case of news services. The new types of cooperation emerging show that the preference to go it alone is being eroded by contemporary financial conditions and the difficulties of operating independently in the digital environment.
The International Business Times is the leading provider of international business news online.
Showing posts with label competition. Show all posts
Showing posts with label competition. Show all posts
Convoluted Views about Media Ownership Inhibit Effective Policy
I was recently reviewing the effectiveness of media ownership policies and regulations and was struck by the limited success they have achieved during the past 50 years in Western nations.
There seem to be two central problems with ownership regulation efforts: ownership really is not the issue that we are trying to address through policy and we have convoluted views of ownership.
Media ownership is not really what concerns us, but is a proxy of other concerns. What we are really worried about is interference with democratic processes, manipulation of the flow of news and information, powerful interests controlling public conversation, exclusion of voices from public debate, and the use of market power to mistreat consumers. It is thus the behavior of some of those who own media rather than the ownership form or extent of ownership that really concerns us.This is compounded because media practitioners, scholars, and social critics have highly convoluted views about ownership and most have complaints about all forms of ownership. It is thus nearly impossible to identify a preferential a form or extent of ownership.
We don’t like private ownership of media because proprietors can use them pursue their private interests; we don’t like corporate ownership because companies can put profit goals ahead of social goals; and we don’t like having just public service media because they doesn’t provide enough choice and are often limited in their ability to pursue political agendas--a function important in democracy.We don’t like big companies because they can be arrogant and unapproachable and because they can control content as well as markets; we don’t like small companies because they can’t provide the range and quality of content we desire and because they sometimes can’t withstand pressures from powerful interests.
We don’t like foreign owners because they don’t share our identity, don’t represent who we are very well, and can bring foreign influences that affect national sovereignty; we don’t like domestic owners because they can be too close to those with domestic social and political power.The list of ownership we do not like—and the fact that most regulation is promoted because of particular proprietors we disliked—makes it difficult to fashion effective policies. We are stymied because no ownership form itself is good or bad and they all have advantages and disadvantages. And there are examples of good and bad owners under all the forms of ownership.
Using ownership regulation to control the behavior of bad owners can only somewhat limit the scope and scale of their activities, not address their poor behavior. It is like permitting higher levels of crime in one area of town as long as it does expand into other areas.If we are to effectively address our real concerns, we need to develop better mechanisms for influencing behaviour and we need to stop ineffectively regulating ownership just because it makes us feel like we are doing something.
FCC Moves to Give Viewers Choice and Provide More Competition on Cable Systems
The U.S. Federal Communications Commission has adopted rules designed to halt cable system operators from retaliating against independent channels when there are business disputes or discriminating against them in favor of ones in which they ownership stakes.
The rules are intended to ensure that the monopoly power of cable operators is not used to deny viewer choice or harm competition channel providers.
One rule is designed to prohibit systems from dropping channels when there are business disputes with systems that have been taken to the commission for resolution.
Another rule is designed to create a more level playing field for independent channels by making it possible for them to reach more viewers. Comcast Corp., for example, has been accused in recent years of forcing competitors’ sports channels into premium packages that fewer viewers select.
Given that price rises for cable services have far outstripped inflation rates in recent years, that service providers create bundles of channels that primarily serve their benefits rather customers, and that consumers continually express dissatisfaction with choices, prices, and customer service provided, it is not surprising that the commission decided to act to slightly limit the power of the major players.
The big cable players are livid about the rules, of course, and can be expected to be highly active in the next regulatory stage seeking comments on how to implement the rules.
At this point they and they supporters are complaining that keeping channels on the air while dispute resolution is underway is somehow unfair to them. The system operators, of course, refuse to recognize how it is particularly unfair to customers who have no way to influence the decision.
The rules are intended to ensure that the monopoly power of cable operators is not used to deny viewer choice or harm competition channel providers.
One rule is designed to prohibit systems from dropping channels when there are business disputes with systems that have been taken to the commission for resolution.
Another rule is designed to create a more level playing field for independent channels by making it possible for them to reach more viewers. Comcast Corp., for example, has been accused in recent years of forcing competitors’ sports channels into premium packages that fewer viewers select.
Given that price rises for cable services have far outstripped inflation rates in recent years, that service providers create bundles of channels that primarily serve their benefits rather customers, and that consumers continually express dissatisfaction with choices, prices, and customer service provided, it is not surprising that the commission decided to act to slightly limit the power of the major players.
The big cable players are livid about the rules, of course, and can be expected to be highly active in the next regulatory stage seeking comments on how to implement the rules.
At this point they and they supporters are complaining that keeping channels on the air while dispute resolution is underway is somehow unfair to them. The system operators, of course, refuse to recognize how it is particularly unfair to customers who have no way to influence the decision.
What Legacy Media Can Learn from Eastman Kodak
What do you do when your industry is changing? What do you do when your innovations are fueling the changes? Those problems have plagued Eastman Kodak Co. for three decades and the company’s experience provides some lessons for those running legacy media businesses.
Eastman Kodak’s success began when it introduced the first effective camera for non-professionals in the late 19th century and in continual improvements to cameras and black and white and color films throughout the twentieth century. Its products became iconic global brands.
The company’s maintained its position through enviable research and development activities, which in 1975 created the first digital camera. Since that time it has amassed more than 1,100 patents involving electronic sensing, digital imaging, electronic photo processing, and digital printing. These developments, however, continually created innovations damaging to its core film-based business.
Digital photography created a strategic dilemma for the company. It could move into digital photography and destroy the highly profitable film-based business or it could exploit the film-based business while it slowly declined and then--when it was no longer profitable--try to leap out of the business into digital world. It was an ugly choice and the company chose the latter.
Today, the company has just 15% of the employees it once had and its stock prices are about 15% of what they were before it finally stripped out its production capacity and distribution systems. An enduring benefit of its research and development activities is that the company now owns patents on much of the underlying technology used in all digital cameras including those in mobile phones. It is building a new digital revenue stream on licenses and infringement payments for use of those technologies. Those alone now account for 10% of its turnover.
Eastman Kodak’s situation is not unlike that of legacy media firms, especially those in print, whose uses of digital technologies two decades before the arrival Internet and whose experiments with teletext and other telecommunication based information distribution systems foreshadowed the arrival of the Internet.
Today, newspapers and magazines—and increasingly broadcasters—are faced with dilemma of whether to keep exploiting their base legacy product or to dump the old business and jump fully into digital. It is as ugly a choice as that faced by Eastman Kodak in the 1980s and 1990s. So, what lessons can be learned from its experience?
1) Don’t try to fight change
You may not like its direction and may understand how it will affect your current business, but you will not be able to stop its momentum and trajectory if it is beneficial to many customers. In such conditions you can only protect your existing product by making it as productive and competitive as possible, by adjusting its strategies to better serve those who are most loyal and resist change, and by carefully monitoring the pace of change and the investments you make in the existing product. Simultaneously, existing companies that want to benefit from the change need to be creating new products for the new markets and allow them to develop and mature with the pace of change even though they may be compounding the challenges in the pre-existing product.
2) Don’t wait too long to change
Waiting to move into new markets with new products gives upstart companies and other competitors opportunities to become players with better products and larger market shares once you decide to enter. Although there are sometimes reasons not to be first movers, you should not wait too long because it is very difficult and expensive to enter and become a major player once a new market moves into its maturation phase.
3) Be willing to sacrifice some short-term profit for long-term gain and sustainability
Careful strategic consideration must be given profits during transitional periods and managers needs to make the strategy clear to the company and its investors. It may be desirable to boost research and development costs even though there is no guarantee they may produce results; it may be necessary to harm the profits of the existing product by building up its replacement and cannibalizing some of its market; it may be appropriate to make investments in the new product that may not pay off in the short-term. Whatever the strategy, it should be the result of clear and deliberate choices and managers need to ensure that investors and entire company understand the reasons for it.
4) Own the rights to technologies and services your competitors will employ
Use your R&D efforts and make strategic acquisitions to acquire the technologies and services that competitors will need to employ in the new market so they must turn to you and share the benefits of their growth. Unfortunately, few legacy media companies invested in research and development to early exploit opportunities in digital media by creating the underlying hardware and software for content control and distribution online and in phones, tablets, and computers. Thus, they own few intellectual property rights other than trademarks to their legacy media names and most are not benefiting as Eastman Kodak from patents being used by those eroding the business base. However, the new products still need content products and content management services that legacy media have long produced and companies need to be open to cooperating with the new competitors rather than giving them incentives to go elsewhere or to develop their own content capabilities.
These are turbulent times for legacy media and they require making choices and positioning firms for the future. It is no time for timidity or keeping on with business as usual.
FCC Moves to Halt Internet Service Provider Content Discrimination and Preferences
The Federal Communications Commission has moved to keep Internet service providers from limiting or unreasonably discriminating against content provided by competing services
The regulations are designed to keep telephone and cable companies that provide phone services from using their Internet services to limit use of Skype and other online telephone services. It is also intended to halt them from making content provided by audio and video service providers they do not own less desirable by limiting downloads from firms such as Netflix or Hulu or providing faster service only for their own content.
The rules are designed to maintain a level competitive position on the Internet and to restrict the abilities of companies that dominate access to the Internet from using oligopolistic control of the service points to harm content competitors.
The regulations require that services allow their customers equal access to all online content and services, but allow the services some flexibility to management network congestion and spam as long as the rules are clear and not anti-competitive.
The rules apply to fixed line services, but do not apply equally to wireless telephony which is becoming the primary means of Internet access though smart phones and electronic tablets and e-reader. Mobile phone providers are permitted to provide preferential access to their services or selected partners, but the rules forbid mobile providers from blocking access to competing sites and services. Mobile services are given more leeway to manage their networks because capacity is more limited than on the Internet.
The regulations are an important step in ensuring that major service providers such as Comcast and Verizon are not allowed to use their dominance in service provision to harm other companies and the FCC should be applauded for its efforts. Such companies have in the past shown their willingness to take advantage of their monopoloy power and are not widely noted for their consumer friendliness.
Major service providers and Republicans are vowing to fight the move, arguing that the FCC does not have the authority to issue such regulations. If the courts side with them on the issue, Congress should explicitly give it the authority or empower the Federal Trade Commission to ensure competivieneess online.
The regulations are designed to keep telephone and cable companies that provide phone services from using their Internet services to limit use of Skype and other online telephone services. It is also intended to halt them from making content provided by audio and video service providers they do not own less desirable by limiting downloads from firms such as Netflix or Hulu or providing faster service only for their own content.
The rules are designed to maintain a level competitive position on the Internet and to restrict the abilities of companies that dominate access to the Internet from using oligopolistic control of the service points to harm content competitors.
The regulations require that services allow their customers equal access to all online content and services, but allow the services some flexibility to management network congestion and spam as long as the rules are clear and not anti-competitive.
The rules apply to fixed line services, but do not apply equally to wireless telephony which is becoming the primary means of Internet access though smart phones and electronic tablets and e-reader. Mobile phone providers are permitted to provide preferential access to their services or selected partners, but the rules forbid mobile providers from blocking access to competing sites and services. Mobile services are given more leeway to manage their networks because capacity is more limited than on the Internet.
The regulations are an important step in ensuring that major service providers such as Comcast and Verizon are not allowed to use their dominance in service provision to harm other companies and the FCC should be applauded for its efforts. Such companies have in the past shown their willingness to take advantage of their monopoloy power and are not widely noted for their consumer friendliness.
Major service providers and Republicans are vowing to fight the move, arguing that the FCC does not have the authority to issue such regulations. If the courts side with them on the issue, Congress should explicitly give it the authority or empower the Federal Trade Commission to ensure competivieneess online.
Competitive Struggles Among Television Platforms
Since the emergence of cable and satellite television services there has been struggles among platforms to increase their attractiveness to audiences and to draw market share from terrestrial television in developed nations. These struggles have had affected content producers, broadcasters, platform operators and regulators attempting to fashion socially optimal broadcasting systems.
In the first competitive struggles between terrestrial broadcasters and cable operators, broadcasters controlled the highest quality contemporary programming and cable operators primarily competed by offering a wider variety of channels and providing premium movie channels. In many locations broadcasters actively sought regulatory policies to keep their channels from appearing on cable in order to reduce its attractiveness as a competitor.
As cable matured and satellite services emerged, the nature of the struggle shifted as greater subscription and advertising revenues allowed cable networks to offer higher quality contemporary programming. In this competitive phase, terrestrial, cable and satellite operators began struggling for exclusivity of content that would drive audiences to the platforms. Gaining exclusive rights to first broadcast runs of motion pictures, sporting, musical and other events, and high quality original programs became primary goals. In this environment, producers of content and owners of event rights sought to maximize their returns across the platforms. while platform operators sought to maximize their returns by gaining market power through exclusivity. This led to negotiations based not only on transmission rights but exclusivity rights as well, which dramatically pushed up costs of some content—especially sports rights.
As cable garnered a larger audience share, broadcasters that had previously been opposed to carriage of terrestrial signals on cable because asking regulators for ‘must carry’ rules to require cable operators to carry terrestrial channels so they could have additional access to audiences or audiences in places their terrestrial signals had not previously reached. This was especially useful for advertising supported channels, both public service and commercial.
In recent years, the widespread success of cable and satellite platforms and the shift of wealth from terrestrial to other platforms has led broadcasters to demand payments from cable and satellite platform operators for carrying their channels. The newer platforms are resistent and in some nations the struggle over payments remains on-going.
The digitalisation of terrestrial, cable, satellite, and broadband platforms has now created multiple opportunities of distribution of audiovisual materials and is creating a new environment in which additional competitive struggles are taking place among platform operators. At stake are the significant potential gains from advanced paid video-on-demand services and IPTV. Platform operators—DTT, cable, satellite, and telecommunications firms that offer broadband services—are now struggling to ensure that they are not competitively disadvantaged compared to other operators. Operators that control or have high market power over platforms, especially broadband links and systems needed for advanced services or interactive DTT services, will have significant advantages in the next generation of services. Consequently, there is a great deal of effort on the part of major platform operators to acquire access to all platforms and services through ownership, alliances and joint ventures and in many cases there are outright efforts to control those platforms and servcies.
The trajectory and outcome of this competitive struggle is particularly important because it will have significant impact on the range of services and costs for services available to the public. These developments also have significant importance for the relationship between content producers and platform operators because the means of compensation is likely to evolve from current transmission rights and exclusivity rights payments to one involving revenue and profit sharing. This has significant implications to the funding and ways that contemporary terrestrial television programming is created and role of terrestrial broadcasters in the new environment.
In the first competitive struggles between terrestrial broadcasters and cable operators, broadcasters controlled the highest quality contemporary programming and cable operators primarily competed by offering a wider variety of channels and providing premium movie channels. In many locations broadcasters actively sought regulatory policies to keep their channels from appearing on cable in order to reduce its attractiveness as a competitor.
As cable matured and satellite services emerged, the nature of the struggle shifted as greater subscription and advertising revenues allowed cable networks to offer higher quality contemporary programming. In this competitive phase, terrestrial, cable and satellite operators began struggling for exclusivity of content that would drive audiences to the platforms. Gaining exclusive rights to first broadcast runs of motion pictures, sporting, musical and other events, and high quality original programs became primary goals. In this environment, producers of content and owners of event rights sought to maximize their returns across the platforms. while platform operators sought to maximize their returns by gaining market power through exclusivity. This led to negotiations based not only on transmission rights but exclusivity rights as well, which dramatically pushed up costs of some content—especially sports rights.
As cable garnered a larger audience share, broadcasters that had previously been opposed to carriage of terrestrial signals on cable because asking regulators for ‘must carry’ rules to require cable operators to carry terrestrial channels so they could have additional access to audiences or audiences in places their terrestrial signals had not previously reached. This was especially useful for advertising supported channels, both public service and commercial.
In recent years, the widespread success of cable and satellite platforms and the shift of wealth from terrestrial to other platforms has led broadcasters to demand payments from cable and satellite platform operators for carrying their channels. The newer platforms are resistent and in some nations the struggle over payments remains on-going.
The digitalisation of terrestrial, cable, satellite, and broadband platforms has now created multiple opportunities of distribution of audiovisual materials and is creating a new environment in which additional competitive struggles are taking place among platform operators. At stake are the significant potential gains from advanced paid video-on-demand services and IPTV. Platform operators—DTT, cable, satellite, and telecommunications firms that offer broadband services—are now struggling to ensure that they are not competitively disadvantaged compared to other operators. Operators that control or have high market power over platforms, especially broadband links and systems needed for advanced services or interactive DTT services, will have significant advantages in the next generation of services. Consequently, there is a great deal of effort on the part of major platform operators to acquire access to all platforms and services through ownership, alliances and joint ventures and in many cases there are outright efforts to control those platforms and servcies.
The trajectory and outcome of this competitive struggle is particularly important because it will have significant impact on the range of services and costs for services available to the public. These developments also have significant importance for the relationship between content producers and platform operators because the means of compensation is likely to evolve from current transmission rights and exclusivity rights payments to one involving revenue and profit sharing. This has significant implications to the funding and ways that contemporary terrestrial television programming is created and role of terrestrial broadcasters in the new environment.
Getting It Wrong: The FTC and Policies for the Future of Journalism
Following hearings on the state of newspapers this past year, the U.S. Federal Trade Commission staff has now prepared a discussion paper of potential policy recommendations to support the reinvention of journalism.
The FTC’s staff ignores the fact that most newspapers are profitable (the average operating profit in 2009 was 12%), but that their corporate parents are unprofitable because of high overhead costs and ill-advised debt loads taken on when advertising revenues were peaked at all time highs. It also fails to make adequate distinction between longer term trends affecting newspapers and the effects of the current recession. The staff thus blends the two together to give a skewed picture of the mid- to long-term health of the industry.
Policy alternatives suggested by the staff for consideration include:
If commercial news enterprises can’t effectively manage themselves, compete in markets for their products and services, or find effective business models for themselves, why does anyone think that bureaucrats in the government have any ability to solve those problems for the news industry?
It is a classic example of policy-making folly that starts from the premise that the government can solve any problem—even one created by consumer choices and an inefficient, poorly managed industry. Most of the proposals are based in the idea of using government mechanisms to protect newspapers against competitors and to create markets for newspapers offline and online.
The FTC’s staff ignores the fact that most newspapers are profitable (the average operating profit in 2009 was 12%), but that their corporate parents are unprofitable because of high overhead costs and ill-advised debt loads taken on when advertising revenues were peaked at all time highs. It also fails to make adequate distinction between longer term trends affecting newspapers and the effects of the current recession. The staff thus blends the two together to give a skewed picture of the mid- to long-term health of the industry.
Policy alternatives suggested by the staff for consideration include:
- Limiting fair use provisions of copyright and providing new protection for “hot news,” which would give first news organizations to distribute a story a proprietary right to the facts in their article
- Providing a variety of types of subsidies for news providers
- Changing tax exempt status laws to make it easier to obtain not-for-profit status and funds from charitable donors
- Taxing advertising, spectrum, internet service provision, consumer electronics, and cell phones to provide funds for news organizations
- Creating new antitrust exemptions allowing price collusion and market division
It is hard to ignore the irony and incongruities of a government agency whose purpose is to protect competition and effective markets suggesting anti-competitive practices and taxes that will have negative effects on consumers, competitors, and other companies. Setting those aside, however, none of the suggestions deal with the real underlying economic and financial problems of the news industry: that fact that many consumers are unwilling to pay for the kinds of news provided today and that news organizations need to radically change their management practices and begin reducing organizational inefficiencies.
If commercial news enterprises can’t effectively manage themselves, compete in markets for their products and services, or find effective business models for themselves, why does anyone think that bureaucrats in the government have any ability to solve those problems for the news industry?
HONOLULU JOINS THE RANKS OF NEWSPAPER MONOPOLY CITIES
I was sorting through some of my father’s belonging recently and came across the 1941 souvenir edition of the Honolulu Star-Bulletin (Jan 8, 1941), “The March of Hawaii.” Its lead story was the reorganization and strengthening of the Pacific Fleet and the appointment of Admiral H.E. Kimmel to head it.
My father acquired the paper while stationed in Hawaii with the Army Air Corps. Eleven months later the U.S. was at war, with Kimmel taking heat for having the bulk of his capital ships anchored in Pearl Harbor during the Japanese attack.
I was reminded of the find this week while reading the news that Gannett has agreed to sell the Honolulu Advertiser to the Star-Bulletin. The two have a 130-year history of competition, somewhat muffled until they escaped their relatively difficult marriage in a joint operating agreement between 1960s and the millennium. Now the smaller paper is buying the bigger paper, if it can comply with or skirt antitrust provisions.
We are now in the last throes of consolidation of the newspaper industry, brought on by audiences shifting to television, cable channels, and the Internet for news and information, and advertisers following audiences. The consequence is the newspapering has become a monopoly business in more than 1360 cities and towns and big city papers—even when they are monopolies—are having difficulties competing for advertising dollars. Only two percent of cities have competing dailies.
This change calls into the question the traditional view that a competing press is the foundation of democracy. If competition among perspectives on news and information is necessary for democratic functions, we have to think of it beyond the printed press and begin recognizing the important functions provided by other providers of news, information, and commentary.
Rather than constantly challenging their abilities to carry out functions in the same way as the press once did, we need to find ways to support and improve their activities—whether they be broadcast or Internet based. And we need to find ways to ensure that the papers remaining in place reevaluate their democratic functions and find ways to provide service to the spectrum of observations and ideas that has been diminished by the newspapers monopolies that now dominate our land.
My father acquired the paper while stationed in Hawaii with the Army Air Corps. Eleven months later the U.S. was at war, with Kimmel taking heat for having the bulk of his capital ships anchored in Pearl Harbor during the Japanese attack.
I was reminded of the find this week while reading the news that Gannett has agreed to sell the Honolulu Advertiser to the Star-Bulletin. The two have a 130-year history of competition, somewhat muffled until they escaped their relatively difficult marriage in a joint operating agreement between 1960s and the millennium. Now the smaller paper is buying the bigger paper, if it can comply with or skirt antitrust provisions.
We are now in the last throes of consolidation of the newspaper industry, brought on by audiences shifting to television, cable channels, and the Internet for news and information, and advertisers following audiences. The consequence is the newspapering has become a monopoly business in more than 1360 cities and towns and big city papers—even when they are monopolies—are having difficulties competing for advertising dollars. Only two percent of cities have competing dailies.
This change calls into the question the traditional view that a competing press is the foundation of democracy. If competition among perspectives on news and information is necessary for democratic functions, we have to think of it beyond the printed press and begin recognizing the important functions provided by other providers of news, information, and commentary.
Rather than constantly challenging their abilities to carry out functions in the same way as the press once did, we need to find ways to support and improve their activities—whether they be broadcast or Internet based. And we need to find ways to ensure that the papers remaining in place reevaluate their democratic functions and find ways to provide service to the spectrum of observations and ideas that has been diminished by the newspapers monopolies that now dominate our land.
THE BATTLE TO CONTROL ONLINE PRICES
The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music.
In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.
Producers, of course, want higher prices because they produce higher revenue and better profits.
The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.
Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.
What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.
Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.
Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.
Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.
In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.
Producers, of course, want higher prices because they produce higher revenue and better profits.
The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.
Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.
What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.
Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.
Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.
Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.
JOURNALISM AS CHARITY AND ENTREPRENEURSHIP
Many journalists pursuing new online initiatives are learning that good intentions are not enough for providing news.
The latest group to do so is former Rocky Mountain News reporters who started rockymountainindependent.com this past summer using a membership payment and advertising model. The effort collapsed Oct. 4 with them telling readers, “We put everything into producing content and supporting our independent partners, but we can no longer afford to produce enough content to justify the membership.”
There problem is hardly unique. The conundrum facing many journalists is whether to pursue the noble work of journalism as unpaid charitable work or to become engaged as journalistic entrepreneurs with a serious attitude toward its business issues—something many despised in their former employers.
If journalists want pay for their work, if they want to provide for their families, and if they want to pay mortgages, they need to spend more time figuring out how to provide value that will extract payments from readers and advertisers. To do that they have to construct organizational structures and activities that support the journalism; they will have to ensure that startups have sufficient capital; and they will have to engage staffs in marketing and advertising activities, not merely news provision.
One of the most difficult issue for these new journalism providers—as well as existing print and broadcast providers—is that journalists tend to overestimate the value of news for the public. What the public actually wants is less, not more, news.
It is not that the public doesn’t want to be informed, however. It is just that journalists spend so much time, space, and effort conveying commodity news that provides little new and helpful information for readers and cannot generate sufficient financial support. By commodity news I mean the simplistic who, what, and where stories about what happened yesterday. Those kinds of stories are readily available from many sources and provides readers little for which they will pay.
Instead, in a world of ubiquitous commodity journalism, successful journalists need to be spending time exploring the how and why of events and issues and helping readers understand and cope with what is expected next. Effective journalism in the new environment needs to focus more on today and tomorrow than on yesterday.
Success in the contemporary journalism environment it is not merely about providing news, but about providing helpful and advisory news explanation based on solid values and identity to which readers can relate. It must be part of entrepreneurial journalism or new ventures will fail.
To get there, however, journalists starting up new enterprises will need to develop resources and entrepreneurial motivation to sustain their efforts more than a few months. Most new commercial and noncommercial enterprises require 18 to 36 months of operation before they develop a loyal audience and achieve a stable financial situation. Unless journalists are willing to work for free during that time, they will have to raise capital to survive; and if they want their new organizations to thrive and develop they will have to provide a different kind of news than most are used to creating. It will need to be unique and better than what is already available.
The latest group to do so is former Rocky Mountain News reporters who started rockymountainindependent.com this past summer using a membership payment and advertising model. The effort collapsed Oct. 4 with them telling readers, “We put everything into producing content and supporting our independent partners, but we can no longer afford to produce enough content to justify the membership.”
There problem is hardly unique. The conundrum facing many journalists is whether to pursue the noble work of journalism as unpaid charitable work or to become engaged as journalistic entrepreneurs with a serious attitude toward its business issues—something many despised in their former employers.
If journalists want pay for their work, if they want to provide for their families, and if they want to pay mortgages, they need to spend more time figuring out how to provide value that will extract payments from readers and advertisers. To do that they have to construct organizational structures and activities that support the journalism; they will have to ensure that startups have sufficient capital; and they will have to engage staffs in marketing and advertising activities, not merely news provision.
One of the most difficult issue for these new journalism providers—as well as existing print and broadcast providers—is that journalists tend to overestimate the value of news for the public. What the public actually wants is less, not more, news.
It is not that the public doesn’t want to be informed, however. It is just that journalists spend so much time, space, and effort conveying commodity news that provides little new and helpful information for readers and cannot generate sufficient financial support. By commodity news I mean the simplistic who, what, and where stories about what happened yesterday. Those kinds of stories are readily available from many sources and provides readers little for which they will pay.
Instead, in a world of ubiquitous commodity journalism, successful journalists need to be spending time exploring the how and why of events and issues and helping readers understand and cope with what is expected next. Effective journalism in the new environment needs to focus more on today and tomorrow than on yesterday.
Success in the contemporary journalism environment it is not merely about providing news, but about providing helpful and advisory news explanation based on solid values and identity to which readers can relate. It must be part of entrepreneurial journalism or new ventures will fail.
To get there, however, journalists starting up new enterprises will need to develop resources and entrepreneurial motivation to sustain their efforts more than a few months. Most new commercial and noncommercial enterprises require 18 to 36 months of operation before they develop a loyal audience and achieve a stable financial situation. Unless journalists are willing to work for free during that time, they will have to raise capital to survive; and if they want their new organizations to thrive and develop they will have to provide a different kind of news than most are used to creating. It will need to be unique and better than what is already available.
CAN PUBLIC BROADCASTERS HARM COMPETITION AND DIVERSITY?
This is not trick question and it is being increasingly asked as public broadcasters grow larger, offer multiple channels, move into cross-media operations, and increasingly commercialize their operations.
The Federal Communications Commission will have to consider that question shortly when it considers the effort of WGBH Education Foundation—operator of WGBH-TV, the highly successful Boston-based public service broadcaster—to purchase the commercial radio station WCRB-FM.
WGBH is the top ranked member of the Public Broadcasting Service in the New England and produces about one third of PBS’ programming. It operates a second Boston television station, WGBX-TV, and WGBY in Springfield, Massachusetts. In addition it operates FM radio stations WGBH (Boston), WCAI (Woods Hole), WZAI (Brewster), and WNAN (Nantucket) and is a member of National Public Radio and Public Radio International. It operates two commercial subsidiaries involved in music rights and motion picture production.
This month it announced it was planning to purchase WCRB-FM, a classical music station that serves the Boston area. The purchase would allow it to alter its WGBH-FM format to compete more directly with WBUR-FM, the leading public radio station in Boston that is operated by Boston University.
WGBH Educational Foundation is an enterprise with $580 million in assets and revenues of $280 million annually. It has more than 600 employees who are paid more than $50,000 annually and has 5 paid more than $225,000. Its president and CEO is paid about $340,000 and 2 vice presidents about $250,000 annually. This is not a small, poor charitable enterprise.
Were WGBH a commercial broadcaster, those who hate big media would be howling in protest, arguing that it puts far too much control of the airwave in the hands of one organization and that the concentration will create market power that harms competition. But they are strangely silent.
However, in deciding whether to permit the purchase, the FCC will have to consider whether the expansion of the public broadcaster harms competitors and plurality and diversity.
Similar questions are being asked elsewhere as well. Across the pond, the British Broadcasting Corp. has recently been the target of a good deal of criticism because of its increasingly commercialized operations and because its expansion of public service operations in TV, Radio, and Internet at the local, national, and international level are seen as affecting commercial firms and competition.
The BBC is one of the largest broadcasting companies in the world, operating on revenues of £4.7 billon ($7.4 billion) and it has assets of £1.5 billion ($2.4 billion).
Many commercial broadcasters and publishers in the U.K. have criticized the growth of the BBC operations and the debate became especially heated recently when James Murdoch, the News Corp. head in Europe and Asia, made a public speech charging the BBC was engaging in a “land grab” and that its ambitions were “chilling.”
“The expansion of state-sponsored journalism is a threat to the plurality and independence of news provision, which are so important for our democracy," Murdoch told the Edinburgh International Television Festival. Whether you agree with him or not, you have to give him credit for co-opting the language of critics of big commercial media.
News Corp. and the other commercial firms competing with the BBC obviously have self interests at heart, and some commercial firms have certainly behaved in ways that harmed public interests in the past, but their arguments should not be casually dismissed.
If competition among commercial firms, between commercial and non-commercial firms, and among non-commercial firms is good for pluralism and diversity, cannot concentration and reductions in sources of news and entertainment due to acts of large not-for-profit firms also harm competition, pluralism and diversity?
The Federal Communications Commission will have to consider that question shortly when it considers the effort of WGBH Education Foundation—operator of WGBH-TV, the highly successful Boston-based public service broadcaster—to purchase the commercial radio station WCRB-FM.
WGBH is the top ranked member of the Public Broadcasting Service in the New England and produces about one third of PBS’ programming. It operates a second Boston television station, WGBX-TV, and WGBY in Springfield, Massachusetts. In addition it operates FM radio stations WGBH (Boston), WCAI (Woods Hole), WZAI (Brewster), and WNAN (Nantucket) and is a member of National Public Radio and Public Radio International. It operates two commercial subsidiaries involved in music rights and motion picture production.
This month it announced it was planning to purchase WCRB-FM, a classical music station that serves the Boston area. The purchase would allow it to alter its WGBH-FM format to compete more directly with WBUR-FM, the leading public radio station in Boston that is operated by Boston University.
WGBH Educational Foundation is an enterprise with $580 million in assets and revenues of $280 million annually. It has more than 600 employees who are paid more than $50,000 annually and has 5 paid more than $225,000. Its president and CEO is paid about $340,000 and 2 vice presidents about $250,000 annually. This is not a small, poor charitable enterprise.
Were WGBH a commercial broadcaster, those who hate big media would be howling in protest, arguing that it puts far too much control of the airwave in the hands of one organization and that the concentration will create market power that harms competition. But they are strangely silent.
However, in deciding whether to permit the purchase, the FCC will have to consider whether the expansion of the public broadcaster harms competitors and plurality and diversity.
Similar questions are being asked elsewhere as well. Across the pond, the British Broadcasting Corp. has recently been the target of a good deal of criticism because of its increasingly commercialized operations and because its expansion of public service operations in TV, Radio, and Internet at the local, national, and international level are seen as affecting commercial firms and competition.
The BBC is one of the largest broadcasting companies in the world, operating on revenues of £4.7 billon ($7.4 billion) and it has assets of £1.5 billion ($2.4 billion).
Many commercial broadcasters and publishers in the U.K. have criticized the growth of the BBC operations and the debate became especially heated recently when James Murdoch, the News Corp. head in Europe and Asia, made a public speech charging the BBC was engaging in a “land grab” and that its ambitions were “chilling.”
“The expansion of state-sponsored journalism is a threat to the plurality and independence of news provision, which are so important for our democracy," Murdoch told the Edinburgh International Television Festival. Whether you agree with him or not, you have to give him credit for co-opting the language of critics of big commercial media.
News Corp. and the other commercial firms competing with the BBC obviously have self interests at heart, and some commercial firms have certainly behaved in ways that harmed public interests in the past, but their arguments should not be casually dismissed.
If competition among commercial firms, between commercial and non-commercial firms, and among non-commercial firms is good for pluralism and diversity, cannot concentration and reductions in sources of news and entertainment due to acts of large not-for-profit firms also harm competition, pluralism and diversity?
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