Online won't save the old media

By Charles Hammer

Let’s say you owned a cookie store where you sell cookies for $3 each. You’ve seen a slow, steady decline in your sales. Your customers start asking you to sell them online. You do a few Web searches and realize that there are big sites that sell comparable cookies for $1.50 each. Then you realize that you’ll have to change the recipe and package the cookies so they’ll stay fresh longer.

You make the plunge and start up your Web site, selling your cookies for the reduced price. You see a slow, steady rise in your online sales. You also notice that your store sales are declining faster. You see more cookie Web sites popping up every day, with new specials.

You fire up your computer and do the numbers. The online revenue won’t replace the store revenue for 10 years or more. To ensure that you can compete online, you’ll need to buy more equipment, rent out more space and hire more people. You’ll need a big loan from the bank, but you already owe too much from keeping your store going.

You think you have three options: (1) sell the store, (2) go completely online, (3) cut back and hope that everything gets better.

The newspaper and magazine businesses are facing the same dilemma, and they think they have the same three options. The Bancrofts, the family who owned Dow Jones for generations, opted to put their company up for sale. The only sucker who offered a decent price was Rupert Murdoch’s News Corp., whom the Bancrofts loathed.

After much wrangling, Murdoch walked away with Dow Jones. But even though he is a longtime newspaperman, he may be one of the few who perceive that there is a fourth option to our cookie scenario: create better products by listening to customers.

In December of 2008, I attended a conference in California called “Voice of the Customer.” There were two days of presentations about how to discover customer needs and how to incorporate them into how you create products. There were people at the conference from manufacturing, insurance, theme parks, software and finance, among others. Many of these companies had been around for decades, even a century. There wasn’t anyone from a car company. I did, to my surprise, find one other media person. A nice man from Autotrader.com, who told me he was usually the only media person at these types of things.

I thought back on all that I’ve read while studying management and product development. The media is seldom mentioned. It’s as if they are frozen in the 1800s and haven’t noticed that the business world has changed around them. Manufacturers, even carmakers, invest more in understanding customers than the media do.

I tried to avoid reading the news for the two days I was there. Somehow, staying at this spa/hotel in always beautiful Southern California made me want to believe that everything was just fine. But of course the big headlines in big media were about the automakers desperately begging for billions of dollars to save hundreds of thousands of American jobs. It’s difficult for us to bail out these fat cats because they’ve been arrogantly abusing us with bad cars for so long. I doubt that anyone believes the car companies will really turn themselves around. We just want to save the jobs during this economic crisis.

The big headlines in the trade press about the media were of layoffs at newspapers, magazines and Web sites. The scariest headlines were about some newspapers considering closing down entirely, such as the Newark Star-Ledger and the Rocky Mountain News. Thirty years ago, newspapers like these with their profit margins of up to 25 percent would have fetched fat prices from potential buyers. Now some of them are being sold for $1 because they have so much debt and so little potential to pay it off.

The parallels between the car companies and the media companies are frightening. Both were accustomed to little competition and squandered their profits instead of creating better products. Both have long histories of losing their customers’ trust. (The media is consistently near the top of surveys about who the public trusts the least.) Both ignored competition until it was too late. When given other options, their customers ran away.

There won’t be a bailout for the media. Just as we are facing a future without American cars, we are facing a future with a very different mass media. Readers aren’t running away to one competitor, they’re running to hundreds of competitors. Nebraska is facing a future without the Lincoln Journal-Star and the Omaha World Herald, which could cascade into the radio and television stations.

Online revenue won’t save them anytime soon. Although revenue from big media Web sites goes up by the millions every year, they cannot replace the tens of millions lost every year on their offline products. News in December that magazines were laying off their online content staff and keeping their print staff surprised some in the industry. The management at Fortune magazine, when announcing cuts in online staff, said it cannot justify losing so much money online when it makes more money selling a magazine.

The advertising rates for print versus online just don’t compare. Again, there are hundreds of ways of reaching your audience online. The New York Times or The Wall Street Journal just cannot charge as much online as they do for the newspaper, nor will they be able to in time to preserve the sizes of their news-gathering organizations.

Many in the industry think the solution is in technology, but it’s not. Here’s Murdoch in a radio address on ABC Radio National in Australia: “The more serious challenge is the complacency and condescension that festers at the heart of some newsrooms… The condescension that many show their readers is an even bigger problem.”

This quote made me think back to my days at the University of Missouri School of Journalism. We believed we had a sacred duty to tell the people what they needed to know. The readers and viewers weren’t smart enough or just didn’t know enough about what was “really going on” to be able to tell us what they needed to know. After many years of this, it becomes easy to think of readers as an ignorant mass and journalists as some sort of knight protecting them.

Murdoch’s been able to compete in different media in different countries and succeed by building trust and listening to the customer. Many, of course in his competition, interpret this as catering to the “low brows” of the world.

To return to our cookie store, perhaps there really is a fourth option. How about making cupcakes, catering, delivery or franchises? How about talking to your customers and finding out what their needs are? Perhaps the answer for the media is not to keep doing the same thing and hope everything gets better but to find out what people need and create products that meet those needs.

These things have a way of working themselves out. Someone will step up and find a way to make money off keeping us informed, but it won’t be the same people who are doing it today. They’ve had their chance, so now it’s time for someone else to bake a better cookie.

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