The following piece is a guest post from Geoff Campbell, the president of NewsBeat Social. Guest posts do not necessarily reflect the opinions of this publication. Read more about MediaShift guest posts here.
Fifteen years ago, the music industry went through some painful restructuring. The business had been disrupted by a website called Napster and a tidal wave of peer-to-peer sites that allowed consumers to get for free music they once paid for. Many believed the industry was finished.
What they failed to see, however, was that the period was, in reality, a transition to a healthier future. Looking back, music was a vanguard for media businesses that would be disrupted by the digital revolution. But for one industry in particular — the news media — the upheaval and adaptation of the music industry serves as a uniquely instructive example.
The Sweeping Digital Tide
The news business is facing a struggle to survive that’s remarkably similar to the one music faced. Like the music industry, news developed its business model around packaged formats, such as newspapers, magazines, television programs and radio shows. Lacking a way to get only the news they wanted, consumers were forced to purchase a broad basket of news, curated by publishers for general consumption.
But when digital swept in, it also washed away the need for old formats. If Napster gave consumers the ability to consume the songs they wanted, Facebook has done exactly the same thing with news. According to Pew Research, nearly 41 percent of American adults now get some of their news from Facebook – up from 30 percent two years ago. And this number is twice as high for millennials, according to the American Press Institute. The publication has gone the way of the CD while the story, like the song, has taken center stage.
Leveraging the On-Demand Model
What salvaged the future of the music industry was the disruption of the on-demand model, coupled with the need for a quality experience. Consumers had grown used to getting the music they wanted, when and how they wanted it. But smart people in the industry also began to understand there were problems with the peer-to-peer experience, which made finding new music hard, delivered inconsistent sound quality, and was vulnerable to viruses, bad content and other byproducts of an unregulated content ecosystem.
While the per-unit economics have shifted dramatically from the $20 CD, causing a 40 percent drop in industry revenue from 2000, the music business is on the road to recovery. Today, there’s more music being consumed than ever before and billion-dollar companies such as Pandora, Spotify and iTunes are driving the next generation of music experiences.
New Industry Quick Fixes Won’t Work
Facing a very similar crisis, albeit 15 years later, the news industry is busily trying out its share of quick fixes. We’ve seen the paywall, which essentially asks the consumer to abide by the old economics of subscriptions. We’ve got clickbait, which misleads the consumer or dumbs down news (or both) to pump ad revenues. We have steroidal advertising assaulting news consumers with a barrage of banners on already-cluttered sites. And last (but certainly not least) we have paid or “sponsored” news that trade on consumers’ trust, effectively requiring news companies to trade their brand equity for ready cash.
None of these approaches will work over the long term. While not as overtly anti-consumer as the music industry’s ill-fated attempt to litigate its own customers, in one way or another these tactics pit the consumer against the news brand they want, and need, to trust.
Embracing a New Value Proposition
For consumers, the value proposition of news has already changed. They know what they want, and it’s pretty simple: high-quality news at very low cost delivered to where they are. To meet this new expectation, the industry must learn how to deliver a better news-consumer experience by finding ways to produce and deliver the news that don’t punish consumers with heavy ad loads, high-priced subscriptions or deceptive advertising practices.
Though this will inevitably drive down per-unit economics, in the next five to 10 years, 2 billion people will come online, primarily through social media and on mobile devices, and they will all want news. Factor in the size of the news industry, which, by our estimate, stands at approximately $174 billion – or eight times larger than the music industry — and the potential for innovation is boundless.
News providers who successfully deal with these changing realities will be ones with strong brands and equally powerful story formats that can serve as standalone products delivering a consistent experience across multiple points of distribution. Social platforms will be the primary place of consumption (and monetization), but they’ll be supplemented by differentiated stand-alone services offering excellent curation.
News can change—and it already is. Social media gives consumers a personalized news experience that’s right for them on a story-by-story basis. News companies have a ways to go to figure out how to take advantage of this transition to support their business. By looking at the lessons learned by the music industry, we’ll be able to get there faster.
Geoff Campbell is President of NewsBeat Social, a video-first news agency gathering coverage from around the world and delivering premium, objective one-minute news reports across social media. A media and music industry expert, he formerly worked in digital music for Sony at Sony Connect in Los Angeles.