Netflix and Spotify have transformed how people watch TV and listen to music, but what about in news? Will a credible news aggregator ever emerge, and if it did what would it solve? Is Apple News or any kind of aggregation capable of solving the news media’s challenges?
Dominic Young, industry commentator (and former managing director of News Corp Digital), says publishers should be careful what they wish for — it might just come true. Rather than look to big platforms for their next step, they should be looking to themselves.
In an exclusive Webinar for INMA members on Wednesday, November 13, Young presented this argument and outlined how publishers can navigate the landscape of major platforms.
Young opened the Webinar with a discussion on how the industry got here in terms of the domination of major platforms and where it goes from here.
“We have spent many years adapting our products to rules that have actually been set by other people,” Young said. These are rules such as:
- Content is king.
- Payment = paywall.
- The subscription economy.
- “Free” is inevitable.
- People won’t pay.
- Advertising is the most valuable market.
- Data is the best route to money.
- Micropayments don’t work.
- The platforms are all-powerful and unavoidable.
Young believes all of these rules are completely wrong. The idea of the inevitability that all news media will become free by necessity is one that he rejects completely. And when it comes to advertising, it’s increasingly obvious that it is not the most valuable market on the Internet: “Partly because it’s limited in scale, it does not keep on growing systemically with the audience, and also because these big networks are taking it away from us as publishers.”
The platforms such as Google, Facebook, and Apple, Young argued, are new occupancies on the Internet. “It’s not automatic that our interests have to be opposed to each other, nor is it automatic that we have to be dependent on them,” he said. “I think we should really redefine that relationship.”
The largest platform is media
The biggest network of all, that the Internet hasn’t really yet interfered with, is in fact the media.
“There are very few people who don’t interact with the media, on some level, every day,” Young said. “The media, potentially, has a gigantic network — but what we don’t have are the connections between the nodes on that network to really enable it to be truly powerful.”
Yet with the right tools and the right incentives, Young believes media organisations can re-write the rulebook and make a better Internet.
“We try to live within the constraints of the current rules, and so far it’s proven really hard to do,” he said. “There are winners, but it’s very hard to replicate the lessons from the winners.”
Young issued a call to all media publishers: “If you find yourself boxed in by some of these assumptions ... try to look beyond it, because I think opportunity is closer than it looks.”
These rules are already being challenged by regulatory requirements, and the pendulum is swinging back towards publishers’ favour. “The data-driven economy on the Internet isn’t quite as free and unrestrained as it once was. I think regulators are less credulous about their being only one way to success.”
The forces that once seemed against the industry are turning toward media publishers’ benefit, and now is the time to act, Young said. If news media activates the power of its existing network, it can change everything.
What does winning mean?
Young then defined what success and winning with a new rulebook means:
- Making money.
- Taking advantage of the efficiencies and low capital needed for online publishing.
- Focusing on our consumers as customers.
- Having control over our product and pricing.
- Having a competitive, growing market.
- Having no structural cap on revenues.
“That might sound really boring and old-fashioned and perhaps a bit trite, but I think the ability to make money is really the key performance indicator,” Young said. “One of the reasons why that’s been difficult is because the link between the popularity of the product and revenue has been harder to make in news media. So, whilst the Internet makes it very efficient to publish and very efficient to reach a massive audience, and it reduces the amount of capital required to launch media products, converting that into revenue has become harder.”
Winning on the Internet has also been a zero-sum game so far, he added. For one player to win audience and revenue, another player had to lose it.
“At the moment, there are publishers who are making a big success out of subscriptions and are making very high-margin revenues from their subscribers,” Young said. “But it’s quite difficult to get subscribers. You need a certain kind of product. There’s an awful lot of people trying to work the casual end of the market, ad-funded, trying to play all the games they can to maximise their ad revenue.”
In the middle lies a huge amount of activity from what he calls the “Middle Majority,” publishers who are finding it very difficult to monetise their product.
“The reality right now is that they have just sort of lost opportunities,” he said. “There’s a big gap in the middle, which is very, very hard to convert. Getting people from being casually engaged to becoming a subscriber is quite a leap.”
This reality, Young argued, has distorted both media publishers’ products and their thinking, because they’re all forced to focus on the extremes — with subscription on one end and advertising on the other.
However, this approach does not work because subscribers are too expensive to acquire and retain in a competitive environment — and subscriptions have a growth plateau. At the other end of the spectrum, advertising is impossible to scale enough to take on the big platforms, giving publishers little control, and the fixed market size creates the zero-sum game he spoke of.
Middle majority = massive opportunity
That middle majority space, however, is where the massive opportunity lies. “If the middle majority can become paying customers, we don’t have to change and disrupt the ad market. We don’t have to disrupt and change the subscription market. We can start to work up enough opportunities in between the two. And those opportunities, I think, add up to huge new revenues,” Young said.
To take advantage of this opportunity, publishers must accomplish a few things.
More people need to pay for media
“People will pay for things whenever the desire exceeds the cost,” Young said. This has proven particularly difficult for news media because the desire for it is brief, immediate, and frequent. “But the desire is relatively low, and the cost is almost always too high.”
When the cost of access is too high, it overwhelms the desire and the user goes elsewhere. Young pointed out that cost is not just about the monetary price. It’s also about the process of paying and how much friction or time that entails, as well as the commitment being demanded of the user.
“When desire exceeds cost, people will pay for things.” This leads to the question of how publishers can make sure desire exceeds cost.
Better, user-focused media products and better price are the basic answers, Young says. “We should reward people who engage more deeply with the product — and it’s the product, not the content, that really matters. When you buy a newspaper, all of the content is different every day, but the newspaper is the same.”
The product is the brand and what people learn to expect from it. Publishers should also encourage frequent return to the product to make it habit driven rather than commitment driven.
When it comes to reducing cost, Young said publishers should charge what is right for their product and be aware of all costs, including the process of buying. This should be a zero-click process that makes payment as casual and easy as browsing. Reward engagement rather than punishing it by over-charging.
It’s about more than having a great product
“Returning to a world in which having a great product is the principal goal of being in business as a media company is the thing we all want to do,” Young said. “But there are some things we need in the environment before we can convert that to success.”
“I think if we can connect quality product with revenue through audience, then media companies will become one of the most investable things on the whole Internet.”
The biggest opportunity of all: Open up the network
The media network already reaches everyone, Young said. This creates an opportunity for synergy, and in the absence of a zero-sum game, publishers can thrive in a growth market.
“That doesn’t mean we don’t need Google. It doesn’t mean we have to win a fight with Google. What it means is that people like Google and Facebook and everybody else become marketing channels for us.” Thus, the nature of the relationship between media publishers and these platforms will change dramatically.
The consumer journey doesn’t have to be just about one product, but a flow from one thing to the next. This also means each individual publisher doesn’t have to do everything itself.
Product thinking versus content thinking
Young returned to the point that publishers must be product-focused rather than content focused:
- Publisher content changes constantly. While the content must meet the user’s expectations, those expectations are created by the brand and overall product.
- The redefinition of product as “content” is a trick. The Internet functions by breaking down products into content and then re-exploiting it, which amounts to a huge appropriation of value. Publishers can reclaim this by focusing on product.
- While users can move from one piece of content to another, their journey is not random. Publishers provide readers a service by helping them choose their content journey, and the media network should take control of that journey collectively.
“If the visit produces revenue, everything changes,” Young said. “We can design these different journeys, we can guide them within our products and between our products, and we can use the other players on the Internet as marketing channels [rather than competitors], which is what everyone else does.”
This will give media organisations new incentives to collaborate and kick-start rapid evolution.
“We can start right now, and we only need two things,” Young told the Webinar participants.
- The tools that enable this marketplace — a neutral player to sit in the middle and offer the same opportunities to everybody that wants to join the network. Other tools include the casual payments.
- Publishers — new and old — with great products.
“Within a network, as long as everybody’s outcomes in terms of success are driven by the same things, the idea of perverse incentives driving perverse outcomes is much lower,” Young said. “I think if we, as media, connect and we find the right tools, this is a multi-billion dollar market.”
INMA: What do you think our future relationship with the big platforms should be?
Young: What big platforms have is a large number of users, but what they don’t have is a lot of content. If our relationship with the platforms means we can convert those users into paid customers, then what the relationship might mean is that we become advertisers.
INMA: Can subscriptions sit alongside casual payments?
Young: Yes. Casual payments are actually a way to encourage people to subscribe — try before you buy. We’re not making any claim that this is better than, or a substitution for, subscriptions. We’re just saying this opens up a part of the market.
INMA: Is this mainly a young audience topic?
Young: My impression that people paying for Netflix and Spotify are as much parents of younger people as they are the younger audience themselves.