Why the news media industry is ripe for start-up level optimism, growth

By Wolfgang Bretschko

One of my favourite video clips on YouTube is a short piece of a presentation given by Al Gore, the former vice president of the United States.

He shows what happens if a frog jumps into a pot of boiling water: he jumps out immediately. But if you put the very same frog into pot of lukewarm water and you bring it to boil slowly, the frog stays in the water until ...

We are very often in situations where we do not recognise dramatic changes around us because the development itself unfolds very slowly but steadily. And when we realise the impact of the development, it’s very often too late to change the course.

If one compares the situation of the newspaper industry with the frog in the pot, one will find many similarities. For many years, we have seen the slow but steady decline of our readership. We realise the water around us is getting warmer and warmer, but nobody is rescuing us.

I think the newspaper industry is in the situation of the frog in the pot.

  • Readers are shifting to new platforms and devices.

  • Advertising customers have more and more choices. There is an oversupply of ad space.

  • And, last but not least, 100 of start-ups try to innovate on a daily basis, designing and launching new products and services, based on the nearly infinite opportunities the Internet and new technologies (like cloud services) are providing them. They all compete with the traditional business model of the daily newspaper and offer readers/users and advertisers new products and opportunities. 

All these developments will accelerate. Therefore many experts predict that the best days of the newspaper industry are over. 

Why is it so hard to jump out of the pot? 

In 1998, I attended my first newspaper conference, in Chicago, I think. From that time on, I tried to attend at least one conference a year in Europe or the United States. These conferences had in common that they took place in nice five-star hotels. But that was not my main reason for attending. My purpose was to learn from interesting case studies, to connect with other media professionals around the world, and to know the trends and issues that were on the industry’s agenda. 

Over the years, the impact of the Internet and digitalisation of content on the media industry has become a common topic at these conferences, especially in the United States, where at least two speakers have predicted the imminent end of the printed newspaper. 

After Philip Meyer published his book “The Vanishing Newspaper” in 2004, the question no longer if the printed newspaper will die; the main question discussed was when the last newspaper would be printed and distributed.

In 2010, Ross Dawson published his newspaper extinction timeline, where he predicted country by country when newspapers in their current form will be irrelevant.

But the interesting thing was that I flew home from such a conference, and what I had heard at the conference didn’t have a big impact on my daily managing routines. At home, business was going on as usual. We were selling newspapers and ads, just as we had done the last 10 or 15 years.

The general assumption was this: The predictions might be true for the United States, but Europe is different — especially our newspapers. Reading a printed newspaper is a cultural habit that will not disappear. 

In the last quarter of each year, we made the budget for the next three years. Even when we were not too optimistic about the upcoming year, we planned growing revenues for the year two and three, because we believed in our business. By that we satisfied the expectations of our boss, supervisory board, and owners. 

Today, I know it is hard to jump out of the pot.

A quote by Marc Andreessen describes the current situation very well: “Today’s news organisations are spending 90% of their effort and resources on playing defense. They are protecting the old artifacts and business models, rather than going on the offense and making the future.”

Many companies stay in the pot. They try to fix the problems within the existing framework of the system and business model. That doesn’t work. 

To change a system within the existing framework of the system is nearly impossible. 

You have to jump out of the pot; otherwise it could get too hot to survive. 

But there is hope. 

Once again I would like to quote Marc Andreessen: “I am more bullish about the future of the media industry over the next 20 years than almost anyone I know. You are going to see it grow 10X to 100X from where it is today.” 

I agree 100%. The news business will be a growing business. You just have to look at your personal media consumption habits.

In the days before the Internet emerged, reshaping and redefining businesses and our daily life routines, my personal news consumption habits where very simple and stable. I read my preferred newspaper in the morning while having breakfast. During the day, I listened to the news on radio. And in the evening, I watched the news on TV.

From 2000 onwards, these habits started to change slowly but steadily.

Today, I start my day with checking the news via my iPhone, using the apps of three different newspaper brands, then checking my Linkedin, Facebook, and Twitter accounts. Very often I find some recommended and featured stories or news there, which are worth reading. After that I quickly scan my printed newspaper, mainly to have a look to see if I have missed something interesting and because it is a habit.

During the day, I then check my preferred news sites on the Web or smartphone from time to time. I also receive several newsletters, which update me on my special interest topics. If I am in a good mood, I write a blog post or post something on LinkedIn or Twitter. If I have some spare time, I go to Medium to look for an inspiring and interesting new story, which I find nearly every time.

My media consumption patterns have become more diverse. I am not just in the passive mode of reading, listening and watching news and stories; I also produce and publish my own content.

I believe that these changes in media consumption (and production) pattern will accelerate, that media production and consumption will grow 10 times to 100 times, just as Andreessen said they would.

In May of 2013, Yahoo acquired the blogging platform tumblr for US1.1 billion. By that acquisition, Yahoo wanted to gain access of tumblr’s young customers, where the average age of the user lies between 18 and 24 years. Tumblr hosts more than 108 million blogs and more than 50 billion pieces of content.

Facebook, LinkedIn, Twitter, and Wikipedia are other tools that allow everybody to produce and to share content. Statistics show that very month, 70 billion pieces of content are shared on Facebook, which is used by 1.4 billion people. The total amount of articles hosted by Wikipedia is 17 million. The average amount of tweets published daily is 190 million. 

Today, everybody has the ability to produce, publish, and distribute content on the Web. It is becoming easier and easier to use the different tools to do so, and the number of tools is increasing as well. 

In March of this year, the Pew Research Center released its State of the News Media 2014 report. This report highlights the big impact of social and mobile development. More than 50% of social network users share or repost news stories, images, or videos while nearly as many discuss news issues or events on social networks sites. This changes the methods and dynamics of news consumption.  

Due to these developments and the nearly infinite availability of smartphones, the usage of content will constantly increase. This will create many new business opportunities, most of them unknown, some with an interesting approach:

  • Scripted.com: A start-up that helps businesses get great content for their blogs, Web sites, and newsletters. Scripted has a pool of 80,000 writers. Businesses can come to Scripted and buy blog posts at a flat rate of US$39 for up to 500 posts. Scripted matches businesses with writers by area of expertise. So far, the start-up was able to gather more than US$5 million in financing.

  • Mattermark: A start-up that wants to organise the world’s business information. So far, the company has gathered more than US$3.4 million in financing. 

  • TripleLift: The native advertising solution for the visual Web. The company says about itself: “We’re creating beautiful, integrated ads that automatically embrace the look and feel of each publisher without resorting to annoying flashing or blinking.” The company was also able to gather more than US$6 million in financing. 

This is just a random list of start-ups in the field of digital media. This list shows that there are many ideas around us for new media ventures. And that there is money out there. Investors and business angels are willing to invest in digital media start-ups. 

If you search AngelList for digital media start-ups, you will find 5,754 companies. And this is not just true for San Francisco and the Silicon Valley. You will find such companies in Europe and in your country.

Techcrunch published the following stories in April and August of this year: 

Station12 Is Raising $250M To Fund European Media Tech Startups’ Growth Rounds” — A UK based VC plans to invest in Series A and B rounds in start0ups in Europe in the field of media, entertainment and technology. 

“Europe’s Bauer Media Sets Up Fund To Invest $134M In Start-ups Over 10 Years” The motivation for a media firm like Bauer to be looking at start-ups is, of course, the omnipresent need to establish new revenue streams and maybe even figure out fixes for its own digitally disrupted media business models.

When I was in San Francisco in March and April this year, I attended a meet-up at Bloombergs. The topic of the event was: Are media start-ups hot again? More than 150 people followed the discussion of two venture capitalists. 

Media start-ups are hot again. 

There is a lot of innovation going on in the field of digital media. Many of these companies will not survive, but the few who will might change the rules of game. Therefore, I think it is so important to be part of this game. 

I would like to quote Marc Andressen once again: “The more noise, confusion, and crap – the more there is a lack of, and corresponding need for, trusted guides, respected experts, and quality brands. The market is plenty big enough for thousands of high margin , small- to medium-sized businesses.”

Therefore, I think the best days lie ahead of us. We have just to jump out of the pot!


About Wolfgang Bretschko

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