USC Annenberg Online Journalism ReviewUSC





Old Media Firms Dig a Grave With Shovelware

The following is adapted from a speech that OJR Executive Editor Larry Pryor gave as the keynote address for a conference on new media held in Boston, March 23, 1999, sponsored by Emerson College and the Boston Globe.

The Fog of Digital War, the speed and noise of corporate battle, makes it hard to predict where the Internet is going, but perceivable trends don't look good for traditional news purveyors. And this should be a source of great concern to anyone who values the quality of information in a democracy.

The difficult trick that publishers and broadcasters face is this: How can they make a successful leap into the digital world -- HDTV, the World Wide Web, and wireless/broadband environments -- and compete with agile, creative rivals without suffering fatal damage to their stock prices?

Wall Street shows little confidence that executives in traditional media 'get it.' In the face of exponential growth in the new media sector, most publishers and broadcasters stand frozen. (Times Mirror, in its latest annual report issued this April, refers to Internet retailing as 'widespread hype.') Net-native organizations merge, pool, innovate and expand, but not traditional media. Such inaction could have disastrous implications for journalism at the start of the new century. Newsroom budgets are sure to suffer.

Broadcasters, who are owners of sound and video, face fewer problems in a multimedia world and gain from the momentum of the World Wide Web. Print publishers, by contrast, appear to be stuck with text and unwilling to commit to a multi-platform, interactive, non-linear medium.

Some news executives confess they seldom take time to even look at the Web. And few news organizations have a corporate focus on new media, actually devoting the time and effort of senior executives to stay on top of technical and marketing advances. Meanwhile, other industries, such as the computer, auto and aerospace sectors, are turning their entire businesses around to accommodate the Internet.

Traditional media managers almost uniformly treat new media as a mere extension of print or broadcast, not the main driver of communications in the 21st century. They are incapable of seeing the Internet as a unique mass medium that is being driven by new user expectations and experiences. They view the Internet as a mere matter of technological change -- much of it questionable, in their eyes -- and not as a sea change in the way global societies function.

Ironically, many technology reporters at newspapers, magazines and networks do a superb job of covering the Internet. And some traditional media organizations have spawned powerful Web sites. But news sites will not carry the day. News organizations should be rapidly partnering or pooling resources with online entities or splitting off their online resources into separate businesses. This would give them the ability to attract the hundreds of millions of dollars worth of investor cash needed to grow their new media businesses. Instead, they try to make do with tens of millions of dollars that now come -- painfully -- out of earnings, further damaging their bottom line.

Some traditional organizations show signs of hope. NBC has teamed with Microsoft. Disney has tied its news organizations with Go. The New York Times bought an equity position in theStreet.com and is supplying audio content to MP3.com and wireless text to Palm Pilots.

But most traditional news organizations are hostile to new media. Editorial pages, and even news reports, use every opportunity to attack the Internet as being synonymous with confusion, clutter, gossip and sensationalism. A shaky study on a link between depression and Web usage gets Page One treatment. Pornography, hackers and all forms of cybercrime receive prominent but often superficial and inaccurate coverage. Matt Drudge gets elevated to Net Whipping Boy.

This short-term focus on the negative impacts of technology overlooks the longer-term reality that the Internet has entered new territory. The Net's implications for society, in terms of governance, education, commerce and communication, are revolutionary. And if the growth of the World Wide Web since 1994 is impressive, as Larry Ellison of Oracle gleefully exclaims, 'Baby, you ain't seen nothing yet.' Broadband and wireless technologies bring into play cable TV boxes, satellite feeds, mobile computers, tablets, Personal Digital Assistants, and on and on, all at increasingly cheaper costs, The Internet is permeating global society.

And who will be the major players? It now looks like AOL, Yahoo! and Microsoft will dominate. Others, like Disney and Time-Warner, surge to catch up. Excite, which gets five million visits a day, is aiming for a billion visitors a month. This is the language of a new mass medium: hundreds of millions of users and trillions of dollars in transactions.

The Net offers vast opportunities: profit margins on the Web are 50% to 75% of sales; barriers to entry are low; more than 50% of U.S. households are still non-computing and non-connected; more than 75% of the U.S. population has yet to make a purchase over the Internet.

But the problems and perils for publishers are equally great. Unless they make major moves, they may go out of business. It's one thing to say, 'OK, the Web is going to wipe out travel agencies, car dealers and most middlemen.' But what if we start to see newspaper editorial offices, the highly efficient factories of information, shrink or close? This is a real possibility. Ask any candid newspaper executive. Classified ads represent 20% of newspaper ad revenue, a $17-billion annual revenue stream. A loss of half of that to the Internet would be a disaster for publishers.

In 1995, a group of major papers founded CareerPath, an aggregator of classified ads that has now grown to include ads from 86 newspapers. It was clearly a defensive move, to ward off Microsoft and AOL, and the site doesn't have a proactive purpose, with little sense of community or niche enthusiasm, and appears starved for funds.

Times Mirror, one of the main backers of CareerPath, said in its latest annual report, that it was investing $25 million annually in Web sites and its classified ventures. And 'the investments will go on as will attempts to figure out where the new medium really is going.'

It is this lack of urgency -- when new media growth is exploding and IPO's are sucking up capital by the billions -- that frustrates tech-savvy newspaper executives. One recent ?migr? from a major paper said that virtually no top-level focus was being placed on the Internet at that publication. Traditional news people have a mantra: no one is making money on the Internet. In fact, some online news organizations are finding ways to make a buck: they use old business models, new ones, odd ones.

A recent survey by Editor & Publisher discovered hundreds of traditional media companies that are running profitable interactive businesses. The Los Angeles Times is starting an online travel service and a link to an auction house. The New York Post runs a digital mall. Traditional news sites are forging lucrative links with Amazon.com, Barnesandnoble.com, eToys and others.

A recent Forbes article argues that the payoff from e-commerce for media companies will be relatively small. The average royalty is 10% of sales to the content site that delivers the customer. Clearly, as Forbes noted, this is no Holy Grail. But newspapers have many strengths to draw on. They have specialized content that can be used to leverage revenue on the Internet. Some of it, such as valuable financial information, can be sold on a fee basis. E-mail newsletters, with ads, can be targeted to particular interests. Some papers sponsor online seminars and virtual job fairs.

Newspapers and broadcasters, big and small, already demonstrate great potential strength on the Internet. Some examples: Quality foreign and national news: The New York Times, Washington Post, Los Angeles Times, USA Today Breaking news: CNN, MSNBC, Reuters, Associated Press, Bloomberg Regional news: Look at Boston, Minneapolis, Chicago, Dallas, Orlando, San Jose, and on and on for dozens of solid sites Specialized news: Wall Street Journal, CNET, Wired News, Street.com, ESPN Local news: broadcasters and hometown newspapers nationwide The value of local and regional audiences can't be underestimated. Each locality has something of potential interest, if only to all of the people who once lived or went to school there. And now sites like Snap.com and LookSmart allow a reader to be transported from one local site to another -- just put in a ZIP Code or the name of the town.

Income opportunities for newspapers abound. They can leverage their brand names to create virtual communities. Bulletin boards and chat are now a big business. The iVillage stork site, started by a nurse, has 6,000 posts a day. AOL built its service on chat. TalkCity has 18,000-19,000 people a day in chat, monitored by 2,000 hosts, many of them volunteers. The New York Times and Wall Street Journal sell content to Palm Pilots and the future of wireless news distribution looks golden. Many of the revenue streams that will be driving Internet news five years from now have not been invented yet. But will traditional news outlets be in a position to reap those benefits?

The Forbes article noted: 'None of the top Web sites belong to a traditional media company; a lack of buying options may be one reason why. Newer rivals -- Web portals such as Yahoo -- blend content and commerce without batting an eye.' That means that, to survive, publishers must embrace e-commerce. Yet commerce blended with content raises serious ethical problems that threaten credibility.

The debate over how much commercialism to tolerate on news sites rages in such places as the online-news e-mail list. Purists there argue that links between content and paid products or services will kill online journalism. Keep the wall between Church and State high, they say. But pragmatists counter that ethical ways can be found to turn 'readers' into 'buyers.' The way that links are made can be important, for example. Is it a direct link from a book review to an order form for that particular book at Barnesandnoble.com, or is it a link to just the bookseller? Is it a direct link from a movie review to a discounted advance ticket for that movie or just to the theater chain?

This may sound like hair-splitting, but the distance between content and paid ads or services is crucial. A direct link is unethical because it creates the appearance of manipulating the reader. But where's the harm in a link to an online store, travel service of theater chain? The product mentioned or reviewed resides among competing products.

Traditional media that are experimenting with blurring the line between content and commerce so far have confined this practice to cultural content: books, entertainment, travel, restaurants and local listings. This could probably be extended to sports without causing harm. Most cultural and sports news in traditional media is already surrounded by advertising that is closely related to content.

The problems arise over hard news. So far, links from that content to ads have been few. The Seattle Times Web site has linked weather forecasts to weather-related gear, which seems a bit goofy but not objectionable. No one has tied crime stories to security services or accidents to insurance brokers. Too much is at stake for Web editors to damage their credibility with something so crass.

Qualms about e-commerce may be much overblown. Some research indicates that readers can separate sales hype from fact. For them, expediency and convenience is more important than credibility. Other surveys show that privacy concerns are higher on people's minds.

But traditional news people, agonizing over ethical issues, appear reluctant to join the real battle. They don't want to give up editorial control of their news products to independent Web spinoffs and their marketing whiz kids. They would rather perish, it seems. And portal sites run by non-news firms will be happy to help them.

This seems such a waste when the Web architecture makes every news outlet a potential portal. And smaller portals have distinct advantages: they can specialize and serve niche audiences. They can narrowcast content and be absolutely complete and authoritative. They can create one-stop communities of like-interested people, much as CompuServe did at its inception, except at a more sophisticated, global level.

Using a magazine model, newspapers on the Web can provide information that caters to certain needs -- and they can carry the advertising that meets those needs. This has been done for years in print: PC magazines sell PCs and PC ads Women's magazines sell cosmetics and fashion Home magazines sell interior designs and garden products Money magazines sell mutual funds The same is true online except the opportunities are a quantum leap greater, since there are no physical boundaries to potential circulation areas. People interested in discussing trombones can be recruited from anywhere on the planet. New media also allows content to be interactive, personalized and customized. Each layer of capability adds value.

Software permits readers and customers to define what they care about. Readers can create their own content. Buyers can act on informed impulses. And online publishers need to offer the content and tools to facilitate these decisions. Editors must have the nerve to allow readers to modify the form and content of news so that they can understand it in a personal context.

For example, most newspapers rely on shovelware, a computer programmed to convert print to Internet content. A story of a city council meeting goes up in toto, a linear, hard-to-read document. What's needed is, in addition to the print version: An audio/video Webcast of the meeting while it is in progress, which can be edited and archived for later viewing whenever the citizen likes. A bulletin board that will let readers sound off on what happened at the meeting. A way to let readers send e-mail to the reporter who wrote the story, which may produce leads and sources that will lead to new and better stories. Have the reporter conduct a chat session in evening prime time about a hot issue that may have come up at the meeting or that is high on the community agenda. Provide e-mail links to City Hall, to council members and city staff so that citizens can contact them. Put up links to relevant documents, such as zoning ordinances, courts cases and environmental impact statements. Create relevant maps and graphics associated with topics that arose at the meeting. (This means hiring a skillful designer.) Such a multimedia news presentation turns a 2-D city council report into a 3-D experience in which readers can immerse themselves. But will they? Surveys of Internet usage cited on the online-news list show that casual browsers outnumber active readers -- consumers of interactive news packages -- by 65 to 1. But the quality of content drives the decision whether to engage in casual browsing or to actively seek more complicated content. Good site designs and a commitment to non-linear story telling will both promote habitual usage of a site by casual browsers and convert casual browsers into active users.

This means that sites must be quick to use, simple, efficient and offer multiple diverse headlines -- they must be easily navigated. Long stories should not be shoveled in but broken up, layered and surrounded by a hypertext presentation that makes them truly interactive. All of that requires close collaboration by trained journalists and talented designers.

It also requires good, raw content, the product of street reporters and sharp line editors. They are the ones we all count on to sort through the mountains of information each day and make sense of it. They have great skill in putting news into context, making it relatively error-free and presenting it in a way that busy people can digest and comprehend.

Above all, newspapers, by using the Web effectively and with an adequate investment, have an opportunity to recapture young readers. By and large, surveys show, 10- 20-year-olds have checked out of the homogenized, mass-marketed print and broadcast media. They are now on the Web. Publishers and broadcasters can either go after that market and give young people a chance to rejoin the civic conversation, or they will lose them for good.

If that happens, traditional media will die and if the civil conversation dies, too, society will face a major problem. The stakes involving the success of online journalism, in other words, are far greater than the survival of publishers and broadcasters.