The announcement that London’s Evening Standard is moving from paid to free is the latest twist in London’s newspaper wars, following the closure of Rupert Murdoch’s free Londonpaper, which failed to make a quick enough return for its owner in the face of its free (but inferior) rival from the Daily Mail publisher DMGT. Now the long-established Standard, with its new Russian owner, is coming out fighting by abandoning its cover price. With many other publishers now considering going in the opposite direction (online at least), who has got it right?
Neither is an easy route for publishers, and I speak from bitter experience. A long time ago I edited a free movie magazine, distributed in cinemas, with a circulation of more than 1 million. Happy days? Not quite. It was a struggle to make a profit, once those hefty print and distribution costs had been met. The message from elusive advertisers was that readers who didn’t pay for a mag were not worth a lot, that active buyers were what they wanted.
Long story short, we shifted to a paid-for version, hoping that our newly engaged readers would please the advertisers. We ended up with a paid circulation of around 40,000 (which I know now is an eminently respectable conversion rate of 4%), but the message from advertisers was just as unhelpful. We now didn’t have enough readers. Funny that.
The latest research from the IAB, suggesting that the UK is the first major economy where advertisers are now spending more online than on TV, is certainly an intriguing development, though some interested parties have taken exception to the maths involved. While it says something about the sorry state of our commercial TV sector, the news does offer some hope for the online publishers waiting for the rapid growth in ad revenues that will save them from possible extinction.
Forrester’s latest consumer data – still warm and not yet published - confirms the continued rise in popularity of online content, especially video, across Europe.Good news? Not necessarily, if you are a publisher having to pay for serving all that content, with little yield (as yet) from current models.Monetizing online video is still a defining problem for publishers.
What are the answers, and how will the market evolve? Is ad-supported the only realistic model for monetizing online video? Are micropayments for video content, as mooted by execs from ITV and Fremantle Media, really an option? And how will Project Canvas change the landscape? Is it all about TV content? And what role should video play on sites from non-broadcasters?
The lead story on UK news bulletins this morning was the latest results from commercial broadcaster ITV. Two observations, even before we get into the detail of the story: big media companies, due to their prominent role in our lives, have a deep resonance with the public in ways that, say, a ball-bearing company, would never have; and the media meltdown— where traditional media business models based on scarcity and control are fundamentally challenged by the new realities of digital media consumption — is now high on the mainstream news agenda.
The focus of today’s news is on ITV’s losses and the sale, at a knock-down price, of its social network Friends Reunited.The broadcaster’s business model, heavily reliant on advertising revenues, leaves it exposed to this shift, whereas rival broadcaster (and major ITV shareholder) BSkyB has succeeded as a platform business, offering telephony and broadband alongside Pay TV. ITV has made the right noises about focusing now on its online video proposition and acquiring more of its own content to exploit. Neither will be easy, however, and successful execution will be the key here. ITV’s track record, looking at its failure to develop Friends Reunited (by no means a bad purchase at the time), is not great.
Analysts as a breed have a tendency to create new buzz words and phrases, neologisms that capture emerging trends and themes. But what we are now calling the media meltdown — where traditional media business models based on scarcity and control are fundamentally challenged by the new realities of digital media consumption — is not some abstract economist notion.
For many of our clients, including media companies that create and distribute content to users, the media meltdown is already a painful reality. Users want more and more content for free, while advertisers are struggling to engage fragmented audiences. The old business models aren’t working, and the new ones aren’t yet in place.
But while the media meltdown equates to pain for many companies, it is also creating opportunities for non-media companies — including telcos, hardware manufacturers, and FMCG brands — to increasingly use content directly to engage users. In other words, we are all media companies now — and, as such, have to embrace new ways of thinking.
You can expect to hear more about the media meltdown from me and my fellow Forrester analysts in the next couple of months. We believe this is a seismic shift that has huge implications for marketers, advertisers, content managers and product strategists across a whole range of companies. We also believe we can help our clients negotiate this challenging period.
The news that Joost is scaling back its plans for world domination to focus on developing white label services is not a surprise. But it is a marker of sorts, given that back in the day Joost was a poster boy for a new kind of mid-form online video destination that would flourish in the perceived gap between YouTube, with its skateboarding cats and ad-unfriendly farting fratboys, and the old media dinosaurs wedded to distributing their prized content on TV.Sadly, the game moved on.
So what lessons can be learnt from Joost’s experience? First of all, it took the wrong decision by asking users to download client software. As iPlayer discovered in 2008, users want streaming: it turned out the appeal of YouTube wasn’t just the content, it was the instant click and play experience. Joost changed to a streaming model – eventually - but too late to engage the audiences who had already discovered iPlayer and Hulu.
The media business is still about content, and those who have spent millions of dollars creating and acquiring it are not inclined to let someone else distribute it online. The likes of ABC, NBC/Fox and the BBC (as well as smaller brands) built their own online video platforms to deliver content direct to consumers. At the other end of the spectrum, YouTube started to clean up its act while experimenting with longer-form content. Joost got squeezed out.
The latest US newspaper to find its own trouble making the headlines is The Boston Globe. It joins a growing list of titles faced with an uncertain future, with both print sales and ad revenues declining. Web revenues will not compensate for these shortfalls (who said they should?) so current models are unsustainable.
Old hands complain that it's all the web's fault. Of course the internet has been hugely disruptive to models based on controlling scarcity, but it's also created whole new audiences for content, with news still the most popular category among users. Editors who argue that feckless online readers don't value their content enough should perhaps look closer to home for the reasons for their current woes before they reach for a paywall.
UK commercial broadcaster ITV’s announcement this
morning that it would be cutting 600 jobs, slashing programming budgets and selling
off a number of its assets, was hardly a surprise. Broadcasters internationally
will recognise the picture: the downturn in advertising revenues, to which ITV
is exposed more than any other UK
broadcaster, has been accelerated by the economic downturn. Current models are
not sustainable and hard decisions have to be made.
This week sees the publication of my new report looking at online video strategies in an economic downturn. The question is - with advertisers and consumers looking to tighten their belts - should companies continue to build and develop their online video offerings? Yes they should.
I've had an interesting day digesting the Digital Britain report from the UK's Minister for Communications, Technology and Broadcasting, Lord Carter. My colleague Mark Mulligan will be posting his response to some of the detail of the report, but for now I wanted to reflect on why this is a landmark document.
That job title, for a start, is something we haven't seen before. The UK government has never really given the impression that it cares about the web or digital technology, but perhaps as another benefit of the Obama presidency, Gordon Brown decided it was time to create a new role for a big hitter.
For hard core politicos the Department of Culture, Media and Sport has traditionally been seen as a lightweight gig, derided as the Ministry of Fun. Today we had the Prime Minister acknowledging the wider value of a digital infrastructure, describing it as a "backbone of the economy." As an analyst know that's true, I just didn't expect to hear it from Gordon Brown.
This is my first blog post for Forrester, so let me introduce myself. I'm Nick Thomas and I'm an analyst covering media issues for Consumer Product Strategy Professionals.
The hot topic in the UK media sector at the moment is the future of Public Service Broadcasting, and more specifically what funding model the broadcaster Channel 4 will have in the future. I won't go into the detail of the debate here, fascinating though it is. Instead, let me reflect on the bigger issues arising from it which have struck me in this historic week. We are indeed entering a new era.
Speaking at the Oxford Media Convention this morning, the Secretary of State for Culture, Media and Sport, Andy Burnham, offered a sobering view of the media landscape which may have been obvious for the assembled audience of media types, but which from a UK government minister is nevertheless still fairly radical.
"Old certainties have broken down," he argued. "That much is clear in global finance, but it is equally true in media. And this change is happening on many fronts.
"The change that was coming in the multi-channel, online age – the structural threat to the advertising revenue funded model – has accelerated with the change in the world economy.