Can the News Industry Move Beyond Its Napster Phase?

The news business is just one of many to see its entire value structure be steamrollered by the Internet. Today the journalism industry is still struggling through its Napster phase, in which creators are panicked to find their content stolen in droves right off the factory floor. (The Associated Press’ recent demand to be paid for every search result headline linking to its articles is reminiscent of music industry lawsuits against file-sharing college kids in the late ’90s. One almost expects Lars Ulrich to re-emerge and take up the AP’s cause.) It needs to find its iTunes phase, as the TV and movie industries are trying to do: the point at which people would rather buy than steal. The problem for the news industry, of course, is that news — put another way, “perishable information” — can be duplicated and diluted a lot more easily than a song or a movie, without the same legal protections (and without the same computer viruses). Some of the pieces of this puzzle are slowly starting to come together, however. Some are technological, some economic, and some cultural.

The cultural problems were met head-on last week by the “Internet Manifesto” published by German journalists in an attempt to convince the industry to let go of its traditional models and get busy perfecting new ones. The technological and economic issues are being tackled by a range of players, from Web 2.0 startup Sprinklepenny (which aims to set up tip jars across the web) to media giant News Corp. (which has plans to phase out free news). Most recently, Google took its own swing at it, drafting a proposal to the Newspaper Association of America on ways to use micropayments and targeted advertising, among other things, to build viable business models around online journalism. And, as it turns out, the Internet Manifesto and Google’s proposal share some complimentary themes. Take a look:

Manifesto: “The Internet has many currencies…[Advertising] has always been one of the fundamental tenets of financing. Other forms of refinancing which are journalistically justifiable need to be forged and tested.”

Google: “We envision the typical scenario to be where a user pays a monthly fee for access to a wide-ranging package of premium content.”

Manifesto: “Journalism’s self-conception is — fortunately — being cured of its gatekeeping function. All that remains is the journalistic quality through which journalism distinguishes itself from mere publication.”

Google: “Any successful premium model will likely include some combination of free [and premium] content…Users are unlikely to pay for basic reporting on the news of the moment covered by multiple sources. Deeply researched pieces, exclusive interviews, opinion pieces and enterprise journalism are most suitable for a premium/pay subscription service.”

Manifesto: “The Internet changes improves journalism.”

Google: “A successful premium model needs to enhance advertising opportunities: Relevant ads across the Google content network via our interest-based advertising feature, enhanced ads serving across premium sites (i.e., a premium content network) and advertising based on voluntary data from individual registration information on individual sites. All of these systems should have transparent and easy-to-use privacy controls for users.”

Manifesto: Links reward, citations adorn.

Google: “To extend the reach of any content — free or paid — publishers should also have options to easily package their content for display by third-party sites (e.g., other newspapers). Publishers would be able to take advantage of this broader audience via advertisements embedded with their content, micropayment options for the syndicated content, and traffic back to the publisher.”

Moving beyond the Napster phase will not be the same for the news industry as it was for the music industry. While Apple cracked open the current online music era with a single platform, today the subscription-only Wall Street Journal sits incongruously amid countless free online newspapers that, despite their hardship, would probably collapse completely if they tried to follow the Journal’s lead. There won’t be an iTunes for the journalism business. What there will be is a variety of revenue streams and monetization models that will require each news source to figure out independently which mix best suits its own particular purpose. (The GigaOM Network is taking a slightly different approach, offering up free content on our network of ad-supported blogs,  but charging for our subscription-only research and analysis service.) Web 2.0 is almost as good at enabling those new models as it is at destroying the old ones.

Question of the week

How will the news industry make money in a Web 2.0 world?
Relevant analyst in consumer electronics
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