In a decade, the business model of legacy media companies had become obsolete, sending the industry into despair as the prophets of doom predicted the end of print.
Asking ourselves whether there are any successful media companies begs the questions as to what defines success for industries and firms. If one were to ask whether technological disruptors like Uber, Amazon, and even Elon Musk’s Tesla, are prime examples of accomplished companies, most people would agree. Ask the same crowd whether The New York Times, The Washington Post, and The Guardian are successful, they would probably nod their heads. Finally, if we mention Clarín’s media business, Infobae, and Editorial Perfil, the response would be less uniform, many labelling these as failed, and only a few indicating Infobae, being a digital native, is indeed thriving.
A critical look at the recent history and future prospects of journalism and media more broadly forces us to start by analyzing financing. Uber, for example, is one of the biggest cash burners in history, and also one of the largest privately held tech companies in the world, valued at US$62 billion. In 2017, the company booked sales of US$7.5 billion and declared a loss of US$4.5 billion. Uber only exists because investors like SoftBank, Sequoia Capital, Goldman Sachs, and others decided to give its leadership tens of billions of dollars to finance losses, betting on a bright future and massive returns. It took Amazon 14 years since it went public to turn a profit, while Tesla reportedly burns through US$7,430 every minute — which translates to US$445,800 every hour and US$10.7 million every day. The founders of all three companies are massively rich, with Amazon’s Jeff Bezos currently ranked as the richest person in the world by Forbes.
The New York Times is probably the most widely cited case of a successful media company that has journalism at its core. Yet, its annual revenue has halved in a decade and has only just returned to sustained growth in the first quarter of 2017. The Washington Post, bought by Bezos for a meagre US$250 million in 2013, just managed to scratch profitability last year, while the Guardian Media Group has been losing money since 2009 — with a few years of marginal profitability — hitting a record £173 million in 2015. They expect to break even by the end of this year.
Clarin’s media unit, AGEA, has been bleeding cash for years, while both Infobae and Editorial Perfil have grown on the back of cash injections until very recently. Along with La Nación, they represent Argentina’s most relevant journalistic media firms. In terms of reach and audience, these companies are at their historical peak, yet their financial situation remains precarious, which is dangerous for the Argentine media industry as it forces the major players to downsize, axing jobs and cutting the quality of their products, which in turn accelerates the transition out of legacy platforms and into digital.
Starting in the mid-90s, major newspapers began launching their digital versions. Having controlled — along with other mass media platforms like radio and television — the flow of information and the supply of advertising space, they pursued eyeballs, giving away the content for free. In the same way as US magazine publishers subsidised print subscriptions in order to grow their reach and sell ads at a higher price, newspapers looked to the world wide web as a repository for larger audiences. Argentine media companies followed suit, launching their digital versions a few years later.
As the web matured, so did tech companies’ business models, targeting the same advertising dollars that legacy media companies depended on. Google, looking to index the world’s information, began to sell ads alongside its search results, which in turn relied on aggregating information from millions of sources, including journalistic articles. Taking the content for free, the search engine model broke the oligopoly of information by listing individual articles and pages in their search results, while taking advantage of the massiveness of its audience to sell targeted ads. The need to visit a newspaper’s website was further made redundant by the mass adoption of smartphones and the emergence of social media platforms, particularly Twitter and Facebook, as users scrolled through infinite feeds of content without caring if their data was used to target them with ads, or whether they were reading news or watching cat videos.
In a decade, the business model of legacy media companies had become obsolete, sending the industry into despair as the prophets of doom predicted the end of print. Journalism entered an era of uncertainty in the face of a vicious cycle of falling print circulation, failed digital experiments, and drying funds, exacerbated by the global financial crisis of 2007 and 2008. As the world’s leading journalistic titles stared into the abyss, platforms like Google and Facebook tightened their grip on the digital advertising market to the point where today, they control 70 to 80 percent of sales at a global level and more than 100 percent of growth in developed markets.
Over the past several years, though, journalism has adapted. We understood that the audience was the first key to digital success, and generated strategies to gain clicks at a massive level, sacrificing quality for Google and Facebook’s scraps. In parallel, we learned that all the free technology the platforms offered us was rigged with tools that scraped our data and our capacity to control monetization, accelerating media’s decline. As an industry, we discovered the allure of branded content, where we are truly better than the digital platforms, further proving that in this industry there is no silver bullet.
Having become certain that the ad-model is a necessary but not sufficient condition for economic survival, the media is testing out a new hypothesis: charging for content online. After an initial failed attempt, The New York Times has imposed its “metered paywall” and currently boasts 2.9 million digital subscribers. In the same way as streaming services like iTunes and Spotify have proven users will pay for music online, with Netflix demonstrating the same for on demand movies and series, publishers now recognize they must get paid for their content. It shouldn’t be so hard to fathom: we’ve always charged for print.
The new paradigm is not just an economic model, it also requires high-quality journalism that people will pay for. Not only must the audience recognize the value of journalism in society, they must also receive a product that is attractive, practical, and at a cost that they are willing to pay. Infobae, which best interpreted the traffic-at-all-costs paradigm, will have a hard time convincing its users to pay for their content, not so the legacy companies. Yet, something is still off with the model: Clarín and La Nación, the two Argentine players to follow in the Times’ suit, are still in the process of downsizing, meaning the number of journalists they employ will fall and with that the quality of their product. At the same time, there could be a limit as to how many digital subscriptions users are willing to pay for.
While the industry is once again in an era of uncertainty, our path is clear. Media companies need to maximize the ad model, understanding they are competing with the likes of Google and Facebook, while raising the quality of their products so that both advertisers and users will cough up the pesos — or dollars — that will allow them to enter a virtuous cycle of investing in better journalism. Thus, we start out at the beginning: it’s still not clear where the financing will come from.