How Europe can save the Internet

January 30, 2012 | Leave a comment

I wrote a piece about ACTA for Imperica:

When the French MEP Kader Arif stepped down last week from scrutinizing the Anti-Counterfeiting Trade Agreement, declaring that he “would not participate in this charade”, it was the culmination of eight years of political lobbying, back-room deals and undemocratic conniving that now threatens to undermine the entire global Internet economy.

[...] Despite declaring an intention to prevent piracy, the agreements once again represent a significant infringement of civil liberties and undermine the principles by which the Internet works. The agreements’ intentions appear good at first glance – who doesn’t want to protect the rights of artists? – but actually represent an irreversible erosion of personal freedoms.

Click here to read the whole article.

The death of newspapers, and why it matters

January 4, 2010 | 4 comments

The Internet has, undeniably, changed our culture.

For most of the 20th century, we paid for our news, entertainment, art and literature. We allowed businesses to act as gatekeepers for this content, and accepted that the media landscape would be dictated by decisions made in the boardroom. Publishers, movie studio bosses, broadcasters and record company executives dictated what we read, saw and heard, based on financial projections. Their opinions about what was commercially viable regulated supply. Content had a price.

This situation was dictated by economic scarcity. That is to say, not only did an original work, such as a novel or a movie, cost money to produce, but each item used to distribute it, such as a book or a DVD, had its own individual cost of production. To make money, a publishing house or a movie studio needed to recoup its initial production costs for the original work, as well as the per-item cost for each book or DVD. The exception to this in the media landscape was broadcast media – television and radio – which anyone could watch for free, in exchange for a regular advertising break. However, in both distributed and broadcast media, the content needed to be commercial enough to either attract buyers or advertisers. In order to recoup the production cost. the companies involved controlled what was released according to what they thought would sell. As a result the market for content was led by supply – what the content companies deemed worthy of release – rather than consumer demand.

The first continuously-published American newspapers launched in April, 1704. Since then, their philosophy of objective journalism has played an important part in American culture. For democracy to function, a citizen must understand the facts surrounding an issue, so they can vote on it in an informed way: access to impartial information is key. One New York resident remarked in the 1840s that “one thing is certain – nowhere will you find better informed people – that is, those who better understand all the principal movements of the day, whether political, moral or religious, than the readers of a country newspaper”. As the primary method for disseminating facts and information to the public, newspapers have been fundamental to democracy.

In the first decade of the 21st century, the model for distributing newspaper content changed. In 2008, newspaper circulation in the US dropped by 4.6% on weekdays and 4.8% on Sundays. Meanwhile, visits to the top fifty news-related websites, which all are free to access, increased by 27%. Correspondingly, the first quarter of 2009 was the worst ever for newspapers, with sales plunging by $2.9 billion.

The seeds of the Internet were sewn in 1969. However, it wasn’t until Tim Berners-Lee invented the World Wide Web in 1989 that its effects on the media began to be felt. While content had been made available on the network for twenty years, it had been purely text-based, required a level of technological knowhow to operate, and needed to be accessed through specialist communications software. The Web was based on hypertext, a more accessible way of joining documents and articles together through linked topics and phrases. Most importantly, though, it brought with it the Web browser, a single portal for accessing all content, and allowed the use of embedded images, movies and sound.

In 1992, the Internet was opened for commercial access, and online services like AOL, Prodigy and Delphi began offering connectivity. Anyone could run a site on the Web, which was now accessible to millions of people worldwide. In 1993, Global Network Navigator became the first online publication to support itself with interactive advertising banners, and the path forward was clear: newspapers could make their content available for free to anyone in the world with Internet access, and pay for it with advertising. Due to the nature of the network, once a piece of content had been produced, the cost of disseminating it indefinitely was negligible. The barrier to entry had also been dramatically lowered: anyone could publish news without having to establish a distribution network. Other advertising-supported sites like the Drudge Report, the Huffington Post and opinion-orientated “Web logs” like DailyKos began to spring up. The former media gatekeepers were no longer an effective part of the news ecosystem.

These events moved newspaper content beyond the scarcity model. Wikipedia says this about scarcity: “Goods that are scarce are called economic goods. […] Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater”. Thanks to the Internet, content became like air and seawater: almost infinitely abundant, and free. The possibilities provided by Internet advertising seemed to have heralded a new era.

Internet advertising has a major benefit over its printed cousin: it can be targeted towards its audience, and statistics about advertisement effectiveness and reader engagement can be captured in real time. Advertisers know exactly how many people have responded with an advertisement, and can tailor it to a particular viewing demographic. Contrast that with the print medium, where by necessity everyone must see the same advertisements, and advertisers must make inferences from the newspaper’s readership statistics and their own sales to determine an advertisement’s effectiveness. It should be no surprise that in addition to its $2.9 billion in lost sales, print advertising sales in American newspapers declined by $7.5 billion in 2008.

Given its theoretical superiority, the loss of newspaper advertising revenue in print should have been made up for online. However, this is not the case. Scarcity provided a captive market: often there were only one or two newspapers available in any particular location. Suddenly, with the advent of the Web, there were tens of thousands of titles available everywhere. As a result, what had previously been a supply-constrained readership that read a relatively small number of sources fragmented into a demand-driven one that read articles in the most convenient way to them, from whichever source was most conveniently available. Competition for readers had become fierce, and the abundance of publications willing to host advertising meant that prices were much lower.

Furthermore, a lot of advertising that had traditionally been placed in newspapers was now being cannibalized by new, specialized websites like Craigslist and Monster.com. As New York University’s Clay Shirky notes, these new companies “all have the logic that if you want to list a job or sell a bike, you don’t go to the place that’s printing news from Antananarivo and the crossword puzzle. You go to the place that’s good for listing jobs and selling bikes.” Newspapers, or even their associated websites, were no longer hubs for local information. People were visiting specialized sources for each kind of information they needed.

Shirky also points out that the alignment of advertising and journalism was always going to be short-lived: “the commercial success of newspapers and their linking of that to accountability journalism wasn’t a deep truth about reality. Best Buy was not willing to support the Baghdad bureau because Best Buy cared about news from Baghdad. They just didn’t have any other good choices.” In other words, the advertising attention they received was because they were the only, rather than best, option. As soon as the Internet opened up more efficient avenues, the money flowed away.

To replace this vacuum, some newspapermen are attempting to rebuild a captive audience through other means. Rupert Murdoch, the head of News International (the multinational news corporation that owns the Fox News Channel, the Wall Street Journal and the New York Post, among others), announced in the summer of 2009 that he would begin charging for access to all of his newspaper’s online content, from the Wall Street Journal right down to the Sun. With it, they will also ban readers from electronically sharing content with their friends, which is a kind of social word-of-mouth marketing that has driven readership levels in recent years. As Chase Carey, News International’s Chief Operating Officer, puts it: “we believe customers value quality journalism. We need to get paid for our product as it shifts to the digital world.”

Murdoch’s announcement sent a strong signal to the rest of the newspaper industry, and split commentators down the middle. Consumers, after all, were now used to getting their content for free. Both the music and movie industries had been having a very difficult time convincing their customers to purchase rather than pirate their wares. On the other hand, it was clear that making content free and advertising-supported was not delivering the revenue that publishers had been expecting. Variety, the entertainment trade newspaper, had experimentally made all its content available for free online in 2006. Although their website’s readership flourished, advertising dollars did not appreciably increase. On December 17, 2009, the “pay wall,” as website pages demanding payment for content are known, was re-established.

Indeed, a recent decision by the Dallas Morning News to bring its editorial department under the control of its advertising sales division (brought to my attention by Paul Adrian of Press for the People) would seem to support the idea that news content should be directly paid for. The old supply-driven model allowed editorial departments to maintain journalistic integrity: companies might have been ticked off by a newspaper article, but where else could they place their advertising? However, in today’s multi-source media, the loss of a valuable advertising contract is a very real possibility. The situation at the Dallas Morning News may help ensure the newspaper’s longevity, but it results in subjective journalism that is at the whim of overriding commercial concerns. Arguably, the only way forward for objective journalism is to charge the people who value it.

However, serious questions are being asked about the viability of this route. In particular, how willing will people be to pay for content, even from a trusted newspaper, now that there are thousands of competitors giving it away for free online? “When we look at why people quit buying the newspaper, it’s overwhelmingly because ‘I can get it for free online,’” notes William Dean Singleton, the CEO of the fourth-largest American newspaper company, MediaNews. It may not be possible to force an artificial scarcity in news reporting without all newspapers charging for it at the same time – something that would require widespread collusion in the industry. With the exception of reporting niches like finance, where, according to Shirky, “data is valuable in inverse proportion to its availability (unlike editorials, say, or political reporting),” most consumers prefer to receive their content for free. In the mainstream, Shirky suggests, “the key questions for the average publisher contemplating pay walls are: How serious will that competition be? How many users will you lose? Will banning sharing create a defensible advantage? And the answers are: crushing, most, and no.”

How, then, will objective journalism survive? One emerging suggestion is that we must de-couple journalism from newspapers. We may have to accept that the latter may become extinct in order to save the former. After all, it’s the factual reporting and analysis that are valuable to our society, rather than the bundles of low-grade paper they are printed on. I would argue that those things, when provided in a thoughtful way that makes full use of current technology, are worth paying for.

As O’Reilly Publishing’s online editor Kurt Cagle puts it: “When a previously thriving industry seems to be dying, it is most likely because the services that it initially provided are becoming obsolete. It is better in this situation to rethink what such services should provide, then build a niche for it. Otherwise, you’re just wasting money.”

It’s an open question, and one I intend to help address in 2010.