4/20/10

SEARCH FOR ALTERNATIVE MEDIA BUSINESS MODELS HAMPERED BY NARROW THINKING

Media executives around the globe are clamoring for new and alternative business models and industry associations everywhere are holding seminars and conferences on how to create and discover them. There is just one problem: They don’t know what business models are.

When you cut through the rhetoric, you find that most executives are merely interested in finding new revenue streams. Even when you consider firms touted as having best practices in that regard, none have been very successful in establishing them. The reason is simple: The dominant thought about business models is highly limited and far too narrow to solve the contemporary challenges of media industries.

Business models are not merely about the revenue streams. Instead, they establish the underlying business logic and elements. They involve the foundations upon which businesses built, such as companies’ competences, value created, products/services provided, customers served, relationships established with customers and partner firms, and the operational requirements. If you get those elements right, the revenue issues take care of themselves.

The biggest problem of media business models today is not that the revenue model is diminishing in effectiveness, but that most media companies are still trying to sell nineteenth and twentieth century products in the twenty-first century. And they are trying to do so without changing the value they provide and the relationships within which they are provided.

Because of the enormous changes in technology, economics, and lifestyle in recent decades, the needs of customers have changed, they kinds of content they want, and the ways they obtain news, information, and entertainment have been dramatically altered. If media firms do not address these changes in consumer needs and behavior, no amount of worry about revenue streams will stem the fundamental challenge that audiences are leaving traditional print and broadcast media behind for content providers and distribution platforms that better serve their needs.

The content of traditional media products were created in specific technical, economic, and information environments that no longer exist. In order to evolve and prosper media companies must revisit the foundations of their businesses, ensure they are providing the central value that customers want, and provide their products/services in a unique or different way from other media firms.

The range of technologies and distribution and interactive platforms available in the twenty-first century require that firms increasingly see their business activities as cooperative processes requiring coordination and interdependence with external firms and customers themselves. Standing isolated and alone—at arms distance from the customer—is no longer a viable option.

This is not to say that firms must make sudden and dramatic changes in their business models, but they must start revisiting all the aspects to make regular incremental improvements and changes. Questions need to be asked about what is provided, why it is provided, how it is provided, and the entire structures and operations of firms. These need to be addressed first, then the revenue models can be sorted out and improved.

7 comments:

jf200399 said...

I absolutely agree. I recommend the interested reader to look at the work of Alex Osterwalder, e. g. the business model canvas (cf. http://en.wikipedia.org/wiki/Business_Model_Canvas). This model facilitates the discussion about business model and it is fun as well.

Ken Doctor -- Content Bridges said...

Indeed. For most newspaper companies, they've seen company after company come along and offer local services -- city guides (Yelp), real estate (Zillow), restaurant/food guides (Open Table, Chowhound +++), service finders and raters (AngiesList) and a host of others come along and build useful businesses, under their noses. Robert, you're right: companies have looked first for new revenue models, not how they can grasp digital tools to serve communities better -- and then prosper. Now, there are faint signals they may be learning, but it may be too little, too late.

William said...

Well said. We have our professional reporters focus on core news, complex stories and schools, and we ask our readers to help us out with just about everything else. And they do. Revenue and traffic have been rising slowly but steadily and our expenses have been fairly consistent.

We've been able to set aside dollars for a redesign and major CMS upgrade that will be completed early next month. We sell ads and sponsorships in innovative ways that closely track our readership. And we have very close relationships with our customers and readers. None of this could be or would be accomplished under a Fossil Media business model.

— Bill Macfadyen, founder & publisher, Noozhawk.com

Carolina said...

You couldn't have said it better. Media executives are too worried about the money-making process instead of focusing their efforts on providing a valuable product. They're blaming the Internet and Google, but perhaps the real problem is their inability to keep up with the media companies that have already understood what it is that users want and need.

Gonzalo Martín said...

In France and Spain, newspapers executives have found a much more agressive strategy to survive: ask the government for money and privileges. They claim for subsidies and new laws that make Google pay. As somebody has said, they're not interested in the public anymore, just their balance sheet. No wonder the readers flock to the alternatives.

Jose Agustin Muñiz said...

I do not want to be rude, but it seems to be a contradiction between this post and the previous one.

On "News has never been a commercially viable product" you say: "Focusing on news as a commercial product appears futile and commercial news providers would do well to put their efforts in creating other commercial activities that can subsidize news provision". While you were describing the crisis of the business model based on subsidies, you change the focus and you say that the answer could be another source of subsidy.

On this post, your thesis is that looking for revenue streams seems to be narrow thinking.

I mean, both posts, separately considered are great. But read as one they seem contradictory. If new revenue stream cuold save news (which never were commercially viable), there is no reason for thinking of alternative business models.

If I had to choose, I would say that the crisis of the business model really exists, and solutions are to be found when we develop a new approach to the problem, a systemic approach, under new paradigms, new laws, and maybe, a new definition of "media", "distribution" and "consumption".

Sorry if I made mistakes or or looked rude, but English is not my native language.

Robert G. Picard said...

Jose,
It is not a matter of contradiction, but of finding a way to support news gathering when it is not a effective commercial product itself.
As I said in the earlier posting, news hasn't been viable SOLD as news to readers, so other ways of subsidizing its costs were found.
It is wishful thinking to believe that charging readers online is going to provide enough income to maintain broad, well organized news organizations.

New arrangements creating revenue in different ways for things other than the news itself will be needed. And traditional ways of conveying news are not going to work very well.