The cutbacks at The Guardian and the demise Al Jazeera America announced this month provide painful lessons that the news business is not just about providing news, but creating workable business models and gaining audiences who think their content is valuable.
The Guardian
announced 20% budget cuts (£50 million; $72 million) and stretched the credibility
of corporate public relations by presenting them growth strategy. The news
organization has been losing money for years in a digital strategy that can
only be described as hoping to buy market share through aggressive
international expansion, free content provision, and the belief that digital
advertising would replace declining print advertising. The Guardian’s strategy was closely aligned to the discredited
digital startup approach of considering the “burn rate” of its capital as a
surrogate for prudent investment.
In announcing the changes, David Pemsel, The Guardian’s
new chief executive, used trite popular business language: “We need to be an agile, lean and
responsive organisation that can respond at pace”. While reducing its losses and having a flexible organization are
necessary, the firm will not be able slash its way to growth and will need to
be more realistic about its future prospects.
Admitted, reducing costs is critical because The Guardian's activities have been
supported by commercially viable non-news properties. Unfortunately, it has
seen income from those properties dwindle and has been selling assets in a way
that it can no longer expect to be bailed out for large losses in the future.
However, projecting the cuts as a path to growth is fanciful.
Al Jazeera America was the best-funded startup cable and satellite television
news channel in the US recent years after beginning operations in 2013. It
announced its April 2016 shutdown, admitting its business model was not
sustainable—a model that relied on subsidies from the Qatar government, whose wealth
has been falling along with oil and natural gas prices.
The channel presented news in a sober manner that reflected non-US perspectives and won both acclaim and ridicule for its
content. Despite its $500 million
initial investment, a staff of 700, and spending about $1.4 billion on
operations, it reached only about 30,000 viewers and managed to attract less than $25 million in advertising during its operations.
The media business is alluring, but it is a crowded environment
in which fickle audiences, befuddled advertisers, and rapacious service
providers abound. Media must be able to critically analyze the environment, develop
effective strategy and feasible business models, and provide content that
differs from and is better than that of competitors. The Guardian and Al Jazeera
America may have succeeded at the latter, but both let unrestrained optimism in the
goodness of what they were doing keep them from accomplishing the other central business
tasks.
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