Wednesday, February 26, 2014

The future of news

Marc Andreessen has a post on the future on news, and it's interesting to see how his experience has colored his views (as happens to us all). Some interesting elements:
The news business is a business like any business. It can and should be analyzed and run like a business. Thinking of news as a business is not only NOT bad for quality, objective journalism, but is PRO quality, objective journalism. A healthy business is the foundation for being able to build high quality products, and to do so sustainably. That includes journalism.
The main change is that news businesses from 1946-2005 were mostly monopolies and oligopolies. Now they aren’t. The monopoly/oligopoly structure of newspapers, magazines, and broadcast TV news pre-‘05 meant restricted choice and overly high prices. In other words, the key to the old businesses was control of distribution, way more than anyone ever wanted to admit. That’s wonderful while it lasts, but wrenching when that control goes away.

The news "business" was split into two parts -- tabloid journalism (or the old "yellow press") who dealt with sensationalist headlines, and the "serious" press who felt more responsibility, for good or will, of the individuals they were trying to influence. Within both of these, there was the business side, focused on advertising and classifieds, and the content itself which was run quite separately. The Church and State divide should illustrate how newspapers were never really, or at least not entirely, in the business of selling information for money. Nor is it clear that there is any market at all for the traditional, high minded, "serious press". Maybe the NYTimes should be run as a non-profit where they can ditch all the ads and focus on telling us what to think.

Some other titbits:
Right now everyone is obsessed with slumping prices, but ultimately, the most important dynamic is No. 3 – increasing volume. Here’s why: Market size equals destiny. The big opportunity for the news industry in the next five to 10 years is to increase its market size 100x AND drop prices 10X. Become larger and much more important in the process.
"Market size equals destiny" is a great sound bite, and I see how Marc's experience with Netscape, as the web exploded, and now as a VC who listens to pitches all day, would shape this idea. There is also a great deal of truth to it.
An obvious one is the bloated cost structure left over from the news industry’s monopoly/oligopoly days. Nobody promised every news outfit a shiny headquarters tower, big expense accounts, and lots of secretaries!

Unions and pensions are another holdover. Both were useful once, but now impose a structural rigidity in a rapidly changing environment. They make it hard to respond to a changing financial environment and to nimbler competition. The better model for incentivizing employees is sharing equity in the company.
Again, really? I don't think Unions and pensions were about motivating employees, I think they were about giving labor more bargaining power vis a vis management so labor could get more profits for themselves. And while Marc's had great luck with equity, I'm sure he knows from his VC position how that just isn't true for the median employee across his portfolio companies.

I'm not arguing for either unions or pensions here. Both have serious problems. However, in this current climate where Silicon Valley billionaires are being criticized for being out of touch, "let them eat equity" may not be the most appropriate thing to say.


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