By Brad King, Assistant Professor, Ball State University
Rupert Murdoch raised quite a stir in the publishing world when he announced last month that he would, in the near future, remove his company’s news content from Google. His reasoning: Google is stealing, making money off headlines, decks and images, which ultimately hurts his bottom line since people aren’t viewing that content on his company’s sites.
In December, the news industry fired another salvo when Murdoch’s News Corp. and four other media conglomerates announced the formation of a joint venture to develop a digital publishing platform for the Web and the emerging e-Reader market. This followed the Hearst Corp., one of the companies involved in Murdoch’s conglomerate, attempting to push its Skiff e-Reader software to e-Reader devices in 2010.
That Google — and the rest of the technology world — didn’t blink any of these ideas is telling. Google, in fact, quickly unveiled an easy solution that would allow any publisher to remove its content immediately from search. So far, none have.
Clearly the publishers, who are hemorrhaging money, have to do something. Fast. A looming cloud of doom hovers above every news organization, fueled by all manner of demons, some real and some imagined. And in this chaotic time it’s difficult to suss out which is which.
In uncertain times, people want easy answers. Increasingly that looks to mean a showdown between news companies and technology companies.
Yet as Murdoch and his news brethren prepare, this all seems eerily familiar. And wrong.
* * *
That the music industry’s business model was failing in 2000 wasn’t in question. Compact disk sales were down. What nobody could figure out was why.
The obvious answer was that the crash was caused by the popularity of emergent technologies and social software that allowed people to easily find and swap digital music files: Napster.
There were, in fact, a number of other, more complex answers. Sales, for instance, historically drop before a major technology change (e.g. tapes to CDs). Radio had become homogenized to the point there were fewer bands being heard, which meant people were less likely to hear new music. CD prices had skyrocketed to more than $20 despite a decade-long insistence by the labels that digital would drive prices down.
Fear and uncertainty, though, trumped logic. So while correlation does not equal causation, it was much easier for the recording industry to focus on the one area it didn’t control — technology — and make that the cause of its woes.
And so it went.
The traditional business models sank, the rise of social software became the cause for the sinking. Taken in that light, the answer to the question of why the business model failed ceased to be mystery, as Gladwell defines it, and became a puzzle. A mystery is open to interpretation; a puzzle has a single solution.
With that sleight of hand, the answer was now easy: stop the spread of that software and control the network. If the recording industry could do that, then new business models controlled by the music labels would surely emerge.
Crisis averted. Almost.
* * *
In June of 2001 as Napster’s fate was being sealed by a federal judge just two years after it launched, 11 technology start-ups were working to license music from the recording industry. At least they thought they were working to license content.
Now that Napster was shuttered (although there were more file-trading networks), the “threat” had passed. Instead of working vigorously with the start-ups , those big five labels developed their own services: MusicNet, owned by EMI, Warner Music and BMG, and PressPlay, owned by Sony Music and Universal.
Sure, they paid lip service to licensing their content, but after the Napster debacle, the music industry was in no hurry to put its fate in the hands of another technology company. So as part of any licensing deals, the labels “asked” technology companies to give up an equity stake in the business. Some companies, such as Musicbank, chose to shut their doors instead, while others, such as Musicmaker.com, gave up a stake only to have the industry partners sell off its stock soon after going public, driving the stock underwater.
Either way, the competitive market was cleared for what should have been the successful launch of the industry-owned MusicNet and PressPlay. The labels even managed to work out those pesky rights issues that had plagued the 11 start-ups and licensed their services to heavyweights like Yahoo, RealNetworks and a handful of Internet Service Providers.
By 2002, though, it became clear that the labels had made a tactical error. Napster wasn’t the cause of the problem. Napster had solved the problem.
What the industry failed to realize was that its business problem was actually a customer problem, which looked something like this: The Web trained people to access to information quickly, which they couldn’t legally do when they wanted to hear a song.
The solution: do a quick Napster search, find it, download it and listen to it anywhere. The fact that it was free was incidental. (In study after study, people reported that the continued to buy music, sometimes at greater rates, because of these file-sharing networks.)
The actual problem, the one that the record executives missed, was that they weren’t giving consumers the opportunity to purchase music in the most convenient way. Since they got the problem wrong, their solution only made matters worse.
With MusicNet and PressPlay, you never knew whether you’d find the song you were looking for since neither service had a complete catalogue. To even a mostly-complete catalogue you had to pay $20 per month ($10 per service) to have access to all the major label content. When the labels did sell individual songs (the catalogue of songs hovered around 200 for months), they charged upwards of $2.50 per track.
The licensed services were even more ridiculous, such as the RealNetworks subscription that allowed 100 downloads and 100 streams per month from the MusicNet’s catalogue. That’s about 8 1/2 hours worth of music a month. From only 60 percent of the major label music.
Not exactly Napster.
Since the industry never solved the right problem, consumers were trained to look elsewhere for music, to use the digital network to solve the problem of finding what they wanted to hear when they wanted to hear it. Meanwhile, the music industry continued to waste millions of dollars and untold amounts of time wondering what its solution never worked.
* * *
So here we are now. The news industry stands in exactly the same place the music industry did in 1999 with one exception: these executives have ten years of knowledge the music companies didn’t have. The MP3 format, Napster and the influx of music-playing consumer electronic devices (like the Diamond Rio) nearly swamped the music industry, sending executives scurrying to develop cohesive digital strategies while the waves crashed around them. The mistakes, however misguided they seemed to those of us in the technology world, were understandable.
It’s impossible to know whether this new publishing platform will work or go the way of MusicNet and PressPlay, at least until the details get worked out in the marketplace. Maybe Murdoch and the gang don’t really believe that social media technologies have caused the bottom to drop out of their industry. Maybe they understand that developing business models is like solving a mystery and not putting together a puzzle. Maybe they understand that anything less than a full complement of content will eventually fail.
These are not un-learnable lessons. The movie and television industries developed models that have generated traction with consumers such as Netflix live streaming, Hulu.com, MLB.tv and the Turner’s recently launched mobile NBA application.
But those two industries are different because they sell media that is stationary.
The news industry feels more akin to the music industry, offering content that you want to download and take with you wherever you go. And with every stumble that Murdoch and the rest of the news industry makes, the more it looks like 1999 all over again.
Brad King is an assistant professor of Journalism and an Emerging Media Fellow at Ball State University. He is also on the advisory boards for South by Southwest Interactive and Carnegie Mellon’s ETC Press.