How to structure media organizations to capture value?
As the sources of value and the competitive landscape have changed, so have the business models that are mostly likely to succeed. Underpinning the dissonance between old and new media is a imbalance between traditional revenue models and their ability to cover the high costs of original content production—particularly for investigative reporting. The financial crisis accelerated this shift, forcing quicker adaptation and shortening the runway for new models to prove themselves.
Organizations cannot merely create value; they must eventually capture enough value to sustain themselves, whether it is directly from those who benefit or from third parties such as philanthropists. Ventures that make a play for audience first, such as Twitter and YouTube, must eventually capture value. In fact, YouTube is still far short of making enough money: Its costs are nearly three times more than its revenue, as one analyst reported in April 2009. Furthermore, the collapse of the print industry and economic crisis cannot be blamed as the sole cause of magazines’ troubles. Some have continued to grow due to their ability to capture value. Of the 100 magazines with the highest circulations in 2005, 21 were able to increase their print advertising pages from 2005 to 2008.
“The best-case scenario,” according to Clay Shirky, “is where [traditional media organizations] give up on the idea of ‘Plan B’—that is, we’re going to move from one business model to this other business model, because it’s not going to happen this way. In this future you can do news in a much cheaper way with a dramatic range of outlets.”
Business models will change in significant ways, beginning with more efficient operations. Many organizations are testing new revenue models and will likely mix of several of them. As this happens, a new value chain of journalism is coming into focus, which TMC and its members can influence in proactive ways.
This chapter covers the following business models:
- Emerging operation models and cost structures
- Emerging revenue models
- Diversification and tension
To read more, download Vol. 2, Chapter 4 of The Big Thaw.
This blog is an excerpt from The Big Thaw, a guide to the evolution of independent media, written by Tony Deifell of Q Media Labs and produced by The Media Consortium, a network of leading independent media outlets. Learn how your organization can use this report. For more information and recommendations from the study, click here.