Media and tech worlds must work together. There is not a shred of a doubt about it. The former have lost the dual battle for growth and economic performance; the latter are attracting eyeballs and endless funding. Still. When combined, their relevance to society can be greater than the sum of their respective parts.
Last week in New York, I was asked to share my views on the matter. This was before an audience of 350 media executives gathered for the Inma World Congress. Most were looking for ways to effectively partner with digital companies. As I worked on my speech, I asked my tech world contacts how they see us, the media crowd. Here are some quotes, from people who requested not to be identified.
“You guys, are geared to compete rather than collaborate. You’re not getting that collaboration is the new name for the game”. “Even among yourselves, you are unable to cooperate on key industrial issues, shooting yourselves in the foot as a result”. “Your internal organizations are still plagued by a culture of silos. The winners will be the ones who break silos”.
Tech executives also underline they see media companies as co-managed with unions – the consequence being a wage system that discourages rewarding valuable individuals. Media companies are also viewed as having a tech-averse culture. “Media don’t understand that their business has become engineering-intensive. Their investment in technology is grossly insufficient”.
Symmetrically, I collected adjectives summing up media people’s perception of the tech world. “Arrogant, condescending”: true, old media people always have the feeling of being looked down upon by the guys in chinos. “Nerdy, left-brained”: well, it goes along with the flip-flops and the hoodie… “Wealthy”, (I’ll come to that later). “Alien to the notion of value for content”: also true; and that might be the most difficult obstacle to a reconciliation.
More than anything else, techies view the contents news outlets painstakingly put together as an annoyance. They don’t have a clue, nor are they interested in getting one, to the complex, costly and often dangerous process of collecting original information. “Euro-ignorant”: let’s just recall what the geographic distribution looks like in large tech corporations. The often-used EMEA acronym encompasses Europe, Middle East, and Africa, i.e. from Germany to Burundi. Practically, when landing in Silicon Valley from Paris, you’re often made to feel you’re dropping in from the Third World.
“Contract Nuts”: when a 30 pages contract lands in your inbox from California, written in knotty legal English (even for a France-based deal), stipulating the relevant jurisdiction will be the Santa Clara County Superior Court, you can’t help but feeling a bit bewildered and put off. In dealing with tech companies, the amount of money spent in legal fees suddenly appears out of proportions. We have no choice but getting used to it.
The only identical critic, evenly spread on both sides, concerns bureaucracy: medias point at intricate technostructures staffed with legions of people working on the same subject; tech people mock news media needing six weeks to sign the innocuous non-disclosure agreement covering a routine project.
Let’s stop for a moment on the financial issue. Three key factors differentiate the tech from the media world.
1 / Size. The combined revenue of the US newspaper + magazine industry, all sources combined is about $60bn. This is sector is facing the following: Apple (most likely $100bn in revenue this year); Google ($29bn last year); Microsoft ($62bn) or Yahoo ($6bn). As for stock valuations over the last 10 years, consider the graphic below. It shows the performances of three mostly newspapers groups with market values above $1bn: Gannett Co. (market cap: $3.5bn), The Washington Post Co. ($3.33bn), The New York Times Co. ($1.13bn). Over the last 10 years, their stock prices went like this :
Now, on the same 10-year scale, let’s superimpose, Apple, Google, Microsoft; the scale flattens quite a bit:
You get the point. The media industry faces dramatic value depletion.
2 / Access to cash. Technology companies have access to a huge pool of money. After years of disappointing results, the Venture Capital industry is red hot again. In a previous Monday Note, I mentioned Flipboard – great app for the iPad, 32 people, no revenue – with a current valuation of $200m, roughly the equivalent of the McClatchy Company with its 20 newspapers, 7700 employees, 24% EBITDA for a revenue of $1.4bn.
3 / How to spend it. In itself, the cash allocation illustrates the cultural gap. In a tech company, once a project is approved, money will be injected until the outcome becomes clear: success or failure. As I asked an exec in a large tech group what the budget of the project we were discussing was, he answered: “Look, honestly I’ve never seen any spreadsheets on this. This project has been decided at the highest level of the corporation. We’ll pour money into it until it works or closes”.
By contrast, in a media company, investment will be kept at a bare minimum. Any engagement is set as low as possible: temporary staffing, outsourced work, everything is in penny-pinching mode. Not exactly the “No Guts, No Glory” way…
Nevertheless, the more I’m involved in digital media projects, the more I’m convinced that both worlds need a rapprochement. Medias have a lot to learn from tech companies. The way they conduct projects, their relentless drive for innovation, their bold imagination, coupled with a systematic and agile “Test & Learn” approach… For the news industry, drawing inspiration from such a culture is a matter or survival.
As for the tech ventures, they must admit they need the media industry more than they like to think. Flipboard, Google Reader, Bing: all aggregators would lose a great deal of their appeal if they no longer had original contents to aggregate or organize.
Over the past fifteen years, we kept hearing stories telling us Google or Yahoo could swallow any old media in a single gulp. It didn’t happen. Nor did these deep-pocketed corporations find within themselves the vision and skills to create a decent news gathering operation from scratch. The reason is simple and complicated: it’s a métier of its own; thousands of people have been practicing and evolving it for decades.
People like me, working on both sides of the fence, strongly believe in the virtues of cross-pollination. On the media side, it might have to start by finding out what we expect from the tech world, whether they are aggregators, distributors, or search engines. Then, we’ll need to change the way we innovate. In a nutshell, screw the bean-counters that will strangle decisive investments while being unable to stop the hemorrhage in their “legacy” businesses; assign small teams on a small numbers of really (as opposed to cosmetically) crucial projects; do more prototypes and less spreadsheets. Be bold and fearless. As the techies like to say: Go big, or go home!
Failure must be an option. Paralysis is not.
—frederic.filloux@mondaynote.com
Related columns:
- Daily Telegraph opens its own tech lab TweetIn the digital world, speed is key. And in the media world, being digital is key to survival. For this reason, The Telegraph Media Group is setting up its own technology lab. It will be initially staffed with three people, going to ten by year end. They will explore how to mix-up news and user-generated [...]...
- Irreconcilable differences Tweet“We gave Norm an unlimited budget, and he exceeded it”. This is what the CEO of Dow Jones said about Norman Pearlstine, the managing editor of the Wall Street Journal. Well, those days, the eighties, are gone.The increasing antagonism between editors and publishers is a byproduct of the unending financial crisis of the newspaper industry. [...]...
- Emerging economies — 33% growth expected this year for India tech industry TweetIndia’s technology sector has never been so booming. All indicators compiled by India’s National Association of Software and Services Companies are exceeding expectations. > see figures in thisBloomberg story > this tech related growth is boosting India’s GNP. story in ZDNetAsia...
- Steve Ballmer sees the end of media paper within 10 years TweetAsked about his outlook for the future of media by the Washington Post, Microsoft CEO Steve Ballmer answered this: “In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down — my opinion. Here are the premises I have. Number one, there will be no media [...]...
- media finances — Shareholders pressure and the bubble TweetThe examples stated above epitomize the increasing pressure of shareholders activists. The CBS/CNet deal has been, for a large part, prompted by an angry campaign led by the investment firm Jana Partners LLC. Jana criticized CNet strategy and called for a complete overhaul of the board. Actually, more and more media companies are facing shareholder [...]...
8 Comments
I’m afraid I had laugh at your stock price graphs…
I did the comp between NYT and MSFT, and over ten years they are pretty much as bad as each other.
Without Apple there isn’t much to see…
Good piece but I disagree with this: “they need the media industry more than they like to think”.
No, IMO, they need talented authors (that sometimes happen to be journalists) that can drive sizable audiences. For decades, Medias companies have provided a business in which these authors could operate, but it’s not the case anymore.
So the field is open again for a company that will be able to create a business where these authors will be able to earn a living. Admitedly, from that POV, today’s Web sucks (Adsense, banners…). So there is a big opportunity out there IMO.
A well written (as usual) and thoughtful piece. But it’s not going o happen.
If you believe in the fundamental principle of which Clayton Christensen writes in “The Innovator’s Dillema”, then you have to believe that the media companies are fundamentally incapable of what you suggest they do. These companies’ organizations were built to manage and maintain known business models. These same organizations are not built to disrupt or innovate.
The large tech companies may also not be the ones to create the innovative news gathering organizations, but they don’t have to. New, smaller, more nimble companies will fill the void that large media are unable to fill.
You can’t tell them to screw the bean counters because they are the bean counters.
An interesting piece. What struck me is the disparity between the valuation of tech and media (I knew it was huge, not that it was so huge…). The problem is partially that the media companies have not reinvented themselves and partially that many tech companies are overvalued like **ll (take Skype) in relation to what they can reasonably be expected to make in ten years. What really drives the market cap of tech companies is not any inherent worth – more the reasonable expectation that you can overpay and still make a killing (and we know where this leads).
I agree with Anthony C., the future for media will come from new companies that aren’t encumbered with legacy culture and costs.
These are great times to be in the media industry. There is tremendous amounts of innovation happening in media and tremendous amounts still to be achieved. But it’s difficult to be innovative if you are in a traditional media company where you have to deal with so many issues related to shrinking your business model to fit into the new economic realities of the media industry.
Tech companies are increasingly ‘technology enabled media companies.’ But they don’t understand how news is produced, they don’t understand the human component or the cost of it.
The future has to be created by a new class of companies that can take the best practices of media, developed over centuries, and use the powerful media technologies that are now available.
Website is very comprehensive and informative. I have enjoyed the visit. From http://www.rakhiworldwide.com/rakhi_worldwide.asp
AMERICA IN THE HANDS OF COMMUNIST GANGSTERS
Mental slavery is imposed upon all nations that combine to make up our Democratic/Republican political system. Franklin Roosevelt taxed working productive people indirectly through Social Security. In the beginning this system was known as a pension, as citizens retired from a productive life. Not one cent of this money has ever been put into an established escrow account.
In the beginning, this money was used to finance Roosevelt’s social engineering, in planning a future WW11. As today, trillions of dollars have been stolen from Social Security donors. and IOU’s have replaced stolen wealth from day one. This system is broke and the money is missing. Political gangsters on both sides of the isle know this, and the global wire pullers shudder that investing citizens are crying that they will starve in the years to come. THERE IS NO MONEY IN THE POT. CONGRESSES ONLY WAY OUT IS TO CUT BENEFITS TO THE ROOTS1
Incidentally, higher education has poisoned the minds of unsuspecting students in regards to economics. The fly in the ointment of national physical responsibility is thought control holding back free speech. America and England are supporters of a universal depression. This holds true. as both nations control global oil outlets. Oil is gold and gold hoarding is of no significance. Momentarily, this is because the West controls the world’s most acute energy supply.
And now we take a look at the INTERNATIONAL MONETARY FUND. This set up is a major political tool used to finance hand-picked dictatorships in all loosely run THIRD WORLD COUNTRIES. Fiat money in use by this syndicated financial octopus has no gold backing whatsoever. In fact, the privately owned property of all productive Americans is being mortgaged through artificial inflation Gold is at an all time high because our species is not backed by gold—fiat monies. When this unholy system of robbing our people of America through a false economy then whats left of a once free Republic will fall. At the root of this masterfully planned destruction of our great Republic is the hold upon a nation through pseudo Democracy and a pseudo Republic being controlled from aliens from within and land lords of anti West financial institutions basing their planned anti social global revolution that Marxian socialism will out weigh western civilizations. Yes, its over oil. Watch gold prices rise, while inflation and fiat money with no precious metal backing, will eventually drive American into national poverty, as the controlled mass news media hammers away the tune of pseudo liberalism with its ties to universal socialism. And then GOLD will arise as the globe’s nations return to their original optimal median of trade.
THE UNITED STATES CONGRESS MUST TAKE A STAND—–AMERICA FIRST!
Hogorina
Reply
Just desire to say your article is as astonishing. The clarity in your post is just great and i could assume you are an expert on this subject. Well with your permission allow me to grab your feed to keep up to date with forthcoming post. Thanks a million and please carry on the rewarding work.
6 Trackbacks
[...] Media & tech: Reconcilable Differences [...]
[...] Filloux, writing at Monday Note, points out that Flipboard has just 32 staff and no revenues, but at $200 million its valuation is nearly the [...]
[...] Frédéric Filloux’ «Monday Note» über die noch viel zu getrennten Welten von Medien und Technik: «When combined, their relevance to society can be greater than the sum of their respective parts.» [...]
[...] Media & tech: Reconcilable Differences (Frédéric Filloux/Monday Note) If you like this story, please share [...]
[...] The first reactions to the new legislative framework were more than positive. High status figures from all sectors warmly welcomed Hargreaves’ work, they fully support a common legislation between all EU countries, they like loosening up the heavy and “complex” restrictive IP paragraphs and they greet his attempt to develop cooperation between media and technology companies, something that was firstly suggested here. [...]
[...] worthwhile content, there’d be nothing to wrap that gorgeous user interface around. As Frederic Filloux, writing for Monday Note, observes, Flipboard has a staff of only 32 with no revenues, but is enjoying the same valuation [...]