Wednesday, August 26, 2009

New business model needed for traditional media

In 1979, British new wave group the Buggles released the song Video Killed the Radio Star. The lyrics nostalgically referred to the 1960s when technology threatened the ability of radio to create stars and many lamented that children would grown up without the magic of radio. (Wikipedia). Appropriately, the song’s music video was the first to be played at the debut of MTV in 1981.
The same could now be said of the Internet and Satellite TV which encroaches on local television’s ability to attract viewers to local news content as well as popular syndicated television. Without viewers, advertisers turn elsewhere making the business model for local television and local newspapers difficult to sustain.
Revenues are going on-line. The Interactive Advertising Bureau of Canada reported in July that the 2008 Canadian Online Advertising Revenues grew
by 29% in 2008 to just over $1.6 billion surpassing radio .
As revenues move online, more traditional media are trying to offer news, information, and entertainment online. But can they move quickly enough to save their medium?
Countless local and national newspapers, magazines and television stations are shutting down because the existing business model and traditional delivery via newsprint and the increasingly fragmented broadcast channels means higher costs per reader and fewer viewers, as well as more choice for advertisers.
Almost all online viewers like free music on YouTube and free news offered by aggregators. However even the best aggregators don’t generate content; they gather it and revenue is generated for the originator (the newspaper or television station) when a web viewer clicks through the story to the owner’s web pages where the material originates.
Some would say that that should be good enough. Produce quality and meet audience need for information, and the click-throughs, and revenue, will follow.
Unfortunately, falling advertising revenue from traditional sources and the slumping economy have not been off-set by the increase in Internet advertising revenues. It’s simply not enough to pay for the cost of generating quality, accurate news reporting. The question becomes what are web viewers willing to pay for the content? What are advertisers willing to pay to reach the viewers?
The online news model currently offers free information, except for Wall Street Journal and soon-to-be News Corp major papers based in the UK under Rupert Murdoch who recently announced a new business model pilot that features paying for news online.
Closer to home, CanWest Global Communications, which owns the
Calgary Herald and Edmonton Journal, has significant debt and has seen share prices fall. It's surprising how much content is available free on their website. Maybe they have the model right and a combination of traditional and online ad revenue will sustain them.
On the television front, changes have already been made. In July, CanWest Global announced they were closing their CHCA TV in Red Deer and the Victoria stations in its E! Network after no buyers came forward.
So this week marks the final news cast of CHCA in Red Deer. Hard to believe that Alberta’s third largest city will soon be without a full television newscast after 52 years. Having worked there in the late 1980s, I’m nostalgic to see it go even while as a broadcasting community we’ve all stayed in touch as a large family over the many years thanks to some keen social organizers in the group.
Their final in-studio farewell is appropriately entitled “Fade to Black”. Sadly, the community at large will lose a portrayal of itself, a centralized archive for footage, and documentation of today’s activities and news which becomes its history. Other TV news journalists remain in town: CITY, CTV and sometimes CBC and now Global will still have a presence for the major news.
Whether the sustainable online business model becomes pay-per-view, combination of free and paid stories, more display ads, or some other business model, hopefully the convergence of the traditional and digital mediums happens quickly enough to keep our journalists employed locally so they can tell our local stories from our unique and valuable perspectives.