The Sound and the Fury

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At Technode We produced a wonderful chart a couple of days ago, detailing the Chinese digital reading market. This is all good, and intrigues a bigger question that lingering: what are they fighting for?

When we look to America, we can see this question is especially relevant at a time like today, when great media properties are folding left and right. The latest victim is The New Orleans Times-Picayune, a daily known for heroically covering its home city during the Katrina Crisis, but is now forced to cut back to three printed issues a week and shift its focus to online news.

People do not need to see Page One, the documentary about The New York Times, to know that the newspaper business has been in trouble. But newspapers are not the only victims disrupted by waves of technological innovations. Magazines, too, have suffered. Two years ago, the venerable Newsweek was first sold for a buck, and then merged with The Daily Beast, a popular online blog.

Of course, the game is not yet over traditional content providers. The death of newspaper has been greatly exaggerated. Perhaps there is no better example than The New York Times, the nation’s newspaper of record. Just two years ago, the Gray Lady was forced to asking a hand out of 250 million dollars from the Mexican billion Carlos Slim, but it appears the Kingdom would be saved by paying customers.

The New York Times’ strategy to charge readers two years ago was hotly debated, both within the company and within the media industry. No one knew whether this time around the strategy would work or not. Now the case appeared to be settled. Yes, people would pay for content, and pay well enough for the Times to make a profit.

But the trouble is far from over, both for the Times and for the media business in general. The Times benefited from a deliberate strategy to build a national brand in the nineties; this is not an alternative for others. Even so, The Times is still losing money on the print side, and along both its stake in the money losing Boston Globe and About.com properties, is worth only 1 billion dollars collectively.

Even if the Times survive, others probably wouldn’t. The legendary investor Warren Buffett, himself a newspaper veteran who owned newspapers in Buffalo and Washington, predict “nearly unending losses” for the papers that haven’t folded yet. In addition, Buffett don’t think newspapers can cut their ways out of the jam. His predictions are corroborated by the recent Times report that when newspapers switch from print to the web, many readers do not follow.

This is partly newspaper’s own fault for buying into the whole “information wants to be free” nonsense. In addition, Newspapers’ shortsightedness and mismanagement have been well documented. Even when newspapers got close, it never quite got it right. Even Buffett himself admitted that a lot of newspapers’ woes are self inflicted: “I think we made a mistake in newspapers when we offered the same product online. I could sit here in Omaha and pay five dollars for the Sunday New York Times, or just read it online. That is not a sustainable business model.”

Buffett apparently still believes there is some residue value left, especially in newspapers that have “more of a feeling of community”. That’s probably why the great Oracle of Omaha still finds newspaper attractive enough to pay 142 million dollars for them.

But finding a business attractive for being able to squeeze the last cents out of it is not the same as finding the business to be an opportunity of growth. If we refer to the BCG growth share matrix, newspapers and magazines are “dogs”. While the Chinese content and media business hasn’t been as hard hit as their American counterparts by the digital wave, it is certain that the Day of Judgment will arrive. With no tradition of protecting intellectual property and a consumer base unused to paying for anything on the Internet, one has to ask: would all the jostling for position today turn out to a tale told by an idiot: full of sound and fury, signifying nothing?

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