Eyes Wide Shut

Always On, a community-cum-social networking-cum-blogging website created by uber-VC Tony Perkins, is publishing excerpts from a recent Silicon Valley schmoozefest held at the exclusive Churchill Club. The most recent transcript, entitled “Open Source Equals Open Content,” caught my eye because it sounded like it could almost be the name of an essay that I am currently finishing up (stay tuned!). As it turns out, the title is a bit of a gyp because the label “open source” seems to be have chosen precisely for its attention-grabbing potential, not because the subject under discussion has any relationship to open source software.

Nonetheless, the discussion begins promisingly. Tony, the moderator, points out how the blog revolution has turned the media equation on its head because readers no longer have to rely on a few centralized sources for their news and information (naturally Dan Rather is mentioned). Interspersed between (sometimes shockingly clueless) comments by the remaining panel members, who are all big name VCs and technology pundits, he elaborates:

…there’s a tension point right now between the open-source media people—where it’s a free-for-all of ideas, and there’s more transparency and collaboration—and the old-media model where editors control everything and there’s no participation. They have to control every damn thing that happens under their brand. When I say they’re going to ‘relent,’ I mean that they’re going to have to open up—because if they don’t, people won’t trust them, and they’re going to lose…

I think what he was looking for (and what I would have expected) was a discussion about how media will function in a future where centralized editorial control is rejected by a public with increasing access to a cornucopia of open information sources. Instead, he was slapped down instantly by his fellow panelists. Whereas it seems obvious to me (and presumably to Tony) that the current blog revolution and related trends in digital media are only the tip of the iceberg, with far more disruptive developments still to come, the others apparently feel that the revolution is already over. The very contention that open media like blogging will have a profound effect on established media companies is thus trivial because, hey, it’s already happened. What’s more, things are the way they are because that’s what people want. They’d like their newspapers and TV news programs to stay just the way they are, thank you very much, with blogs forming not a challenge but a nice complement. The proof? Well, people still read newspapers and watch TV news, right?

With all due respect, gimme a break! It would have been fun if Tony had mounted his soapbox to rubbish these arguments and expose them for what they are: extraordinarily short-sighted. But I suppose that isn’t how a moderator is supposed to treat his illustrious guests. Bloggers are not constrained by any such social graces, however, so let me take a crack at it.

A trend as important as blogging is news aggregation, something that was not discussed at all by the panel (at least in the published excerpt). I used to have a few online publications that I would read regularly, like Wired and the New York Times. Nowadays I only consult two online news sites: Google News and Slashdot. Both are aggregators; that is, they filter content from other sources rather than creating their own. So I end up reading articles in a huge range of publications, driven not by brand loyalty but by my interest in a given story. Google News is still fairly conventional in that the news sources are mostly online versions of print newspapers and magazines, but Slashdot is more inclusive and links to many blogs as well.

Traditional news media still serve three useful purposes… for now. For one, they represent brands that can help to guide me, the content consumer, in my choices. I don’t go straight to the Times for my news anymore, but I am more likely to click on a Google News link to one of their articles than to click on an adjacent link to the same story in, say, the Fort Wayne News Sentinel. Secondly, they provide a working economic model for putting food in journalists mouths, something that bloggers have yet to accomplish. Finally, they offer cheap bulk printing services; I continue to buy the print edition of The Economist every week because I can read it in the bus on the way to work. None of these raisons-d’etre are likely to survive for much longer, however.

In the past, brands were expensive and time-consuming to establish because they needed to be. Since the only way to vet content was to read (or view) it, there was tremendous value in singling out a few elite media outlets for special treatment. In this way, the best journalists knew where to apply for a job, and discerning readers knew how best to invest their precious news gathering time. Technology has changed all that. As usual, Amazon provides one of the best examples of this with their “rate the rater” system of book reviews. Not only can readers post comments on books directly to the website, but other readers can vote on whether a given comment was helpful or not. The reviewers who most often post usual comments are also ranked and their posts are adorned with the appropriate accolade: top 1000 reviewer, top 500 reviewer, etc. Brands are formed overnight by popular consent, based only on the quality of the brandee’s output. It is only a matter of time until this type of system is generalized to cover federated content on a site like Google News. Suddenly the value of a hard-won brand evaporates, as surfers use objective ratings, not a well-known name, to decide which content to peruse.

The convenience of reading a printed publication is another factor whose days are numbered. I discussed this as well in a recent post. As long as we don’t have flexible, portable, high-resolution electronic paper, a large proportion of written news will be consumed in printed form. This gives old-school publishers a stick to beat off the bloggers, who are trapped in the online world. But the day acceptable electronic paper arrives, and it doesn’t look to be that far in the future, this last bastion of centralized control will be no more.

As the last tangible advantages of old media go up in smoke, so will their economic model. Printed newspapers rely on two revenue sources: publication sales and advertising. But consumers are unlikely to pay for carefully filtered and printed content when printing is no longer desired and filtering can be performed far more effectively by content aggregators, automated ranking systems and user ratings. As for advertisers, they go where the readers go. One of Google’s most striking innovations (and certainly its most profitable) is its AdSense technology for distributed advertisements. Advertisers are no longer faced with a stark choice: decide how many eyeballs you want to reach and fork out accordingly for a spot in the publication with the appropriate circulation. Instead, they can pay for those eyeballs directly and let Google’s technology decide where to place their ads, whether on the front page of the Times or on flamingrugburn.blogspot.com.

This isn’t going to happen overnight, and the established players have time to adapt their business models and thrive in the world of digital media. There are countless ways that they could do this: by creating their own aggregation sites, by encouraging the formation of online communities that will increase their “stickiness”, by peddling their archives (something the Times and the Economist, among others, have already begun to do) and so forth. Perhaps they can push for an a la carte pay-per-download model to replace the current system (where print journalism effectively subsidizes its online counterpart), on the assumption that consumers will be more willing to pay for online content as their spending on print media declines. In a nutshell, they’re going to have to open up, just as Tony Perkins postulated. But if they aren’t more circumspect about this state of affairs than the Churchill Club panelists, they may find themselves watching the action from the sidelines.

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