Zaijian, Ni hao (Goodbye & Hello)

It is customary at this time of the year to look back and reminisce about the year gone by. This year, its also the end of the decade – the “noughties” as they are curiously called. The media, traditional and new, is dominated by the recounting of events of the past decade –the horror of September 11, the tsunami, the Sichuan earthquake, the wars in Iraq and Afghanistan, the wonder of the Beijing Olympics, the rise of China, the global financial crisis, and so on.

But take a step back, and by far, the greatest event of the decade gone by has been the unbelievable development of the Internet. Just picture the dawn of the new millennium. Google had just been started and most people still did not know of that term. Blogging was virtually unknown – the word blog itself had just been coined in mid 1999. More recent phenomena such as Twitter, Facebook and the like were not even on the horizon. Even e mail was not ubiquitous. Dinosaurs like AOL and Alta Vista ruled the world.

10 years on and the on line world has dramatically changed. If even a tech savvy Rip van Winkle has gone to sleep in December of 1999 and woken up today, he would be completely lost. Such has been the pace of change. That Chotu’s great grandmother can see and talk to her great grandson who is thousands of miles away, for free, is a miracle of immense proportions.

What amazes me is that as a society we have embraced this change so well. Disruptive change of this nature usually comes with cataclysmic implications on society. Large numbers of people are very slow to accept such changes – when the first railways were introduced in Britain long long ago, most people would not travel on it as they feared the health consequences of high speed travel (20 kmph. But today the online world is rapidly changing every month and even Chotu’s GGM adopts it gleefully.

What does the next decade hold for us online ? Only one thing is for sure – everybody who predicts what the change will be is going to be wrong. But at the end of the coming decade, we are surely going to marvel at the immense changes that have taken place. And probably reflect back on how unthinkably backward 2009 was !

We will, no doubt, plunge headlong into the changing online world. But change as it may, one thing I shall pray remains the same. The lovely community that we have come together as bloggers, le embrouille blogueur, Adesh, Zoobie, AJCL (still sticking to your old name), Savitha, Sri, The Thoughtful Train, Gils, Sandhya, Preeti, Reflections, Deepa, Dave, Priya, Rads (please come back) and all ye yeomen, I hope remains the same warm well knit online community. And perhaps some of the lovely people who comment here and are very much part of our wonderful community – Dada, Kiwibloke, J, Satish, Hansjoerg, Durga, VA, LG, Sabareesan, Mahesh, Kotla, Aashish, Exkalibur, et all, may become bloggers themselves.

Raising a toast to the wonderful friends who inhabit this space.

Happy New Year.

THE WIDENING RANGE OF REVENUE SOURCES IN NEWS ENTERPRISES

It is obvious that both the offline and online news providers are in the midst of substantial transformation and that the traditional means of funding operations are no longer as viable as in the past. This is disturbing to the industry because it has enjoyed several decades of unusual financially wealth and few in the organizations know how to find and generate new sources of revenue.

The financial uncertainty facing the industry is not unusual, however. We tend to forget that news has historically been unable to pay for itself and was subsidized by other activities. In the past newspapers and other news organizations engaged in a far larger range of commercial activities than then they do today and publishers had to be highly entrepreneurial and seek income from a wide variety of sources in order to survive.

The initial gathering and distribution of news was paid for by emperors, monarchs, and other rulers who needed information for state purposes. Later, wealthy international merchants hired correspondents to gather and relay news that might affect their businesses. When news became a commercial product, newspaper publishers subsidized the operations with profits from printing books, magazines, pamphlets, and advertising sheets, income for editors from shipping and postal employment, profits from operating book shops and travel agencies, and subsidies from communities and political and social organizations.

Today, however, news organizations are struggling to maintain themselves and develop digital operations by primarily focusing on the two revenue streams they have known in recent decades: subscriptions and advertising. Many people are being disappointed because those are failing to provide sufficient financial resources to sustain their operations.

The need to seek income from multiple sources is clear, but runs somewhat counter to the values of twentieth-century professional journalism, which denigrates commercial activity and thus engenders organizational resistance to new business initiatives. Continuing staff reductions and other budgetary cutbacks are eroding some internal opposition, but are rightfully leading to questions about how far one goes down the commercial road before news gives up its independence.

In both the online and offline news worlds, a wide variety of revenue generating activities are appearing—some based on traditional subscriber/single copy sales and advertising sales—but many others moving into new areas of monetization.

Many news organizations are increasing the range of advertising services provided to sell and create ads for their own media products, but also to provide clients services that can be used in competing products as well. New types of advertising offerings are being created to link across platforms, sponsorships of online and mobile news headlines are developing, video advertising is being offered online, and special “deals of the day” advertising spots are being offered.

Some organizations are increasing their product lines producing paid premium products and niche content for professional groups and persons with special interests; some are providing business service listings for a fee; others are creating a variety of non-news products; still others are operating additional business units creating paid events, running cafés, book and magazine shops, and providing training and education activities.

Sales of other products and services are being increasingly embraced through e-commerce (linking published reviews films, performances, and recordings to sites where customers can buy tickets, DVDs, CDs, etc.), creating and selling lists and databases of local businesses and consumers, producing special reports and books, selling photographs and photography services, and even selling items such as computers and appliances.

A growing number of news organizations are seekings subsidies though reader memberships and donations and grants from community and national foundations.

These are healthy developments because they increase the opportunities to create revenue that can fund news activities. Obviously, the abilities and willingness of different news enterprises to engage in the range activities vary widely, but the fact that they are appearing show that news organizations are beginning to adjust to the new environment and becoming more entrepreneurial than they have been for many decades.

What is needed now is not knee-jerk opposition to these efforts from news personnel, but thoughtful development of realistic principles and processes to minimize any negative effects of these new initiatives on news content so that trust and credibility are not diminished.

Holidays is a cultural thing

Today is Christmas day – virtually everywhere in the world, today is a holiday. And here I am , at my desk, pretending to be working. For its not a holiday in atheist China. Despite the best efforts of companies to tempt the Chinese into “Christmas shopping”, the day remains stubbornly irrelevant here.

I have a stream of people walking up to my desk today. They are all asking me to approve carrying forward their leave entitlements which they have not used up. Everybody knows that they will not use them up next year as well and will ask to carry it over again. This charade goes on every year. Much as I rail against them for not planning their leave properly, its not going to change. For the Chinese (and Indians) don’t like to go on holiday. They like to work.

Contrast this with Europe. In August, most of Europe, at least France, completely shuts down. And between Christmas and New Year, not a soul is seen anywhere near the office. So here we are, working in a global business, where the lights have gone out of the offices everywhere in the world, bar the solitary illumination seen in China.

It's not that one is wrong and the other is right. It just shows the cultural differences between Europe and Asia. Europeans prize their holidays highly. To them its 46 weeks of slogging to earn the 6 weeks off. Asians start to feel uncomfortable at the very thought of taking anything more than 2 weeks off. And a second holiday during the year will prompt snide remarks of being on perpetual holiday.

But this is time for holiday cheer. Whether you are at your desk in China or stuck on the Eurostar between the UK and France, here’s wishing you a Merry Christmas and the compliments of the season. Maybe you are having a white Christmas, as seems to be the case in most of the Northern Hemisphere. Or, you may be in Bondi beach in beach clothes soaking in the sun. Or you might be the classic NRI, on the once in two years trip “back home”. To you, may I quote from an unknown author - Let the spirit of love gently fill our hearts and homes. In this loveliest of seasons may you find many reasons for happiness.

Amen.

Pay a tax if you tan

The US healthcare bill that is doing the final rounds in the Senate today is a landmark piece of legislation, if passed. It has aroused intense emotions and divided America. But an obscure part of the bill, buried in the thousands of pages of legalese is illustrative of the way lobby and pressure groups have come to influence economic policy.

In the first draft of the bill, a tax was proposed on cosmetic procedures like Botox injections, breast implants, tummy tucks, etc. Part of the ingenuous ways of raising revenue to fund the massive healthcare costs. Inevitably, this tax proposal has come to be called as Bo-tax. Now the medical industry lobbied like crazy to get Bo-tax reversed. And they succeeded , at least in the latest draft doing the rounds. No comment on what persuasive powers they used.

However the government cannot forego any revenue at all, considering the huge costs the health care bill is likely to result in. They have therefore replaced the Bo-tax by a tax on tanning salons that use sunbeds.

Predictably there’s howls of outrage from the tanning industry lobby. They have caught on a great angle to protest on. Tanning salons are obviously used by only white people. Therefore they are claiming this tax is racist ! And since most of the clientele is women, they are calling it sexist as well !!

A spokesman for Harry Reid , the Senate Majority leader is reputed to have stated that the swap of Bo-tax with the Tan tax was “based on the more compelling health concerns with indoor tanning services”. The tanning industry association has shot back that ultraviolet light has at least some proven health benefits, while Botox has none.

So the lobbying goes on. If this is what is happening on an obscure side show, you can imagine the lobbying that is going on, on the main aspects of the bill. And for that matter every piece of legislation. No wonder Washington is full of lobbysists and pressure groups with a single agenda item – everybody is clamouring for his or her own cause and to hell with the rest of the world and the consequences.

Is this any way to determine economic policy ?

Who can you trust now ?

Conventional wisdom has been that a sovereign guarantee is the best form of security you can have when you lend money. You can be pretty much sure that your money is safe if you buy government debt. Doesn’t matter which government, if you leave aside rogue states like North Korea or Myanmar. Conventional wisdom that is.

That was before the financial crisis. As the crisis spread, Iceland was the first country to go virtually bankrupt. When that happened, it was viewed as an isolated instance of an insignificant country that didn’t matter.

Then came Dubai. Well technically, not Dubai the Emirate, but Dubai World, the company. But then in that part of the world, it’s the same thing. Didn’t people see it coming ? – virtually anybody who’s been to Dubai would know that it was a place gone financially crazy. Of course, everybody knew that. But then everybody expected that Abu Dhabi, the oil rich emirate would always stand by Dubai. That was the mistake. The really startling thing about the Dubai crisis, is that there’s stony silence from Abu Dhabi.

Lenders have woken up and are now no longer sure about government debt. The country under the spotlight is now Greece. This is serious, for Greece is in the Euro zone. For years Greece has had irresponsible governments. The commitment made to join the Euro was that. its deficit would be no more than 3% of GDP – instead Greece runs at above 12% of GDP. Lenders always assumed that since it was in the Euro area, “Europe” (read Germany) would bail them out if it came to a default. Now, after the Dubai experience, not so sure. Rating agencies have fallen over themselves to cut Greece’s credit rating. Interest rates have soared. Greece needs to borrow a large amount in the first half of 2010 just to keep the government going – pay salaries and all that. There’s now real uncertainty whether their debt issue would be taken up.

There’s a lesson here for India. Not just that India must rein in its deficit – that’s repeated ad nauseum and as long as there are a few responsible ministers and bureaucrats in the Central government, we are OK. The lesson is for the States.

Every State government in India is virtually bankrupt. It’s a crying shame that the richest state in India, Maharashtra, is the worst offender. Unlike the Centre, State governments are completely irresponsible and fall over each other to loot the Treasury. The quality of leadership in the States is abysmal, irrespective of which party is in power. Every single minister in every single state would flunk Economics 101.

State Governments survive by issuing debt. The RBI and the Central government exercise control by regulating this, but state governments are masters in resorting to brinksmanship. Nobody would buy state government debt, but for the fact that it is backed by the Central government. The guarantee of the Government of India still stands for something.

So here’s the thought. The Central Government must withdraw the sovereign guarantee for state government debts. Automatically state governments would be forced to become fiscally responsible. Actually the Centre doesn’t even need to do that. They just have to deny a rumour that they may withdraw the guarantee. That’s enough. The markets would do the rest !

IMPLICATIONS OF CHANGING DEFINITIONS OF MEDIA MARKETS

An important contemporary development is the shift of media market definitions from traditional platform-based definitions to functional definitions. This is occurring because media product platform definitions are losing their specificity and uniqueness due to digitalization and cross-platform distribution developments.

Newspapers are becoming news providers, delivering news and information via print, online, mobile, and other platforms; broadcasters are moving off the radio spectrum, exploiting not only other streaming and video-on-demand opportunities, but also text-based communication on web and mobile platforms.

Although functional definitions clarify what companies actually do, they obscure wide differences in audiences, business relations, and revenue sources on the different platforms and give some the mistaken impression that a functionally defined operation can be successful operating the same way across the different platform environments. The functional definition is also confusing some policy makers and regulators concerned with effects of cross-media activity, consolidation, and concentration who do not carefully sort out the different elements of product and geographic market definitions among the platforms.

From the business standpoint, the fundamental problem of the functional definitions is that it leads many content providers to believe they can simply repurpose existing content across platforms. They are happy to do so because the marginal cost is near zero, but they ignore the facts that it also commoditizes the content, that the content losses uniqueness, and that similar presentation may not be appropriate on other platforms. Consequently, the repurposed content can produce only a small marginal increase in revenue.

To ultimately be successful in functional markets, companies need to offer a good deal of new content and launch new products on the new platforms rather than merely reusing what is already there in the traditional ways. Leading cable channels, for example, early in their development relied on motion pictures and syndicated programs previously shown on network television, but soon realized that they needed original programming to attract better audiences and gain additional revenue. Financial newspapers have begun to get it right on the Internet, offering more content and tools than in their print editions and establishing specialized niche products for different types of industry and business readers.

We are all watching to see who among general content providers manages to get their functional approach to markets right using the Internet, Mobile, e-Readers, and other platforms.

MEDIA, INNOVATION, AND THE STATE

There is a growing chorus for governments to help established media transform themselves in the digital age. From the U.S. to the Netherlands, from the U.K. to France, governments are being asked to help both print and broadcast media innovate their products and services to help make them sustainable.

State support for innovation is not a new concept. Support of cooperate research initiatives involving the state, higher education institutions, and industries has been part of national science and industrial policies for many decades. There has been significant state support for innovation of agriculture/food products, electronics, advanced military equipment, information technology, and biomedical technology and products.

State support tends to work best in developing new technologies and industries and tends to focus support on advanced basic scholarly research through science and research funding organizations, creation and support for research parks and industrial development zones for applied research, and incentives and subsidies for commercial research and development.

Many governments also support efforts to transform established industries. These are typically designed to promote productivity and competitiveness as a means of preserving employment and the tax base. In the past there has been some support for technology transfer from electronics and information technology to existing industries and for retraining, facilities reconstruction, and entering new markets.

Trying to apply those kinds of research and transformation policies in media is challenging, however, because much of media activities tend to be non-industrial and are dependent on relatively rigid organizational structures and processes that are difficult to change. These factors are complicated by the facts that media engage in negligible research and development activities, have limited experience with product change and new product development, and tend to have limited links to higher education institutions.

It is clear that a growing number of managers in media industries understand the need for innovation because of the declining sustainability of current operations and because Internet, mobile, e-reader, and on-demand technologies are providing new opportunities. The real innovation challenges in established media, however, are not perceiving the need for change or being able to get needed technology, but organizational structures, processes, culture, and ways of thinking that limit willingness and ability to innovate. This is compounded because many managers are confused by the opportunities and don’t know what to do or how pursue innovation.

Today, the innovation challenge facing media—especially newspapers--is not mere modernization, but fundamentally reestablishing their media functions and forms. What is needed is a complete rethinking of what content is offered, where, when and how it is provided, what new products and services should be provided and what existing ones dropped, how content will differ and be superior to that of other providers, how to establish new and better relationships with consumers, how the activities are organized and what processes will be employed, what relationships need to be established with partners and intermediaries, and ultimately how the activities are funded.

The state’s ability to influence media innovation of this type is highly constrained. Governments worldwide have proven themselves ineffectual in running business enterprises and they have limited abilities to affect organizational structures, processes, culture, and thinking in existing firms. What governments can do, however, is to fund research that identifies threats, opportunities and best practices, provide education and training to promote innovation and help implement change, offer incentives or subsidies to cover transformation costs and support new initiatives, and help coordinate activities across industries.

These kinds of support will be helpful, but they will not be a panacea because the greatest impetus for and implementation of change and innovation must come from within companies. The support will only be helpful if companies are actually willing to innovate and change to support that innovation. The extent they are willing to do so remains to be seen.