Media to Google: Pay for our content
Google to media: Get stuffed, its free.
Maureen Dowd talks to Eric Schmidt about the media getting some of those Google riches for its own
He declines to pony up money, noting that newspapers could opt out of giving their content to Google free and adding, “We actually like making our own money for obviously good capitalist reasons.”
Yes, there is a crisis in the media but like so many other crises, this one is based on poor economics. Many people point to issues of the declining quality of content that is hurting the media. This is no doubt true, to a certain extent.
But more so it is because the media doesn't understand the economics of its own business in the new online world. They love Google because it drives content to their sites. They hate Google because Google, through its targeted advertising, is really the only ones making money in this transaction.
They give links to Google for free but then demand payment. Paying for something you would otherwise get free is not a wise economic decision and Google is not staffed by dummies.
For too long, the media has been giving away its content, which therefore has become increasingly commoditized. You can basically read the same story or opinion anywhere on the web. Most news sites have really very little content that is differentiated and therefore valuable.
The media will not make money by giving away content, even if it makes up for it in volume.
Thursday, April 16, 2009
Apple tells music retailers how to behave
Here is a great example of a market leader signaling to its competitors the rules of engagement. So Apple is the market leader in downloading music, right? So when it raises its prices, what should the competition do? Lower their prices in order to win over users and gain marketshare, right?
Wrong?
They just follow right along and raise their prices too! Apple goes from 99 cents to $1.29 and so does Amazon, Rhapsody and others.
The concept is simple and is illustrated so well by Bruce Greenwald and basic economic theory.
Apple rules the market for downloadable music and every competitor knows, Apple could credibly take them on if it really wanted to. So who wants to launch a margin-busting price war with Apple when you could just imitate their prices and maintain your own comfortable share of the market.
Because of its dominant position, Apple is able to set prices for the rest of the market and everyone follows in proper obedience.
This example is a great counterpoint to the magazine industry that is fragmented, without a clear leader, and totally unaware of its own value.
Rather than the industry raising prices to protect their own margins, magazines are on this destructive race for the bottom in a vain attempt to attract subscribers. In the end they just end up commoditizing their own business because they are now unable to spend in order to innovate, and they create the perception that their product is cheap and replaceable.
Wrong?
They just follow right along and raise their prices too! Apple goes from 99 cents to $1.29 and so does Amazon, Rhapsody and others.
The concept is simple and is illustrated so well by Bruce Greenwald and basic economic theory.
Apple rules the market for downloadable music and every competitor knows, Apple could credibly take them on if it really wanted to. So who wants to launch a margin-busting price war with Apple when you could just imitate their prices and maintain your own comfortable share of the market.
Because of its dominant position, Apple is able to set prices for the rest of the market and everyone follows in proper obedience.
This example is a great counterpoint to the magazine industry that is fragmented, without a clear leader, and totally unaware of its own value.
Rather than the industry raising prices to protect their own margins, magazines are on this destructive race for the bottom in a vain attempt to attract subscribers. In the end they just end up commoditizing their own business because they are now unable to spend in order to innovate, and they create the perception that their product is cheap and replaceable.
Canada slipping in innovation
I’ve decried the lack of innovation in Canada before and while I (admittedly) don’t know the details of this announcement, it sends the wrong signal to the world. While most other countries are looking for ways to increase their national R&D capabilities, Canada should not be cutting its own. Not now, not in a crisis where, on the other side, innovation will be a premium.
For too long we’ve lived beyond our means financially and environmentally. If this economic crisis results in some sort (however small) of realignment of our priorities and our expenditures, we will need innovative thinking to help shape the new order.
I’ve seen Canada slip over the past few years in almost every global index of innovation. As someone who spends a great deal of time thinking about how to invest corporate funds in different countries, I can honestly say that a country’s capacity to do research and innovation is a huge criteria that impacts a decision.
For too long, it seems that Canada doesn’t really care about innovation. Now it seems that it cares even less.
For too long we’ve lived beyond our means financially and environmentally. If this economic crisis results in some sort (however small) of realignment of our priorities and our expenditures, we will need innovative thinking to help shape the new order.
I’ve seen Canada slip over the past few years in almost every global index of innovation. As someone who spends a great deal of time thinking about how to invest corporate funds in different countries, I can honestly say that a country’s capacity to do research and innovation is a huge criteria that impacts a decision.
For too long, it seems that Canada doesn’t really care about innovation. Now it seems that it cares even less.
Wednesday, April 15, 2009
Evolution of the newspaper
Currently it is very trendy to talk about the "death of the media" but I think a more sophisticated discussion should rather focus on its evolution. Yes, it is painful for those involved and yes the result may be a media product that is quite different than what we've been used to in the past.
But then again, find me one industry that has essentially remained unchanged over the past 100 or so years (the auto industry immediately springs to mind.... great model they turned out to be.)
Hyper-local sites like the one starting in Seattle may very well be the next step in the evolution of the local paper. There are already some excellent models out there, most notably in San Diego.
Admittedly, these are non-profits at the moment but hopefully these will evolve into sustainable for-profit models. Whatever business models these non-profits may eventually come up with will probably be better than some of the questionable management decisions that are currently plaguing parts of the media industry.
But then again, find me one industry that has essentially remained unchanged over the past 100 or so years (the auto industry immediately springs to mind.... great model they turned out to be.)
Hyper-local sites like the one starting in Seattle may very well be the next step in the evolution of the local paper. There are already some excellent models out there, most notably in San Diego.
Admittedly, these are non-profits at the moment but hopefully these will evolve into sustainable for-profit models. Whatever business models these non-profits may eventually come up with will probably be better than some of the questionable management decisions that are currently plaguing parts of the media industry.
Monday, April 13, 2009
The micro of magazines
Basic microeconomics 101, when you’re competing on price, you are now in a commodity market. That’s great if you sell copper, it is not so great if you sell content.
If a magazine is trying to attract subscribers (and therefore advertisers) by slashing prices, it is a commodity magazine. Basically you’re telling the world that your content can be replaced by any other content out there, but so you’re willing to offer it cheaper.
This race to the bottom may explain part of the media’s ills. Positioning your product as a commodity is a terrible message to send to advertisers.
But it seems that people think they can rely on commodity pricing but still position themselves as a differentiated produce.
Interestingly, whether consumers pay $5 or $50 for a subscription does not affect their perception of the magazine, according to a study conducted four years ago by the media consultant Rebecca McPheters for publishers including Time Inc., Condé Nast, Hearst and Meredith.
“There was no difference between the engagement of those who paid less and those who paid more,” Ms. McPheters said in an interview.
I guess the debate will come down to how you define the word “engagement”. Maybe lining your birdcage with BusinessWeek is considered “engagement”.
Given those findings, the price a consumer pays should not matter to advertisers, since it does not affect the reader’s attitude toward the magazine, said Robert A. Sauerberg Jr., the group president for consumer marketing at Condé Nast. Mr. Sauerberg said that prices were constantly tested, and “the fact is, the pricing comes as a result of what the consumer is willing to pay.”
Or, in other words, how much they value your content. If you’re attracting subscribers only on price, there is clearly a problem with how readers value your content.
This lesson on the perils of a commodity existence isn’t lost on all publications however. One would hope that one called “The Economist” would get it right.
Even though The Economist is relatively expensive, its circulation has increased sharply in the last four years. Subscriptions are up 60 percent since 2004, and newsstand sales have risen 50 percent, according to the audit bureau.
Although, apparently you don’t really need to be that smart to figure this all out:
The subscription price for People has risen about 5 percent, to $104 a year, in the last four years. The cover price has risen 21 percent, to an average of $4.09 (including special issues, which cost more). In that time, People’s subscription and newsstand sales have both increased slightly.
In Switch, Magazines Think About Raising Prices - NYTimes.com
If a magazine is trying to attract subscribers (and therefore advertisers) by slashing prices, it is a commodity magazine. Basically you’re telling the world that your content can be replaced by any other content out there, but so you’re willing to offer it cheaper.
This race to the bottom may explain part of the media’s ills. Positioning your product as a commodity is a terrible message to send to advertisers.
But it seems that people think they can rely on commodity pricing but still position themselves as a differentiated produce.
Interestingly, whether consumers pay $5 or $50 for a subscription does not affect their perception of the magazine, according to a study conducted four years ago by the media consultant Rebecca McPheters for publishers including Time Inc., Condé Nast, Hearst and Meredith.
“There was no difference between the engagement of those who paid less and those who paid more,” Ms. McPheters said in an interview.
I guess the debate will come down to how you define the word “engagement”. Maybe lining your birdcage with BusinessWeek is considered “engagement”.
Given those findings, the price a consumer pays should not matter to advertisers, since it does not affect the reader’s attitude toward the magazine, said Robert A. Sauerberg Jr., the group president for consumer marketing at Condé Nast. Mr. Sauerberg said that prices were constantly tested, and “the fact is, the pricing comes as a result of what the consumer is willing to pay.”
Or, in other words, how much they value your content. If you’re attracting subscribers only on price, there is clearly a problem with how readers value your content.
This lesson on the perils of a commodity existence isn’t lost on all publications however. One would hope that one called “The Economist” would get it right.
Even though The Economist is relatively expensive, its circulation has increased sharply in the last four years. Subscriptions are up 60 percent since 2004, and newsstand sales have risen 50 percent, according to the audit bureau.
Although, apparently you don’t really need to be that smart to figure this all out:
The subscription price for People has risen about 5 percent, to $104 a year, in the last four years. The cover price has risen 21 percent, to an average of $4.09 (including special issues, which cost more). In that time, People’s subscription and newsstand sales have both increased slightly.
In Switch, Magazines Think About Raising Prices - NYTimes.com
Bathing in Inflation?
Taking a warm bath in all the new money floating around may feel good now, what with the frozen credit markets, but as the economy stops cooling and begins to warm up (even ever so slightly), will the rising temperatures also cause inflation to heat up. (I think this metaphor really got away from me.)
To me, this is a key point:
Meltzer says political pressure will prevent Bernanke, 55, and fellow policy makers from withdrawing liquidity quickly enough as the economy recovers. That’s similar to the pattern that occurred back in the 1970s, he says. Then-Chairman Arthur Burns allowed excessive money-supply growth because he was unable or unwilling to resist pressure from President Richard Nixon’s White House to hold down unemployment, leading to the “great inflation” of that era, he says.
A lot of floating money may make sense now, but soon the time may be upon us when we need to start drying out this extra liquidity (run-away metaphor again...really, I shouldn't quit my day job...) Hopefully a sense of pragmatism has taken over the financial ruling class and they'll be willing to take the tough decisions to cool down inflation at the first sighting.
Bernanke Bet on Keynes Has Meltzer Seeing 1970s-Style Inflation - Bloomberg.com
To me, this is a key point:
Meltzer says political pressure will prevent Bernanke, 55, and fellow policy makers from withdrawing liquidity quickly enough as the economy recovers. That’s similar to the pattern that occurred back in the 1970s, he says. Then-Chairman Arthur Burns allowed excessive money-supply growth because he was unable or unwilling to resist pressure from President Richard Nixon’s White House to hold down unemployment, leading to the “great inflation” of that era, he says.
A lot of floating money may make sense now, but soon the time may be upon us when we need to start drying out this extra liquidity (run-away metaphor again...really, I shouldn't quit my day job...) Hopefully a sense of pragmatism has taken over the financial ruling class and they'll be willing to take the tough decisions to cool down inflation at the first sighting.
Bernanke Bet on Keynes Has Meltzer Seeing 1970s-Style Inflation - Bloomberg.com
Friday, April 10, 2009
The new normal - The McKinsey Quarterly - The new normal - Strategy - Strategic Thinking
Quick look at the “new normal” by McKinsey. Not a lot of detail here but in the spirit of the article, here are a couple of my “new normal” predictions;
1) The economy will be more slow burn. With (somewhat) higher savings rates and (somewhat) lower consumption, the economy will be on a slower, but hopefully more sustainable and less bubbly) path
2) I don’t want to overstate the higher savings/lower consumption in the US. Yes, there will be some changes in consumption patterns but it won’t be extreme. The US is not going to turn into Asia-type supersavers and consumer credit will trickle back to fuel consumption.
3) Western/Ango-Saxon/whatever you want to call it capitalism won’t die. It won’t even be on life support. Yes, it may evolve somewhat. Yes, there may be more regulations. But the core principles will remain
4) I hope I can say the same for globalization. I don’t think there is great long-term threat to globalization but there may be bumps
The new normal - The McKinsey Quarterly - The new normal - Strategy - Strategic Thinking
1) The economy will be more slow burn. With (somewhat) higher savings rates and (somewhat) lower consumption, the economy will be on a slower, but hopefully more sustainable and less bubbly) path
2) I don’t want to overstate the higher savings/lower consumption in the US. Yes, there will be some changes in consumption patterns but it won’t be extreme. The US is not going to turn into Asia-type supersavers and consumer credit will trickle back to fuel consumption.
3) Western/Ango-Saxon/whatever you want to call it capitalism won’t die. It won’t even be on life support. Yes, it may evolve somewhat. Yes, there may be more regulations. But the core principles will remain
4) I hope I can say the same for globalization. I don’t think there is great long-term threat to globalization but there may be bumps
The new normal - The McKinsey Quarterly - The new normal - Strategy - Strategic Thinking
Thursday, April 09, 2009
Homegrown Aid
Short but compelling case for bottom-up development, meaning letting poor countries decide for themselves how to allocate development resources.
Make development results-based rather than consultant-based. I'll leave it to Jeffrey Sachs to explain far better than I could:
Rather than have Washington (Penguin: or anyone else) decide the kind of aid each country will receive, the recipient countries should be invited to prepare plans and budgets that would be reviewed by independent experts. These plans would describe the inputs needed by the farmers, the expected increase in production, how the strategy would be put into place and how much money would be required. Such plans, if described with care, could then be closely monitored by the United States and other donors to gauge results and avoid corruption.
Two international programs during the last decade, championed jointly by the United States, other governments and the Gates Foundation, have demonstrated the benefits of such a scientific, results-based aid approach: the Global Alliance for Vaccines and Immunization, and the Global Fund to Fight AIDS, Tuberculosis and Malaria. These programs have saved millions of lives and protected hundreds of millions more from disease and infection. Here’s how they work: Low-income countries submit national action plans to the two programs, which then scrutinize the plans on their scientific, financial and management merits. If the plans are properly put into effect, recipients get more financing.
I would even take it one step farther and in certain cases, only where is makes sense, have outside investors come in to provide either loans or risk capital. When done properly (ie, this is NOT a peanut butter solution that can be spread over every problem) but when done properly, local for-profit entities working on local social problems could benefit from insights and knowledge of outside investors.
Make development results-based rather than consultant-based. I'll leave it to Jeffrey Sachs to explain far better than I could:
Rather than have Washington (Penguin: or anyone else) decide the kind of aid each country will receive, the recipient countries should be invited to prepare plans and budgets that would be reviewed by independent experts. These plans would describe the inputs needed by the farmers, the expected increase in production, how the strategy would be put into place and how much money would be required. Such plans, if described with care, could then be closely monitored by the United States and other donors to gauge results and avoid corruption.
Two international programs during the last decade, championed jointly by the United States, other governments and the Gates Foundation, have demonstrated the benefits of such a scientific, results-based aid approach: the Global Alliance for Vaccines and Immunization, and the Global Fund to Fight AIDS, Tuberculosis and Malaria. These programs have saved millions of lives and protected hundreds of millions more from disease and infection. Here’s how they work: Low-income countries submit national action plans to the two programs, which then scrutinize the plans on their scientific, financial and management merits. If the plans are properly put into effect, recipients get more financing.
I would even take it one step farther and in certain cases, only where is makes sense, have outside investors come in to provide either loans or risk capital. When done properly (ie, this is NOT a peanut butter solution that can be spread over every problem) but when done properly, local for-profit entities working on local social problems could benefit from insights and knowledge of outside investors.
Inflation genie...
.... we shouldn't let it out of the bottle.
Nouriel Roubini speaks and as you'd expect, the news isn't good (well, he's called Dr. Doom for a reason)
.
I see Roubini covered a lot in the Canadian press. I think his general crappy outlook on the world suits the alienated Canadian perspective.
He's the "ghost of unregulated banks present" and I think Canadian like him because he's walking justification for the regulated bank past that Canada has been through.
Nouriel Roubini speaks and as you'd expect, the news isn't good (well, he's called Dr. Doom for a reason)
.
I see Roubini covered a lot in the Canadian press. I think his general crappy outlook on the world suits the alienated Canadian perspective.
He's the "ghost of unregulated banks present" and I think Canadian like him because he's walking justification for the regulated bank past that Canada has been through.
Tuesday, April 07, 2009
Earnings could throw wrench in U.S. stock rally
Great headline.... those dang earnings are sssssooooo darn inconvenient.
Earnings could throw wrench in U.S. stock rally
Earnings could throw wrench in U.S. stock rally
Monday, April 06, 2009
Investment in addition to aid
I’m not sure I agree with much of this WSJ article, but hidden within this anti-IDB opinion is I think a valuable point, that creating an environment to attract investment, not just aid, is key for a country’s development.
Those developing countries that are the most attractive for investment are those with a stable local market, an educated population, and those that facilitate a way to both protect and safely deploy capital.
Developing countries (especially those that don’t happen to be China or India) need to demonstrate to international investors that the government is on their side when it comes to protecting capital.
People and institutions that put money in emerging markets are not risk-takers, they are in fact very risk-averse (or at least, the smart ones are.) So if these risk-averse investors find a developing country where they see a reasonably safe way to deploy and grow their capital---allowing them to put money in and take it out, to find and invest in promising enterprises, to work with trustworthy local partners—then the country will not only benefit from the money that comes in, but also from the talent and know-how that often accompanies these types of investment.
Latin America Needs Economic Liberalization and Property Rights, Not Foreign Aid - WSJ.com
Those developing countries that are the most attractive for investment are those with a stable local market, an educated population, and those that facilitate a way to both protect and safely deploy capital.
Developing countries (especially those that don’t happen to be China or India) need to demonstrate to international investors that the government is on their side when it comes to protecting capital.
People and institutions that put money in emerging markets are not risk-takers, they are in fact very risk-averse (or at least, the smart ones are.) So if these risk-averse investors find a developing country where they see a reasonably safe way to deploy and grow their capital---allowing them to put money in and take it out, to find and invest in promising enterprises, to work with trustworthy local partners—then the country will not only benefit from the money that comes in, but also from the talent and know-how that often accompanies these types of investment.
Latin America Needs Economic Liberalization and Property Rights, Not Foreign Aid - WSJ.com
Friday, April 03, 2009
Missed the last rally...?
...Don't worry, it probably won't last.
The market has been a lousy predictor. People used to say that the stock market predicted 12 out of the last nine recessions. This time, it predicted six out of the last zero economic recoveries. Every time there was a rally, and then the macro[economic] news, the earning news, the financial news was worse, and the market touched a new low.
reportonbusiness.com: A big bear: Markets 'way too optimistic'
The market has been a lousy predictor. People used to say that the stock market predicted 12 out of the last nine recessions. This time, it predicted six out of the last zero economic recoveries. Every time there was a rally, and then the macro[economic] news, the earning news, the financial news was worse, and the market touched a new low.
reportonbusiness.com: A big bear: Markets 'way too optimistic'
Don't worry be happy... or maybe not
I love John Authers... he sorta reminds me of a British, slightly too earnest David Gergen.
Anyways, I'm always looking for some good news in the economy and John provides a bit for us here. Or maybe not... wait to the end when he at the last second puts things into some sort of historical context and suggests we may be more screwed than ever.
Short View: Happy Days
Anyways, I'm always looking for some good news in the economy and John provides a bit for us here. Or maybe not... wait to the end when he at the last second puts things into some sort of historical context and suggests we may be more screwed than ever.
Short View: Happy Days
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