What the news business could learn from Hollywood

November 28, 2005

Suppose your industry controlled 11 of the top 25 news and information Web sites, and was the dominant online information source in most of the country’s biggest 75 markets. You drew nearly a third of all U.S. Internet users. Of your online customers 44 percent were younger than 34 and earned over $50,000. Your Internet audience —alongside the 75 million adults who buy your off-line output every day — was up 16 percent from a year ago.

You’d feel pretty good. You wouldn’t be moaning about imminent extinction, laying off staff, and quelling stockholder unrest by hiring dealmakers to help you dismember yourself for a quick selloff.

But you’re not the newspaper business. There — in spite of numbers like those, from a recent Newspaper Association of America survey, and oblivious to its enduring value to the U.S. informational landscape — gloom reigns. Industry captains can’t imagine how to grow except by acquiring each other, and think the only way to make more money is by cutting costs. Why such fear and trembling? It’s the technology, stupid.

Some bewilderment is understandable. The speed with which the Internet is engulfing and absorbing prior media exceeds all expectations. That is indeed a monumental challenge to the news industry’s ingenuity. But what it’s not is a fundamental threat to the value of the news and information that are the industry’s foundation.

In that regard, newspapers are lucky. The Internet does threaten some revenue franchises, especially classifieds. But it also offers a new way to reach audiences by going paperless and shedding 60 percent of operating costs.

By contrast, consider the video rental business. Now there’s an industry that’s toast. Or the plight of your local TV stations, the richly profitable affiliates that depend on the flow of network shows — programs that are heading to the Internet. Now that over half of U.S. online users have high-capacity broadband connections, the Web is mutating: no longer the electronic extension of print that it has been, it’s becoming a televisual medium built around pictures and sound.

NBC and CBS say they’ll be making top prime-time shows available to viewers on demand — CBS via cable and NBC via satellite and digital video recorders — for per-program payments of 99 cents and up.

Terrible news for the affiliates. The networks are finding alternative ways to deliver programs directly to viewers without paying the local stations that are no longer needed to rebroadcast signals. The affiliates are a few years away from having the struts kicked out from under their business model.

They’ll change, or they’ll die. My point is that while the news business looks for somebody to cater its funeral, the entertainment industry is furiously ramping up for an online future, making everything it produces available via every available medium from laptops to cellphones — some supported by ads, others sold directly to audiences, either per-view or by subscription:

+ Disney’s ABC cut a deal with Apple Computer to download “Desperate Housewives” onto Apple’s new video iPods for $1.99 per episode.

+ Fox Television is producing original mini-episodes of “24” to be watched on mobile phones, and ABC is making 20 so-called mobisodes of “Lost.”

+ Time Warner is launching In2TV via AOL, and will offer thousands of ad-supported hours of vintage Warner television, from “Falcon Crest” to “Sanford & Son,” on the Internet.

+ NBC’s Bravo is moving Trio, its troubled pop culture network, from cable to online.

+ Movielink is adding 1,200 titles from 20th Century Fox, giving the download service movies from every major studio for you to download to your personal computer (PC.)

+ Microsoft is developing advanced technology to enable PCs to be cable-ready for high-definition TV.

So why the huge difference between the entertainment industry’s vigorous efforts to capitalize on the Internet and the desperation that has led the newspaper business to self-mutilation? I think it lies in Hollywood’s unwavering confidence in the market value of what it produces.

Newspaper circulation is down? Look, a half-century ago 90 million people went to the movies every week; now theaters draw barely a quarter that many. So what? Hollywood rakes in five times the money from DVDs and the like that it gets from theatrical release, which now is little more than advertising for lucrative home entertainment sales.

Just as Hollywood adapted to a new business model, so must news industry chieftains look beyond their sluggish newsprint sales and realize that the audience for quality news, information and commentary is robust and vital. That public may want to buy stories instead of subscriptions, and advertisers may demand something more effective than colorful pop-ups.

But depopulating newsrooms — ownership’s current response — will enfeeble the industry, not transform it. What’s needed is a business imagination commensurate with the editorial vision the public demands and deserves.

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