Few people in urban places do not use food delivery these days. It is convenient and relatively cheap. The food you have delivered to your home or office is almost always basic food that is not too expensive, like nasi lemak, fried rice, noodles, pastries and coffee, tea or soft drinks.
There are few, if any, occasions where one would have delivered Miyazaki wagyu steak that is medium done, an omakase sushi set or a French meal from a three-Michelin-star restaurant.
Why the difference in behaviour above? On the surface they are the same — getting food to the table.
The difference, of course, is in the quality of the contents. You don’t mind having the food delivered in less than perfect condition if the food is basic, fundamentally similar and not expensive. Indeed, you can always throw it into the microwave to heat up. But this is not the case if the food is premium, expensive, where eating it is an experience, one of a kind and high quality with unique content. A meal that perhaps needs to go with a nice bottle of wine and a cigar after.
So what does food delivery have to do with the future of media?
Like the quality of food, there is a wide range in terms of quality of media content. Some have been, and will continue to be, disrupted by innovation in free digital and social media, just like food delivery is a great substitute for eating out at mediocre or average eateries.
But if you operate restaurants such as Arzak in San Sebastian, Restaurant Guy Savoy in Paris, or Kanda in Tokyo, the threat of food delivery as a disruptor is furthest from your mind. What you are concerned about is the quality of your food, service and supplies (and by definition, your people).
We have seen most general daily print newspapers disappear, or become a shadow of their past. Those still around are supported by either public money or for clandestine purposes. The reason is simple. They were created and based on the business model of serving a buffet — content ranging from A to Z, with nothing more than “who, what and when” instead of “how and why” and what it means and for whom. People read it as much for advertisements and obituaries, and for what they can get selling it to the old newspaper collectors, as they do for the content of the news.
Once people can read today’s news today (online, as they happen), google anyone and any business, socially interact with individuals and companies, and get other users’ views and recommendations at their fingertips, these old dinosaurs will die naturally, serving absolutely no purpose. Well, perhaps one purpose — to try and brainwash their readers, with no possibility of success.
See also: Education was, is and always will be the great equaliser
This summarises our views in the first two parts of this series, The Future of Media — Part 1: “Go digital or die. Is print media really dying?” and Part 2: “Went digital, also died. Going digital itself is not a strategy”.
We wrote the first three parts of this series in November and December 2017. We have held back our concluding arguments till today. Why? Because we waited for our views to be proven right, and we saw no reason why we should give any advantage to our competitors then. This week, we will do a brief recap and provide a little more clarity on the previous articles. We will conclude this series (Part 5) in a special pullout in the Sept 5, 2022, issue of The Edge. Meanwhile, readers can scan the accompanying QR codes to read Parts 1 to 3 in full.
Part 1: Go digital or die. Is print media really dying?
In Part 1, published on Nov 27, 2017, we highlighted the fact that the print newspaper industry was competitive in the past only because it was able to reach a wide audience at relatively low costs. Most newspapers simply added on more and more content with the goal of expanding their audience. Much like serving a buffet meal, quality was of no consideration. The growing audience allowed newspapers to sell more advertisements at a premium pricing.
The internet has the same advantages and more. More powerful reach at literally no cost. Firstly, digital technologies create monopolists because of network effects. They become more useful, more efficient and cheaper as the number of users grows and more applications are connected. Secondly, there are virtually no additional costs and no limit on supply of space as more and more content and advertisements are added. This is unlike print media, which faces an incremental cost of newsprint, a limit on physical space and cost of delivery. How do you fight an industry where the long-term supply curve is at almost zero marginal costs?
Obviously, smartphones, which made connectivity and data all-pervasive, accelerated the demise of the print media. Craigslist decimated classified advertisements. Free online news aggregators, which provided today’s news today, replaced general daily newspapers (yesterday’s news today). Google changed reading habits, especially in terms of searching for news and information, moving away from curated news to specific interests. Social media changed behaviours towards audience engagement and crowdsourcing, making Facebook, WeChat, Instagram, Twitter and Snapchat what they are today.
While print delivered the same content for all its readers, digital technologies made it possible for personalisation and customisation, at almost no cost.
For more stories about where money flows, click here for Capital Section
As newspapers began to lose revenue, they cut back, pushing low-quality content to being of even worse quality. This resulted in a further decline in circulation and advertisement revenue, creating a vicious cycle that led to their eventual demise. Surprisingly, for men of knowledge, they don’t really understand what they sell!
Part 2: Went digital, also died. Going digital itself is not a strategy.
What many print newspapers did was to be expected (expected behaviour and intelligent behaviour are not necessarily the same). They copied the online news model and put their content (lock, stock and barrel) online to get more readers, in the hopes of expanding their digital advertisements.
Media owners were told, “Newspapers are not selling papers but news, and with the internet, paper is replaced by pixels, which offers better engagement and experience, a bigger and global reach, yet has the ability to customise and personalise to each customer and at literally no cost.” How could it possibly be wrong? Only management consultants can put together such an elegant articulation, and yet it is totally misplaced. (I started my career in Malaysia as a young management consultant in 1984, quitting seven working days later when I realised I possessed no such talent.)
But alas, the facts do not match up. From 2013 to 2016, the share of annual global digital advertisement revenue for news publishers actually fell from 11% to just 5%. Instead, Google’s advertisement revenue went from US$43.7 billion in 2012 to US$79.4 billion in 2016. For Facebook, it shot up from just US$4.3 billion to US$26.9 billion over the same period.
So, what happened? Many are probably still wondering today. Let us put forward our personal view. The print media generated original content at a high cost, and gave it away for free on the internet to attract more traffic in the hope that they would generate more advertisements. Google and Facebook own the platforms and interface with the people. They generate no new content. The original content generated at high costs (by the news media) is now given free to Google and Facebook. And of course, no news media company will ever have as many eyeballs or visitors as Google and Facebook. It is sort of like owning a shop within a mall and owning the entrance to the mall.
And as we explained earlier, digital technologies benefit from network effects and near-zero marginal costs. They have no space limitations and no incremental costs to take on more and more advertisements.
And voila, the elegant reason for putting news online basically turned against the news publishers and enabled the likes of Google and Facebook to grow even faster. Otherwise, they may have crowdsourced information, but would still lack credibility without original content.
Part 3: Is there a Media 3.0 strategy for news publishers?
In Part 3, published on Dec 11, 2017, we further elaborated on why relying heavily on major technology platforms like Google and Facebook as part of a business digital strategy (including for news publishers) is likely to be detrimental to your business in the longer term. Why? Because the characteristics responsible for the success of these digital platforms are predicated on weakening you, taking away the ownership of your customers, your brand and your unique selling proposition.
To enable efficient matching, these platforms must own the data of your customers. This means as a supplier (of news content, manufactured goods or services), your business is just a “spoke in the wheel”. Nothing more. One of many other similar suppliers. You no longer own, or have any particular affinity with, your customers.
Another important characteristic of digital platforms is that they offer low to no frictional costs. This requires scale and homogeneity. It means commoditising your products and services offered on their platforms, which eliminates branding preferences. Imagine you being asked to give up your name.
Customers often will only go digital with the promise of lowest costs. Accordingly, suppliers and manufacturers will have to accept lowest costs because they no longer have a brand preference or own the customers. You may sell more, but surely your margins will keep falling over time.
We must celebrate the digital revolution. We must promote innovations that make lives better. There has been plenty of good from the democratisation of the information ecosystem, including giving an equal voice to all. But we must also understand the constraints, risks and challenges. Ultimately, we need to balance — innovations with regulations, freedom with responsibilities, and intellect with humility.
We conclude this article as we did in Part 3. We must always know what it is that we are selling and what our customers want. For news media outfits, it was, is and always will be the NEWS CONTENT and ANALYSIS. Media companies will live or die by the content they generate for their customers. Like all businesses, you must first know who your customers are and what they want and can afford.
If your target customers are looking for knowledge, truth, breaking news and leading opinions, do you have the capacity to deliver that product consistently? How will you deliver it — in print and/or online? How will it be priced to ensure the sustainability of your business? Giving content away for free to generate advertisements would be as silly as a three-Michelin-star restaurant giving away food to get positive reviews.
For customers who don’t want to pay and are looking for free news, a different business model is required. If someone can only afford to ride the public bus, give them the best value-for-money proposition to ride the bus. But don’t try to sell them a Ferrari.
Finally, if you can only produce mediocre news content in a world with information overload, don’t blame the internet or anyone else when you fail. You should count your lucky stars that you had previously succeeded due to the control of printing press licences. In other words, you had previously reaped unjustifiable gains from rent-seeking.
How we deliver content is the enabler — whether by print or online, they are just part and parcel of the technological evolution over time. They have changed and will continue to change. But why people want a product or service will not. Of course, this does not mean your work or business will not be replaced or displaced.
Of course they will. It’s the very definition of progress. New innovations, from technology or otherwise, will make the old obsolete, bringing forth better products, services and how they are delivered. But the underlying necessity, whether they be food, shelter, comfort or knowledge, will not.
In summary, the digital revolution has democratised news and information to the point where they are widely available at low to no costs. It has also made it possible for anyone to spread their news and views. Mass-customisation enables each person to receive content that is unique, that is customised to what that person wants. Consequently, traditional media, which curates news and information for many, quickly loses its appeal. This technological change does not remove people’s desire for news and information, but has made it possible for them to get what they want more efficiently.
Back to food. There are advantages of having food stalls located together with many others in the same locality to benefit from footfall. Customers enjoy the convenience of getting variety, but the popularity of food delivery services negates this location advantage. People can search for the best char kway teow stall, the best nasi lemak and get them delivered. And the search functions and crowdsourced data of digital platforms inform people what others liked.
Just like food, the competitiveness and relevance of news publishers must shift from a buffet-serving strategy of providing many varieties, from poor-quality content to specialised high-quality content at competitive pricing.
Part 5: Why credible, trusted and independent media is even more necessary in the digital age
In the last instalment for this series, The Future of Media or Media in the Digital Age, we will explore why credible and independent media will remain relevant and necessary, even in this digital age. Indeed, we will argue why it is even more necessary in this post-truth age.
The Global Portfolio fell 0.6% last week, underperforming the MSCI World Net Return Index, which gained 3% on the back of strong recovery in US stocks. Our biggest gainers were Airbnb Inc (+7.1%), Apple Inc (+6%) and Commercial Bank for Foreign Trade of Vietnam (+5.9%). On the other hand, Chinese stocks came under selling pressure with Yihai International Holding Ltd (-11.3%), Alibaba Group Holding Ltd (-10.5%) and Chinasoft International Ltd (-5.1%) ending lower. Total portfolio returns since inception now stand at 26.4%, trailing the benchmark’s 41.7% returns over the same period.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/ or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
