BusinessWorld purchase: Why digital media is becoming mainstream

It is now time for us to flip our thinking about media. I am willing to bet that in less than five years - assuming certain minimum levels of broadband access - digital news media in India will become mainstream and mainstream will become sidestream - or niche.

This morning's newspapers have reported the purchase of BusinessWorld magazine by exchange4media, a digital media publisher, among other things - one of the first purchases of mainstream by a news portal. Of course, one swallow does not make a summer's day, but the logic of digital is unbeatable. But it is an early indicator of which way the wind is blowing.

The first question I am asked by people is always this: how will digital make money when you are giving it away free?

I don't claim to have all the answers, but the point is this: how does the mainstream media make money? Newspapers are given away practically free, with most of the price paid being swallowed up by distribution and subscriber acquisition costs. News TV channels are now earning a bit better after digitisation, but they are essentially nearly free to viewers. And they have much bigger overheads than digital media.

A magazine vendor in India. AFP.

A magazine vendor in India. AFP.

So, my mixed answer to how digital newsrooms will make money is simple: it will happen when the penny drops for advertisers. Advertisers already know that they are paying top dollar to buy readers for newspapers. Once they know that there are credible digital publications which can deliver multiple times the audience at a fraction of the cost, they will wonder whether they were being gypped so far by mainstream media.

The BusinessWorld purchase must be seen not as a vote of confidence in mainstream, but as an effort by digital media to gain access and build mainstream-like editorial credibility. It is not about the magazine itself.

Amazon boss Jeff Bezos' purchase of The Washington Post is not about reinventing the newspaper, but about buying a brand that could one day rule the digital space.

The New York Times, which went digital with a vengeance some years ago, is already beginning to show revenues that indicate the kind of potential digital has.

Henry Blodget, writing in the Business Insider, reckons that NYT's digital revenues are in the range of $350 million (versus total revenues of around $2 billion). Assuming digital revenues soon rise to levels of $400 million, the NYT's digital edition itself would be able to support 850 journalists costing around $130 million.

Blodget writes: "Specifically, a $130 million annual newsroom budget could fund a newsroom of (around) 850 writers, editors, producers, videographers, and photographers who make an average of $150,000 a year all-in (salary, bonus, benefits, office, and T&E costs)."

Of course, the NYT is the NYT, and other digital newsrooms are going to have their work cut out in generating enough revenues to keep their heads above water, especially in India.

But the logic of costs is actually stronger in India, since journalism costs less here, and the digital revolution is going to be even bigger.

For four reasons.

One, smartphones and tablets are leading the digital access revolution here. This is where digital news will be consumed most in future. Add cheap 4G services in cities, and the last mile issues could get addressed quickly.

Two, the internet is really the mother of all media - with its capability to deliver text, voice and video over the same pipe.

Third, news consumers may not in future want to sit at a particular time in front of a TV or look for a newspaper to read news. They may prefer to consume news when they are free, rather than when it's prime-time. The internet and smartphones make it easier to access news at a time and a place of your choosing.

Four, delivery costs for digital will rise more slowly than for physical products such as newspapers. If wages and distribution costs are only going to rise, and advertising is going to taper or fall, the economic logic is moving in the direction of digital.

The idea of mainstream media clearly needs a rethink. Digital publications, once the child of mainstream, is on it way to becoming the parent.

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Updated Date: Dec 20, 2014 23:10 PM

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