10 am
Latest update… two groups (51 people) have been called. Yours truly remains in this room… that still looks so full of people. Some guy sitting behind me doesn’t stop talking… he’s apparently an expert because he’s been on jury for a traffic court situation. I keep to myself… I don’t want to give away my biases prior to sending whomever to death row. I do typically announce upon my entrance, though, that the star juror has arrived.

First of all, old media (and in particular, print publications) are in a state of crisis. Newspaper circulation has been steadily declining for years. Less than 50 percent of households read a newspaper these days, down from the good old 1960s when that number exceeded 80 percent.

These numbers become even more alarming when considering the younger generations, which are abandoning the printed page even more rapidly. A 2005 study found that less than 25 percent of teenagers had read any part of a newspaper the previous day; it’s unlikely that they will ever become converts to newsprint. Newspaper readers tend to be older than 45 years old, so publishing companies are seeing their primary audience aging while making little progress in cultivating new readers. 

Of course, both creating and filling this gap is the Internet, as we increasingly turn to online news sources and blogs to get information. Sixty percent of those same teens polled in 2005 use the Internet daily. Nearly 80 percent of adults these days use the web regularly, averaging three hours communicating, shopping or reading online. And all this Internet usage tends to take time away from other media.

In regard to blogs, their growth as an information source can be attributed to some other factors. To start, people are just down on the establishment media these days, which toil at the bottom of approval rankings with lawyers and politicians. Big media isn’t considered very trustworthy. Over 60 percent believe the press is biased in its coverage, and only around 45 percent trust these organizations to accurately cover the news.

As this perceived bias hinders the establishment media, it’s been a boon for the blogs, which display their bias proudly. Blogs are more transparent, they share links, and they correct themselves openly. This approach has served to gain the trust and following of readers.

In general, though, people are growing tired of these moneyed media monopolies that have controlled the news for centuries. The Internet represents the democratization of information, and blogs are taking full advantage of this trend toward alternative news sources.

All said, we shouldn’t be carting the mainstream media to the funeral parlor quite yet. While the Internet may be cannibalizing other media, it has nonetheless become a predominant source of news and advertising. And this plays into the hands of the established companies, which have the resources, systems and experience.

Mainstream media have necessarily made the move to the web, usually with a robust online presence. They have professional staffs which provide copious amounts of content. And because of their size and reputations, newspaper websites continue to garner a large amount of hits, many getting millions of monthly visitors. This dwarfs the traffic of the majority of blogs.

Big media is also pretty important to the blogs. Bloggers often rely on news coverage by traditionally media outlets in the creation of their own content; blogs highlight published articles and offer opinions, analysis and humor on their own pages. Most blogs wouldn’t be as successful without the resources indirectly provided by the mainstream media.

What is clear is that in this media environment, online entities will continue to compete for readers. All websites will need to embrace quality design and usability to be able to create a positive user experience. Compelling information in an attractive and easy-to-use package will be the hallmarks of the best sites and blogs, and ultimately a component to online success.

Sources:
Blog!: How the Newest Media Revolution is Changing Politics, Business and Culture. David Kline and Dan Burstein. 2005.
Say Everything: How Blogging Began, What It’s Become, and Why It Matters. Scott Rosenberg. 2009.

Most people these days have had an experience like this one. And Clay Shirky’s 2008 book, “Here Comes Everybody,” takes this trend even further, providing anecdotes and insights into the many ways people are communicating and working together in the digital era. The book is filled with examples of how this is taking place, whether via banding together to recover a lost cell phone, flashmobs in Belarus, sharing photos of the 2005 London Train bombings, or creating an online encyclopedia with volunteers.

Essentially the heart of Shirky’s book is that better and cheaper technology has altered the manner in which groups function. This flexibility is challenging the long-accepted attributes of institutional structure; people can now organize in a cost-efficient fashion that allows for creativity. This helps to counter the “institutional dilemma,” which is the competition between value and cost. Institutions understand the value of group activity, but managing it depletes resources. Online social tools are lowering the costs of coordinating this group action, and now, successful organization is being done regularly outside the walls of business.

Shirky packs a lot of punch into these 300 pages. Each chapter covers in depth yet another lesson on the use of online tools, and the societal context. His writing is engaging, and the stories he relates are enlightening and sensible.

The case of Wikipedia shows how well people can work without a structured organization. When it began, as Nupedia, it wasn’t really catching on. That’s because there was an onerous editorial and approval structure that was sapping the enthusiasm of the contributors. But once it was set up so that anybody could make entries and edits, it caught fire. When the masses were entrusted to do it on their own terms, the result was one of the most popular sites on the Internet.

The book weaves seamlessly between simple and complex theories. Early in the book he describes the birthday paradox, explaining why a room with 25 people will usually yield a pair with the same birthday, which at first seems counter-intuitive. Later in the book he goes further, explaining why there’s a decent chance two people sitting next to each other on an airplane likely are acquaintances with someone in common. This “small world” theory underscores that we are socially connected. And digital tools are making these connections easier to facilitate.

Shirky claims that in this online era everyone is a media outlet. Indeed, everybody these days is creating and sharing content. We don’t need a printing press to distribute our words, nor a television station to pass along compelling video. And due to the ubiquitous social tools, now amateurs can do it in a fashion that rivals professionals.

This blurring of the lines between amateur and professional is a common theme throughout Shirky’s book. This is what we’re already seeing as the mainstream media, in particular newspapers, fight for their very existence. The professionals just don’t have the market cornered any more. Bloggers and other online news sources have fundamentally changed this equation. The news model before was for a few professionals to decide what would be published. Now, as detailed in the chapter “Publish, Then Filter,” there’s so much information available for all, and the challenge is deciding which content we want to read, watch and trust.

What we’ll see emerging from this shift isn’t necessarily a new institution to take the place of the old. Shirky, in an interview while at the “New News Ecology” conference at Yale earlier this year, says that “lots and lots of little overlapping versions of small organizations” will become the norm. And that’s good; instead of a few companies making loads of cash, these many smaller entities will have varying revenue streams. These organizations will be nimble and not as bound to the traditional ways of conducting business.

That said, we never really know for certain how technologies will affect society over time. Shirky relates that space flight and nuclear power were once considered potential catalysts for changing the world. But as it turned out the real change agents of the era ended up being transistors and the birth control pill; transistors because they brought increasing power within a small package, and birth control because it helped create a world where women were empowered and free.

“Communications tools don’t get socially interesting until they get technologically boring,” Shirky writes. “It’s when a technology becomes normal, then ubiquitous, and finally so pervasive as to be invisible, that the really profound changes happen.” Thus, looking ahead will be difficult, and we won’t really even understand the repercussions of these times until the technology hits a high level of saturation. That would also include use of the tools by a broader portion of the population than Shirky gives attention to in the book, those of different ethnicities and lower financial and educational levels.

Another particular question about the future is what will be the monetary model. Shirky, like others before him, plays up that people are creating content for free. I am still doubtful that this will be the case over time; money will at some point become a driving factor for those who have enhanced their skills and reputations.

That the Internet has changed the way we communicate and interact is already well established. Over the last several years much has been written about the impact of digital media on society. Shirky’s insights vault him into an esteemed club of visionaries. “Here Comes Everybody” is a must-read for those who seek to better understand this revolutionary time. Not only does the book deftly provide perspective, but it does so in an intelligent and easy-to-understand manner.

The divide can fall along many lines, including culture, race, age and education. But often the most telling indicator is economic. Those in lower income environments and families are far less likely to be taking advantage of the many wonders of technology.

It’s great to see that Thailand’s government had made bridging the divide a priority. While the article is short on specifics as to how to it’s going to actually fix the problem, it clearly sees the benefit of moving in this direction. I’ll be curious to see what progress has been made in that country since the introduction of this initiative.

Closer to home, the City of Seattle released a report in October that examined how our citizens are using information technology. Among the research findings of note:

• 84 percent of households have Internet service. And 75 percent have broadband or a service that’s faster than dial-up.
• There are disparities along the common lines of income, ethnicity, and education. Ninety percent of Caucasian households are online, while only 45 percent of Hispanic/Latino and 66 percent of African American households do.
• People want to use the tools, but need them to be affordable and accessed in a friendly environment that features training and comfort for all cultures.

During his campaign for mayor, Mike McGinn talked of creating a city-wide wireless system. This was dismissed by some, the feeling being that we’re in pretty good shape now in regard to our options, service and rate of use.

Now that McGinn’s moving into city hall, though, I can see him embracing the results of the technology report and moving forward on expanding and improving service. McGinn, more than any local candidate, understands the power of these online tools, and they were utilized in his campaign organization and strategy. Now he’s out there, preaching the mantra of communicating and working together to make this city better… essentially collective action as a city priority. I even see opportunity to address the digital divide by offering instruction on the basics of citizen media so that people can gain those skills and serve their communities better.

Digital media seems to have a friend in the mayor’s office come 2010. Watching how the city incorporates technology into all of its endeavors will be fascinating.

Murdoch’s recent mutterings, though, are escalating the rhetoric and speculation. First, he said he was on the verge of blocking Google from linking to any Murdoch content, and vowing to finally erect a pay-wall around his material. He even implied that he would fight fair use laws.

And next he announced that he was considering entering an agreement with Microsoft’s Bing, giving it exclusive search rights to all News Corporation content.

With Murdoch front and center in the discussion of digital media, it’s worthwhile to speculate on the repercussions of his plans if they actually were to take place.

Let’s begin with the subject hovering over all establishment media companies: charging for access to content. Murdoch’s News Corp. owns broadcast, film and print publications, but his initial volley is putting a price on his newspapers’ offerings. Of these papers, the reputable Wall Street Journal already is one of the online publications that charges for premium content, so this isn’t much of a deviation from business as usual. His New York Post, while a popular tabloid in the Big Apple, would likely lose readers to the free sites in that competitive market. And his Queens and Brooklyn community papers are the ones that need eyeballs to garner online advertising in the hyperlocal market; the amount he collects in small subscriptions would be negligible while leading to a decline in site visitors.

Similarly, precluding his content from appearing in Google search would be a questionable move. Google has the largest share of search by a long shot; people are already accustomed to using it on a daily basis. The moment Google is shut out is when the clicks to News Corp. material will dissipate. That is not a winning formula in these days when building market share is crucial to online success. It may make some money from Microsoft for the rights, but it’s debatable whether News Corp. has strong enough brand and quality to lead to a major behavioral shift in readers’ search habits.

Lastly, challenging the fair use laws. This is a most likely an idle threat. Few media corporations would risk going to court for fear that fair use might be made even stronger in the digital era. Fair use affirmation by judges would weaken the arguments of Murdoch and others seeking to limit access to their content.

At this quick glance, it doesn’t appear as if Murdoch’s latest rumblings are practical or realistic. Rather, they look like attempts to shake up existing practices and encourage other media companies to join his folly.

“Cluetrain” came to mind while listening David Hanley of Banyan Branch talk about the many methods his company uses to interact with the public on behalf of clients. While he covered many cutting edge techniques for doing such, a casual comment resonated with me: referring to one of his employees, he said that she spent her time selling benefits rather than building relationships.

This reflected once again that a shift is truly taking place within the walls of business, not merely being expressed within the pages of books. The fact is that we are tired of being treated as targets of a message; we see through the marketing and cheerleading both as consumers and employees. We want to be leveled with, not patronized. And online tools make finding the facts easier than ever. We don’t glance at an advertisement and buy the product or visit the restaurant. We research it, looking for reviews, and turning to those whose opinions we trust. As a result, the approach of engaging a community is gradually becoming a business norm, not just a corporate buzzword.

The discussion of Comcast’s prospective purchase of a majority share of NBC was timely. I’ve subsequently read Nicholas Carr’s article in The New York Times Magazine about the topic, and was impressed that many his insights were included in our conversation the other evening. He points out that television was initially thought to be the medium that would suffer least in the Internet era, due mainly to the size of watching video online. But as bandwidth has increased, tv is now scrambling like news and music have previously. And Carr agrees with us that net neutrality is crucial to ensuring that overzealous owners of “programming and plumbing” won’t use their power to control or infringe upon the information we seek to access.

This is the premise of Yochai Benkler’s classic and influential book, “The Wealth of Networks.” His tome, published in 2006, touts the emergence of a “networked information economy” that is shaping the way in which we create and share, and its far-reaching consequences.

Benkler explains that the world has moved to an economy based on the production of information (software, science, financial, services) and culture (music, writing, film). And it is our use of the Internet (which Benkler describes as a “communications environment built on cheap processors with high computation capabilities”) that allows us to produce information in an interconnected and decentralized manner.

These changes have fueled what Benkler describes as “commons-based peer production,” which features collaboration and creativity that is easily disseminated. Benkler claims this will replace the industrial production methods that dominated the 19th and 20th centuries. No longer will we rely upon monopolies to supply us information goods; instead we will do it ourselves. Printing presses, cable and satellite systems, and proprietary rights will give way to non-market social production, practiced and shared by millions worldwide via the power of the Internet.

Where all this is leading, Benkler posits, is toward making “the 21st century one that offers individuals greater autonomy, political communities greater democracy, and societies greater opportunities for cultural self-reflection and human connection.”

It’s quite an ambitious blueprint.

Certainly much of what Benkler writes rings true. The economic traits of information apply seamlessly to peer production, including low marginal costs, large-scale consumption, and widespread availability. Benkler is also correct about our transformation from an industrial economy that is centralized and mass-market-based to a networked version that is interconnected and distributed. This sea-change is threatening entrenched business models and corporations.

Media companies, in particular, are suffering. We no longer just consume media, but now we also create and share it, and that has caught the old-guard off-guard. For decades these companies relied upon wealth, political influence, consolidation, and copyright law to stave off competition and solidify profits. But these techniques aren’t as effective any more due to the sheer scale and democratizing power of the Internet.

Examples of how social production is altering the media landscape are in abundance: the CraigsList marketplace has obliterated newspaper classified advertising revenues; blogs have given everyone the opportunity to have a voice; cheap video cameras and platforms let everybody be a film-maker or talking head; and collaborative efforts have led to open-source software creation and a community-based encyclopedia.

Subsequently we’ve seen media companies buying up tech firms and products, supporting Benkler’s inference that monopolies will typically act in self-serving fashion rather than for the common good. As their business models are failing, newspaper giants such as Gannett, Hearst and others have purchased or invested in digital properties like E-Ink, Adify and CareerBuilder.com hoping to alter their dire prognosis.

Benkler champions an open marketplace that isn’t driven by monetary considerations, but he also acknowledges that the infrastructure can be costly. Social production may be free, but not the cables, switches, and microprocessors that are necessary to a networked economy.

For all of Benkler’s forceful and enlightening insights, though, his over-arching view is utopian. And herein lies a problem: idealism is admirable, but usually unattainable.

Benkler envisions a world where the masses come together and create for free in a new economy based on decentralization and distribution. In turn, he believes this will revolutionize the way business is conducted, how society communicates, and how government works. While some of this may seem plausible, societal and economic realities would seem to make the dream elusive.

Specifically, his assumptions about non-monetary rewards give pause. Benkler feels that community members will be guided by altruism. But it is ingrained in society that we will be paid for our work and expertise. I don’t see desire for money disappearing in a networked economy. That which we produce will eventually be driven by a profit motive.

Benkler contends that a decentralized approach to production will succeed outside a price system. However, this is more likely because the market has yet to fully evolve. YouTube, Facebook and other social production sites are wildly popular, but they are still desperately seeking ways to make money. Creators seem to be biding their time until monetization occurs.

Going further, amateur production will gradually lead to specialization and commercialization. Radio played this song before; it began as an amateur endeavor, but eventually gave way to a set of radio stations that could better serve a growing audience. Similarly in this era we’ve already seen bloggers create successful business ventures and networks.

Even in Benkler’s writings we see examples of monetary motivation. Among his strategies for the production of information, Benkler describes the Scholarly Lawyer who gives speeches or writes articles for free, but mainly to enhance reputation and thus opportunity for financial gain.

Another of Benkler’s claims, that production will proliferate without managerial structure, invites scrutiny, too. As entities grow, structure will necessarily become part of the equation. Look no farther than some of the darlings of social production: Wikipedia has implemented some hierarchy to improve its quality, and open-source software production utilizes a management framework. Autonomy may be a hallmark of social production, but there’s nothing wrong with being well organized.

At times Benkler’s overly pedantic prose can obscure his message. But his 515-page treatise nonetheless provides tremendous observation and analysis.

“The Wealth of Networks” is a groundbreaking book covering the repercussions of the Internet on society at large. While Benkler may overestimate the influence that social production will have in transforming the world, he still builds a convincing case by connecting current trends to larger ideals. In that regard, the book remains required reading for understanding the relevant issues of today’s networked economy.

Amid all the hue and cry about the demise of newspapers, the fact remains that they are still profitable for the most part. The problem was that they grew accustomed to large profit margins. When those margins got smaller the newspapers panicked because they’d made business decisions based on the inflated return, including purchasing other papers and real estate, two areas industries hit hard in the recession. And, of course, they had to answer to their investors on Wall Street. One of their answers, cutting staff and coverage, may have saved money but led to a worse product. If only they had learned to live with margins in the 5 to 10 percent range, which they are very capable of achieving, then they wouldn’t be pleading poverty. Barron’s online on Monday ran analysis saying that in reality, newspapers are doing just fine. And if newspaper management had been even a little bit agile in regard to digital media, they would have figured out ways to stem the losses to Craigslist and others.

The New Yorker doesn’t skimp on its content; it’s well-respected and award-winning. Online, though, it doesn’t offer access to every article. It lists all the content in the current issue, but some of the best articles don’t open when you click on them. The magazine can get away with this because of its sterling reputation; people can either buy a subscription to read the article, or wait until it becomes live online later. Many publications use this method, including Columbia Journalism Review, and it underscores the point that having compelling content needs to be central to any media approach.

As the editor of Wired magazine, Anderson has had a front-row seat for the technological revolution of the last couple decades. His 2006 book, “The Long Tail,” surmised that digital technology was toppling standard business convention. Specifically, because of high costs of marketing and distribution, brick and mortar companies have relied on selling massive quantities of a few hot products. But thanks to digital tools, these marginal costs are significantly lowered, allowing companies to sell smaller amounts of many different items and still make money.

“Free” is a continuation of Anderson’s general themes of “Long Tail”: the positive economic effects of digital technology on society and business. Here he argues that offering stuff for free is a savvy and inevitable move.

Anderson understands that his thesis runs counter to traditional economic theories. “It doesn’t take a PhD to understand why Free works so well online,” he writes. “You just have to ignore the first ten chapters or so of your economics textbook.” He seems to relish his role as a rabble-rouser, and heaps praise on successful practitioners of “free,” from Gillette to Google.

The economics of production have indeed been turned upside down by digital media. At the heart of this transformation is the sharply decreasing price of technology: processing power, storage and bandwidth. As a result, the marginal costs of copying, sharing and distributing are next to nothing.

Thus, he reasons, these low marginal costs, combined with the psychological appeal of a zero price point, make “free” a winning proposition. In turn, Anderson argues, businesses that learn to accept and maximize “free” are going to find success. The book goes on to lay out the ways this is being practiced, and cites cases where companies are using “free” as part of their business models.

So far advertising is the most prominent method of monetization. There’s a lot of free information on the Internet these days, content that attracts viewers with specific interests and needs. And advertisers are paying to reach these coveted audiences. Besides the standard display ads to which we’re accustomed, many creative approaches to online advertising have taken hold: pay-per-click text ads, affiliate ads, site sponsorships, paid listings in search results, and more. Google is the leader in translating its page views to cash; its services and products are offered gratis, and the money comes from advertising.

“Freemium” is another popular model, in which some content is free, but there are charges to access enhanced information and services. Several online publications, including The Wall Street Journal, Congressional Quarterly and Consumer Reports, and niche sports sites such as Rivals.com, are successful with this hybrid approach; free content generates interest, but if you want the really good stuff you’ll need to pay. Flickr and Craigslist give away services, but charge fees for what they deem premium services.

Anderson doesn’t limit himself to information products in explaining why Free is so dynamic. He points out that Zappo’s and Amazon use the power of free shipping to encourage purchases, and studies have shown it works.

What becomes obvious while reading the book, though, is that these common approaches to monetization aren’t really all that unique. Advertising revenue subsidizing free content has long been the strategy of publications, radio and network television; bring in as many people as possible, and charge high ad rates. Freemium, too, is merely a derivative of subscription publications and cable television. And using “free” as an enticement to buy a product is a time-worn strategy.

And while the book celebrates “free,” others curse it. In particular established media companies have struggled in the online era. They’ve offered their content for free, but the ad dollars haven’t proven to be particularly lucrative. Classified advertising, a cash cow for newspapers for decades, has become a skinny source of revenue as those dollars have fled to free online classifieds sites. Meanwhile, the one product you would think the media should be able to convert to cash, content, instead is being poached and monetized by Google and other aggregators. Media companies are actually failing, in part, because of their embrace of “free,” and the book doesn’t reconcile that conflict.

So as the book claims that there’s a lot of money to be made by charging nothing, this isn’t necessarily proving to be the case. And “Free,” while making its points, doesn’t really address where the money is going to come from over the long haul either. When it comes down to it, Facebook, YouTube and others mentioned in the book aren’t yet making a whole lot of money on their free offerings. Anderson concedes as much in the pages of “Free,” noting that while anybody can incorporate it, “typically only the number one company can get really rich with it.” Google is proving to be that exception, a company that is raking in big bucks in the era of free. But Google’s CEO Eric Schmidt is also quoted in the book, expressing concerns about the free model on the larger marketplace; free does work fine for his company, “and not well enough for everyone else.” That said, considering Google’s remarkable innovation and products, one might even question whether free is the reason Google is succeeding.

The book is at its best in providing historical context to “free,” and tying it gracefully to the present. And it does an excellent job explaining the basics of “free,” and demonstrating how prevalent it truly is today. However, unlike its cover claims, it doesn’t really examine the future of “free.” Free offerings may still be an interwoven element of our digital economy going forward; but without insight into its future I’m not convinced “free” will be the backbone Anderson believes.

Anderson, Chris.  Free:  The Future Price of a Radical Price.  New York:  Hyperion, 2009.

The July/August issue of Columbia Journalism Review featured a series of essays titled “No Free Lunch” discussing the challenges facing news organizations, and how they might be able to recoup some money for the content they produce.

“Open for Business,” by Michael Shapiro, suggests a free/paid hybrid, whereby some subscribers subsidize the free content. While society is indeed accustomed to free content, the fact remains that people do pay for in-depth and exclusive information they deem valuable. Sports sites provide “insider information” for a fee. And online versions of established publications have successfully utilized the “freemium” approach described in “Free,” in which some content is free, but there are costs to access enhanced information and services. Among those in this category are Consumer Reports, The Wall Street Journal and Congressional Quarterly.

The catch, of course, is that there has to be something that people are willing to pay for, and this requires an investment in reporting and creating content of value. This is where the paying customers also come in handy; they help underwrite the cost of producing more quality content that brings in both paying and free eyeballs. This fits into freemium’s 5 percent rule: the small percentage that pays for a premium version end up covering the costs for the many who access the content for free.

Clearly the establishment media created many of its own problems. They opted for the network television model: free access, mass audiences and high ad rates. Perhaps news organizations should have taken the cable television model instead: subscription fees and ad revenues driven by quality content. Ironically this approach is what newspapers and magazines operated under for decades, before the internet led to some rash, and arguably faulty, business decisions.

And now many media giants such as Murdoch and the Associated Press are circling the wagons, adamant about putting a price on the content. They believe that what they produce is valuable and merits a fee.

But just because media companies facing a crisis want to change the game, it doesn’t mean the people will necessarily go along. At least that’s what is indicated by a study by Hsiang Iris Chyi of the University of Arizona, “Willingness to Pay for Online News: An Empirical Study on the Viability of the Subscription Model.” The 2005 study randomly surveyed 853 Hong Kong residents, and found that very few would be interested in paying for information they’ve become accustomed to having for free. And those that were willing to cough up the cash tended to be both older and newspaper subscribers, demonstrates a generation gap rather than an income disparity. The takeaway from Chyi’s report, though, is that it will be difficult for media companies to rely on a subscription model for economic viability.

Rather than prying open the wallets of a generation used to free online content, Free suggests news organizations need to find ways to generate revenue within this new economic reality.

Slides:

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Resources:

Chyi, H.I. (2009). Willingness to Pay for Online News: An Empirical Study on the Viability of the Subscription Model. Journal of Media Economics, 18(2), 131-142.

Osnos, P. (2009). What’s a Fair Share In the Age of Google?. Columbia Journalism Review, 48(2), 25-28.

Shapiro, M. (2009). Open for Business. Columbia Journalism Review, 48(2), 29-35.