Wednesday, March 4, 2009

Icebox Syndrome (a tale about newspapers)

Chris Gulker blogs from the Silicon Valley:

Story goes that in the old days there were companies (some 2000 existed in 1909) in cold climes that cut ice blocks from frozen bodies of water in winter, stored them in insulated warehouses and sold them in the summer for people’s (literal) iceboxes.

Along came mechanical refrigeration, then-giant machines that allowed a new breed of ice company to make ice blocks all summer long in warm climes and cold. No large gangs of laborers required 4 months a year, big cost advantage, bigger market. None of the ice-cutters made the jump to ice-makers.

Then home refrigerators came along, and none of the ice-makers made the jump to making, or even selling, kitchen-sized refrigerators.

All three businesses were really about different things: guys with saws and sleds, warehouses with big machinery attached, appliance manufacture. The first two industries were just not equipped, in mind-set or plant, to become something else.

Rich companies try to avoid this trap by investing in multiple kinds of businesses - for old media this meant, print, radio, TV, movies - but diversified companies tend to lose focus and something suffers . More focused companies tend to do better, but are vulnerable to sudden, disruptive changes that can render their core business irrelevant.

Newspapers, like ice-cutters of yore, are grappling with a cost structure and delivery constraints that have had them on shaky ground since Marconi unveiled the radio. The web server, the cheapest ‘press’ in history by many orders of magnitude, is merely hastening the inevitable (and taking down the music, broadcast and film industries in the process).

Notice that it is the business model of newspapers that is the problem here, not the product. People want reliable, well-written information, just like they want a convenient way to keep food fresh. In both cases, the consumer gravitates to the cheapest and/or most convenient way to get the product.

Newspapers didn’t see themselves as information companies until it was too late. They were guys with printing presses, labor contracts, trucks and newsracks. Many mainstream media companies, Time-Warner and Hearst come to mind, are contending with a portfolio heavy in businesses that web servers and widespread access to bandwidth will put out of business in one way or another, sooner or later - probably sooner.

Hereabouts, the 144-year-old San Francisco Chronicle is in trouble, and may soon go (at least in its current form), ditto NYT and most other print outlets. I’ll miss much that these now-unwieldy entities produce.

What will be interesting is to see what modern business or other entity succeeds in filling that space. Companies like Hearst will probably best restructure as entities that manage their cash, real estate and other assets. I’m not sure the blogiverse can sustain enterprises like investigative journalism… Sphere: Related Content

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