Newspapers

Since several newspapers have folded, executives in this industry are now hocking paywalls as the solution to their revenue problem.  The real question here is to ask why newspapers are failing.  The rise of free and instantaneous internet news has driven down the number of subscribers.  Furthermore, online marketplaces such as Craigslist, and to a lesser extent, social networking sites, have siphoned off classified ad revenue.  As I see it, the current system will only get worse.  As newspapers are driven farther into the red by those switching to the internet, more and more quality journalists will be laid off.  With neither solid writers nor the funding for interesting and comprehensive stories, the quality of newspapers will degrade at a quickening pace, fueling their demise.  Is there a solution to keep the local paper afloat?  I think so.  National and international news is readily available everywhere on the internet: Reuters, AP, MSNBC, and CNN all provide coverage in this area.  Newspapers should focus on something that only they can do best: local coverage.  The local coverage for The Virginian Pilot is terrible.  The staff has been drastically reduced and the paper thinned.  The sports section writes about the Redskins as if they were a home team, while plenty of local minor league, college, and high school games are ignored.  If newspapers were to drop national coverage entirely and focus solely on local news, business, and sports, they could bring themselves back into the game.  There are plenty of stories to tell about what is going in any local area and plenty of people willing to hear about them, but these stories are displaced by some far away event that is already well covered on the internet.  I admire the Virginia Gazette for following this approach.  I have no doubt that paid subscriptions would rise if newspapers focused on improving local coverage.

Good stories would be worth paying for.  However, as newspapers continue to crash and burn, the quality of their stories has suffered and the demand has gone down along with it.  Nobody wants to pay for a newspaper article that could have been written by a blogger on the internet.  Newspapers complain that their demise would lead to the end of investigative journalism and educating the public on current events.  They argue that no blogger has the resources to provide the quality and detail of coverage that newspaper journalists provide.  This may have been true in the past, but is no longer.  Again, reinforcement of local coverage would really help turn things around.

Online Media

This reality shock extends from newspapers to media corporations of all kinds.  Those in the TV and movie industries are upset at the rise of freely available internet media, ranging from cable and broadcast content on Hulu, to user content on YouTube, and to plain old bootlegging.  The CEO of Sony Pictures, Michael Lynton, complains that “nothing good has come from the internet,” and that “anyone can have whatever they want at any given time.”  Lynton goes on to argue that the internet should have rules as well as “guardrails” to keep people following these rules.  Whose rules should the people of the internet follow, you might ask?  Lynton’s rules.

As the old phrase goes, “I can’t change the direction of the wind, but I can adjust the sails.”  Lynton has it backwards: Sony should adapt to the reality of the current world, not the other way around.  He argues that his company is trying to make money, and thus, people should pay for the content his company produces.  Wrong.  For any rational individual, it should be: “I want quality content, therefore I am willing to pay for it.”  Nobody will pay someone for a piece of junk just because the seller wants to make money.  If someone produces something that is subpar, nobody is going to be willing to pay for it, and if they want it at all it will probably be bootlegged.  Like newspapers, TV, cable, and other media companies put profit first and quality products second.  If this were reversed, I imagine things would change.  TV shows should be kept in production based on reviews, not based on viewership, which is really an ad revenue metric.  Sequels to movies shouldn’t just be made because the previous installment was profitable.  I can think of no unplanned movie sequel that was as good or better than the original.  Furthermore, consumers should be given more options to purchase content.  For example, all previous episodes of any currently airing series should be available for purchase instead of just the last n, as is done with Hulu.  As with newspapers, an emphasis on quality and availability would more than likely support the media industry in the age of the internet.

Internet Connectivity

As bandwidth usage has increased due to increased consumption of online media sites, ISPs feel they’ve got to get their piece of the pie.  Recently, Time Warner experimented with tiered internet pricing.  This is a step backwards to the days of dial up where nearly everyone paid by the hour.  Fortunately, enough people complained that Time Warner reverted to the current unlimited monthly scheme.  While tiered pricing has been held off for now with respect to wired broadband, it’s a mess when it comes to wireless.  As it stands, a cell phone owner is charged separate fees for telephone usage, text messaging, and wireless data, and all three use pricing tiers.  Cellular telephone billing is the most convoluted of the three, with bizarre rules on who and when you can call with or without incurring some kind of penalty.  Text messages are by far the most profitable:  receiving 160 bytes costs around twenty cents — this works out to $1.5 million per gigabyte — that’s only for the size of a compressed HD movie!  With the advent of data plans, many cell users dream of circumventing weird telephone talk rules and expensive text messaging by purchasing an unlimited data plan.  A data plan could replace text messaging with instant messaging and telephone calls with Skype, but Apple is struggling to change the direction of the wind by restricting Skype use to areas of WiFi connectivity.

The role of the ISP is changing and providers are doing their best to prevent this change.  As landline telephones have been replaced by cell phones, landline internet will be marginalized with respect to mobile internet.  As the PC market has shifted from desktops to laptops over the past ten years, the next ten years will see a shift to small mobile devices.  The role of the internet will have increasing importance on cell phones, ultimately replacing cell telephone and text messaging.  ISPs do not want this, instead restricting the type of phones you can buy and the applications you run on them.  Google’s Android is a step in the right direction, and with more effort it won’t be long before an enthusiast can piece together a phone from custom hardware, install an embedded version of Linux, and connect to the internet from anywhere using software of his choice or creation.  Of course, no traditional-minded ISP would let anyone connect to their cell network with a custom-built phone, a custom OS, running custom software.  But the future will most likely be an internet of ad hoc wireless networks, making use of such custom mobile solutions.  Driven by the desire for constant connectivity and mobility, users will connect to their family, friends, and coworkers with one or two hops (and bypassing ISPs).  A significant portion of the internet could be accessed in this fashion, requesting data held by peers and forwarding it back to a user over multiple hops.  Using technologies with high bandwidth and long range, such as WiMax, a mobile ad hoc network would even be feasible in less populated areas.   Some of each user’s bandwith would be reserved for forwarding others’ requests and responses.  Data could be routed to peers with the least load (shameless plug for the paper I’m presenting at WASA 2009.)

The internet of the future will be mobile and more dynamic, but there is still a place for the ISP.  Unavoidably, there will be connectivity gaps and bottlenecks in an ad hoc wireless network, and a landline ISP will take care of this.  Also, most data will still be stored in fixed, physical locations with landline connections.  Internet users will still have to pay monthly fees to a service provider to handle gaps in coverage, but no longer will there be separate charges for landline phone, internet, TV, cell phone, text messaging, and data.  It will all be data, and it will be a big relief from the obtuse system that is in place today.

Conclusion

Those who are stuck in the system of the past are hindering the development of the future.  Today’s leaders must understand it is they that must adapt to the changing world.  The world cannot and will not shift to accomodate those who wish the world to adapt to them.  Viable business models for the internet exist and more are developing, even those with a “free” component.  Continuing adoption of a less than optimal strategy will only lead to a poor outcome for those that refuse to adapt.

Unless you live in an area with subsidized broadband and/or wifi, you’ve got to pay an access fee to an ISP. At this point, dial-up is more or less useless, so you’ve got to fork over $40 every month just to get online. Like most people, your ISP is probably a large telecom, like Verizon, Comcast, or AT&T, so the true cost is probably a lot more than that since it’s almost impossible to buy internet access by itself. You’re forced into signing up for a “bundle” which is some combination of land line phone, cell phone, TV, and internet all provided by the same company.  A lot of the junk (and added cost) that comes along with the bundle is probably unwanted, like bizarre foreign language TV channels, call waiting, and hardware rental fees since the option isn’t often given to buy your own modem or cable boxes.  By purchasing a bundle from an ISP, you’re subsidizing the weirdos who actually watch some of those high-numbered TV stations, listen music on their TV, or enjoy being nagged by call waiting that can’t be turned off.  Since the number of providers available for a given location are usually pretty limited, you’re forced into paying monopolistic prices as well as paying for services that you don’t even want.

It’s bad enough that you’ve got to fork over the dough for services that you don’t even want in order to get internet access, but in truth, it’s a lot worse.  Access is merely a base cost for using the internet.  In nearly all cases, there’s also a cost for accessing content.  Somebody has to pay for hosting and generation of that website you frequent or the videos you watch, and again, it’s going to be you.  Advertising is one commonly used method to shift the cost onto consumers.  Nearly every website has it.  Until around five years ago with the advent of pop-up blockers, Javascript removal tools, and ad-blocking tools, every website I visited spammed me with a torrent of flashing banner ads, pop-ups, and keyword advertising.  Somehow, the notion goes, enough people would actually click on that crap and buy whatever it was that was being advertised.  The advertising revenue would keep the servers running and provide the blog/newspaper authors with a small paycheck.

Personally, I can’t stand advertising in general.  It gets in the way of whatever it is I’m trying to do, whether it be searching or browsing the internet, reading a print newspaper, or watching TV.  Reading the paper or watching TV probably adds about fifteen minutes of sifting through all the ads or waiting through commercials to get to the rest of the TV show I want to watch or the newspaper article I want to read.  I’ve never clicked on a banner ad, much less even bought something that was advertised in this manner.  On the internet,  it’s hard to manually filter out all the crap to get to what you want.  Fortunately, current ad-blocking tools do a pretty good job.  I’ve even forgotten how good a job they really do, for when I sit down in front of a computer without any ad-blocking software, the harassment of flashing banners and keyword ads drive me up the wall.

Though internet advertising revenue has increased in the last year, it is predicted to fall in 2009.  Everyone is finally getting sick of all the junk constantly being pushed at them as advertising approaches levels seen in “Idiocracy” and methods used in “Minority Report.”  A great argument against internet advertising states that it is “not trusted, not wanted, and not needed.”  While print newspapers are folding due to declining subscriptions, content providers on the internet are worried about a similar fate due to declining ad revenue.  Ironically, the print newspapers mainly blame their plight on the shift to electronic media.  To that end, content providers are considering increasing their usage of a second tool to provide revenue: yet another access cost.

Most online newspaper websites and online offerings of network TV shows do so with fairly low restrictions on who accesses their content. The front page stories for nearly every newspaper are available online as well as last night’s Lost episode.  This freedom of access is what makes the internet so great: once you get in, there are few barriers to access anything.  However, the same people that brought you bundled internet access want to change that.  One media executive says, “We want to change consumer behavior somewhat, so the expectation that everything online is free has to change.”  If this expectation changes, the internet as we know it is finished.  It is the freedom and openness of the internet that makes it as valuable as it is.  You can find anything or anyone and learn about nearly any topic available.  On the internet, you can collaborate with people half a world away.  The introduction of a second access cost for some internet content will most likely remove that openness.  The effort to preserve network neutrality has been in place for several years, but now it may be coming to an end.  Several ISPs are currently proposing pay access for channels and TV shows online.  The movement of this business model may force providers of other media to do the same.  Original sources will become locked down, leaving open and collaborative efforts to rot without them, such as Wikipedia, or IMDB.  Someone may want you to look at a video posted to YouTube, but you can’t look at it because you don’t have the money to pay the access fee.

Nobody really wants to pay a pile of access fees to get the latest news, or even to watch videos on the internet, especially when an ISP is charging a significant monthly fee just to get online (though some say they are).  The problem is that the annoyance and unprofitability of internet advertising is forcing a shift to another solution to prop up content providers.  If the shift to selling access to content goes too far, the internet may become segmented into a large number of tiers, causing the digital divide to span both the physical and electronic worlds.