News business not dying because ‘content’ is king
Imitation may well be the sincerest form of flattery but handing over large sums of money is the most concrete way of determining value. That is why this old newspaperman’s heart was gladdened to see that not once but twice the Pearson group managed to command a sizeable payment for its stake in both the Financial Times and The Economist. Its haul from these sales comfortably exceeds £1.1 billion.
That’s not bad for acquisitions in an industry whose death has been predicted with greater frequency than that of Mark Twain. And, as in the case of Mr Twain, there has been great exaggeration.
It’s embarrassing to reveal how long ago I entered this business but at the time I distinctly remember being told I was coming into an industry with a dubious future. This was when hot metal presses churned out newspapers and us reporters literally banged out stories on manual typewriters. Back then television was confidently predicted to be poised to extinguish the newspaper business.
Now, of course, television itself is said to be threatened with extinction, alongside newspapers but, curiously, the supposedly ancient business of radio broadcasts not only refuses to die but is going from strength to strength.
None of this is to deny that the newspaper business is infinitely less profitable than it used to be, nor to ignore that some major titles have hit the dust. However what the Pearson sales demonstrate and what Rupert Murdoch’s even more expensive acquisition of the Wall Street Journal also emphasizes, is that savvy business people understand something that seems to elude many media pundits.
What they understand is that these acquisitions are investments in content not the means of production. Indeed this is the very logic that has propelled massive investments in internet-based companies that, at base, have little more than great ideas to offer.
Newspapers are different from most of those Internet concept businesses or indeed Internet businesses that have proved their ability to make money, such as Google and Alibaba, because they are considerably more complex. Buying a newspaper involves buying a sophisticated amalgam of news gathering resources, entertaining content and informative commentary that should be shedding new light on a very wide variety of matters, plus in the case of all the above-mentioned publications, there is a considerable collection of valuable data.
How all this content is ultimately to be delivered remains an unresolved question; the options range from the printed page, to the company’s own digital pages or via the services of a third party, such as Facebook. But this matters not because what is of value here is the content not the platform.
The most savvy media entrepreneurs fully appreciate the complexity of the term content because unlike the analysts who spend too much time looking at spread sheets, they understand that content is an endless feast, which is extremely hard to quantify.
Sometimes it requires the instinctive nous of a Murdoch-like newspaperman to know what works and what the public wants. Newspapers themselves have collective nous, a far from perfect instrument but investors in this field sensibly recognize that part of what they are buying is this considerable, yet infuriatingly intangible asset.
What is perhaps not remarkable but seems so in these days when business plans are presented in language designed to obscure, is the lingering relevance of the British Broadcasting Corporation’s mission statement: inform, educate and entertain, conceived by its crusty founder Lord Reith and inscribed in Latin at the entry of the old Broadcasting House.
Any viable player in today’s media world needs to be able to do one of these things and in general media organisations, doing all three remains a prerequisite.
Value is derived from doing them well and this is why papers like the FT still command a premium price. That price is in fact the purchase price of collective human intelligence.
Focusing on how this intelligence is delivered and worrying about competition from the swathes of free content available on the Internet misses the point. It is like saying, for example, that the fashion house Prada is doomed to extinction because cheaper clothing and accessories can be had from many other sources.
Yet while it is widely understood that there is a healthy market for quality fashion goods, there is a lack of understanding about the market for quality information, not forgetting quality entertainment.
That’s why smart media companies are upping their game and should have no fear of extinction. But some media companies are panicking and think that to survive they must reduce investment in content as part of a survival plan. In this game the winners will not be those who are leanest and meanest but those who are fat with content and not afraid to get fatter.
Stephen Vines runs companies in the food sector and moonlights as a journalist and broadcaster