The Gapper gap

(Note: I’m going to link to the Financial Times three times in this post. You’re allowed two views a month at FT.com before being forced to register. If you’re conserving, I suggest you read the second two FT links.)

The Financial Times’ John Gapper gave my book a bad review because he refused to go along with its organizing premise and principal: that our economy and society are undergoing fundamental shifts as we move past the industrial age and that Google is a worthy totem to use to understand that change. Gapper instead treated the premise with surprising literalness (for a Brit) and decreed that Google is not a good example for business; Apple is.

I got some insight into Gapper’s worldview in a good piece he wrote last week on the death of Bertelsmann mogul Reinhard Mohn and, with him, the media moguls of his generation. Gapper does acknowledge fundamental change but he still explains it in the old, expired terms of the old economy, in terms of control.

The challenge of the internet is that it blows up the control of distribution, ensuring that all content owners – from Rupert Murdoch to the lowliest blogger – compete on equal terms. Moguls can no longer exploit its scarcity by buying television spectrum or by owning printing presses.

That is why media moguls have been pushed on to the defensive by a new breed of technology moguls such as Steve Jobs of Apple and Sergey Brin and Larry Page, co-founders of Google. Control of distribution has passed to people who make the software through which content passes.

He’s half right. Control of distribution was how the old moguls prevailed. But that is not replaced, one-to-one, with new control of distribution. The internet makes us all distributors. That is why you want to be open and part of the conversation so the people formerly known as the audience distribute you.

Google is not a distributor. Indeed, its greatest misstep to date, the book settlement, came in part because it uncharacteristically was going to control and distribute content (that it didn’t own). Google doesn’t distribute. It organizes. It links. Google is not in the software business. It is in the platform business (advertising being its primary platform). Apple, too, isn’t in the software business. It’s in the hardware business and that is what gives it control of distribution: we, the cult, buy its great products and take Apple’s control as the price. That, I realized, is why Gapper admires it, because it still has control, like the old media moguls. He defines and measures value in their old media terms.

Gapper is hardly alone. I’m using him as a convenient totem for media’s insistence on viewing the world through old media lenses. Both media and the world around it have changed in many more ways that I tried to outline in WWGD? That’s what I wrote in this post the other day about media’s blind spots to the realities of the new-media economy:

…the imperatives of the link economy, the need and benefit of giving up control, the advantages of creating open platforms over closed systems, the value of networks, the post-scarcity economy and the art of exploiting abundance, the need to be searchable to be found, the deflation innovation brings, the value of free, the triumph of process over product….

Now here’s the bigger question: How does this willful worldview affect the business analysis performed by business journalists? Gapper’s boss, FT editor Lionel Barber, predicted that “almost all” news organizations will charge for content within a year. That was in July. The clock’s ticking. I snarked at the time that if this same analysis were applied to GM, Barber would predict that the car company would simply raise its prices just because its cars cost more to make. There are no simple solutions to such fundamental change. Every industry has to remake itself under the new realities of the new economy. That is the story business media should be covering. But if media people refuse to – if, like the moguls Gapper eulogizes, they insist on holding onto their old ways – how good will they be at analyzing and predicting the future?

That speaks to the key recommendation in the good Luke Johnson FT column Gapper quotes in his Mohn piece. Johnson argues that lamenting change in media is futile and that media companies need to hire the digital natives who understand the new age.

The only answer is to hire as many bright young things as you can afford and hope their dynamism will counteract the inevitable conservatism of an existing institution. The media trade could learn from the technology industry, which is subject to wrenching structural upheaval at regular intervals.

Right. And Johnson also says that’s why the legacy companies are the least likely to see and build for the new world.

Unfortunately, a chief executive only a few years from retirement is hardly motivated to sack loyal colleagues to bring on board lots of teenagers to turn their company upside down. Psychologically, we are congenitally opposed to tearing down what we have helped create in order to build anew. Hence the status quo prevails, even if it is the demoralising task of managing decline with no salvation in sight. And so all efforts are applied to preservation in spite of a realisation that the economic model is broken – because no one is forcing the company in a new direction.

Right again. On this week’s On the Media, Ava Seave, coauthor of The Curse of the Mogul, told Bob Garfield that the media businesses that media reporters love to cover are and long have been bad businesses. But we don’t hear that – because, one assumes, they don’t want to hear that.

So how well equipped are reporters in legacy media companies to analyze the upheaval in the industries they cover? Where are their bright young things who see the world in new ways? Who is the Google of financial reporting?

: Later: Gapper responds.

  • Nic

    The more I hear moguls crying out that they must charge for content the more I get the feeling it’s ground cover for potentially illegal collusion and price fixing. Wouldn’t it be convenient for them if most newspaper sites went to a charge model, especially if these were the quality ones? We’d have little choice but to pay. Perhaps in a few years market forces would break it open (one big defection?) but if ‘moguls’ stick together it’ll have to be something new that breaks the monopoly. Even bloggers would ‘benefit’ since their news could go pay too… The example you mention of GM is an interesting one, but look at airlines. One or two started charging to check bags, then they all did and many other fees. Now it’s the source of most of their profits. That sounds like collusion to me, but extremely hard to prove – you could defect one airline to escape fees, but quickly they all had extra fees… I know that free markets are very powerful, but only if they are kept that way – content owners getting together in Beijing and making grand announcements of their strategies … isn’t that collusion?

    • Andy Freeman

      > Wouldn’t it be convenient for them if most newspaper sites went to a charge model, especially if these were the quality ones? We’d have little choice but to pay.

      No – we always have the option of doing without them. For most of us, that’s good enough.

      Another problem is that they know each other. They don’t trust the others because they know what they’ll do. They know that the first paper to break ranks will make more money than it will make by standing firm.

      However, it would still be a good thing for them to try. Heck, it would be good for them to set up a search engine with exclusive access to their content, so that they can discover the value of the search result page advertisements that they covet.

      • Nic

        Isn’t the exclusive search engine something that Murdoch already owns? (i.e. Factiva). I think you’re right that they are sufficiently paranoid that they do expect someone to break ranks. It’s going to be an interesting few years.

      • Andy Freeman

        Factiva appears to have exclusive, or at least privileged access to some news sources, but it doesn’t seem to be intended for “the rest of us”. It’s more like dialog, lexus/nexus.

        I’m talking about an ordinary search engine, no pay wall to use, that has exclusive/privileged access to various news sources and shares revenue from its results page with those sources. In other words, it is exactly what many of the news folks are demanding from Google, arguing that their content drives Google’s revenues.

        It’s pretty easy to set up such a thing. If they’re correct, doing so will give them tons of money and they won’t have to negotiate or share with Google.

  • http://www.jay.fm Jay Levitt

    Actually, I think Apple’s done an amazing job of straddling the “control” and “platform” divide. Their apparent strategy: Create something versatile and potentially disruptive, but hold off on the disruption as long as is profitable.

    F’rinstance: Everyone else sold MP3-based music players with no DRM. Apple made an iPod that could play DRM-free music – but, instead, they turned around and partnered with every major music label to provide a locked-down but fully-stocked catalog. Gah! Where’s my free music?

    In retrospect, it was pretty damned smart. Guess what they could do just as soon as “pent-up consumer demand profit” became greater than “become best buds with the RIAA profit”? Remove all the DRM.

    They did it again with the iPhone App store. Every other smartphone allowed independent development, but Apple told us we’d get nothing but WebKit-based apps, and we’d like it. Meanwhile, that let them ship the first iPhone without worrying about the public API – and create visible, vocal demand from the development community. By the following year, programmers everywhere were screaming: “Please! Let us write programs for your platform!” And what do you know… the App Store appeared, and Apple gets a cut.

    I don’t know if it was truly planned this way, but it does seem to be a pattern, doesn’t it? Most companies either court the rebellious-hacker base with an open API (early TiVo, some Google, Twitter), hoping to Be The Platform, or build a fortress (late TiVo, Facebook), hoping to Be The Gatekeeper. Apple seems to have a knack for being the gatekeeper as long as it possibly can – and then amazing us with the new power of the platform.

  • cm

    “Google is not in the software business. It is in the platform business (advertising being its primary platform). ”

    Very true. But there is another part to this. To get the growth in areas they are interested in, Google often has to step outside its business area to help things along. That’s why we see Google doing things like developing Android and Python and funding numerous open source efforts (and looking like a software company, except that they give the software away for free — well most of it) or installing fibre (and looking like a telco).

    Google Books can be viewed in at least three ways:
    i. Google trying to control content and getting outside its core business area (a mis step).
    2. Google wanting to index books so that they can run ads alongside, but unfortunately nobody is doing anything to hurry this along so they stepped in to do it (the Andorid business model). That they had to get pummelled a bit in costs and have to take control, at least for a while, is just the cost of doing business.
    3. A huge benevolent act.

    To come up with a new business requires that you add value. It is pointless trying to out-Google Google in search because:
    * There is no point for people to go visit 5 tiny search engines when they can do one Google search.
    * It is pretty much impossible to build a search system the size of Google to be able to compete.

  • Observer

    Completely unrelated, but why are your archives full of spam links? For example, this page:

    http://buzzmachine.com/archives/2005_03_15.html

    is full of links to something called “photo masenger”, mixed in with your own text…

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  • Rob Levine

    >>>On this week’s On the Media, Ava Seave, coauthor of The Curse of the Mogul, told Bob Garfield that the media businesses that media reporters love to cover are and long have been bad businesses.

    I hardly think you would agree with the argument at the heart of “The Curse of the Mogul,” Jeff. The book does suggest that the media business has performed poorly, but mostly because media companies focused on acquisitions – many of which involved the kind of companies you like to champion (MySpace is one example; StudiVZ would be another). The authors also suggest that media companies needs to focus on businesses with significant barriers to entry; you seem to disdain barriers to entry as somehow old-fashioned.

    • Andy Freeman

      > The authors also suggest that media companies needs to focus on businesses with significant barriers to entry; you seem to disdain barriers to entry as somehow old-fashioned.

      That’s not how I read Jarvis. I think that he’s saying that journalists should do things that journalists do best. That’s a barrier to entry.

      Jarvis does say that journalists should not rely on barriers that keep them from making money. For example, a paywall is not a barrier to entry, it’s a barrier to use, a tollgate. A toll gate collects money, but it’s also an impediment to use. If the reader isn’t willing to pay both costs, the tolltaker won’t collect the first.

      • Rob Levine

        A paywall is not a barrier to entry, and I would never suggest it were. I wasn’t saying anything about the wisdom of paywalls. I was merely pointing out that Jeff is almost certainly wrong in supposing that the authors of “Moguls” would agree with him about the culture of collaboration that he believes helps businesses on the Web. For example, they would certainly not encourage companies to be part of an “ecosystem” or anything of the sort, so far as I understand their thesis (I’ve started the book but not read the whole thing).

        They would encourage companies to wall off their businesses _in terms of compatibility_, not paywalls. For example, they would have supported Apple’s initial decision to lock consumers into an iTunes-iPod ecosystem that allowed Apple to uphold what are among the highest margins in the consumer electronics business for its iPod. They would encourage Amazon to do the same with Kindle. (This may be bad for consumers, but it was certainly good for Apple and it will probably help Amazon as well; it has certainly done wonders for Nintendo and Sony’s Playstation division.) Jeff usually champions Google’s point of view that proprietary _anything_ is bad. Google promotes this because it has the scale to do so – that’s why acting like Google can often be foolish.

      • Andy Freeman

        How about some examples of “barriers to entry” that Jarvis opposes?

        > They would encourage companies to wall off their businesses _in terms of compatibility_, not paywalls.

        What does that mean? (As I’ll point out, the example doesn’t support the argument.)

        > For example, they would have supported Apple’s initial decision to lock consumers into an iTunes-iPod ecosystem that allowed Apple to uphold what are among the highest margins in the consumer electronics business for its iPod.

        iTunes has (had?) a paywall. So does Amazon (with Kindle). It’s the place were stuff doesn’t cross unless money changes hands. There’s no technical reason for that restriction or its location – it’s a biz decision.

        Note that Jarvis doesn’t say that paywalls for journalism are bad. He says that they fail in most cases because readers won’t cross them, because they’ll do without and/or because they have other alternatives.

  • Cooler Heads

    Has it occurred to anyone that maybe you can’t use a for-profit business as an example of a socioeconomic shift in the organization of the global economy and society? For such smart people, that seems kind of dumb, glib, and designed to provoke for instant controversy rather than wise decisionmaking.

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  • Rob Levine

    @ Andy, this is not _my_ argument. I’m describing the argument in the book Jeff cites. I’m pointing out that I don’t think that the book’s authors would agree with Jeff. If you’re arguing about paywalls, you’re misreading what I wrote; if I was vague, I’m sorry. If you’d like to argue that I’m misinterpreting the book, you should buy it and read it – unless you’d like to wait for an Internet summary.

    • Andy Freeman

      > Andy, this is not _my_ argument.

      The part that we’re talking about sure looks like Levine’s position. I’ll quote “you seem to disdain barriers to entry as somehow old-fashioned.”

      No matter what the book says, what its authors believe, or the relationship of those beliefs to Jarvis’ beliefs, that’s a statement of Levine’s evaluation of Jarvis’ position/beliefs.

      I’ve provided an example of a barrier to entry that I believe that Jarvis supports and encourages. Does Levine think that it’s not a barrier to entry and/or that Jarvis doesn’t support or encourage it? If not, doesn’t that counter-example show that Levine’s characterization of Jarvis’ position is wrong?

      Of course, Levine may believe that there’s something wrong with the barriers to entry that Jarvis supports, but that’s a long way from Jarvis not supporting barriers to entry.

      • Rob Levine

        I would love to discuss this, but I can’t even understand what you’re trying to say. Also, I’d prefer you just call me “Rob.”

      • Andy Freeman

        > “you seem to disdain barriers to entry as somehow old-fashioned.”

        In its original context, that looks like a statement by Rob Levine about Jarvis’ position on barriers to entry. That statement seems to suggest that Jarvis doesn’t think that barriers to entry are a good idea for journalists.

        Am I reading it wrong?

        If I’m reading it correctly, I’m pretty sure that Jarvis disagrees with that statement about his position, that he likes some barriers to entry for journalists, and provided an example.

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  • http://www.ashokkarra.com ashok

    This was a really excellent read: you might be implying that focus on preserving an old business model is preventing some reporters from reporting properly – not just analyzing – the change occurring. In other words – yeah, we can read this as a case study in institutions facing change generally, or we can ask whether there is a blind spot certain journalists have, and whether the bias you document is manifest in other ways/analogous to other blind spots.

  • http://vanessamichelegarcia.blogspot.com/ Vanessa Michele Garcia

    I love your book!! However, I’m not too sure about the recommendation for gapingvoid.com, I have emailed them twice to get information on a specific blog card and I haven’t heard back from them. :-(

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