Newspapers as mainframes

I believe that newspapers are and should be businesses, that market pressure is not only good but necessary, for newspapers are all about serving the public and if the public doesn’t want them, well, does that tell you something? The problem is that newspapers became monopolies, which made them fat, sassy, snotty, and lazy. See this very good post by a technologist turned VC who worked at the embattled Knight Ridder about newspapers as mainframes:

The short-form story in the modern history of computing is the deconstruction of the mainframe. Nothing in computing exists today that did not exist in some precursor form back in the original mainframes. The evolution of computing is the continuous unbundling of each of the components, cost reduction and miniaturization, and subsequent empowerment of the user at the point of delivery. Newspapers are Mainframes. The transformational power of the Internet lies in its incessant pressure to unbundle….

The business model of the newspaper is based on two principles – network effects and bundling.

The network effect is the classifieds business. The reason there is only one major newspaper per city, nearly everywhere, is that the classifieds business is a winner-take-all business. This made newspapers ‘natural monopolies.’ The net effect of the natural monopoly was that the competitive pressure for innovation disappeared. How many industries can you name where the product form, features, and delivery has not changed in 75 years? The marketing gene was largely bred out of the industry by becoming local monopolies. Monopolies fail catastrophically because of their inability to respond when the competitive landscape changes dramatically. This is the incumbent’s disadvantage. The very immunity to competition that made newspapers such great businesses also created resistance to market forces.

The bundling is the aggregation of all the varied content to attract and retain the audience. The core premise is you’ll read some content regularly, not necessarily all content….

But the Internet is that ruthless and incessant force for unbundling. Everything is a click away. Search costs are crushed.

Newspapers are Internet victims, but they are far from being the only industry under siege. Newspapers are especially impacted because two of the three main components of their cost structure are obsoleted. Advertising sales moves from traditional ‘push’ to advertiser self-service. All the physical assets of printing and delivery are obsoleted by the shared infrastructure of the Internet. If most of the cost structure goes to zero value, what’s left are news gathering and editing organizations and IT.

I like that: A newspaper is an IBM 360. A blog is an Apple 2. Go read the rest. Then see the post above about people trying to see newspapers as something other than businesses.