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May 25, 2017

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Seven lessons from the digital media revolution

By Stéphane Garelli | 00:01 UTC+8 May 25, 2017 | Print Edition

BUSINESS is about change — but no CEO would like to face disruption on the scale seen in the newspaper business over the past 15 years.

I am chairman of the Swiss top tier newspaper, Le Temps. It was founded in March 1998. At the time, 32.7 percent of total advertising spend was on newspapers. Today, it has dropped to 9.4 percent. Meanwhile, over the past two decades, the proportion of total advertising spend on digital platforms has surged from 2.1 percent to 38.6 percent.

Today, US adults spend 10 hours and 34 minutes a day in front of a screen.

The first lesson from the digital media revolution is that disruption occurs very, very quickly. Historically, different types of media have not posed a direct threat to each other. Television has not destroyed radio; the internet has not killed television. But new, digital entrants have reached a dominant position in just a few years.

Why didn’t publishers react faster? Because the threat emerged from another industry: technology. Like in other sectors, publishers were too busy competing with one another to notice the looming threat from Silicon Valley. Business leaders should always look beyond their familiar horizons. That’s the second lesson.

The third is that, while innovation tends to cannibalize former success stories, it does not mean it eradicates them entirely. Will paper die? Probably not. Sales of electronic books, the likely disruptor to print, have stagnated for the last two years. Reading on paper remains a distinct and valued experience that consumers are still willing to pay for. However, the reading experience itself is more likely to take place during the weekend while digital browsing tends to prevail during the working week. Every business model must adapt to suit changing consumer preferences.

However, it’s critical that companies maintain their core identity and values when adapting to disruption, and this is the fourth lesson.

The fifth lesson is that newspapers are at the center of an ecosystem: revenue comes from digital, print, video, and conferences. All divisions will have different levels of profitability. Many more businesses rely on a stream of different activities but all contribute to the success of the brand in terms of image and income. Consequently, media industry businesses must respect the individual identity of each of their divisions. The sixth lesson is that if back-office consolidation is appropriate, a firewall should be maintained between brands and their individual images. One does not sell a luxury watch with a plastic strap.

The seventh lesson is that readers should be at the center of any business model. That may sound obvious. But unfortunately it is easily overlooked. Too often, in the past, the media industry has been tempted to focus more on advertising and less on readership. But advertising always follows readers, not the other way around. A reader does not buy a newspaper to look at publicity. The digital world creates the same temptation. Advertisers are attracted by sites with the greatest number of clicks, even if they post fake news. However, this strategy can backfire.

Indeed, the public expects the media to be more than a money-making business. They are part of the intellectual infrastructure of a country. They contribute to its attractiveness in the same way as political institutions, physical infrastructure, and culture. A newspaper allows a community to share its identity; to interact and to build an image for the rest of the world to see. The economic success of the media industry depends on its ability to permeate the social and emotional aspirations of a society.

 

The author is Professor Emeritus at IMD where he founded the World Competitiveness Center as well as chairman of Le Temps.

Foreign Views


 

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