Sunday, August 27, 2006

Old Line Media, Internet and Politics

New York Times publishes an interesting article about a leading newspaper company Knight Ridder (KR) and it’s down fall.
I have been reading KR’s front line newspaper San Jose Mercury News for last 8 years and have kind of seen the transformation, mostly the downward spiral. KR had been an old media company with solid financial footing, good circulation, excellent journalism (85 Pulitzer Prizes) and quite a good technological adoption in early stages. I worked with few of their SW Technologist and it had been great experience – their skill set had been advanced one. All in all a good newspaper company with hardly any reason to think that it would face any business crisis.

But KR faced the crisis of Internet, succumbed to it and was finally bought by private investors. In some respect it got dismantled since some newspapers of the group were sold to different buyers. In a nutshell, the company simply vanished in a short period. The article in NYT maintains that primarily KR listened to the Wall Street advice of getting profitable and it got caught in that game. Basically newspaper business in America is mature and Wall Street expects certain return on equity. With challenges coming from Internet, there is no way these old media company can make that kind of money in today’s world and fall of KR is the classic example of that. As some investment bankers point, in today’s world there is no place for these media companies to be as a publicly traded company; they may need to be private companies. In other words the traditional business model is simply not viable.

This much is now well understand – in mature markets of America (and may be Europe, Japan and S. Korea) – traditional style newspapers are dead unless they change. Economist in latest issue laments that not many newspapers are changing rapidly to address this challenge.
New York Times itself is making some efforts in this direction but does not seem to be out of the woods. Washington Post seems to be doing reasonable. That bastion of Market Capitalism – Wall Street Journal – is also facing the blues and not doing that well.

Will this have any impact on what news and analysis is generated? Surely it will in the sense that money and resources behind investigative journalism will lag. But that effect is yet to manifest. So far in the early days of Internet news, we see more variety, more diversity and attempts by established media companies to explore new business models. No new business model has been fully established and the game is still open.

Beyond the business aspect, needless to say it is having impact on politics too since media plays such a critical role. But there is a feeling that it will be more of change in the style (as how TV changed American Politics – ask Joe Klien of Time and he will reply that that has been a negative impact) instead of wholesale change in the way politics is conducted. So far bitter partisan rancor amplification on Internet is the first observation. One Lamont victor in CT Senate Race due to Netroots of Democrats is one visible and easily identifiable impact. But it is hard to believe that the media change in that regard is the core issue. Medium has changed no doubt and it is bringing many other people into the discourse who otherwise did not participate as Al Gore points in England.
Also the new medium is helping in raising more money. Whether in itself these things will change the entire politics, it is not clear. Without the ‘substance or ideas’ politics is unlikely to change.


Umesh Patil
San Jose, CA 95111
August 27, 2006.

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