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Stuff-all change?

26 May 2020

After a protracted period of uncertainty, where its major suitor were the owners of the NZ Herald, Stuff has been sold.

It wasn't sold to NME, it was sold to its own CEO, Sinead Boucher.

More interesting than "who" bought stuff is perhaps the price paid... just one dollar, if reports are to be believed.

So why on earth would an award-winning news site sell for just a dollar?

Surely it's got to be worth more than that?

Well of course it is and the "one dollar" price is just the up-front. There are a lot of residual income streams that will continue to go to the existing owners, even after the sale has completed.

Even so, a dollar seems to be the going price for media companies these days.

Well perhaps a dollar is more than the going price... because earlier this year, Bauer, owners of several iconic Kiwi publishing titles such as "The Listener", offered to sell those publications to the government for a single dollar.

The government said "no thanks" and Bauer responded by simply shutting those titles down, with a loss of jobs and economic activity.

So why are media companies, the things which have created many a massive fortune in the past (Rupert Murdoch for example) now so worthless?

I guess we have the internet to thank for that.

In the pre-internet era, there were huge barriers to entry if you wanted to start your own publishing empire. You needed lots of capital to pay for floor-space, writers, printing and distribution costs, marketing, subscription management etc. All these things were expensive and required a good chunk of "up front" cash.

Thus it was that those who already had a commanding share of the publishing marketspace were effectively well-protected by this moat of expense and new entrants often struggled and foundered on the rocks of undercapitalisation. Whoever owned the masthead of national or global publishing flagships had a license to print money -- and most of that money came from advertising.

Whether you were a publicly listed company selling big-ticket items or just Joe Average wanting to get rid of some unwanted furniture, the newspaper was the place where you'd put your ads. Display advertising was hugely expensive and classified ads also produced a sensational return on each column-inch of a page. Publishers owned the gateway to the public and they charged a very hefty toll.

So how did the internet kill these publishing giants... or at least bring them to their knees and see their worth measured in cents rather than millions of dollars?

Simple... it took them out of the advertising equation.

Thanks to online auction sites, trading sites, Facebook pages and such, both the big companies and Joe Average can now connect directly with their market via the Net. Neither sellers nor buyers need news papers or magazines to pitch or purchase their wares. The queue at the media toll booth is now all but empty and the price per ride has fallen accordingly.

This has left publishers with a massive decline in earnings -- but the costs continue largely unchanged. Floorspace costs more than ever, printing is still a major expense and writers don't work for free (Stuff's interns excepted).

How can you make money and be profitable if you can no longer charge a king's ransom for advertising but your costs remain virtually unchanged?

Well the answer is that you can't. The old advertiser-funded publishing model is pretty much dead and those who cling to it in the vain hope that things will go back to "the good old days" are simply living on borrowed time. It's time for the media to reinvent itself in the same way the music industry did a decade or so ago.

When the sales of physical media started to tank, the recording industry initially responded by trying to sue their way to success. They blamed rampant piracy over the internet for their woes and alleged that billions of dollars a year were being "stolen" by those who illegally downloaded or burnt disks. That got them absolutely nowhere and simply made them look greedy and evil. Fortunately (for them), wise heads eventually prevailed and they realised that the Net wasn't the problem, it was an opportunity.

Now the music industry is doing "very nicely thank you" as a result of the shift from physical media to subscription-based streaming services. They adapted to the needs of a new market and prospered.

This is where the publishing sector needs to be headed -- rapid adaptation to mitigate the hurdles and maximise the opportunities.

Sadly, some have made very unimaginative attempts to change. The NZ Herald for example has installed a paywall that attempts to hide much of its "premium" content unless you subscribe. I'm not a fan of paywalls, but I guess some folk are handing over their money for access. Personally, I think there must be more effective ways to redesign the traditional publishing model to be a better fit with the economic needs and market expectations of people in the 2020s.

The really interesting question that needs to be asked now is "Where to from here for Stuff?"

I would never pay money for a subscription to Stuff because it is simply too tabloid and its stories do not qualify (IMHO) as real journalism. Too many press releases with an intern's byline tacked on. To many stories that lack any level of research or fact checking, too much shoddy "journalism" involved.

Given that the new owner is a person who has already been in a position to fix those problems, I can't see much changing and thus I don't expect to see improvement.

I may be wrong, but I don't see Stuff being a particularly good investment for anyone, until such time as they start thinking outside the box. A lack of new managment as part of the ownership change would seem to rule out that happening any time soon.

However, I shall watch with great interest.

What do readers think?

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