FCC Moves to Halt Internet Service Provider Content Discrimination and Preferences

The Federal Communications Commission has moved to keep Internet service providers from limiting or unreasonably discriminating against content provided by competing services

The regulations are designed to keep telephone and cable companies that provide phone services from using their Internet services to limit use of Skype and other online telephone services. It is also intended to halt them from making content provided by audio and video service providers they do not own less desirable by limiting downloads from firms such as Netflix or Hulu or providing faster service only for their own content.

The rules are designed to maintain a level competitive position on the Internet and to restrict the abilities of companies that dominate access to the Internet from using oligopolistic control of the service points to harm content competitors.

The regulations require that services allow their customers equal access to all online content and services, but allow the services some flexibility to management network congestion and spam as long as the rules are clear and not anti-competitive.

The rules apply to fixed line services, but do not apply equally to wireless telephony which is becoming the primary means of Internet access though smart phones and electronic tablets and e-reader. Mobile phone providers are permitted to provide preferential access to their services or selected partners, but the rules forbid mobile providers from blocking access to competing sites and services. Mobile services are given more leeway to manage their networks because capacity is more limited than on the Internet.

The regulations are an important step in ensuring that major service providers such as Comcast and Verizon are not allowed to use their dominance in service provision to harm other companies and the FCC should be applauded for its efforts. Such companies have in the past shown their willingness to take advantage of their monopoloy power and are not widely noted for their consumer friendliness.

Major service providers and Republicans are vowing to fight the move, arguing that the FCC does not have the authority to issue such regulations. If the courts side with them on the issue, Congress should explicitly give it the authority or empower the Federal Trade Commission to ensure competivieneess online.

Content Farms and the Exploitation of Information

A growing number of firms are aggressively pursuing the market for information by providing material that answers online searches and employing strategies so their material appears high in search results.

These enterprises are providing high quantity, low quality material on topics designed to produce many search hits and driven by the desire to make money from advertising received as high traffic sites. Some are proving quite successful.

Demand Media, for example, uses about 13,000 freelance writers to produce about 4000 articles a day for which it gains about 95 million unique visitors with more than 620 million page views monthly. Its eHow.com site alone gets about 50 million users. Ask.com, Yahoo and AOL are also engaging in the market.

When you make a search and are taken to answer.com, dictionary.com, wikianswers.com or hundreds of other sites providing such information to the public, you encounter this mass produced content. The business strategy is working and many of the sites are among the top 25 sites in the U.S.

These producers and a whole range of similar organizations are producing material in content farms that rely on freelancers who are paid as little as $1 an article or get no payment except for number of page views for their specific work. It is a throwback to the penny-a-word days of journalism in the 19th century. The firms are increasingly seeking video producers, photographers, and graphic artists to provide similar material at similar levels of compensation.

Even established news organizations and other enterprises are starting to use the syndicated material produced by such content farms. Organizations such as Hearst publications and National Football League are relying on them for some content that appears on their sites, for example.

The implications of these developments on the quality of Internet information and the prospects for professional writers are clear and hardly encouraging.

Digital Media Require New Pricing Methods

Newspaper publishers need to explore new methods of pricing content as they expand their digital portfolios because merely transferring the methods used in print can never bring the success publishers desire.

Print newspaper publishers have traditionally tended to set prices based on production and distribution costs and not on value created. Unfortunately, this has made it impossible to possible to obtain a price premium for factors such as prestige, service, experience, and convenience.

New digital operations, however, provide significant other pricing options because they differ in terms of whether they maintain the existing content bundle, whether non-payers can be excluded from use, the types of experience they deliver and how they are used.

Digital media require significant new thinking because they tend to be joint and complementary products with print. These lend themselves to selling strategies of bundling and versioning that permit uses of bundle pricing, option pricing, multiple purchase pricing, differential access pricing, and inventory based pricing that have not typically been used in the newspaper industry.

Pricing is particularly complex in the digital environment because the number of price choices grow exponentially. In the print product managers price advertising and the circulation, but when they add an online product they have to make 8 choices because they are shifting to a multisided platform operation. If mobile, social media and other print products are added to the portfolio, one must give significant thought to the roles each plays in the portfolio and the interactions of pricing choices among them.

Although digital media use is growing significantly, companies need to be pragmatic in their investments and operations and their hopes for new revenue. Online consumption is still only about 10 percent of all media use and online advertising is still only about 13% of offline advertising. Those numbers are significant and rising so companies needs to seek and exploit opportunities in digital spaces, but managers cannot expect those to immediately replace the contributions of their legacy operations.

Newspaper Companies Start to Think Beyond Today's Bills

The somewhat improving condition of the newspaper industry is permitting companies to move from merely paying operating expenses to finding ways to improve their balance sheets and looking for new opportunities. In recent weeks:

• The Gannett Co. has placed senior notes totally $500 million that will be due in 2015 and 2018. The notes financed at 6.375% and 7.125% will give the company some financial breathing space by being used to pay a maturing loan and revolving credits. In addition it negotiated an extension on $2.7 billion in revolving credit with Bank of America from 2012 to 2014.
• The New York Times Co. has cut its debt by 40 percent in past 2 years and is beginning to look at small investments in digital media that may position it for future growth. It recently provided $4 million in financing for Ongo, a start-up news sharing site that will aggregate stories from a number of newspapers.
• The Washington Post Co. announced it would repurchase 750,000 of its outstanding shares. Such a move will increase future earnings per outstanding share and boost shareholder equity in a tax beneficial way. This type of buyback typically occurs when cash is accumulating in the company and its stock is undervalued.

All of these developments reflected the improving financial performance of newspaper companies and indications that the revenue picture for newspapers is getting better. With improved profits and dividend payments, newspaper companies, lenders, and investors are starting to step back from the brink and the reconsider the completely negative picture of newspapers that developed 3 years ago.

Bankrupt Newspapers Leave Employee Unions and Government Corporation Holding the Pension Bills

It has not been a good month for newspaper unions at bankrupt newspaper companies or the government corporation that insures pension funds. As part of their reorganizations, a number of bankrupt newspaper firms are not paying money owed union pensions or are quietly letting the guaranty pick up the tab for retiree costs.

• Unions of Philadelphia Newspapers LLC (The Inquirer and The Philadelphia Daily News) were forced to accept 12 cents on the dollar for the $12 million the bankrupt company owned to employee pension plans as part the reorganization plan.
• The Chicago Sun-Times off-loaded $49.1 million of its underfunded pension obligations for 2300 retirees and employees to the Pension Benefit Guaranty Corp. The paper and it suburban subsidiaries were purchased out of bankruptcy without the new owners assuming the pension obligations.
• The Dayton News Journal dumped $15.4 million in underfunded pensions payments on the Pension Benefit Guaranty Corp. , which will ensure 1,100 current and former employees receive benefits owed to them. The newspaper and its assets were purchased out of bankruptcy by Halifax Media, but it did not take on the pension liability.

The Pension Benefit Guaranty Corp. is a federal corporation designed to protect pensions when company-run pension funds collapse or cannot pay agree benefits.

These types of problems occur when money due for benefits is not paid into pension funds or money is removed from company-run funds by the company. When this occurs companies use the money for other purposes: increasing liquidity, paying bills, giving executive bonuses, etc. However, this creates problems if the company ceases operating or if liabilities of underfunded pension obligations weigh too heavily on the balance sheet.

Existing laws allows employers to take money from company-run funds if they are overfunded, but do not require them to immediately fully fund them when they are underfunded. Overfunding and underfunding, however, are normal conditions caused by fluctuations in stock and bond markets in which pension funds are invested. Because overfunding and underfunding tend to even out over time, companies using the funds like a bank can create problems. Even when pension funds are not run by companies, delays in paying obligations create problems if the company closes or goes into receivership.

Newspapers across the U.S. have carried large stories about pension payment problems at other bankrupt companies, but coverage of the problems at their newspaper colleagues have drawn scant attention.

Competitive Struggles Among Television Platforms

Since the emergence of cable and satellite television services there has been struggles among platforms to increase their attractiveness to audiences and to draw market share from terrestrial television in developed nations. These struggles have had affected content producers, broadcasters, platform operators and regulators attempting to fashion socially optimal broadcasting systems.

In the first competitive struggles between terrestrial broadcasters and cable operators, broadcasters controlled the highest quality contemporary programming and cable operators primarily competed by offering a wider variety of channels and providing premium movie channels. In many locations broadcasters actively sought regulatory policies to keep their channels from appearing on cable in order to reduce its attractiveness as a competitor.

As cable matured and satellite services emerged, the nature of the struggle shifted as greater subscription and advertising revenues allowed cable networks to offer higher quality contemporary programming. In this competitive phase, terrestrial, cable and satellite operators began struggling for exclusivity of content that would drive audiences to the platforms. Gaining exclusive rights to first broadcast runs of motion pictures, sporting, musical and other events, and high quality original programs became primary goals. In this environment, producers of content and owners of event rights sought to maximize their returns across the platforms. while platform operators sought to maximize their returns by gaining market power through exclusivity. This led to negotiations based not only on transmission rights but exclusivity rights as well, which dramatically pushed up costs of some content—especially sports rights.

As cable garnered a larger audience share, broadcasters that had previously been opposed to carriage of terrestrial signals on cable because asking regulators for ‘must carry’ rules to require cable operators to carry terrestrial channels so they could have additional access to audiences or audiences in places their terrestrial signals had not previously reached. This was especially useful for advertising supported channels, both public service and commercial.

In recent years, the widespread success of cable and satellite platforms and the shift of wealth from terrestrial to other platforms has led broadcasters to demand payments from cable and satellite platform operators for carrying their channels. The newer platforms are resistent and in some nations the struggle over payments remains on-going.

The digitalisation of terrestrial, cable, satellite, and broadband platforms has now created multiple opportunities of distribution of audiovisual materials and is creating a new environment in which additional competitive struggles are taking place among platform operators. At stake are the significant potential gains from advanced paid video-on-demand services and IPTV. Platform operators—DTT, cable, satellite, and telecommunications firms that offer broadband services—are now struggling to ensure that they are not competitively disadvantaged compared to other operators. Operators that control or have high market power over platforms, especially broadband links and systems needed for advanced services or interactive DTT services, will have significant advantages in the next generation of services. Consequently, there is a great deal of effort on the part of major platform operators to acquire access to all platforms and services through ownership, alliances and joint ventures and in many cases there are outright efforts to control those platforms and servcies.

The trajectory and outcome of this competitive struggle is particularly important because it will have significant impact on the range of services and costs for services available to the public. These developments also have significant importance for the relationship between content producers and platform operators because the means of compensation is likely to evolve from current transmission rights and exclusivity rights payments to one involving revenue and profit sharing. This has significant implications to the funding and ways that contemporary terrestrial television programming is created and role of terrestrial broadcasters in the new environment.

Getting It Wrong: The FTC and Policies for the Future of Journalism

Following hearings on the state of newspapers this past year, the U.S. Federal Trade Commission staff has now prepared a discussion paper of potential policy recommendations to support the reinvention of journalism.

It is a classic example of policy-making folly that starts from the premise that the government can solve any problem—even one created by consumer choices and an inefficient, poorly managed industry. Most of the proposals are based in the idea of using government mechanisms to protect newspapers against competitors and to create markets for newspapers offline and online.

The FTC’s staff ignores the fact that most newspapers are profitable (the average operating profit in 2009 was 12%), but that their corporate parents are unprofitable because of high overhead costs and ill-advised debt loads taken on when advertising revenues were peaked at all time highs. It also fails to make adequate distinction between longer term trends affecting newspapers and the effects of the current recession. The staff thus blends the two together to give a skewed picture of the mid- to long-term health of the industry.

Policy alternatives suggested by the staff for consideration include:

• Limiting fair use provisions of copyright and providing new protection for “hot news,” which would give first news organizations to distribute a story a proprietary right to the facts in their article
• Providing a variety of types of subsidies for news providers
• Changing tax exempt status laws to make it easier to obtain not-for-profit status and funds from charitable donors
• Taxing advertising, spectrum, internet service provision, consumer electronics, and cell phones to provide funds for news organizations
• Creating new antitrust exemptions allowing price collusion and market division

It is hard to ignore the irony and incongruities of a government agency whose purpose is to protect competition and effective markets suggesting anti-competitive practices and taxes that will have negative effects on consumers, competitors, and other companies. Setting those aside, however, none of the suggestions deal with the real underlying economic and financial problems of the news industry: that fact that many consumers are unwilling to pay for the kinds of news provided today and that news organizations need to radically change their management practices and begin reducing organizational inefficiencies.

If commercial news enterprises can’t effectively manage themselves, compete in markets for their products and services, or find effective business models for themselves, why does anyone think that bureaucrats in the government have any ability to solve those problems for the news industry?

Challenges of Product Choices and Prices in Multi-Sided Media Markets

Commercial media have faced product and price challenges in 2-sided markets for more than a century, but are encountering greater difficulties in getting it right as they try to effectively monetize multi-sided markets.

2-sided and multi-sided markets are ones in which more than one set of consumers must be addressed and there is an interaction between strategies and choices for each set of customers. Prices for one group of consumers affects their consumption quantity and this, in turn, affects the prices for and consumption by the other groups. Optimal revenues can only be achieved by dealing with all groups of consumers simultaneously.

Newspapers are a classic example of 2-sided platforms. The first product is the content sold to audiences and the second is access to audiences that is sold to advertisers. This has been the basis of the mass media business model since late 19th century and the strategy has been to keep circulation prices low to attract a mass audience and then to make the majority of revenue from advertiser purchases.

In this model, success in selling the newspaper product affects ability to sell advertising access because more readers makes a paper more attractive to advertisers; conversely, success in selling advertising affects ability to sell the newspaper to readers because it provides resources that improves content and make the paper more attractive.

Getting prices right in this model is crucial, but most media have traditionally been relatively unsophisticated in setting prices. Few have used demand-oriented pricing, based on what the market will bear, or target return pricing based on achieving a specific rate of return. Instead most have set prices based on what the closest competitors are doing or on industry average price. They were historically able to get away with it because elasticity and price resistance were relatively low because of the near monopolies of past in many markets.

Today, however, product and price choices are getting much more complex because of rising competition and because media are shifting from 2-sided to multi-sided platforms in which relationships among consumers are compounded. This complexity is evident in the difficulties newspapers and magazines are having figuring out effective ways to provide and sell content online.

The problem occurs because there are paying audiences and advertisers for the print edition; free audiences and paying advertisers for the online edition; and some joint audience and advertisers who use both the print and online offerings. If one alters the free price online to create a paying audience, it not only affects the willingness of online advertisers to pay, but affects the willingness of joint audiences and advertisers to pay and thus effects performance of the print sales as well.

Creating the correct combination of content available in print and online, getting the content prices right, generating audiences in both places that are right for advertisers, and properly prices advertising is no mean feat. The situation is made even more difficult as publishers add eReaders and mobile services to the mix.

Those who think they can easily monetize newspapers, magazines, or other information products online ignore the significant challenges posed by multi-sided platforms and need to carefully consider the impact that these factors have on product and price choices.

SEARCH FOR ALTERNATIVE MEDIA BUSINESS MODELS HAMPERED BY NARROW THINKING

Media executives around the globe are clamoring for new and alternative business models and industry associations everywhere are holding seminars and conferences on how to create and discover them. There is just one problem: They don’t know what business models are.

When you cut through the rhetoric, you find that most executives are merely interested in finding new revenue streams. Even when you consider firms touted as having best practices in that regard, none have been very successful in establishing them. The reason is simple: The dominant thought about business models is highly limited and far too narrow to solve the contemporary challenges of media industries.

Business models are not merely about the revenue streams. Instead, they establish the underlying business logic and elements. They involve the foundations upon which businesses built, such as companies’ competences, value created, products/services provided, customers served, relationships established with customers and partner firms, and the operational requirements. If you get those elements right, the revenue issues take care of themselves.

The biggest problem of media business models today is not that the revenue model is diminishing in effectiveness, but that most media companies are still trying to sell nineteenth and twentieth century products in the twenty-first century. And they are trying to do so without changing the value they provide and the relationships within which they are provided.

Because of the enormous changes in technology, economics, and lifestyle in recent decades, the needs of customers have changed, they kinds of content they want, and the ways they obtain news, information, and entertainment have been dramatically altered. If media firms do not address these changes in consumer needs and behavior, no amount of worry about revenue streams will stem the fundamental challenge that audiences are leaving traditional print and broadcast media behind for content providers and distribution platforms that better serve their needs.

The content of traditional media products were created in specific technical, economic, and information environments that no longer exist. In order to evolve and prosper media companies must revisit the foundations of their businesses, ensure they are providing the central value that customers want, and provide their products/services in a unique or different way from other media firms.

The range of technologies and distribution and interactive platforms available in the twenty-first century require that firms increasingly see their business activities as cooperative processes requiring coordination and interdependence with external firms and customers themselves. Standing isolated and alone—at arms distance from the customer—is no longer a viable option.

This is not to say that firms must make sudden and dramatic changes in their business models, but they must start revisiting all the aspects to make regular incremental improvements and changes. Questions need to be asked about what is provided, why it is provided, how it is provided, and the entire structures and operations of firms. These need to be addressed first, then the revenue models can be sorted out and improved.

NEWS HAS NEVER BEEN A COMMERCIALLY VIABLE PRODUCT

Industry, scholarly and policy discussions about the future of the news industry in North America and Europe continue to focus on how news enterprises can sustain themselves in the 21st century. Publishers keep asserting that things will be fine if they can erect pay walls and charge for news online and they argue that governments should provide legal protections for online news so they can make news a viable digital business product.

Their approach is wrong and ignores the fundamental reality that news has never been a commercially viable product because most of the public has been, and remains, unwilling to pay for news. Consequently, news has always been funded with income based on its value for other things.

Historically, the first collection and dissemination of news was funded in ancient times by emperors and kings, who used governors and officials throughout their realms to collect news and information and send it to the seat of power. Emissaries, consuls, and ambassadors collected foreign news and information in places important for trade or seen as potential threats to the realms. In this Imperial Finance Model, news and information were collected and shared with officials throughout the realms to assist in governance activities. This revenue model was based on official financial support because it served the interests of the state.

In the Middle Ages, a Commercial Elite Finance model developed in which wealthy merchants hired correspondents in cities and states with which they traded to collect information about political and economic developments relevant to their trade. Linen, porcelain, sherry, and spice merchants used the news for commercial advantage and held it in confidence rather than sharing it with others.

In the 18th and 19th centuries a broader Social Elite Finance Model developed to support newspapers that served the needs of the aristocracy and widening merchant class. Even with high cover prices, this model news was not viable and newspapers were subsidized by commercial printing activities and income from other commercial activities, governments and political parties, and merchant associations.

The Mass Media Finance Model appeared in the late 19th and 20th century, made possible by the industrial revolution, urbanization, wage earning, and sale of finished goods. In this model news was provided for the masses at a small fee, but subsidized by advertising sales. Because most of the public was uninterested in day-to-day events and “hard” news, the bulk of newspaper content was devoted to sports, entertainment, lifestyle, and features that increased the willingness of the public to spend pennies for the product.

This mass media financing model remain the predominant model for financing news gathering and distribution, but its effectiveness is diminishing because the “mass” audience is becoming a “niche” audience in Western nations as those less interested in hard news continue abandoning newspapers for television, magazines, and the Internet. This is creating a great deal of uncertainty how society will subsidize and pay for journalism in the twenty-first century.

Focusing on news as a commercial product appears futile and commercial news providers would do well to put their efforts in creating other commercial activities that can subsidize news provision, such as events, education and training, bookstores, travel agencies, and a variety of merchandising activities. Many publishers subsidized news activities with these types of activities a century ago and some continue to do so. It is likely that news providers will rely on a far wider range of revenue streams in the future than merely on the consumer and advertising streams upon which they depend today.

RECORD COMPANIES, DIGITAL DOWNLOADS AND ARTISTS RIGHTS

Pink Floyd was always a unique rock group and understood its music as a form of artistic expression. It evolved from psychedelic music in the 1960s to progressive rock known for rock instrumental and acoustic effects in the 1970s. The group often saw their albums as integrated works of art in which subsequent tracks built upon earlier ones. They considered their entire recording to be art; that the ordering of tracks was part of the expression and should not be altered, and that the album should be enjoyed as a whole not merely as a collection of individual songs. Even the album covers got special artistic attention reflecting their content and experiences.

The band felt so strongly about the art of its music that it negotiated a contract with EMI that included a provision to “preserve the artistic integrity of the albums.”

Consumers obviously thought Pink Floyd got the art right, helping the group achieve 16 gold, 13 platinum, and 10 multi-platinum albums. Two of its albums sold more than 10 million copies. The group’s recordings are second only to the Beatles recordings in terms of their value, something not missed by the group’s label EMI.

With sales of digital downloads exploding (accounting for nearly $4 billion in industry sales last year), the record company saw gold in selling individual tracks from albums such as “The Dark Side of the Moon” and “The Wall”. It licensed Pink Floyd’s tracks for sale on iTunes. It was like EMI was cutting up a Kandinsky painting and selling the pieces individually.

The band wasn’t amused and headed to court. It argued that it albums were indivisible and that EMI had violated the contract with the group by splitting them up. EMI countered that it was all just a matter of the new way of doing business in the digital age and that the contemporary technology and business model made it necessary to do disaggregate the albums.

This week the court ruled in favor of Pink Floyd, awarding them $60,000 for the contract violation and $90,000 for legal costs. The court said EMI cannot distribute the group’s music "by any other means than the original album, without the consent of Pink Floyd."

The case is another in a long line of disputes over major media and online companies using content without appropriate permissions of copyright owners. These are the same companies that vigorously protect their own interests against individuals and other media companies and that regularly tell legislators they need more rights so they can protect the interests of authors, artists, and performers. The arrogance and duplicity could not be clearer.

It is also a stark reminder that most media enterprises are somewhat unhappy alliances between content creators—whether journalists, authors and writers, filmmakers or performers—and business creators who often have differing perspectives on the roles and functions that media perform for society and the individuals who use media for art and expression.

HONOLULU JOINS THE RANKS OF NEWSPAPER MONOPOLY CITIES

I was sorting through some of my father’s belonging recently and came across the 1941 souvenir edition of the Honolulu Star-Bulletin (Jan 8, 1941), “The March of Hawaii.” Its lead story was the reorganization and strengthening of the Pacific Fleet and the appointment of Admiral H.E. Kimmel to head it.

My father acquired the paper while stationed in Hawaii with the Army Air Corps. Eleven months later the U.S. was at war, with Kimmel taking heat for having the bulk of his capital ships anchored in Pearl Harbor during the Japanese attack.

I was reminded of the find this week while reading the news that Gannett has agreed to sell the Honolulu Advertiser to the Star-Bulletin. The two have a 130-year history of competition, somewhat muffled until they escaped their relatively difficult marriage in a joint operating agreement between 1960s and the millennium. Now the smaller paper is buying the bigger paper, if it can comply with or skirt antitrust provisions.

We are now in the last throes of consolidation of the newspaper industry, brought on by audiences shifting to television, cable channels, and the Internet for news and information, and advertisers following audiences. The consequence is the newspapering has become a monopoly business in more than 1360 cities and towns and big city papers—even when they are monopolies—are having difficulties competing for advertising dollars. Only two percent of cities have competing dailies.

This change calls into the question the traditional view that a competing press is the foundation of democracy. If competition among perspectives on news and information is necessary for democratic functions, we have to think of it beyond the printed press and begin recognizing the important functions provided by other providers of news, information, and commentary.

Rather than constantly challenging their abilities to carry out functions in the same way as the press once did, we need to find ways to support and improve their activities—whether they be broadcast or Internet based. And we need to find ways to ensure that the papers remaining in place reevaluate their democratic functions and find ways to provide service to the spectrum of observations and ideas that has been diminished by the newspapers monopolies that now dominate our land.

THE BATTLE TO CONTROL ONLINE PRICES

The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music.

In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.

Producers, of course, want higher prices because they produce higher revenue and better profits.

The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.

Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.

What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.

Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.

Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.

Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.

THE BIGGEST MISTAKE OF JOURNALISM PROFESSIONALISM

Efforts to professionalize journalism began early in the twentieth century as a response to the hyper commercialization of newspapers and the “anything goes” approach to news that emerged in the late nineteenth century as a means of increasing street sales through sensationalism, twisting the truth, and outright lies.

The impetus for journalistic professionalism originated among publishers who wish to counter the trend and it gained support of journalists who saw it as a means of improving their working conditions and social standing. Journalism training and higher education programs, professional societies for journalists and editors, and codes of ethics and conduct emerged as part of professionalism. These promoted the core values of accuracy, fairness, completeness, and the pursuit of truth.

These efforts improved industry practices, pushed out the worst journalists and publishers, and creating some trust in the content of news. They also created environments in which advertisers were willing to promote their wares in newspapers and made news organizations more financially sustainable.

This is where journalistic professionalism took a wrong turn, however.

It did so in two ways. First, professional journalists were taught and accepted the idea that they should worry about the journalism and leave the business to itself. Second, journalists, along with other employees, decided to seek improvement to their compensation and working conditions through unionization—thus becoming adversaries of management rather than partners in the management of news organizations.

Both developments clearly improved journalism and lives of journalists; however, they also separated journalists from business decisions and removed them from any responsibility for the organization’s actions and sustainability.

Although some protests over editorial interference, owner avarice, and the corporatization of the news industry were heard in the 20th century, few efforts to alter the situation developed because the enterprises were willing to share a sufficient portion of the riches generated with journalists and because companies employed more journalists, improved newsrooms, built networks of bureaus, and provided resources to undertake interesting reporting activities.

That has all changed. The reporting resources are gone, the networks of bureaus are being dismantled, many enterprises can’t afford their own facilities, and journalists are being widely laid off. All of this is being done with little input and influence from journalists and editors precisely because they spent nearly a century denying responsibility and involvement in business decisions.

Today, many journalists are arguing for the creation of new types of news organizations—primarily not-for-profit enterprises—and they are repeating the same mistake. Most are suggesting, or already setting up, organizations in which journalists still have little say on strategy and business matters. Many are content merely with the idea that the new enterprises won’t be profit driven. That, however, is not enough.

Journalists need to be equally responsible in ensuring they produce news and information that has value. They need to be responsible for ensuring their new organizations create the revenues and organizational strength needed to carry out high quality journalism. They need to ensure that organizational decisions make the organizations and the journalism offered viable.

If journalists continue to deny responsibility for the operation and survival of their news enterprises, it will be impossible to create sustainable news organizations for the future.