Showing posts with label media. Show all posts
Showing posts with label media. Show all posts

Wednesday, May 7, 2014

Glimpse of Tumblr is reminder new media business model isn't generating many jobs

There is still a lot we don’t know about the new media business model, so even a glimpse of the model’s inner workings can be valuable. A New York Times article about Tumblr offers such a glimpse, which shows the company is unlikely to generate a significant number of media jobs.
 
There is a great deal of fascination about companies like Tumblr, a popular blogging platform that Yahoo purchased last year for a reported $1.1 billion, mostly cash. Tumblr wasn’t profitable, but Yahoo did acquire millions of Tumblr bloggers to add to Yahoo’s user base. Yahoo is developing ways to distribute advertising aimed at Tumblr users.
 
Tumblr, like other new media companies, has some superficial similarities to traditional media companies. Both new and traditional media publish content that attracts an audience, then sell advertisers access to that audience. But the similarities end there.
 
New media companies like Tumblr don’t pay for the content - blog posts (including pornography) – they need to exist. Traditional media companies do pay for content, which increases their production costs.
 
New media companies like Tumblr also rely on automation -- computers and computer software --to provide a platform for the production and distribution of the content they use. Traditional media companies cannot easily develop similar platforms because millions of potential users have already selected new media platforms for blogging and other Internet activities.
 
The new media business model relies on free content and automation to keep costs low, otherwise these companies would go out of business. That is because new media companies generate very small per-unit revenue from Internet advertising. These companies must keep their per-unit costs low if they want to generate enough money to survive.
 
The Times article reports that Tumblr doubled its staff, but still employs only 220 people. As of today, Tumblr claims it has 185 million blogs. That is about 841,000 blogs for each employee. If Tumblr expands to 500 employees, it will have 370,000 blogs for each employee. Even if activity on the blogs varies, these numbers show the kind of astonishing productivity that new media companies enjoy because of their reliance on automation.
 
The low per-unit revenue at new media companies means they must also attract a very large number of users before they can generate enough profit to justify the high values that new media companies receive from financial markets. Traditional media companies have much lower values in financial markets, but traditional media still generate high enough revenue-per-unit to survive without an audience in the hundreds of millions.
 
For example, Tumblr’s enormous number of blogs means it has to generate average revenue-per-blog of just $5.95 to match its $1.1 billion purchase price.
 
However, Tumblr still isn’t generating enough revenue to develop “a working business model” according to The Times. (Yahoo hasn’t broken out figures for Tumblr in Yahoo’s most recent financial reports).
 
Yahoo is still trying to develop advertising that won’t disturb the Tumblr ethos, which rejects advertising. I suspect Yahoo is also developing ways to generate revenue from data about Tumblr users even though Yahoo only requires an e-mail address to identify each Tumblr user.
 
This suggests one more thing the glimpse tell us about the new media business model. Small per-unit revenue means these companies require enormous numbers of users to generate enough revenue to become profitable. But sometimes, even a large number of users and a very small number of employees won’t be enough for a new media company to become profitable.

Tuesday, September 13, 2011

Does economics overlook the logic of communication?

Eric Rothenbuhler of Ohio University wonders if economic logic falls a bit short when it comes to understanding what drives success for media companies.  Rothenbuhler, whose research focuses on the nature of communication, writes in response to yesterday’s post:

Steve Wildman is right, of course, about the economic logic of servers versus channels and storage versus programming.  But media companies that forget they are communicators, that try to operate by economic logic alone, are doomed.
The shift from programming channels to storing stuff on servers is analogous to the shift from being in the communication business to being in retail, or wholesale, or just warehousing. The relationship with the audience member goes away and the media business becomes just a supplier of things people choose—it might as well be Sears.
The penny press was programming, not story storage.  Top 40 radio was programming, not juke boxes.  Even silly stuff like NBC's "must see TV" Thursday night line up some years ago, worked because it was programming that pulled audiences in and held them, it gave them something to anticipate before they watched it and something to talk about after—it created an event in the everyday flow of their life.
The greatest successes in media businesses are always based on communication innovations, on programming that attracts and holds audience members because it draws them into a communicative relationship.
That's what media managers ought to be thinking about today - the logic of communication. Be successful at that, and the money will follow.
Eric co-authored a seminal article in the field of media economics when he was a master’s student at Ohio State.  There was a very nice moment at the conference when he and lead author John Dimmick were together again.


Dimmick (r) & Rothenbuhler (l) at the conference.  In 1984 they published "The Theory of the Niche: Quantifying Competition Among Media Industries," Journal of Communication, 34(1), 103-119.


    Friday, August 19, 2011

    Creating the Future: Managing Media in the Digital Age

    Readers of this blog are invited to a Sept. 7 conference at The Scripps College of Communication  to discuss the challenges and opportunities for firms operating in fast-moving media markets.

    Richard A. Boehne, president and chief executive officer of The E.W. Scripps Company, will be the keynote speaker for Creating the Future: Managing Media in the Digital Age.  He will be joined by top executives from media firms in Ohio and West Virginia and leading scholars from four universities.
    For registration and other information, visit our conference website: http://scripps.publishpath.com/creating-the-future-2011
    Partial list of speakers:

    Richard A. Boehne, president and chief executive officer, The E.W. Scripps Company.
    Margaret Buchanan, president and publisher, Cincinnati Enquirer
    Bray Cary, president and chief executive officer, West Virginia Media
    Richard Dix, publisher, Kent-Ravenna Record Courier
    Lynn Gellermann, executive director, TechGROWTH Ohio, managing partner, Adena Ventures
    Anne Hoag, associate professor in the Department of Telecommunications, College of Communications, Penn State University
    C. Ann Hollifield, Telecommunications Department head, Grady College of Journalism and Mass Communication, The University of Georgia
    Stephen Lacy, associate dean for graduate studies, College of Communication Arts and Sciences, Michigan State University
    Phil Pikelny, vice president Dispatch Digital and chief marketing officer The Dispatch Printing Co., Columbus
    Nita Rollins, Ph.D., Futurist, Resource Interactive.
    Scott Titsworth, Interim Dean, Scripps College of Communication, Ohio University.
    Steve Wildman, James H. Quello professor of telecommunication studies, College of Communication Arts and Sciences, Michigan State University
    Joseph Zerbey, president and general manager, The Toledo Blade
    Contact me if you have any questions by e-mailing: martinh1@ohio.edu