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Press Paywalls Are Dying Because Tech Giants Are Eating Our Media

16/11/2015 17:24 GMT | Updated 16/11/2016 10:12 GMT

Last week

The Sun ditched its paywall. Not a surprise. Everyone nodded sagely. You can sell more advertising without one, they said. Look at the Daily Mail. Paywalls are so last year.

But everyone missed a huge red flag: dropping paywalls is another sign that we're on the cusp of the biggest revolution in media that the world has ever seen. Why? Because paywalls set up by the media themselves are incompatible with the future.

The tech giants are coming

Back in April I wrote a Huffington Post piece about Facebook's move to partner with the global media. I use the word 'partner' loosely because Facebook is always in the driving seat. Last week they launched Notify, a roundup of content provided to them by more than 70 news organisations around the world.

Fine, fine, I can hear you saying. But what's this got to do with paywalls and tech giants eating our media? There's nothing wrong with aggregated content - it's all over the place. And yes, you're right. But the other day I was talking to a friend in a senior position at one of the news outlets involved in both the Facebook initiative and Apple's competitor product, Apple News. And he said: Apple let us keep 70% of the ad revenue if a person clicks on an ad in 'our' part of the app.

As soon as he said this alarm bells went off. Because you see, this is the way it starts.

The Contributor-Agency Business Model

There are lots of reasons to believe that Facebook and Apple are looking to create a contributor-agency business model for the global media. This business model is one of the fastest growing trends on the internet. It's sometimes mistakenly labelled as crowdsourcing - but it's not. These days, our tech giants are so large and mature that they've done all the crowdsourcing stuff already. They've run out of crowdsourcing models to exploit, people willing to be crowdsourced, and content crowdsourced people can produce on a big enough scale to make serious cash. So they're turning their attention to much bigger fish: corporations.

The big problem with the Contributor-Agency Business Model is that while, at the start, the Contributor is an important and valued partner, as the Agency grows, the Contributor becomes less and less important. This happens because the Agency gets more and more content and more and more customers or end users. In effect it eats the market. So much so that in the end the content and individual Contributor are practically worthless; overwhelmed by a tide of similar, cheaper content from budget or free sources available on competing Agencies. It's this competition that drives down prices and the Contributor's cut is reduced time and again.

Let's look at a few examples of the evolution of this contributor-agency model:

Video-on-demand

Once upon a time, before the internet, you turned on the telly and watched what was on. Or you watched a video or went to the pictures and ate popcorn. Then digital TV and the Internet were invented. Roll on a few years and you didn't need to do any of those boring old things.

Now you can watch whatever you want, whenever you want, on any device you want. You can watch free stuff; you can pay a subscription, or just buy and download individual programmes. This stuff is content. The content creator, e.g. the film studio or TV company, is the Contributor. They sell a license to show their content to a company (the Agency) who holds it in a 'content library'. Netflix or Amazon Prime come along and buy the license to air it for a certain length of time and you get to watch it. It's enormously profitable - for Netflix and Amazon. Less so for the contributing studio who created it.

Stock photography

When you view a newspaper or magazine, online or in print, 99% of the photos you're looking at have been bought by that media outlet from a stock photo library (the Agency). The newspaper buys a license to print from the stock agency for a certain length of time - or forever - and the content-creating photographer (the Contributor), gets a cut. The cut used to be, in some cases, 80%. It's now, in many cases, down at 20-35%. And the cost of each photo has fallen by around 80 per cent in the last five years.

Spotify

You can see where I'm going with this so it's hardly worth mentioning that to subscribe to Spotify costs not very much for all you can eat, and an artist who licenses their work through Spotify gets...well...fractions of a pence for each play. Spotify/Agency gets rich. The artist/Contributor doesn't.

Let's imagine...

Let's think about this business model and the media, and roll on 10 years. In 2025, newspapers will all be free, both in print and online. Paywalls will be something people laugh about over dinner. Almost all but a fraction of media will be consumed digitally, mainly on a mobile. The vast majority will be accessed through an aggregator/Agency, the cash will be made entirely through advertising to consumers and selling content to other businesses.

The largest three Agencies are Facebook Notify, Apple News (which is now cross-platform) and Google News, which thanks to its successful 2015 Digital News Initiative and its machine-learning instant-translate platform is returning the greatest global ad revenue for the media, also known as Contributors.

Roll on 20 years...

In 20 years there will be no newspapers because people never leave Facebook, Apple or Google apps to look for it. Why would they? Every paper in the UK and the majority of global news outlets are signed up to all the platforms. They have to be because they couldn't compete on their own, outside the apps. No one would ever visit their websites if they weren't directed there via the app.

In fact, most of the big media outlets have now ditched their websites and just use the interfaces created by Facebook, Apple and Google to host their news - they get a better Contributor cut if they use it and offer 10 exclusive stories per week on that platform. Apple and Facebook give them 35% of all ad revenue; Google gives them only 25% but they are the biggest player. They all offer a bad deal, but what's the option? The media is, after all, just the Contributor. And who cares about them?