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Everything Becomes Commodity: Newspaper Industry

-- By AndoY - 11 Dec 2009

Section I Finding Rules

Professor Moglen told us that "almost everything becomes commodity by advancement of technology." The statement is well proven by examples of music and movie industries which have been severely affected by commoditization of their distribution system and recording technology. I thought this “commoditization” statement might be something really important among one of the many rules we learn at school and in life. As a law student, we learn many legal rules. However, we might not remember all or many of the rules after graduation.

When I was asked "what did you learn from your legal study," I used to answer that I learned that law is a tool to mitigate two conflicting interests. The concept of balancing two conflicting interests applies, when I think about relationships between a buyer or a seller in the business deals, or an investor and an issuer in sale of securities. However, I started to feel that a purpose of law should be more than mitigating two conflicting interests.

Since starting my second legal study, I found the importance of finding rules from various cases and situations, then applying these rules to issues. As a result, final outcome of applying a rule in a particular situation may not be ideal in terms of balance; win-win relationship hard to achieve, most of time win-lose relationship unavoidable, or the outcome can be unexpected from the original prediction. Having first educated in civil law country, a law or a rule is not something to be found, rather, it is given by the sovereign power. I may have been too short-sighted on the superficial outcome of the legal rulings using codified laws. Especially, I was agonizing over how to find an optimal balance between the oppressed and the oppressing power. I do not have a definite answer. However, I came to think that I should focus more on finding principles and applying principles to the issues.

Here, I would like to analyze commoditization in newspaper industry since I was once asked to advise a newspaper client.

Section II Is Newspaper Industry Commoditizing?

As I mentioned earlier, just keeping balance may not be almighty. If one side seems unfairly oppressed, is it the best remedy to save the oppressed under any circumstance? If journalists are suffering from declining newspaper industry, would it be the best to subsidize journalism by the government, such as by bailout of newspaper companies, or employing journalists by the government? Newspaper industry is suffering by the change of business model and by emergence of new media formats. Now, they need to adapt themselves to rules of game in the new digital media era. It might be true that Google is free-riding on newspaper contents. Then, would it be necessary to save the newspaper industry?

In a Charles Darwin’s concept, newspaper industry survived a process of “natural selection” by fitting themselves to an advanced form before the Internet became a prevalent media. Newspaper business is an old business. Internet was not the first threat for the newspaper industry, and there were emergence of radio broadcasting and later that of TV broadcasting. Broadcasting has advantage in terms of delivering information much faster in real time compared to newspaper since newspaper involves higher distribution costs and time. On the other hand, newspapers differentiate themselves by providing more detail analysis to various issues, editorials, and giving more advertising information by classified. Thus, newspaper could remain strong media formats until the emergence of the Internet. In addition, in some countries, newspaper companies own broadcasters so that a newspaper company can keep advertising revenue which might otherwise stolen by broadcasters.

However, newspaper industry may become commodity since people find more value in the new technology. Internet changed the way how people access to news information. Now, a growing number of population stopped reading print newspapers which is a “push” media. Rather, people favor “pull” media where people can access digital news through the Internet or iPhone whenever they want. By technological advancement, people have a customized own home pages of news information set up by individual preference. There is no need to subscribe only to the New York Times or to Wall Street Journal. People have tons of access to information 24/7 at real time. People can pull information they want. As advertiser, there is no need to spend advertising budget only to newspaper companies, rather they are better-off paying to Google and various other media. This fundamental shift of people’s behavior might be analogous to a transition of railway industry in a century ago. After automobile changed the way how people commute or move to one location to another, railway industry severely struggled, also they suffered later by emergence of airline industry. Railway industry became commodity while people paid a lot to automobile and airline transportation.

I struggle to find whether newspaper will be commoditized or continue to be strong media force as they survived in the threats from broadcasting. In my original belief in balancing conflicting powers, I may want to think that there should be an optimal point where free riding of content by technology companies may be punished and content providers will be saved. On the other hand, the character of the threat imposed by the Internet is much more severe than the threats by broadcasting. If information in newspapers is really valuable and worthwhile paying a lot of money, I might blame Google or new technology as free-rider. However, the Internet made value of information much cheaper or almost free. Then, as newspaper industry, their differentiation may not be quality of journalistic article, rather, what matters are its technology of distributing content, branding and marketing. I am skeptical whether those cosmetics will keep its strong positioning which newspaper traditionally enjoyed. Google or new Internet media continue to require existence of content provided by newspaper companies. However, content is readily available without paying a lot of cost. Therefore, commoditization of the newspaper industry is likely to be unavoidable.

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Dear Ando, It was a great pleasure reading your article. After reading your writing, I came to encounter one question. As a whole, I think you are right that it is hard for newspapers to avoid being commoditized. But wouldn't "people's personal preference" play a role in this commoditizing dynamic? (For example, even though it is slower in speed, I perfer newspapers than internet provided information since I can think more deeply when I read newspapers.)It is true that newspapers have their own values which are unique and un-substitutable. And people who like that kind of uniqueness certainly do exist. Therefore, even though I might know how, but if the newspaper companies are able to find a way to maintain this "uniqueness" and make the most of it by distinguishing themselves from the upcoming new technologies, wouldn't they be able to avoid being "commoditized"?