Everywhere around us we see evidence of chaos and upheaval in the media industry — newspapers laying off staff and even closing, advertising revenues continuing to decline, and so on. What can be done about this state of affairs? Media analyst and journalism professor Clay Shirky says not only is there nothing that can be done about it, but it may actually be a good thing, because it will help spur innovation. Let’s hope he is right, because there is plenty of chaos to go around.

In his post (on a blog that is almost defiantly old-school, with a default WordPress theme from about 2003), Shirky says that his thinking on the topic has been accelerated by wondering what he is going to tell his undergraduate journalism students about the industry they are planning to join when he starts teaching at New York University in the fall. The realization he has come to, he says, is that “the news” — broadly speaking — needs to be subsidized, cheap and free.

But how can it be all these things at once? And by subsidized, does Shirky mean government subsidies as some have recommended? As it turns out, he doesn’t. In many cases, he says, those subsidies may come from other lines of business (conferences, etc.), from donations — as with ProPublica and some other models such as The Guardian, which is supported by a trust fund — and from simple cost-cutting.

And what about the free part? Although Shirky doesn’t specifically deal with the idea of paywalls (an issue he has been skeptical about for some time), he makes the point that the news “needs to be free so that it will spread” — in other words, so that people will share it and distribute it in a variety of ways for nothing. And what about those media entities that decide to produce only what people will pay for directly, like Rupert Murdoch has done with the Times of London?

[C]reating a high-quality product for a group of loyal and passionate readers willing to pay for it certainly sounds like an interesting business to get into. It just doesn’t sound like the newspaper business.

As Shirky points out, the cost-cutting that makes the news cheap doesn’t just have to come from layoffs (of the kind that Guardian editor Alan Rusbridger referred to in his recent announcement of a “digital first” approach for the paper). Costs can also be reduced by using a variety of crowdsourcing tools and services to let readers and other interested individuals share the burden of producing the news, whether it’s through blogs or photo galleries or “citizen journalism” tools such as Tackable (interestingly, Shirky never once mentions AOL’s Patch and its hyper-local efforts).

The bottom line, Shirky seems to be saying, is that this environment of chaos isn’t just obvious or understandable but actually necessary, so that the industry can evolve — whether it wants to or not. In that sense, Shirky’s post strikes a similar note as one he wrote back in 2009, called “Newspapers and Thinking the Unthinkable,” in which he argued that everyone looking for a solution to the media industry’s problems is searching in vain, because there isn’t one. In other words, not only is there no single solution but most of the likely solutions are simply unknown.

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn’t apparent at the moment it appears; big changes stall, small changes spread. Even the revolutionaries can’t predict what will happen.

The problem, as many including Shirky have described it, is that readers have never paid for the news content in newspapers — at best, they have “helped pay for the things that paid for the news.” And now advertisers are going elsewhere, including targeted websites and social networks, because they can reach the people they want directly and more cheaply. The access that newspapers used to control to those desirable readers is gone. And digital advertising may ultimately never fill the gap between the price that advertisers will pay for a print reader and what they will pay for an online one.

The ‘analog dollars to digital dimes’ problem doesn’t actually seem to be a problem. It seems to be a feature of reality. Digital revenue per head is not replacing lost print revenue and, barring some astonishment in the advertising market, it never will.

In general, Shirky’s point seems to be that innovation and experimentation needs to happen before anything becomes clear, and he is undoubtedly right on that score. Unfortunately, as I wrote recently, that kind of startup-style impulse is sorely lacking in most mainstream media entities, who are content to incrementally dip their toes into new media tools and projects without really trying too hard. Why do something radical when you can just put out an app and throw up a paywall?

It takes some guts for a media analyst and pundit to admit that he doesn’t have all the answers or solutions for the industry, but Shirky has always been better at that than some others of his ilk. And he does at least provide some hints about what he thinks will help while we figure out the answers — things like cost-cutting and crowdsourcing, for example, and just all-around experimentation. What’s really required, of course, is a rethinking of what being a news organization means in an age when real-time publishing is available to anyone, but unfortunately there is still far too little of that happening.

Post and thumbnail photos courtesy of Flickr user Mark Strozier

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From Rupert Murdoch’s The Daily to the New York Times and the Wall Street Journal, it seems more and more newspapers are turning to iPads and other tablets in an effort to capture a fraction of our daily attention. And as this graphic from Column Five  Media illustrates, iPad is well on its way to becoming our Sunday newspaper.

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It’s been obvious for a long time that MySpace is on the ropes, suffering under a series of pummeling blows including an ever-changing executive lineup and slashing staff, to being put up for sale by owner Rupert Murdoch.

And the general consensus is that it has been knocked out by a combination of two interlinked factors: its progress was slowed by dealings with its corporate parent News Corporation, which led to it being outmaneuvered by a younger, hungrier, smarter rival in Facebook.

That’s the main thrust of this substantial and interesting profile of the company by Reuters reporter Yinka Adegoke. It’s a long read, coming in at a little more than 4,000 words, but is probably the best summary I’ve read of the ups and downs of a website once deemed hot property but now looked at with derision.

But the article also points out that it’s not as simple as News Corp clumsily handing Facebook the keys to the social networking kingdom. In fact, the piece suggests, perhaps it was actually Google rather than Facebook that unintentionally dealt the killer blow to MySpace.

Think back to 2006: that’s when they signed 0 million, three year advertising deal to turn Google into MySpace’s exclusive providers of text ads and search. It was a great cash prize for Murdoch’s purchase, but actually ended up being a weight around its neck. The deal’s targets required MySpace to crank up page views and increase already-heavy advertising space at precisely the same moment that Facebook was pushing forward with a clean and easily-understood design.

As Adegoke reports:

Around this time, the Google agreement, which had been hailed as a major coup by Chernin and Levinsohn as well as Wall Street, started to be viewed by Myspace executives as a double-edged sword. The Google deal required a certain number of Myspace user visits on a regular basis for Google to pay Myspace its guaranteed 0 million a year for three years. That reduced flexibility as Myspace couldn’t experiment with its own site without forfeiting revenue.

“It was a good deal in the short-term but in the long term it ended up not being so good,” said a third former Myspace executive close to advertising sales. “We were incentivized to keep page views very high and ended up having too many ads plus too many pages, making the site less easy to use than a site like Facebook.”

This moment is often overlooked, but it turned out to be absolutely crucial. And, of course, it’s kind of darkly amusing that Google — in trying to find a partner who could help it in the confusing world of social web — managed to give a huge boost to one of its nascent rivals.

It suffocated MySpace with love — perhaps something for Larry Page to think about as he reorganizes Google to try and retain its commanding position online.

Photograph used under CC license courtesy of Flickr user Mavadam

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In the media industry, Sir Martin Sorrell qualifies as a genuine titan — not only has he been knighted, but he founded and runs the global advertising colossus known as WPP Group, one of three conglomerates that control the bulk of the advertising, marketing and public relations industry worldwide. Sir Martin was recently asked by BusinessWeek what the media industry needs in order to survive in these difficult times, but unfortunately for anyone hoping to be enlightened, the advertising kingpin’s advice is almost completely wrong.

Sir Martin begins by damning fellow British media player Rupert Murdoch’s new iPad app The Daily with faint praise, saying that charging readers for content is “the way to go,” but suggesting that the app doesn’t really work for him (Sorrell is apparently a big fan of Flipboard on his iPad). And what about the New York Times and its new subscription plan? Sir Martin says that he hopes it will work, but admits that:

There are plenty of other newspapers around the world, and even in America, which have sites … which are equally good — or can be less good and still be effective.

That’s a fairly perceptive remark, because it recognizes a key economic concept that paywalls and other subscription plans fail to acknowledge: namely, that your real competition isn’t the content provider that is better than you, but the provider whose content is good enough. Sir Martin also notes that the problem with the Internet is that “there’s so much of it. It’s highly fragmented, and most of it’s for free.” And he correctly argues that an advertising-only model is not going to work over the longer term for most content companies, since “there isn’t enough advertising to go around. Period.”

After that, unfortunately, Sir Martin’s analysis goes off the rails fairly rapidly. When asked what media companies should do to combat these problems, he says that they should begin by charging for content — even though he just finished making a fairly compelling case for why most paywalls and subscription plans likely won’t work. He also says that media companies should merge or be shut down if they can’t adapt. And what if that still doesn’t do the trick? Sorrell’s solution: government subsidies.

Really? The government should prop up media companies that fail to adapt to the online world? Apparently so. The global ad agency CEO says that more countries should take their cue from the BBC and other government-funded news outlets, and subsidize media companies such as newspapers. “The three things together: paywalls, consolidation, subsidy,” he says. “To keep you in business as a journalist, it’s probably necessary.”

And what about trying new models, or experimenting with new revenue sources, or looking for digital opportunities that go beyond just trying to recreate the scarcity that traditional media entities used to enjoy or putting up walls? What about looking to new services such as iPad apps that actually enhance the experience of reading, the way Zite does, instead of replicating an old model the way The Daily does? Nothing about that from Sir Martin — just a call for paywalls “because people should pay for content,” and for subsidies.

The reality is that for all his understanding of the advertising world, Sir Martin is just as much a part of the past as the newspapers and magazines and other content companies his agency is used to dealing with. And therefore he understands just as little about what they need to do to survive.

Post and thumbnail photos courtesy of Flickr users World Economic Forum and Giuseppe Bognanni

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