The frustration being voiced at The Cable Show ’09 was palpable:

“Should we be allowing Google to steal all our copyrights? Just take them? Not just Google but all the aggregators? Yahoo? And I feel that if you have a brand that’s strong enough, like the New York Times, they should be able to go to Google and say ‘no.’” So when you go to search on Google, it doesn’t show up.

- Rupert Murdoch, The Cable Show 2009, Washington, D.C.

The business model traditional media firms have counted on for decades has been rapidly slipping away. Many are struggling to get a footing in this new digital world – one that is fundamentally different from their far more predictable analog one. What Mr. Murdoch is grasping for here is a solution that will let him fit the new reality he’s confronting into the traditional media framework he has become so invested in. Unfortunately, the thinking behind that approach is more wistful than strategic. The publisher-centric model is dead, and has been for quite a few years. Any media company that wants to succeed in the future will need to come to terms with what it really means to be a publisher in our digital world:

Consumers are in control:

People today want access to content on their own terms. You can’t bundle content together as a publisher and expect that that’s the way people are going to consume it. Aggregation doesn’t take place in the middle any more – it happens at the edge. People will pick their own ‘best-of-breed’ for each topic they have an interest in. They may like the bias of their local news provider for sports coverage, certain blogs for political or financial coverage, and a set of mainstream news sources for global news coverage. Now that people have a choice, bundling doesn’t work anymore. Each stream of content a media organization produces will need to live or die based on it’s own merits and the audience it can attract. For media companies today, it isn’t about being big. It isn’t even about being good. It’s about knowing who their audience is and bringing them compelling and unique value. If they fail at that, their brand alone won’t be enough to carry them into the future.

Content isn’t scarce – attention is:

Attention is the currency of the digital age – not content. The digital world has opened publishing up to all comers. The ‘gatekeeper’ role of the analog world has gone away, never to return. This means that consumers now have many choices vying for their time and attention. They have – by necessity – become very selective where they choose to spend it. If any media firm wants to maintain and grow an audience, they need to aggressively compete for that limited attention. The biggest mistake any of them can make is to think that what they produce is irreplaceable. There is an incredible body of insightful and compelling content being produced by individuals and small organizations from all around the web. NO media organization – no matter how big or popular they are today – can afford to ignore this new reality.

Visibility is critical:

If you want to remain relevant, you need to remain visible. You need to reach out to where people are and fit in to the ways they want to consume content. Demanding that your audience must come to you on your terms is simply arrogant. And expecting them to pay for the privilege is probably a fatal mistake. If anybody is really considering yanking their content off of Google, perhaps they should talk to Howard Stearn first. Howard was one of the biggest names on radio. He had a multi-media brand with enormous draw and influence. When he decided to make the jump over to Sirius – the satellite radio station – people couldn’t stop talking about it. He was given a 500 million dollar payday to effectively abandon his ‘free’ audience and move behind the pay wall of satellite radio. Some percentage of that audience – his real core fans – were willing to pony up the money and follow him over. But most simply found something else to take his place. It might not have been as good, but it was there and it was free. When all was said and done, Stearn effectively cashed out of being relevant. When he recently talked on his program of retiring at the end of his contract with Sirius, nobody even shrugged. It really didn’t matter anymore. Out of sight. Out of mind. Out of luck.

Leverage matters more than size:

There was a time in the media world when ‘big’ was ‘good’. Size gave media organizations reach and distribution. It gave them the scale they needed to be cost efficient. It let them attract the talent they needed to produce compelling content. And that let them grow their audience in ways they could easily monetize. It was a model that built on itself, making the strong even stronger and discouraging competition. For decades, it worked brilliantly for them. Owning a media channel in a large market was like having a license to print money.

But then the world turned digital.

Today all of these large, vertically integrated media companies are struggling to survive. They are run by bureaucracies that lack both the will and agility to adapt. They recognize that the world around them is changing, but are effectively paralyzed by their structural ties to the past – the scope of change demanded by the digital world is simply too painful for most to contemplate.

But rushing in to the void are countless smaller competitors that are perfectly positioned to thrive in the new world order of countless competitors and razor thin margins. Some of them are simple editorial teams, picking out the best content already published on the web, adding their own brief comments, and linking over to the original sources (eg – www.engadget.com). Others are focused on narrow niches, but explore them at a depth that the general media can’t match (eg – www.gamesindustry.biz). Still others are based on new revenue sharing models that compensate writers based on the traffic they generate instead of paying high salaries to full time journalists (eg – www.seekingalpha.com). And others are just offering new and innovative ways to share ideas and publish information (eg – www.twitter.com).

What all of these upstart media businesses have in common is that they are looking for ways to leverage the scale of the internet instead of trying to compete with it head on. By exploiting this leverage, many of these young media companies will be able to find success while their more traditionally structured competitors struggle.

For many of the big media organizations, today’s market reality is a tough pill to swallow. In the content rich digital world we live in today, what they are producing – no matter how good it is – simply isn’t as valuable as it used to be. Supply and demand operate in the digital information market the same way they do in physical markets. A growing supply of news means fewer clicks per source. And it also means less revenue per click. There’s no way around the math.

So why is Google doing so well?…

Despite the protestations of Murdoch and others, it isn’t because they are somehow stealing everyone’s content. Any media company that wanted to could opt out of all of the search engines tomorrow if they thought that would solve their problems. But they know it won’t. The fact is, Google is doing well because they are in the position of distributing everyone’s clicks to them. Google is in the wholesale end of the click stream business where scale does matter, and that gives them the massive volume they need to make the tiny per-click margins they get pay off. Rather than being a gatekeeper, Google now fills the role of concierge – directing people to the things on the web they are looking for. The media companies, in contrast, live downstream from Google in the far more competitive retail end of the click stream business. And with the collapse of their gatekeeper model, this has become a far less lucrative place for them to do business in.

So what easy options do media organizations have these days?

Not too many…

If they decide to opt out of Google, they will become invisible. They’ll need to spend huge sums marketing themselves just to stay on the map. And if they try to charge for access to their content, some people may pay but most will simply replace them with sources that don’t. And if they decide to stay search-able and free, they’ll need to cut their cost structure significantly to align it with what are likely to be significantly reduced revenues. The facts on the ground have changed, and things are not going back to the way they used to be.

It’s clear the media companies don’t think any of this is fair, but to those on the wrong side of the shift, disruptive change rarely is. Being part of a digital world is the cold reality all of them must come to terms with. As painful as it may be for them, today’s media organizations will need to take some bold steps to shed their legacy operational model, streamline their cost structure, maximize the value of their existing assets, embrace technology without reservation, and aggressively pursue the new opportunities being digital offers.

But first they need to stop blaming Google.

The clock is ticking and they have a lot of work ahead of them…

In Part 2 of this post, I offer some advice to media organizations on what they should do to fundamentally transform their businesses and better leverage their assets and capabilities in the digital world.