Is the €500m bath that Denis O’Brien took on Irish media ownership the low watermark for how bad it can get for industry investors?
The case of Facebook and Australia is a warning that there may still be tough times to come.
While O’Brien turned a €650m-plus investment into something closer to around €150m over his ownership tenure here, some of the lessons he didn’t heed may be on repeat down under.
There, the newspaper industry is betting a portion of its future — and maybe some of the world’s media interests — on magic beans.
In case you missed it, Facebook agreed to follow Google in bunging some cash to the biggest Australian media conglomerates in exchange for the government there not subjecting it to a link tax.
Regardless of how my esteemed colleagues try to sell it, it was an out-and-out shakedown, with little grounding in business sense or economics.
The government basically bought the argument of Rupert Murdoch’s News Corp that whoever the biggest firms on the internet are should pay him for any discussions or links about stories published by him (even if not broken by him).
That means cash transfers from Google and Facebook, as the biggest internet companies.
And that seems to be the sum of the rationale: no evidence or figures to back anything up (the economics ironically suggest a reverse dependency), no assurances of funding for journalism, no hints of media business model readjustments. Just ‘pay this industry because you guys are doing well’.
Facebook and Google, after some pushback, now seem to be content; it’s another few hundred million (out of billions they earn) to quieten down a lobby.
But for anyone looking to the future of the media business, it’s a depressing turn of events. It looks for all the world like a corporate stroke from a generation of older newspaper proprietor owners, many of whom still struggle to comprehend online business models and cannot accept their gradual loss of power and influence.
For much of his tenure as a media owner in Ireland, Denis O’Brien partially fit this mould. To be clear, he doesn’t need to prove anything to anyone when it comes to building businesses: he remains arguably Ireland’s single most successful entrepreneur over the last 25 years.
But he seemed blinded for around a decade as to the real long-term business impact of online platforms. He argued continually that internet firms should be paying telecoms companies (like his) a cut for the money they were making from services delivered across telephone lines. This was never going to happen and he only really shook off this doomed trope fairly recently.
But that same antipathy toward the Googles and Facebooks may also have prevented him seeing what was happening in publishing — that information and sales and ads and other business processes was irrevocably moving to the more efficient medium of online platforms.
So he kept building up his shareholding in INM and radio stations.
Because of that — and possibly other motivations — he has lost hundreds of millions. But the Australian publishing heist suggests he may not be the last to believe he can beat the onset of technology and public attention trends.
Journalists and media executives have lingering notions around the equivalence of social media platforms with media companies. Facebook now has many eyeballs on it. But those used to be our eyeballs, so where’s our compensation?
But basing the future of our media businesses on internet sites paying us for their users mentioning our story headlines or links is the 2021 equivalent of O’Brien appealing to Google to pay Eir or Vodafone for ‘carrying’ the search giant’s ad-generating traffic. It may be framed in the language of ‘rebalancing relationships’ and ‘fairness’ but is really just an admission of being passed out by technology and modern business.
Local newspapers are shrinking not just because Google is a more efficient place for ads but because Whatsapp and Facebook groups have replaced chunks of their original purpose — to inform people about what’s going on in their locality.
This can’t be helped. It’s a straight, logical evolution of the communication networks we now have. No amount of taxing, pleading or threatening individual tech companies will change it.
This is not to say that there is no innovation or evolution in the media business. Many of the big companies are absolutely competing with the tech platforms in areas they want to, such as audio or video.
The New York Times is almost as much of a media-tech conglomerate now as it ever was a straight newspaper: it debuts dozens of new products every year, learning from its mistakes and building some powerful new tools that people clearly like. Smaller groups are also shifting their focus.
INM, the company I work for, has done creditably well in signing up some 35,000 paywalled subscribers from scratch in a year. It’s also starting to move into some promising business information verticals, areas that online platforms themselves would probably take an interest in.
But there’s still a lingering air of being owed something by social media companies, that they’re getting attention (and ad cash) on the back of our work.
The 89-year-old Rupert Murdoch, who led the Australian lobby against the tech firms, is a chief proselytiser of this theory. But it’s only true in the same way that we (media companies) get attention (and online ad cash) off the back of telecoms firms’ broadband pipes.
The difference is that the telecoms firms, including O’Brien, have moved on from this trope. Sooner or later, for the good of building a sustainable media industry, we should too.