The Next Phase of Online Media

Clay Shirky, professor of New Media and author of Here Comes Everybody, discusses the coming of the age of media patronage.

The Next Phase of Online Media Question: What is the future of media? If the economics of the old age don’t work as they don’t, what does work? And I think we’re about to enter the second grade age of patronage. I don’t think that there are any business models where customers pay directly or advertisers paid to interrupt. The internet is just not good at either of those things and it’s very good at things that are in competition with those models, but subsidy works fantastically well, right? So, in the current Media Landscape, for instance on the radio dial, we regard a clear channel is the norm and national public radio is the educators, right? Advertisers pay the—it hit me with the idea that I should buy new flooring or car insurance while I’m listening to classic rock. But the idea that 10% of the population voluntarily gives money for something they could get for free, and then NPR takes that money and makes great radio. That seems crazy on the radio dial, but on the internet, I think those things are going to be reversed. I think the idea that people get together in some subset of the most subsidize recreation of something that anybody can have is actually an economic model that works better on the internet than it does on the radio. And the clear channel model works worst on the internet than it does in radio. So, I think, we’re entering this great age of media patronage, and it will be interesting to see how that played at and it just especially interesting now to think a lot of these small experiments in bits and pieces that you see out there could go on to become the new normal as the as the Media Landscape progresses. Question: What is your favorite new media model? I since divided all media businesses up in the six boxes, right. There is user pace, producer pace, and third party pace and there is required and optional and that’s it. All business models right so I have to pay a dollar and fifty for the New York Times in the newsstand that is required user pace plus there are ads in it which is required third party. What the internet is done is it moved the line sharply over away from user pace and towards third party pace or producer pace as move as sharply down from required to optional. The business models that I think are interesting are the ones where you say, not everybody has to pay, just enough people to pay for the business to work, right. The NPR model we talking about earlier. Meetup, the company that tries to get people to actually walk away from their computers and go meet with one out there in the real world move to a four feet business model because they realized that any third party they sold to would want to be able both interrupt and distort the conversation people were having at the Meet Ups, and they said look where here on behalf of the users. We have to charge the users. So there was this big fight between essentially the board of directors and the board of advisers. And the question was, “Do you charge the individual participants or do you charge the groups?” And ultimately at the end of this conversation we came up with the idea of charging the groups because each group can say the leader of the group is going to be a mocker and pay $9 a month on their own and they collect in social capital what they spent in physical capital. Or if it’s a restaurant going group everybody just kicks in buck after the meal and then it works out if not like the fee or the regulars pay but the newcomers don’t then they decided to join. Different groups can collect the money in different ways and Meetup doesn’t have to care. And that ability to say essentially here the minimum requirements for this business model but the users are actually going to find a better way of partialing out the problem of how do you come out with 9 bucks a month than we are. That seems to me be a way to take the logic of crowd sourcing and apply it to the business model which is around certain minimum constraint. You just let people work it out on their own on the outside. So there are going to be lots and lots of experiments. Some of them are working in some environment, you reference to Daily Biz and obviously having to post and so forth, and then there’s not going to be anyone general business model. I think we will look back 20 years from now and we will laugh that we ever thought the New York Times and the Daily Racing form were in the same business right. It’s just because they are both on printing press. Like clearly sports betting information is going to go the one corner of the internet. Global news guides was just going to go to another corner, and the idea that the fact that they appeared on paper made them the same somehow is going to seem ridiculous to us because there’s no one business model that replaces paper. It’s —once the paper is going as the lynch pen all of these businesses kind of migrate to some natural place to exist and including for a lot of businesses the natural place to exist is if there’s no inefficiency for print you go out of business and so that’s the—it’s really the places like Meetup that have the business models that are fluid enough that they’re constantly learning what works rather than just transitioning from A to B. I’ve been most interest to that. Question: What companies understand social media well? One of the really exemplary stories of the difference between assuming the audience is yours and assuming the audience is out there comes from TimesSelect. The New York Times’ attempt, in fact, not just attempt the New York Times’ decision took put up a pay wall. They put up a pay wall in May of 2005 something like that, yeah, back in 2005 and started charging for everything and of course traffic plummeted and then they took it down, I guess, in 2007 and Saul Berger the publisher The Times just recently said, “The reason we took down TimesSelect was we hadn’t anticipated how much traffic would come from search.” And so, first of all, there’s the CEO of a major newspaper who didn’t think that search was going to be important source of readers, but having realized that they changed their strategy because they understood that there were people out there working to send them readers, were spending their own money to send the New York Times additional readers for free. And that their business model ought to be able to take advantage of that free sense of that free traffic. The question of analog times and digital dollars then kicks in right how do you restructure the paper to take advantage of digital advertising? But it’s an example of a restructuring that says, “We thought the audience was this one way or in this one place.” And then we realize no, actually they’re over here, right they are coming from Google. To a degree that it would be hard to overstate Google as the New York Times’ front page and for increasing over business obviously it is, and they restructure their business to take advantage of that as well. Certainly in the creative industries there’s lots and lots of these examples. The replacement of the music A&R Department with MySpace like the breakout of Soulja Boy Tell ‘Em and Crank that as a song that everybody discovered, but no one anointed that’s a really interesting case where their businesses able to now…it’s actually get free focus group style research of much higher quality than doing regular music focused group sampling, and it cost them nothing and then they can sign Soulja Boy Tell ‘Em. So, with that’s another business where the presence of social network is actually creating an ultimate way to decide what it is the business should be concentrating or licensing or turning into a commercial product.