Media owners face distribution dilemma

The music industry hints at what the loss of the means of distribution and exchange can lead to, Nick Baughan writes.

Media owners face distribution dilemma

As a political junkie, I am fascinated by the recent resurgence of socialism – not least because I see some parallels with the digital media industry.

Socialism is often defined as the ownership of the "means of production, distribution and exchange" by the community. The flip side is capitalism, where those same means are controlled by private owners for profit.

Music was the first industry adjacent to ours that surrendered the means of distribution and exchange. Instead of reshaping their own platforms, music labels fought against the rising tide of download sites and streaming services in vain – and lost the means to iTunes and Spotify.

Now, imagine a world where a similar concept is applied to social media platforms. Where Apple, Google, Facebook and Snapchat control the means of distribution and exchange for media owners and news publishers through initiatives such as Apple News and Instant Articles.

Soon, content providers could find that all impressions are equal, not dependent on the quality of content. Even allowing for the fact that relevance and quality are often algorithmically rewarded with reach, there remains a significant imbalance in direct revenue that is paid to the content creator.  

This presents dangers to high-overhead businesses such as news publishers – which, by potentially ceding control over the means of distribution and exchange to the platforms, are surrendering their ability to effectively price their own content.

Behold the era of socialist media. So what can content creators and owners do?

Those who yearn for a return to when they owned the means of distribution and exchange have two choices. First, try to wrest back control of those means by building alternative platforms. Second, accept that the means are gone and maximise the return from third-party platforms.

Wresting back control is not impossible. In music, the major labels could have created a unified streaming platform instead of doing their own thing. But, by the time they woke up, the battle for the means of distribution and exchange was already over.

In media, there are signs that publishers are not willing to cede the means of distribution yet. Earlier this year, Axel Springer launched Upday as a news aggregator in an attempt to regain control of the means of distribution. Elsewhere, both Dax for radio and Pangea for news are notable initiatives that seek to retain as much revenue within their own industries as possible.

But it looks like the trend towards consolidation of the means of distribution and exchange into the super-platforms will continue.

Therefore, there is a real imperative for publishers to maximise their returns from third-party platforms. That means revenue share deals that, crucially, take into account the pricing of the content. Then the threat to publishers could become the industry’s saving grace.

If the history of politics teaches us anything, it is that, if models are taken to extremes, everybody loses – in this instance, the publisher, the platform and the consumer. The triumph of capitalism is that the free market rewards quality and punishes medio-crity. But if quality content cannot derive its just reward, then we are faced with a future of average content.

An unsustainable balance in publishers’ revenue model will lead to a shrinking source of quality content, which in turn will hurt the platform and the consumer.

It is incumbent on everyone in media to find a "third way" to ensure the means of production cannot just survive but thrive.

Nick Baughan is the chief executive of Maxus UK