The media industry is murder right now, with newspaper circulations and advertising under pressure and no new obvious business model to replace the tired old way of the past, writes Chantelle Benjamin.
SA’s media companies are hoping at least part of the antidote lies in the launch of three new “wire” services — essentially agencies that sell news articles to newspapers, radio, TV stations or anyone needing content. The catalyst for this sudden rush: the demise of the South African Press Association (Sapa), the nonprofit wire service that supplied the media houses until two weeks ago, when it shut its doors.
Naspers, which has been riding high thanks to its stake in Chinese internet company Tencent has, after unbundling its printing company Paarl Media (now Novus) through a JSE listing, turned its attention to establishing its own wire service, News24Wire, which fits under its Media24 umbrella.
Times Media Group, which owns the Sunday Times, also launched a rival service, called Rand Daily Mail News Wire.
At the same time, Iqbal Survé’s investment company Sekunjalo, which bought the Independent Media Group in 2013, has also recently launched the African News Agency (ANA).
But analysts are sceptical about whether the market is big enough to accommodate three new entrants, all of which presumably will need to make a profit to justify their existence.
Anton Harber, professor of journalism at the University of the Witwatersrand, warned that “media companies won’t want to buy content from each other, and there is only so many broadcast companies and smaller players in the market” as potential clients.
Harber said local media would be better served by looking at successful solutions found by newspapers globally.
“We can contrast the approaches of The New York Times and The Guardian, both of which have invested hugely in building online audiences.
“The New York Times’s revenue is now based on subscriptions and they are earning significantly from this. The Guardian is free, and earning money from a whole range of services around the website.”
But although the Guardian Media Group has seen its revenue from digital news grow sharply, it is still set to post a £30.6-million (about R537-million) pre-tax loss for the year to March. This is roughly the same as the previous year, even though it boasts 121 million unique users of its website.
The New York Times Company made a $33-million profit last year -a 49% drop from the previous year. It did, however, record a 12% jump in income from its digital arm.
But even The New York Times warned of the risk of not being able to “monetise new and existing print and digital products” in its annual report — especially as “rates for digital advertising are generally lower than for traditional print advertising”.
The shift to digital news, while less pronounced in South Africa than the US, leaves media groups vulnerable.
Vicki Myburgh, entertainment and media expert at consultancy group PwC, said the take-up of smartphones had “seen the [digital] content market flooded with competition for consumers’ media time”.
Although newspaper groups were battling to come up with a business model to make money from digital news, revenue from newspapers and magazines “continued to be the bedrock of the industry”, said Myburgh.
In the case of The New York Times, 73% of its entire advertising revenue still comes from its printed newspapers.
Times Media and Media24 say their primary motive for establishing the wire services is to supply unique content to their digital offerings and internet sites which, until now, have relied on Sapa copy.
Ray Hartley, editor of the RDM News Wire, said the decision had been “viewed negatively, but the choice for consumers has increased dramatically. It’s a much richer media environment now.”
In contrast to News24Wire and ANA, Times Media has opted for a different model and is sourcing content from its existing pool of journalists.
“It was important that this service be sustainable and stable,” said Hartley. “We have a good pool of experienced journalists who are already used to supplying online content.”
Hartley said other wire services would be under pressure to make money and justify costs — “problems we won’t have”.
Andrew Trench, News24Wire editor, said his company initially planned to set up a newsroom to provide unique content to its websites, but this changed when Sapa closed down. News24Wire has since hired 16 journalists, many former Sapa journalists.
News24Wire’s business model is twofold: it will look to sell articles to commercial customers who will “subscribe”, but websites will also be able to take the content and put it up for free. In that case, the article itself will link back to the News24Wire website, which offers more traffic for advertisers.
But neither Trench nor Hartley believes that three players will be able to survive locally.
Independent Media owner Iqbal Survé has often spoken of his desire to merge Sapa with ANA to develop a quality African-focused news agency.
Survé referred questions to ANA’s editor Chris Borain who said his agency “operates completely independently of any newspaper”. ANA does, however, share common investors in the form of Sekunjalo.
Borain said “the market will dictate whether there is enough room for three services”. But he was “pleased with the response” to ANA, which has already got a mix of paid-for subscriptions and trials in place.
Abdul Davids, head of research at Kagiso Asset Management, said it was very difficult to compete in an environment where “a story is only unique for five minutes”.
“In today’s world, news as a premium product has lost its attractiveness,” he said.
As a result, investors considered the print media industry as an “ex-growth” sector.
Davids believes media companies have coped by cutting costs by “centralising the production of content that used to be decentralised”.
But he warned that by halving staff numbers in the print divisions, some media organisations have lost the journalists needed to produce unique content. “The readers are not fools. They will eventually notice that the content they are seeing on sites linked to a media organisation is not unique,” he said.
Harber said: “I hope I am wrong and that these wire services do survive.” But he said he feared these news wires would essentially take content that had already been written, and repackage it to sell elsewhere.
• This article was first published in Sunday Times: Business Times and is republished here with the permission of the editor.
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