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In their own words
Michael Wolff: 'Free Information is Now the Topic in the Media Industry'
Michael Wolff, a media columnist for Vanity Fair, delivered the opening keynote address at the 2005 SIIA Information Industry Summit in New York City, held Feb. 1 and 2. Hundreds of digital content professionals gathered to discuss strategies, examine trends and review forecasts for the industry.
Wolff, the author of "Autumn of the Moguls," a sweeping overview of the media business, "has a unique perspective on what media means and how it fits into the larger society," said Patrick Spain, CEO of HighBeam Research, in his introduction of Wolff at the conference. "He at once combines a critical eye for what's going on with a genuine admiration, even love of the industry and the people in it."
Wolff, however, didn't display much affection for the media biz in his keynote address. His remarks are reproduced here.
"Media companies can't hold an audience because what they produce is shit," he said. Today's media-savvy consumers realize that they're "just being sold something," so they "turn the dial or toss the magazine. We've created a situation of such high disposability of information that, of course, the value is going to drop. ... The ecology of information has been disrupted because there is so much information that nobody has authority."
expressed even less love for the bloggers: "I'm not going to be part of
this blog stuff. ... By all rights, 18 months from now we should be
looking back at this and all kind of embarrassed to say the word blog
-- I hope."
I have a good story. I mean, this is a really good story never before told. At least never before told in public.
A little less than a year ago I was out at a conference on the West Coast. And there was a guy at this conference who in New York we refer to as the mysterious billionaire. We have no idea what he does, but he lives in the largest private residence in Manhattan. That's what everybody always says, that specific phrase: "He lives in the largest private residence in Manhattan." He also travels in a private plane, which I had once been on. I went out to Kennedy and there were all these G5s parked there. And I started to kind of move over to them, and the guy taking it out said no and shifted my attention to a 767.
I got on this plane first with some other people. And then the mysterious billionaire came on, followed by three teenage girls (not his daughters). At any rate, we're at this conference and it finishes and he's going to L.A. and offers me a ride on the plane. As a matter of fact, he says, you can sit up front if you want. So we go out. I follow him out to his car and then we're quickly followed by two other guys. It's Larry Page and Sergey Brin, whom I've met before, and we say hello.
And I said, "Are you going out to L.A.?" And they said, "No, we're just going out to see the plane 'cause we're going to get planes." So we all go out and see the plane. They run through the plane: "Isn't this cool, isn't this great? Can you do this? Can you do that?" And I suppose it's exactly how I would react if I were in the position to buy a 767.
But then the mysterious billionaire started to ask them about their business. And we sat down in this luxurious area of this plane with the three teenaged girls (a different set of three teenaged girls not his daughters), who are sort of serving hors d'oeuvres.
So we were talking about the Google business. But Larry Page and Sergey Brin didn't want to really talk about the Google business. They wanted to talk about another idea that they had. And the idea was -- this is an appropriate pause -- for Google underwear. And we spent the next hour sitting in this plane talking about the underwear business. We talked about Google boxers and Google briefs and the fortuitous circumstance that Google with the two 'Os' would make an incredible bra.
There it is. And the moral of this story is that this is the paradigm in the technology business: They will fuck it up. They will. There's just no way that they cannot screw it up. So that could be good news.
It's the bad news now or the equivocal news that I want to talk about now. And I actually want to talk about the Wall Street Journal, and this is partly because of the MarketWatch acquisition. It at least got me thinking about this again. The Journal is, I think, the world's best newspaper. It has been one of the truly astounding information franchises. It had a quality product. The audience continued to grow and it was a focused, targeted audience. That is to say this is the necessary audience that you had to have. And it really seemed for quite some time that the Journal had accomplished this sort of holy information grail.
And it was always an interesting comparison to the New York Times, which seemed to be going in the other direction. I think you could argue that it was becoming a lesser product. It was certainly losing readers. It looked more and more like it was just a regional brand and a less and less focused one. It was the opposite of targeted information.
And then something happened, and I've sort of tried to figure out when this was. It was certainly mid-'90s in that the Journal kind of disappeared. The Journal went out of the conversation as a point of influence other than the eccentricities of its editorial page. It seemed to if not stop existing at least stop mattering.
It was interesting because the product was as good as it had ever been. It just wasn't present in the discussion. I've spent a lot of time thinking what happened because I know a lot of people at the Journal, and it feels to me from a journalist standpoint something of a puzzle and a little bit of a tragedy. And I think that the answer is the online thing. I think the fact that the Journal felt that it was powerful enough to charge, and for a long time everyone regarded the Journal's activities online as the ultimate. They had unlocked the puzzle. In fact, I don't think they did. I think they locked themselves into a puzzle.
While the New York Times on the other hand became this ubiquitous information brand. It became finally the national information brand. And it did this, I think, because it was free. So free is the word. And free is what I want to talk about -- free information, which in the media industry is now the topic, the theme. This is the thing that is unavoidable, that everyone has to deal with.
I first gave the "information wants to be free" speech 12 years ago. And I actually gave it because Patrick Spain and I had started to talk. And this was at the "content is king" moment in a very big way. But as I look at this, information is losing value. We went over a couple of things and I thought, you know, holy cow, if that's true it changes everything. I mean, it changes literally what I do, what we do, everything in the business. This was 12 years ago, and I gave this speech and everybody said no, no, no. You're crazy, content is king and if you have it you're blah, blah, blah.
Well, we all know that they were wrong, that I was right, or if not me then Patrick was right, and I was his instrument. Over that period of time we have seen the fall of the price of information become significantly more dramatic. It's been astounding, which prompts the question: "Why are you still here?"
And it is the question. There is a set of answers. One is the existential answer: You're dead but you don't know it. The other answer is the perfectly human, practical response, which is that the industry is dying, but industries take a long time to die and we all will actually be dead before the industry finally expires. Or there's the third thing, which is just, you know, the industrial revolution happens and people are still left on the farm.
Do you wake up at night thinking that the value of information is going down while you hold information? It's a scary thing. It's always interesting to look at the purest and most comical example of the devaluation of information, and that's the music business. Which you think is different than your business, but it's not really different from your business because the music business just had one business model -- sell information in units. It's interesting to look at because not only did it become the most devalued information, it was also prior to that the most overvalued information. It was so overvalued that it provided nearly unlimited limousines, drugs, and teenaged girls (not one's daughters).
And the music business is interesting because it really maintained two models. It maintained this free ubiquity model: music was everywhere, you didn't have to pay for it, it felt like your birthright. At the same time, you did have to pay for it. I mean, if you wanted to hold it in your hand then you had to pay for it. So that was the model. And then along came the technological wherewithal to take it. So all of a sudden people have this ability to take what they believe they own. And the music business tried to make everyone out to be thieves. But nobody bought that because the industry had effectively already given away the product, and there was just now this technological solution to taking actual possession of it.
And that in some way is the situation that purveyors of other kinds of information are in, too. So it's interesting to look at what has happened to the music business, and what will happen.
In one little interesting poetic turn, what will happen to the music business is that it will become the book business. So it will come from the most glamorous part of the information entertainment industry to the least glamorous. That if you're in the music business instead of making a business by selling platinum, millions of copies of a single product you will have to make your same business by selling 20,000 copies or 40,000, if you're lucky, 60,000. It's still a business, but there are no limousines and drugs and teenage girls. And that may well be in some sense good. But in some sense also it takes away the reason for being in the business itself. We are on the farm. We're just in this struggling, low-margin enterprise.
The alternative is to look at the music business in a different way -- the way in which everyone in the music business desperate not to be in the book business is trying to do. They're trying to look at the music business as the media business. The music business was never really the media business before. It was the information business. It was just selling units.
Now there is this new conception of the music business, which is a perfect media conception. We can't monetize our product by selling information, but we can bring an audience together, and we can partner with you and your marketing needs. This is the media business. And they have all kinds of plans for doing this, which are all more or less cockamamie. But they are nevertheless a vision of music as media.
It's an interesting and perilous line to cross, from the information business into the media business. But I also imagine it's a line which you all in some way are thinking of crossing. The process of becoming a marketing partner is a fraught one. The magazine business is a good example of what happens here. In order to compete with television, and then in order to grow as fast as possible, the industry decided at some point -- in I'd say late '70s, early '80s -- to de-emphasize its subscription model.
The magazine industry literally decided that having people pay for information was not as valuable as essentially giving it to them and aggregating a large audience, which was then sold to advertisers. This is, of course, fundamentally the Internet business, and fundamentally the model that was entered into there. It's the eyeball business, the marketing business.
In the marketing and information business, there's always a balance of power. In the magazine business, because there was this other revenue stream that allowed the magazine people to maintain what was commonly referred to (but what is almost never referred to anymore) as this church and state separation, we can do this thing. We can put out our product and we can have a marketing relationship with your product at the same time. It's a sort of a parallel relationship.
As soon as you got rid of the subscription side, that parallel relationship started to change. And what you had was a marketing relationship, which almost in every case -- certainly in the magazine business -- took over the information side. And so in all but a few cases magazines have become marketing vehicles.
But it's not just the magazine business. We can go through almost part of the modern media business and start to say, as consumers, we all recognize what's going on here. Part of what happened is that we we started to have fundamental credibility problems with media products. We moved on.
And it's one of the reasons why we've now in this situation in the media business -- it's just that nobody can hold an audience. Why can't anyone hold an audience? Well, people can't hold an audience because there's lots of competition and lots of other things to do. And media companies can't hold an audience because what they produce is shit.
And consumers fundamentally recognize this and say, "This is a goddamn rip off. I'm just being sold something." And so they just turn the dial or throw the magazine. We've created a situation of such high disposability of information that, of course, the value is going to drop.
Which gives rise to a consolidated media business in which in the course of 20 years essentially some 11,000 companies have been consolidated into effectively eight. And this is not about strength, it's about weakness. It's about an industry trying to follow it's audience. We're losing our audience. What do we do? Well, we run over here and we try and buy it. We're just trying to pull it back to create some semblance of the industry that once was. The industry that had its heyday from 1955 to 1975.
But that hasn't happened. In terms of the modern media company, you don't have one in which its core businesses are stronger now than they were a generation ago. And you don't have one that has any idea whatsoever of how to hold its audience.
A profound change has happened. The ecology of information has altered, and virtually nobody (at least nobody who has a job) has been willing to really examine the implications of information flowing not from it's usual source but from so many other sources. The implications of one person having this remarkable control. I mean, that's the reversal. It used to be that if you were an information provider you had control. Now you have no control. Control has absolutely passed to the consumer.
The ecology of information has been disrupted because there is so much information that nobody has authority. So if you're in the information business what you have been customarily selling is authority: "We know. We have information." Nobody believes that you have information anymore. Nobody believes your information should not be qualified by other information.
The most interesting change in the information ecology I know is actually the Martha Stewart model in which she closes the loop on information. She is just selling herself so it's a circular thing. All we can do in the media business is sell. But instead of selling someone else's products, we will just sell ourselves. So we have no product to sell. We have no information, as it were, to sell. We just have the name Martha Stewart to sell, which has worked. If I had to go back into the media business that's exactly what I would do. I would go to jail.
I want to stop rambling and finish up by telling you why I don't want to write a blog. Because I don't. At some point in the '50s Truman Capote was asked about Jack Kerouac, and he said, "That's not writing, that's typing," which is to some degree how I feel about blogs. I even hate saying the word blog. I hate being forced to say the word blog.
When I look at that particular blog piece of software I react viscerally. I said, "Oh, I don't want this. I don't want to be part of this." There's that scene in "Doctor Zhivago" where the professionals and the intelligentsia are reduced to having to walk with the hoi polloi, and that's what I feel when I'm forced into this blog stuff.
So I want to take what I think of as a noble and principled stand in saying that I'm not going to be part of this blog stuff. And I'm going to insist upon this until I am washed away.
Thank you very much. Any questions? I'd be delighted ...
AUDIENCE MEMBER 1: What's your reaction to the news that Universal is renegotiating its licenses on the music business with the various channel partners? And why are you so pessimistic when there are channel partners that are making 50 percent margins on the music business? Don't you think it's still just a redistribution of the profits that are in effect? And the other comment is that, you know, Universal cut the prices and they upped their consumption. So are you convinced that the music business as a content business is dead?
WOLFF: No, as I said, I think it can be the book business. I think the music business as a business that we know -- the business that we think of the business of incredible margins, incredible excess -- is over. Yeah, I mean over the course of this change in the value of content people still stay in business somehow. I'm not sure why they stay in business. And if I were in the music business, I would say, "What am I doing here? I've got to go back to graduate school or something." But yeah, there's something. I mean, there's still a business there.
AUDIENCE MEMBER 2: What role do you see blogs playing in the new ecology of information? They seem to have an impact.
WOLFF: Well, they do have impact. Part of it is actually involved with a kind of further devaluation of information because what it sets up is this constant second guessing of information. Which is not necessarily bad but it does lower the value of all information. You undermine that authority of information. But having been around this business now for some time I've learned that nothing lasts too long. By all rights, 18 months from now we should be looking back at this and all kind of embarrassed to say the word blog -- I hope.
AUDIENCE MEMBER 3: I wanted to ask you a question. You had mentioned that the Wall Street Journal had lost it's clout, and I just wanted to figure out on what basis. Those of us in the media relations business -- or anybody looking to transmit news or influence deal-making -- would put the Journal, on a scale of one to 10, at about a 50. I'm just curious as to where you see the decline coming from.
WOLFF: One of the things that happens is that there's always a kind of a delay in understanding where the discussion is. Where real influence lies. I think that virtually everybody that I'm dealing with -- people who are engaged in this discussion of media power, media reach, of what's working -- would have been aware of this for some time. There are certain things that the Journal is still good for. The kind of space it once occupied has clearly changed. I think it's changed massively and dramatically. Also, from a business standpoint, it has moved way out of that sweet spot. About a year ago it came out that the New York Times had offered to buy the Journal, and Dow Jones had rebuffed them. But Dow Jones had also indicated that were the Washington Post to come along and make an offer they would be more open to it. This is a big sign when you kind of announce that you may be for sale.
AUDIENCE MEMBER 4: When you talk about trusted sources I think about Consumer Reports, which is not for profit but they're selling their information. Do you think that that's a model that can be successful?
WOLFF: You know, I would like to say that it could be, but I don't think so . I think actually Consumer Reports is another one of those examples. It once occupied a very clear position in the opinion market, and it now occupies a kind of marginal position. Would it occupy a greater position if it didn't charge? Yeah, I think it would.
AUDIENCE MEMBER 5: There is a specific development in India which I want to share with you. The largest newspaper chain in India has gone to an aggressive model, taking stakes in companies in return for advertising that they will provide them over a seven-year period. They even have a rate card for things like this. This is the largest newspaper chain ...
WOLFF: It's a kind of barter situation?
AUDIENCE MEMBER 5: They actually bring in cash to these companies and get into a contract with them for advertising. And this only happens with about two or three companies. It seems to be growing.
WOLFF: Isn't this what AOL did and ...
AUDIENCE MEMBER 5: They go to these companies, which are large advertisers, and say you need cash for growth, here is cash. You can have an advertising contract with us over a seven-year period. This is what you guarantee us in advertising revenue.
WOLFF: So, the media companies are buying the consumer product companies?
AUDIENCE MEMBER 5: Absolutely.
WOLFF: I'm flummoxed. I don't know.
WOLFF: You know there's another interesting thing to note about this free information of the New York Times. The New York Times is trying to take this significant position in this Boston Metro. And it's interesting because a year ago Arthur Sulzberger said when asked to comment on this upsurge of these free dailies, he dismissed them extremely and out of hand. This was just last month. And it's worth pointing out that it came out that the guys who run this thing had made these really bilious racist comments. So the moral there is that free information, while it can vastly enhance your brand, also means you meet every skank in the world.
AUDIENCE MEMBER 6: Consumer Reports has almost two million paying subscribers, so I'm just curious. This thing you keep saying about how paying for content devalues it ... I'm confused by that. Can you just elaborate on that a little?
WOLFF: Well, I think Consumer Reports at one time was the brand in product evaluation. That's what you would say: "Check Consumer Reports." But if you want to buy something now, it's "Check the Web." It's not that Consumer Reports doesn't have a business, but it has certainly lost its position as the grail of product evaluation.
AUDIENCE MEMBER 7: You talked about the price value of information falling dramatically over the past decade and the passing of control of information to the consumer, and I couldn't agree more. But going forward, where do you see the opportunity for people like yourself, creative thinkers and writers, to make a living?
WOLFF: On the one hand, I can outline how I will hope to make a living till the end of my days. On the other hand, I have a 21-year-old daughter who is contemplating or threatening to go into the content business, and I have real mixed emotions. I feel paternal pride, but nevertheless I'm thinking that I'm going to have to support her forever.
the career path of a 21-year-old right now in this business? Would you
go into the magazine business? My, God. Would you go into the book
business? Save me! Or the movie business, which will shortly experience
what the music business has experienced? Here, too, I am flummoxed. If
anyone has an idea of what my daughter should do ...?
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