Publishing is Back to the Future

Author: Ben Thompson (Stratechery) URL: https://stratechery.com/2021/publishing-is-back-to-the-future/ One-line: Prompted by a16z’s media push, Thompson argues media’s old “franchise” strength came from controlling distribution, not reporting — and that in a world of infinite choice, only businesses built with competition in mind (and an honestly-held point of view) survive.

Key claims

• a16z is building a media property “about the future”; the obvious worry is conflict of interest — a firm that succeeds on investment returns can’t be expected to cast a truly critical eye on new technologies.
• But bias isn’t necessarily a bug — it can be a feature: subscribers pay for perspectives they agree with, worldviews that get reinforced.
• The only businesses that survive are built with competition in mind — competition quickly kills the startup, returns, or competitive position of any entity that ignores market forces.
• Product/integration fit matters more than the math — a bad product or bad integration isn’t worth doing even if it would make a ton of money (Marques Brownlee).
• Warren Buffett’s Economic Franchise (Berkshire 1991 letter): a franchise is (1) needed/desired, (2) has no close substitute, (3) isn’t price-regulated — and can tolerate mismanagement. Media used to be a franchise; the Internet’s expanded choice fragmented markets and eroded that franchise strength.
• Google and Facebook don’t decide what websites users visit — users do. Publishers built on being the only choice don’t do well when choice appears.
• News loses all economic value the moment it’s reported — instantly reproduced and distributed for free — which is why no single news source is missed when it disappears.
• Journalists mistook what readers paid for: paper, newsprint, and delivery trucks — not their reporting (Distribution).

Notable quotes

Still, I get the concern. Andreessen Horowitz, at the end of the day, succeeds or fails on the basis of its investment returns. It is unreasonable to expect the company to cast a truly critical eye towards new technologies or companies given how significant its conflicts of interest are.

“That applies to the ads that we build in and make ourselves, too. If it’s a bad product, it’s not worth doing it at all, even if we would’ve made a ton of money. If it’s a bad integration or if it’s a bad company to work with, I have to say no, because it just doesn’t fit.” — Marques Brownlee

“It is the idea of work for the community, not commerce, not for one’s self, but primarily for the public, that needs to be taught. The School of Journalism is to be, in my conception, not only not commercial, but anti-commercial. It is to exalt principle, knowledge, culture, at the expense of business if need be.” — Joseph Pulitzer

An economic franchise arises from a product or service that: (1) is needed or desired; (2) is thought by its customers to have no close substitute and; (3) is not subject to price regulation… Until recently, media properties possessed the three characteristics of a franchise… Now, however, consumers looking for information and entertainment… enjoy greatly broadened choices… competition has intensified, markets have fragmented, and the media industry has lost some — though far from all — of its franchise strength. (Buffett, Berkshire Hathaway 1991 letter)

Google and Facebook don’t decide what websites users visit, users do. That they choose not to “directly visit DC’s website or access it through other news aggregators” is the result of publishers losing in the market with more choice and less lock-in than any other in history. Which, again, is the real problem: businesses built on being the only choice don’t do well when choice suddenly appears.

News is a very tough business on the Internet. The reason why readers don’t miss any one news source, should it disappear, is that news, the moment it is reported, immediately loses all economic value as it is reproduced and distributed for free, instantly.

Journalists just didn’t realize that people were paying for paper, newsprint, and delivery trucks, not their reporting.

Notes

• Key takeaways:
  • The only businesses that can succeed are those built with competition in mind. Competition will quite quickly kill the startup, the returns, or the long-term competitive position of any entity that ignores market forces.
  • Inherent bias in media is not necessarily a bug, it can be a feature. Subscribers decide to pay for certain perspectives because they agree with the worldview and enjoy having their own worldview reinforced.
• a16z’s stated mission: #a16z
  • “If Software really is Eating the World, there needs to be a place that is dedicated to explaining and tracking it. So we are doing just that: we are building a new and separate media property about the future that makes sense of technology, innovation, and where things are going.”
  • “We want to be the go-to place for understanding and building the future, for anyone who is building, making, or curious about tech.”
• Products built in competitive environments are required to justify their existence. Monopolies are not. (Connect to the Berkshire Hathaway 1991 letter on Economic Franchise.)
• The New York Times: “Our journalism must change to match, and anticipate, the habits, needs and desires of our readers, present and future. We need a report that even more people consider an indispensable destination, worthy of their time every day and of their subscription dollars.”

How it connects

• Journalism — the central subject: franchise erosion, anti-commercial ideals (Joseph Pulitzer), and the post-distribution economics of news.
• Economic Franchise — Buffett’s three-condition definition and the claim media used to qualify.
• Aggregation Theory — choice + commoditized distribution as the force eroding the publishing franchise.
• Marques Brownlee — the “fit over math” exemplar of a creator who turns down bad deals.
• Ben Thompson / Stratechery — author and publication (itself a subscription-bias-as-feature example).