One shouldn’t deceive oneself into thinking that we are simply in the middle of a crisis caused by the irrational behavior of our financial institutions since there may be other causes. Even though Asia has been bringing costs down for decades, many countries and industries have ignored the potential threat of these lower costs and have chose instead to maintain their cost structures. The generalizations of internet and broadband have extended the competitiveness of the new players (“the world is flat,” according to Thomas Friedman). Not to be mistaken, this financial crisis is a cause as well as a catalyst of the current turmoil brought about by this ‘Asian price’ and this new local and world competition facilitated by broadband.
Many companies have understood this new scenario. Airlines, for one, may offer extremely low ticket prices and absolutely no-frills, but at the same time they may charge for extras like food and drink, seat allocation, baggage...etc. The increasing penetration of low cost and no-frills products and services has carved a position in the mind of consumers and now marketers know very well that people frequently trade up and trade down; they can go for rock bottom prices (below the consumer’s standard of income and living) in order to afford small luxuries, which may appear beyond their reach. By shopping in discount supermarkets, a couple may afford a long haul vacation, no frills, in their dream destination.
One cannot downplay the significant effect that these economic and societal changes are having on our audiences (readers, spectators, users). The bad news is that they now expect basic merchandise to be free, but at the same time they are learning to pay, albeit minimally, for new content. Changes like these have permanent effects in our businesses.
Many newspapers and TV stations are taking too long to adapt their legacy cost structure to the new reality and to get rid of the unnecessary dead weight and the internal obstacles which prevent them from making their companies more nimble. The basic operation has to be a very lean one, enough to put forward the basic offer to the audience. Too many examples are showing us that if that effort is not made constantly and in an orderly way it will have to be done traumatically. Media incumbents should save lots of money on the repetitive tasks of their current operation in order to achieve three basic purposes:
First, to maintain profitability and operations while the company moves forward. Second, these legacy media need those savings to project themselves into the future, in order to explore and develop new media opportunities to further increase their reach. Lastly, parts of those savings have to be addressed at investing in those activities which create brand and differentiate them from the rest. I am referring to investigative journalism, special reports, event creation, exploiting local databases…etc. That is, developing their own content which equals the frills the airlines are able to charge and which makes the difference for audiences and advertisers. It also may open new avenues of profitability. After all, is there anything as vital for a medium as (differential) content and marketing (brand)?
There is no way to cross successfully into the future if cost cutting in legacy activities is not an active policy implemented constantly by newspapers and television companies. Proper cost cutting is not a reactive decision; it’s a fundamental part of our future building strategy. Do not be apologetic about it. (Just don’t cut corners in brand image and differential content creation).
Newspapers and TV stations are taking a long time to adapt to this new situation, as if time wasn’t an issue.”
You are free to use this article in your publication as long as you credit the author Fernando Samaniego.