Where's Media's Silver Lining?

By Scott D. Anthony, Clayton M. Christensen

Dwindling numbers of subscribers, fleeing advertisers, layoffs, frozen dividends and rampant talk of selling hunks of business lines. Say what you will about the challenges of the last few months for just about every industry, the mainstream media has had a particularly rough time. The Dow Jones Broadcasting & Entertainment and Publishing indexes were down 42% and 50%, respectively, this year.

Three years ago most newspaper companies had launched successful Web sites and enjoyed operating margins approaching 30%. Today the industry is fighting its demise. In October the Los Angeles Times announced plans to cut 10% of its news staff. Both the New York Times and the Boston Globe have consolidated sections in their print editions. Next year the Christian Science Monitor will become the first daily national paper to move entirely to online distribution. Publisher Lee Enterprises, which borrowed money to buy Pulitzer Inc. for $1.5 billion in 2005, is worth $73 million today.

Big media's problem is that it was built on scarcity: one newspaper in a city, three broadcast channels, ten radio stations. Now anyone with an opinion, fact or photo can self-publish. The good news for the media is that these circumstances should end the debate over whether to transform. It's mandatory. Media executives have to ask themselves: "What business are we really in?" The best way to answer that question is to understand what consumers and advertisers want. What job are they trying to get done? Do they want mindless entertainment? To be part of a community conversation? The answer can lead companies to focus resources on a few, well-chosen innovations.

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