The Threat of Online Publications to the Traditional Publishing Industry
The aggregate demand of published material, both online and offline, is a fixed number. Publishers in today's mass media market face fierce competition; each customer that an online publisher wins comes at the expense of its offline counterpart. To illustrate, imagine the unequal slicing of a pumpkin pie representing market shares that vary in size. The sum of all shares, or 'slices,' adds up to the total client base. Although each publisher already owns a portion of the pie, it still covets those who have a bigger slice. In this zero-sum game, with each new slice that a publisher gains, its pie becomes ...view middle of the document...
In assessing the economics of the media business, it is helpful to first examine the ways in which publishing companies are owned and financed. Broadly speaking, media systems can be owned by the state, by private corporations, or by a mixture of both, all of which are financed through advertising (McCullagh 75). As with any other business, the publishing industry is profit-oriented, and the premise for all strategies deployed and actions taken is ultimately a means to achieve financial rewards.
Many major national periodicals and magazines have developed web versions in the past two to three years, a move that helps strengthen media ownership (van dur Wurff 217). Large media companies buy into or merge with other media companies that serve the same market, a process known as horizontal integration (McCullagh 75). For example: the merger of America Online and Time Warner in 2000 brought together CNN, Netscape, Warner Brothers, and Time Magazine.
It is very common to find well-known magazines such as TIME, Fortune, or Newsweek that offer full access to the same published content online. This requires some initial cash outlay to setup the proper web-hosting infrastructure, but once the host servers are in place, no additional capital is required to run the internet operation. Web versioning transfers ready-to-go material onto the World Wide Web, which compared to the original paper content, is simply an alternative mode of display. For example: TIME magazine invests some initial capital to create www.time.com. Once the website is operational, it then attracts new readership and advertisers and generates more revenue.
From a project valuation stand point, the online content has already been paid for; therefore web operations can earn additional profit while incurring negligible added cost. Companies integrate horizontal markets1 not only to achieve operational efficiency, but also to attract advertisers and readers with different demographic profiles. In that sense, the online-offline combination seems to achieve synergy and reinforce the traditional publisher's position in the market.
Market segmentation is another economic reason that traditional publishers stay afloat. Rather than becoming a powerhouse in the open market, such as consumer products conglomerate Proctor & Gamble, smaller companies tend to specialize in selected products and enjoy a large market share in a small market segment. For example, companies that specialize in manufacturing artificial hearts face mild competition because very few competitors exist; therefore product demand is predictable and recurrent. In general, smaller companies that specialize in one or two products can stay profitable just by satisfying a particular market niche.
Similarly, the K-12 textbook market has its own niche that is free of online competition. Beyond K-12, most universities rely on printed textbooks as the major venue for learning, too. (Blog-based classes such as...