Weathering the disruptions of the sharing economy

Fueled by technology and driven by millennials, the sharing economy has pioneered a new perception about the value of physical and digital goods from which few industries are immune, writes Nikolay Malyarov in this guest post.

by WAN-IFRA Staff | May 17, 2016

“Access to other’s idle assets is resulting in a significant behavioural shift: people start favouring usage over ownership,” Frédéric Mazzella, Founder and CEO of BlaBlaCar

It’s interesting how the internet and cloud services gradually weaned people away from the whole concept of ownership. For centuries the principle of “private property” was a basic value – the sacred cow of western civilization. It was paraded on banners during revolutions and wars; many people were killed in the name of possession.

But when the digital revolution erupted it didn’t take long for Apple and Google to debunk this long-held ideology. It was quite easy to accept the premise that we shouldn’t have to buy CDs and DVDs; we just need to pay for the right to listen to music or watch videos. Historically, music downloads from the likes of iTunes made up the majority of the recording industry’s revenue; in 2015 streaming music became its biggest income source.

Paying for Kindle eBooks was a harder pill for us to swallow. The experience of browsing bookstores and choosing the perfect book for oneself or as a gift has never been fully replicated in digital. This is partly due to the more transient nature of digital books, but also for the loss of the individuality that comes with a treasured collection of dog-eared titles in a bookshelf. For many of us, our library is a reflection of who we are, what we value and what we dream about.

The auto industry is definitely feeling the effects of this economy. At one time buying a car, especially a first car, represented the “coming of age” – everyone remembers their first car. Cars were a reflection of who we were; a quarter of American’s even anthropomorphized their automobiles by giving them names. But as car ownership becomes less profitable than its usage, more and more people are giving up all the emotional and proprietary aspects of possession to become members of a car-sharing community.

“25 years from now, car sharing will be the norm, and car ownership an anomaly,” Jeremy Rifkin, author and economist

Real estate and the hotel industry are also being disrupted by the trend towards shared accommodations, spawning new referral services such as Airbnb, FlipKey, VRBO and HomeAway.

Not everyone is ready to let strangers live in their homes for money. But we must, of course, evolve in this direction. Some have even suggested that it won’t be long before people will only own one personal thing ─ their passcode on their smartphone. And that there will be only one setting ─ the way they lay out applications on the desktop and photos albums in the cloud.

The tangled web

One of the main problems in today’s sharing economy lies in the fact that even in Europe and America there is not enough legal framework that properly regulates “consumption versus owning.” Today companies are just doing what they want, and we the people, what we can get away with.

Fashionably trendy Uber, which disaccustoms people of car ownership, wrote a user agreement that is contrary to the constitutions of some countries and it refuses to unlink banking cards from customers’ accounts. We’ve all heard the horror stories of outlandish surge pricing and discretionary fees. All we can do is try to resolve conflicts as they occur using existing and inadequate legal instruments. Disruption forces us to move the bureaucratic behemoth faster.

But there are some precedents for which customers are unprepared. What happens to shared digital accounts (e.g. iTunes, Amazon, magazine app subscriptions, etc.) between spouses upon divorce? How do you divide those digital assets when you only have access privileges, no real ownership of the content? Clearly there needs to be a reformation of the laws surrounding collaborative consumption.

The double-edged sword of disruption

In the sharing economy, there typically two different kinds of disruptors – those that evolve industries (clever disruptors) and those that dissolve them (destructive disruptors). But regardless of their endgame, both succeed in their goals because they share one fundamental focus – the consumer.

Zipcar (clever disruptor) has helped evolve the transportation industry by inspiring major automakers to embrace car sharing to the point of changing their mission from selling cars to offering “premium services for individual mobility.”

The same is true in hospitality with many traditional hotel chains launching unique millennial-friendly properties that give GenYs what they want – affordable, functional and minimalistic luxury.

The music industry was disrupted both cleverly and destructively. By unbundling albums into songs, iTunes virtually destroyed the album industry, while at the same time saving the music industry from the plagues of piracy that had the record labels facing 15% losses of its revenues in just four years from its peak of US$ 15 billion in 1999.

Netflix had similar effects on video when it launched its streaming service in 2007. However, it only took four years for home video industry revenues to stabilize with digital contributing up to 70% of sales.

And while Netflix is still seen as a dubious disruptor, movie studios have been growing revenues since 2009 as a result of the massive increases in digital video consumption, thanks to Netflix, Hulu and others.

And the grumbling film studios are still more profitable than their frenemy.

But what does all this have to do with newspaper and magazine publishing? A lot…

In the publishing industry there are a number of disruptors looking to capitalize on the sharing economy. And although one might not intuitively see an apple-to-apples comparison between music and news content (due to news’ ephemeral nature), when it comes to meeting the needs of the new consumer, the similarities can’t be denied.

Take a look at craigslist. The unbundling of classifieds from newspapers was not unlike iTunes unbundling songs from albums; the move brought tangible value to consumers and advertisers. But instead of evolving the industry, this destructive disruptor all but destroyed it, transforming classifieds from a multi-billion-dollar business into the 300-million-dollar one it is today.

On the flipside of the commotion coin, clever disruptors are actually helping to evolve publishing into a more consumer-centric industry. Aggregators like Google, Facebook, Apple, PressReader, Zinio, Magzter and Blendle bring value to publishers by providing access to a massive audience they can’t reach on their own and offering innovative ways for publishers to monetize their content. And unlike craigslist, these companies are not competing with publishers on content; many are, in fact, paying for the privilege of giving readers what they want – quality content when, where and how they want it.

Sharing is not caring

Just like the music, video, book publishing, transportation and real estate industries, magazine and newspaper publishers are experiencing a property crisis.

We do not listen to music in albums ─ we stream or download terabytes of songs; we do not watch films to the end; and we don’t consume news in quantity; we snack on it. Many of us do not even remember the name of the newspaper or magazine where that cool article we just shared on Twitter was published.

Exclusivity of content is becoming virtually non-existent as social networks spread stories virally across the web, where readers can experience frictionless discovery of news curated by peers and trusted sources they follow. As exclusive ownership of content dissolves so does brand affinity, making it difficult for publishers to attain and retain the loyalty of readers.

Meanwhile, newswires and photo banks proliferate duplicate content across publications, degrading the reading experience in magazines and newspapers. Today, sport scores, financial news, weather and even homicide reports are being published through automated platforms. If these trends continue, it won’t be long before traditional media will just be commoditized newsfeeds of little worth. Sadly, some already are.

Quality journalism is collateral damage in a war between newsrooms and the growing number of commercial owners who care little about the future of news or the spread of democracy through journalism. It’s all about the money and the ones getting the least of that are the reporters, columnists and writers who produce the goods. This is driving them into freelancing and PR, abolishing publishers’ feudal rights to those authors’ work.

From the journalist’s perspective, the challenges are not dissimilar. Except for the rare few who may be able to build an omnipresence of their work online, the majority will face the same fate as publishers – the loss of content ownership.

The sharing economy is not talked about much in the context of publishing, but it is a threat that must be recognized and addressed sooner rather than later. Because, as in all other industries, with today’s ME generation, loyalty is trumped by convenience and instant gratification. And publishers that continue to hold on to their proprietary-ism when it comes to content distribution control are swimming against a rising tide. It’s a wonder they haven’t drowned yet.

To weather the storm of the sharing economy, it’s important that media executives:

  • Always put readers first – identify them, understand them and make them feel welcome; encourage them to participate in the creation of exclusive content for the brand
  • Stop pushing journalists out the newsroom doors and start rewarding them for producing high quality, relevant content for their target audience
  • Invest in new ways to serve readers, rather than spending money and time on prosecuting those who violate their copyrights
  • Embrace clever disruption and exploit the opportunities of publisher-friendly distribution models

What does the future hold?

Property is no longer a privilege; in fact, it has become a burden. The proprietor no longer governs the world, but serves those who make use of his/her possessions. In publishing, it means that customer service and experiences that build brand affinity and loyalty are critical.

Progress cannot be stopped, but it does develop nonlinearly. Driven by nostalgia, quality and relevancy, there has been a renaissance of long playing vinyl records, CDs, printed books, high-quality greeting cards and even Polaroid cameras.

So that begs the question, “Will we will ever see a reversal in this current trend – a return to fashion of ownership and possession ─ something that is “just mine” and very personal?”

Nikolay Malyarov is Chief Content Officer and General Counsel of PressReader – the largest all-you-can-read digital content platform with a growing list of over 5,000 newspapers and magazines. Known for his thought leadership and vision, Nikolay offers provocative commentary on future trends in publishing at major international events. He frequently contributes to prominent global publications, exposing what’s between the lines on topics such as audience development and user experience, content distribution and monetisation strategies. He holds a Master of Arts and Juris Doctor degrees from the University of British Columbia.

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