Gabor Steingart

(Speech delivered on Capitol Hill in the speakers series “Woodrow Wilson Center on the Hill” on September 22nd.)

Dear Ladies and Gentlemen. It´s a great honor and pleasure to be your guest on Capitol Hill, a historic place in troubled time. As I know you are all more than busy here on the Hill – you have to pass through big pieces of legislation from health care reform to immigration- so let’s come straight the to point. My topic is the media crisis. The headline of my speech could be: I´m dying.

Don´t get me wrong. For a 47-year old man, I feel healthy. As a father of three kids, I´m more than happy. Living in the US is an amazing experience.

But: As an old school print journalist, I´m dying. And the sad truth is: I’m not the only one. In our industry, people are dying like flies, even if a few swine flu victims get a lot more attention. One fifth of the journalistic workforce of 2001 has disappeared over the last couple of years. And it looks like a lot more will follow. We are losing people and profits.

So it’s good to be here. It’s always good talking about this strange illness that has infected a whole industry. Conversations like this are important. For me they serve as my personal “end of life consultation”.

Let’s have a closer look at the process of passing away. It all started a few years ago when I received a phone call from one of our controllers at DER SPIEGEL. I was bureau chief of our Berlin office at that time. The controller came up with a critical question:

Mr. Steingart, do you think the professor you had dinner with a little while ago, was worth a bottle of red wine for 80 Euros?

I had never heard a question like this. And I also had never thought about people that way.

The professor the controller was referring to was Mr. Arnulf Baring. He was and still is a very well respected political observer, author of several great books, a strong supporter of Chancellor Angela Merkel. It’s always good to pick his brain. We Spiegel guys, like our colleagues worldwide, love to meet many people even if they are sometimes less important than the US President.

But was it worth 80 Euros? I have no idea. Strange question.

While I was thinking, the voice of the controller became more serious: Mr. Baring is getting older, he insisted. Is he really still important for our magazine?

Important for what? Our magazine? I had never looked at it this way. Since I had joined Der Spiegel at age 28, it was for me a haven for writers, reporters, editors and last but not least our great researchers.

To me, the controllers were not part of that family. So I gave him my answer. The dinner with Mr. Baring was great. It was not only worth 80 Euros for red wine, it was cheap. Sorry to say, but we cannot print the graphs on your desk in our magazine. So please let’s stop this kind of thinking.

But as we all know: My response was not really successful. The kind of thinking the accountant showed has not stopped. It has succeeded – it has mushroomed in all our newspapers, magazines, TV-stations, and online outlets. All too often the people in the back office of our operations try to be the new masters of our universe.

Don´t get me wrong: The controllers are not bad people. I don´t want to blame the little guys. I would like to blame the big guys of our industry. They are responsible for this crisis.

It feels like our industry has started a kind of assassination program with itself as the target. This assassination program could be titled “How to perform business suicide”. It’s a three-point-program.

Rule 1. Pick the wrong role model!

Everybody needs a role model. The role model for our publisher seems to be Mr. Waggoner, the former GM-Boss. He made cost cutting and the end of all sorts of creativity the centerpiece of his strategy. He forgot about the number one rule in the car industry: Cars also have to be special – they are not only machines with 4 wheels. We love them before we drive them.

Journalism also has to be special. A story is not the space between two ads. Journalism is not a job; it’s a mission, the mission of making the world a better place by criticizing it. A journalist who starts thinking about him or herself as a number – nowadays often written in red ink – as just another costly part of the production chain, will not feel self-confident and independent enough to fulfill his or her mission. The wrong role model helps to create a systemic risk.

Rule 2. Let’s ignore the market!

GM followed this rule strictly. The oil prices skyrocketed, people were worried about the environment, Al Gore became green, and Detroit ignored all of this. They were building muscle cars, full-sized trucks, and gas guzzlers like nothing had changed. In doing so, they destroyed their business model.

Our publishers behaved in the same way. They destroyed our business model.

We used to charge our audience for news – and now our publishers have decided to give it away for free online. Most newspapers and magazines collect emotional stories, thought-provoking opinions and breaking news – and now the publishers let these stories fly like birds in the sky.

Everybody can see and read them now. On our own websites, on Google, or on some of the smart aggregated sites like Real Clear Politics. Print no longer stands out. It seems like just another news source, it looks like just another blog entry. Our publishers have managed to make us small. They have made us look cheap. Like GM they destroyed our markets by making us cheap. Detroit gave discounts to everybody; we gave our content away for free.

Rule 3. Feed your competitors!

The GM policy was a great invitation to all competitors. It seems Detroit was calling: Please Toyota come to our soil and beat us!

Our publishers have done the same thing: Our Toyota is our own internet business. It’s the toughest competition I have ever faced in my life. I’m my own rival now. Should I hold a piece of information back until the deadline of our magazine or should I post it online? Could we break the story now or later? The online guy in me tries to kill the print guy because he tries to steal my nice opening paragraph, my background information, my inspiration for a first quick story online.

We are competing for the same story, the same money resources and the same time of their readers.

Thank god the online guy in me is very polite. He is at least killing me softly. Like Toyota has done to GM.

Our publishers even today don’t understand they are feeding other people’s businesses. Google is a recycling company. The I-phone would be not called a smart phone if we media outlets did not deliver most of our pearls for free access to the internet sites the phone easily gives access to.

I find my own articles now on the Blackberry, on the iPhone, on Google, Yahoo, and often the telecom companies charge me while I read my own sentences. AT&T is creative: They charge me for “data transfer”, for a “roaming fee” or whatever – but the content they are selling to us is our content. And the crazy thing is: There was no need for them to steal it.

Our publishers gave it to them. So they killed our whole business model without creating a new one. That’s why we are suffering. That’s why the controller is becoming a VIP in all our companies.

Let’s try to stop the bleeding of our industry. Here is my 3-point-solution.

1. Let’s be proud again! Even if the numbers are currently looking terrible, we should not scare ourselves to death. The problem we are facing is not an audience problem or a credibility problem. It is a revenue problem. Let us blame the other side of the aisle. Let’s fire the Mr. Waggoner style of CEO! We need risk takers and pioneers in our industry again.

2. Lets crash other people’s parties! Why not ask the hardware companies who sell computers, iPhones and Blackberries to add an extra fee for their products that helps pay for our content? And if they say no, why not ask the politicians to ask them again? Let us continue the negotiations with Google executives about a license fee for the publication of our content on their search engines. The publishers have given away our intellectual property rights, now it is time to bring our crown jewels home again.

These kinds of negotiations won’t be easy. I’m not naive. A single media outlet can’t win them – but if the industry united forces, we could accomplish it. It is high time to find common ground and to build a new business model on it. In Germany, Mathias Döpfer from Springer has started an effort to pool the interests of the European publishing industry and to streamline a common response. The talks with Google have already started.

3. We have to talk honestly about our problems to our readers. Unpaid content is like free beer all day long. Not a single brewery could exist if the whole industry served free beer. The same is true for journalism.

The only question is: How can we charge our audience? Will a subscriber based model be better than some sort of micro payment for every read article? Or should we adapt the cable model, in which a fee is part of a monthly Internet access fee? And let’s not forget about the regular copy price. Our readers – like the movie audience and the listeners of pop music – will accept this price if they care about their products.

The coalition between journalists, publishers and readers has been broken up. We have to rebuild it.

One last remark. Government money for me is not a solution. We should never ever ask for subsidies. For the free press there is no public option. Coming from Germany I know what I´m talking about.

There was one industry that was doing even worse than Detroit is now, that was the car industry in the eastern part of Germany. Taxpayers money and government bureaucrats helped create the Trabi. Let’s prevent the free press from becoming a Trabi style business.

Thank you for listening!