Telcos, Airlines, Newspapers: Structurally Incapable of Making a Profit?

Some businesses, some would argue, are structurally incapable of making a sustained profit. Airlines are the typical example. Others seem to make money only if operated as monopolies. Electrical, water and natural gas services are examples.

This year, we have started to see major U.S. newspapers going out of business. So you would think advertising, a key pillar of the newspaper business model, has migrated elsewhere; to TV or the Internet. Clearly, some has. But migration to Internet venues has slowed.

You might attribute some of that to the recession. But there's a bigger problem right now. As advertising tends to follow eyeballs, you'd think Twitter, Facebook and YouTube would be getting more ad revenue. They aren't getting as much as you might think, or any at all. In fact, some online properties are faring better than print assets, but not by much.

In the first quarter, Yahoo's revenue dropped 13 percent while New York Times Company revenue fell 18 percent, and advertising dropped 27 percent.

So far, nobody has successfully replicated the two-sided revenue stream characteristic of so much of the "old" media in the "new" media space. It has proven largely impossible to monetize content directly.Nor has it proven easy to create stable and large advertising streams.

This is a bigger problem than some realize, as it is not confined to the media, new or old. In telecommunications, all the new fundamental services, IP voice, broadband access and video, are less profitable than older voice services.

Mobility has been key in enabling a transition away from long distance revenue as an industry mainstay. But even that will be under increasing pressure as mobility becomes a broadband access service, with similar margin issues faced by wired network providers.

That's one reason why some of us spend so much time writing about, and thinking about, business models. Right now, some models don't work, while others don't work well.

http://247wallst.com/2009/04/22/the-end-of-%E2%80%9Cnew-media%E2%80%9D-yhoonytgoog/