Andreessen’s not-so-hot idea for publishers
Evoking Hernan Cortes, the 16th Century conquistador who legendarily destroyed his fleet so members of his expedition to the New World would not be tempted to return to Spain, Andreessen said mainstream media companies summarily should abandon their traditional businesses so they can concentrate single-mindedly on new media. “You gotta burn the boats,” he told TechCrunch. “You gotta commit.”
If he applied the same intellectual rigor to this topic as he presumably does to his work as a golden geek (see 1996 Time Magazine cover at left), Andreessen could have used the web browser he invented to quickly discover the realities of the publishing business by viewing the sales data published by the Newspaper Association of America.
The data show that the $3.1 billion in interactive advertising collectively sold by newspapers in 2008 accounted for 8% of the industry’s $38 billion in ad sales. If you assume papers generated another $7.5 billion in circulation revenues in 2008, then some 93% of the industry’s $45 billion in sales were associated with the legacy print product. Even though ad revenues probably fell $10 billion in 2009, print-driven newspaper revenues sill are running at better than $30 billion a year.
It doesn’t take a certifiable Silicon Valley genius to see that no business can walk away from some 90% of its revenue base without imploding. Andreessen should know this better than most, because he watched Netscape, the pioneering browser company he helped launch, go from supernova to black hole in a few short years.
Netscape kicked off the tech boom when its valuation as a public stock broke all kinds of records by climbing to $2.2 billion in its first day of trading in 1995. The company rapidly grabbed some 90% of the nascent browser market as the Internet rocketed from science labs into the mainstream. Within five years, however, Netscape was well on its way to becoming a footnote in tech history.
Why? Because it was forced to stop charging for its innovative software when Microsoft flooded the market with a free browser that did the same thing. With its business model mortally threatened, Netscape cleverly sold itself in 1998 for the implausible sum of $4.2 billion to AOL, which was besotted by its own early success and excessive market capitalization,. The Netscape name limped forward as an obscure and underfunded division of AOL until the plug mercifully was pulled in 2007.
The lesson is this: While there may have been no way to save Netscape after Microsoft changed the rules of the game – and there may be no way to fully defend newspapers from the countless digital competitors gnawing away at their audience and advertisers – you sure can’t transition a business to a new model by torching 90% of its existing revenue.
There’s simply nothing constructive – or amusing -- about this sort of thinking.