Sunday, April 20, 2008

Do Newspapers have a future in South Africa? And An American Perspective

The good news is that they most certainly do (in South Africa). The bad news, is that online media almost certainly does not have a future.

South Africa is distinctive for having a very low internet penetration in terms of the overall population. Just over 10% (less than 5 million South Africans) have access to the internet, and a large amount of these users have work-only access. On the other hand, the vast majority of South Africans have access to newspapers. Far more people in South Africa read newspapers, or get their news from the radio, than the internet. Meanwhile, what about the penetration levels of mobile handsets. Is it 70% already, or more?

But the macro-economic factors now in play – inflation, interest rates, contraction and recession – are quickly eclipsing South Africa’s Promised Internet Land. Just as South Africa is about to free itself from a service monopoly that has strangled its ability to innovate and grow online for years, just as an undersea cable is about to connect us to the rest of the world, those hopes and dreams have been essentially amputated by prohibitive costs of living. These include the costs of eating and moving around. And what would you rather have? Food to eat, or Google? The lights working, or email?

Most South Africans with internet, that are on a sort of borderline, will probably cut back on unnecessary expenditures, and the first of these include exorbitant communication costs, including internet subscriptions, magazine subscriptions, expensive cell phone subscriptions in favor of cheaper options. Expenditure is about to become far more functional and practical.

Meanwhile, on the other end, the production side, finding online advertising revenues is going to become more difficult, and the small flows that already exists are going to have to be spread even thinner. This does not bode well for companies who have only recently anticipated high market growth, and increasing yields, and responded only over the last couple of years. That market – the internet market – is about to be frozen in its tracks.

Where internet networks exist and are to some extent entrenched, these are likely to thrive. But those who have recently been set up are likely to be shed, as consumers find their choices (and their cash) far more limited. So if all the various websites in South Africa were sodas, we’re going to say goodbye to Fanta, and Schweppes, and Mellow Yellow, and Spar Letta and all the rest. All we’re going to be left with is Coke and Pepsi.

Elsewhere in the world, the internet is likely to be a vital resource for news and information, and in many advanced economies, will take over completely from paper, as environmental concerns and costs become ever more critical. Power outages in South Africa will also have a dampening effect on local internet use, and as users attempts to remain connected become more frequently frustrated.

There remains though tremendous opportunity in South Africa to provide effective news to mobile handsets; something which even the poor carry around with them wherever they go. What is certain though is that the future, especially for the poor in South Africa, is becoming less and less certain.

An American Perspective

Last week I spoke to Californian Katharine Euphrat (pictured above). I wanted her view of the Media, and the day I spoke to her was her third day on the job,and her first front page artcicle (‘Soap stars brutal assault on women’). She says newspapers won’t be around 50 years from now,and in some countries, sooner than that. In America she says people her age never buy newspapers. Katharine says she consumes some news from newspapers that her parents buy (the San Diego Union Tribune), but otherwise consumes – and I found this surprising – by far the most news off her cellphone (whilst on the bus or other public transport).

Katharine said that in the USA paper news is hard news, and dying because of that. In South Africa we are seeing more and more Entertainment-based news making front pages. One of the few exceptions to this – in my opinion – is The Star.
Katharine spoke about how ubiquitous news is online in America, and also how useful it was to browse news on her iPhone. She said in her spare time she spends 70% of the time on the internet using her iphone, and 40% on her PC. When she arrived in South Africa it was immediately difficult even to find somewhere to use the internet, and also, she found it agonizingly slow, even our broadband.

I asked her about her first impressions of South Africa and she said, "When we said we were going to South Africa they tried to scare us. They said you’d arrive at the airport and see someone being raped on your left, someone robbed on your right, and someone being murdered right in front of you. But Johannesburg could be anywhere in the world.”

I know that whenever I have returned to South Africa from an overseas visit I am astonished at how empty the place is, like: Where is everyone. In many western countries there are cars everywhere. It’s not like that here, in South Africa. Katharine said she was surprised to see large patches of countryside.

These large patches of countryside are analogous for the large, barren wasteland that is the Undiscovered Internet Country in South Africa. It will turn out that Telkom’s drag effect on the rollout and uptake of the internet in South Africa is likely to be a permanent injury and one which the country cannot recover from going into an austere future. A small niche internet population will survive, but it will be even smaller than the present one as work-place users are shed (both through stricter regulations at work and through increased unemployment as a local recession kicks in). It will also not be worth much as a revenue stream, but it may have some value in terms of the service there will be to communities that remain plugged in.

In the end, (even in a general sense) those companies that have not entrenched themselves, will lose ground and fail, and only the strong and hardy and well established will survive.

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