International Entrepreneurship and Management Journal

ISSN: 1757-1938 SJR : 0.847 SNIP : 1.89948

The disruptive effects of internet on the news media industry

By Ainur Ongdash ( PhD doctor, acting associate professor of chair “Al-Farabi Kazakh National University Department International relations and world economy)

Anargul Rakhmetzhan (Senior Lecturer at Al-Farabi Kazakh National University Department of International Relations )

1- Introduction: 

Innovations settled by organisations reflect their continual ambition to improve their performances as a way to enable themselves to follow the incessant changing occurring in all industries owing to the high digitisation of markets and the wide spread of internet based technologies (Turban et al, 2011). Therefore, some implications occur varying between sustaining, disruptive or efficiency perceived effects which reshape the scope of industries and the role of companies while redefining the level of reach and richness professed from the offered products and services (Christensen, 2013). 

Thus, pursuing the purpose of displaying the disruptive effects of internet within the news media industry, it would be necessary to define the concept of disruption and to differentiate it from the sustaining and the efficiency perceived notions, which would lead to investigate features of internet that define it as a disruptive innovation for the news media industry, followed by a critical assessment of the implications of this disruption illustrated by organisations belonging to news media sector. Finally, as a way to analyse the news media industry’s change occurred as a consequence of disruptive effects of internet, the diffusion of innovation model would be defined and brought into the news media context using data about this industry and its substitutes’ companies likewise Google and Facebook. 

2- Innovations between disruptive, sustaining and efficiency perceived effects: 

In this era of continual technological development, the competition is more likely to become rude in most of industries. Therefore, in order to differentiate themselves from competitors, companies conceptualize or just utilize the latest innovations in the markets which encompass some effects that imply either the success, the fail or the metamorphosis of companies (Christensen, 2013). Indeed, according to Christensen (2013), innovations affect industries with different manners. Thus, he distinguished the disruptive innovations from the sustaining and the efficient ones. 

The disruptive innovations has been defined by Christensen (2013) as new processes that overturn the established standards of an industry in a way that they transform its products and services that were initially complicated, expensive and hardly accessible to affordable, reachable and easy to use goods and facilities for the largest possible population. Therefore, owing to the new values perceived from disruptive innovations, it is required from companies to draw on their funds to obtain them initially; also because of their reforming criteria, this kind of innovations is likely to create new jobs opportunities (Christensen, 2012). In another side, the same author defined sustaining innovations as more concerned with the products performances or the productivity of existing processes improvement which slightly affect the jobs or capital’s creation. Moreover, Christensen (2012) defined a third kind of innovations as efficient because of their production’s cost reduction and their 

increase of efficiency of processes which eliminate some jobs and reduce the products’ fees. Therefore, in order to illustrate the difference between the three kinds of innovations, this following application of Ansoff’s matrix is used in that purpose: 

All in all, the combination of the three kinds of innovations leads to reshape the industries’ scope and induces to the reassessment of companies’ roles within their industries likewise the previous graph and the chart in appendix 1 summarise. Therefore, in order to investigate how the disruption occur within an industry, the reforms introduced by internet into the 

news media industry would be taken as an instance, which would lead to evaluate the implication of internet’s disruption to news media. 

3- Causes and implications of internet’s disruptive effects on the news media industry: 

3-1- The disruption of internet in term of news media’s reach and richness rebalancing: 

Specialists within news media industry express some scepticism regarding the future of their organisations likewise the New York Times’ executives did while questioning about the presence of their print version in the future decade (Ahlers, 2006). In fact, the interference of internet within this industry seems to continually increase as reported by Ahlers (2006), which would obligate television and printed news media companies to reassess their role to match with the disruptive effects generated from internet-based innovations. Therefore, in order to verify the legitimacy of this scepticism, some surveys have been conducted in order to analyse the perception of news editors regarding the characteristics added by internet to news media industry. For instance, the survey reported by Gladney et al. (2007) has been completed by 723 online news editors which ranked from 1 to 7 the importance of 38 criteria of online news editing. Moreover those criteria have been decomposed to 6 categories which are presented in their order of importance in the following table: 

Category Rank  Mean 
Content 5.72 
Navigation5.66 
Look and Feel 5.44 
Functionality5.30 
Community Relevance 5.22 
Interactivity5.15 

Source: table adapted from Gladney et al. (2007) regarding the ranking of criteria’s importance of online news 

Consequently, pursuing the analysis of the table, the content criteria which is paramount in the traditional news Media still has an enormous importance within the online news editing, whereas the interactivity criteria which is praised by the innovative online news media alternative as claimed by Gladney et al. (2007), is the least important criteria according to the survey results. Moreover to confirm this tendency, following the analysis of the 38 criteria importance’s detail (see appendix 2 and 3), the credibility and utility standards have been best ranked with 6.62 and 6.57 successively, which highlight the importance of the basic criteria of news broadcasting even using the online method. Furthermore, the previous table shows that all the six categories have been averagely well ranked which brings to the spotlight the added value of internet in its disruptive effects among the news media industry. 

Indeed, internet innovations are characterised by their balancing between the reach and richness of information as it is claimed by Evans and Wurster (2000).The same authors defined the reach of information as the number of people involved in its share, whereas the richness of information has been linked to its depth in term of the bandwidth with the reader, to its customization, the interactivity of the website which provide it, and to its reliability and updating. Therefore, the results of the survey reported by Gladney et al. (2007) are coherent with the fact that internet valorises both the reach and richness of news media. 

Furthermore, considering that online news media are disruptive innovations owing to their different and new characteristics which reshape the news media industry especially in their balancing between the reach and the richness of the wanted news, therefore this new innovation passed throughout a long process of adoption which is proportional to online news adopters’ behaviours and criteria which represents the diffusion of online news media innovation process as an application of the “Diffusion Of Innovation” framework conceptualised by Rogers (Keegan and Green, 2015). 

3-2- The diffusion of innovation framework related to internet disruption to news media industry: 

3-2-1- A brief overview of Rogers’ Diffusion of innovation framework: 

As stated before, Rogers defined the diffusion of innovation framework which consists on the evaluation of an innovation’s adoption process in term of all the steps backward to the embracing of that innovation; from the step of consumer awareness about this new technology, product, service or process, passing through the interest it created in their mind, to the stage of its evaluation via its trial and comparison to the normal products which lead to the decision either of adoption or forsaken of the innovation in question (Keegan and Green, 2015). Furthermore, the innovation adoption process, as Rogers claimed, depends on the Characteristics of that innovation in term of its added value compared to normal products and its compatibility with the targeted market. Moreover, this adoption process is also linked to the adopters’ characteristics, what condition the speed of their adoption. Therefore, in order to evaluate the diffusion of online news media innovation process, the concepts summed by Rogers in his framework in term of adoption process, features of innovations and adopters’ classification in regard to time (Keegan and Green, 2015), would be applied to online news media in the next parts, but in order to have a previous global view, this following graph summarises the diffusion of innovation framework applied to news media sector: 

From this graph, it could be argued that the adoption process part of the diffusion of innovation framework is a direct consequence of the two other parts, which are the characteristics of innovations and adopters’ categories; therefore these two parts would be examined in detail, while the adoption process would be presented as natural consequences of them. 

3-2-2- The attractive Characteristics of internet as perceived by news media companies: 

As reported by The Economist (2009), the big amount of costs related to news media and especially the printed ones is related to their transportation and duplication, thus pursuing the inventing of the electric telegraph in 1845, the cost of transportation regarding news media has been considerably dropped down which made the electric telegraph as a disruptive innovation in that time. Similarly, as claimed by Ahlers (2006), the cost of duplication of online news likewise for television news is approaching zero which is, added to the free transportation costs of online news, constitute real added values for news media companies in term of operating expenses reduction. These advantages perceived from 

internet by news media companies may be summarised in the following adaptation of Porter’s value chain framework to the added value brought by internet: 

From the analysis of News media’s value chain improvement due to internet, it could be argued that this industry is more likely to switch into the online methods, as firstly, consumers’ behaviours regarding news media is changing especially that internet provide a balance in term of reach and richness of their desired news, and secondly because more than 90% of news media revenue is from advertising as reported by Ahlers (2006), and that the advertising sector is increasingly switching to online means as illustrated in the appendixes 4 and 5. 

Indeed, from the graphic in appendix 4 it is remarkable that the revenues from online advertising is the highest among all media advertising with $b 44.8 which represents 25.31% of all US media advertising revenues in 2013, but what is the most impressing is the rate of online Media increase against the other media means as shown in the graph of appendix 5, especially the newspapers media which knew a considerable drop in advertising revenues from around $b 47 in 2005 to $b16 in 2013 (IAB, 2014). Therefore, it could be argued that the obvious switch from traditional to online media is mainly due to the added values proffered by internet to the news media industry in term of reach and richness rebalancing, 

the personalisation and the interactivity praised by consumers (Gladney et al., 2007). Even though, as claimed by Christensen (2012), internet in its disruptive role has not just reshaped the news media industry, it also created new substitutes to this market which are highly acclaimed by consumers for what they offer as added values. In fact, owing to internet, the advertising sector finds several ways other than news media to be more efficient, for instance search engines enables to target niches with specific needs via key words typed by consumers as reported by Goldfarb et al. (2012), and social media enables mass targeting to reach the highest number of consumers as claimed by Keegan and Green (2015). Therefore, these more specified added values of news media’s substitutes allow them to gain more market share in a quicker rate against online news media in their main source of revenue, which is advertising as illustrated in the following graph: 

From the previous graph, it is noticeable that search engines and social network constitute significant substitutes to online news media in relation to advertising, especially that just Google in its own exceeds in term of revenues all online media together. Furthermore, the 19.4% increasing rate of online media is inferior to those of Google with 22.58% and Facebook with 36.85% which means that consumers are more likely to adopt search engines and social network than online media. Speaking of that, the adoption of online news media depends highly on the adopters’ characteristics (Keegan and Green, 2015), which lead to highlight the percentage of each adopter category regarding online media adoption. 

3-2-3- Online news media adopters’ categories: 

As stated before, the adoption of any innovation is related to adopters’ characteristics. Indeed, for online news media as an instance, adopters have different approaches depending on their gender, age or even nationality as claimed by Ahlers (2006), which categorise them between online readers, offline, dabblers or multichannel readers. Thus, the following table summarises the rates of adoption depending on each category: 

From this table it is remarkable that online news media adoption depends on different characteristics of the adopters. For instance, online only readers are younger than the other categories with a 70% big majority for men, while the offline only readers are likely to be the eldest category with a 66% majority for women. Besides, the most of readers, at 51% of them tend to be multichannel readers as they prefer to mix between the both kinds of news media and see them as complementary rather than competitive (Ahlers, 2006). Therefore in term of time of adoption, readers may be categorised as the graph in appendix 6 shows. 

4- Conclusion: 

To conclude, internet has metamorphosed the shape of news media industry due to its disruptive effects which proffered a balancing between reach and richness to news media what catches the interest of news’ readers. Moreover, internet in its disruption to news media industry has induced some substitutes to the market as search engine and social network which inducted to strategies reforming from news media organisations in order to match with the new requirements of customers, which is an obvious consequence of a disruptive innovation as claimed by Christensen (2012). 

5- References: 

  • ·Ahlers, D. (2006) News Consumption and the New Electronic Media. Available from: [Accessed 26th April 2015]
    ·Christensen, C. (2012) Disruptive innovation. Available from: http://www.claytonchristensen.com/key-concepts/ [Accessed 29th April 2015]. ·
  •  Christopher, M. (2005). Logistics and supply chain management: creating value- adding networks. 3rd Edition. Harlow: Pearson education.