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Old Media Can't Make Headway on Web

Jim Cramer

Every day we read articles about how the major media companies are dealing with the Web. Some are adopting podcasts, some are putting delayed programming on the Web. Still others are adding augmented programs or additional scenes to their Web entities.

OK, I'll say it: It's all nonsense. That's right. It is all much ado about nothing. Because the economics of the Web simply aren't there.

The economics aren't there for the major television networks because the Web ad dollars are dwarfed by what the networks take in for regular programming. And when it comes to hits, one run of a show is equal to the revenue these guys might take in from weeks of Web traffic. In fact, any time spent by senior management on the Web is a misuse of time because of the disparity between the money taken in by broadcast and the money taken in by the Web. Sure, March Madness worked for CBS, but it works for millions; the CSI franchise works for billions. And how many other programs are like March Madness, with daytime games that need to be watched by the in-office audience? I can't count even five.

Newspapers gain little traction with the Web. A few display ads in a newspaper's front section or some want ads in the back are more than anything the Web brings in. Plus, these places have huge vested interests in print, including an infrastructure that is huge and must be used to get the money's worth out of it.

Google(GOOG) and Yahoo!(YHOO), by virtue of their ability to get copy from original producers on the Web (full disclosure: TheStreet.com is one of them) simply can't be beaten by a print entity. Now, if every print entity went out of business, there wouldn't be as much content for Google and Yahoo!, but surprise, surprise, the next generation may not even care.

Now, maybe everyone will develop a model like the music business', where the content gets paid for. But I don't think so. The rights issues for everything about sports, music and other content are reverting to the leagues and record companies because of complex agreements controlling usage.

That leads to still another threat to the media. What happens if the NFL says, "We want to broadcast the whole season on the Web and take the gains ourselves"? Could happen.

So, when you read about all of these attempts by old media to be involved with the Web, remember that the old model is where the money is, and all these companies are doing is shifting content from some distribution that pays the freight to another that doesn't. Shrinking margins, shrinking ability to capture value, lower share prices, not higher ones -- that's what awaits them.