The (industrial) (r)Evolution of Media

Rupert Murdoch's Op-Ed in his WSJ today was opportunistic and not terribly surprising based on his recent comments. He seems to be making a realistic case for his own set of challenges which are shared by many in the industry worldwide.

I have only one question for people to think about: Why do people everywhere insist the advertising business model for content is dead? It's not. It is as good an idea today as it was decades ago. The only thing that has changed is how efficient a business must be in order to be profitable.

The hidden challenge in the media business is that the empires that exist today suffer from the same social illness as the rest of America. Leverage.

The ad based business model is not going anywhere and among the many examples of why, Google may be the best. In fact, if you look closely at Ad Words, you can see a lot of reasons why it works so well.  Likewise, if you look at Coca Cola's success over the decades, it was not harmed when the bottlers became a business by itself. The US drinks as much soda as it does because the bottling industry is as good at what they do as Coca Cola is at making their products.

This AM's merger agreement for Comcast to take control of NBC Universal can be looked at from a few directions based on the news surrounding it. The FT, a great newspaper, has a story titled "Comcast's NBCU move is no joke". It's worth a quick read.

If you look back at my last post here and consider that broad view, my takeaway from the merger and what I read in the FT is fairly straight forward.(What follows are my own observations and did not come from the FT article in any way, though it was good reporting)

#1. Comcast just bought a bunch of programming we used to get first and for free on broadcast.....no doubt there...so, potentially, there will be even less on regular TV now. Some of the syndicated programming on cable will be migrated more to NBC and the first run new shows will likely migrate to cable as they justify the expenditures by limiting the free Choices. I see this as a potentially Big strategic mistake in a world with a digital universe and fewer barriers to entry.(Am I wrong about this? Let me know)

#2 Forcing viewers in what this article calls new "non-linear" choices into the old model of cable and on-demand is a recipe for new competition, not market control...though I am sure a few legislators have been recruited to help them slow change down. The article suggested that owning more long form content would be good for on-demand inventory but that should already be working if the economics were in balance. 

#3 To my eyes, Comcast is buying near a current top in order to diversify into programming when they should be specializing in distribution methods that are more friendly to Choice.

#5 The industry's overconfidence in existing revenue streams will be a mistake in the 5 year time-frame as pay TV turns out to be more discretionary than anyone imagines right now. Add competitors like Hulu and you can see the long term decline already if you squint just a little. (Simply buying these new competitors will not change the demand for the new channel.) 

The titans of media are right when they say quality content can't be completely free but forcing the solutions into unrealistic tired choices so that government regulation (or even approval) can be obtained is cheap and insincere at best. Business titans and legislators who think media distribution must be regulated are not working for the citizens they serve.  Back during the first industrial revolution (in the US) every part of our economy saw distinct specialization as people went from being highly self sufficient to more dependent upon interrelated systems for their needs. The very same thing is happening to media right now and this demands smaller parts that do what they do better than ever, not bigger, monolithic, vertically organized caretakers over our content Choices.

The FTC is holding hearings this week and the FCC is also involving themselves in matters that are best handled by private enterprise. The Bailout mentality lives but it is also wearing thin. How long before cable TV is considered a tax? We are inches from health care being a tax. The big banks had to be saved though doing that produced exactly what? (there's a lot to fight about on this point)  These political sounding issues are really echoes of the same dramatic social change being brought to us in the form of the industrial revolution of media. Fixing media won't fix banking (of course) but I submit to you that the media construct in the US is more important in order to keep us connected and aware now that we have grown to be such a large and complex society. Encouraging overt vertical concentration in these businesses is as dangerous (in different ways) as having five investment banks that each pose a systemic risk by themselves. Large closed systems do not produce a diversity of ideas and that will only add to social polarization. It is time to end legislatively supported consolidation of our media resources. That is the only way we will see the true innovation needed to revive a core component (freedom) of a mature nation.    The disruptive qualities of distribution over the internet is positive for consumers and only negative for companies that cannot figure out a different way to do it. Supporting even more media consolidation while attacking the search business is like telling the voters, 'we know what is better for you than you do'. There's just too much of that these days. Think about it...A lot.