The (industrial) (r)Evolution of Media

The Great Media Pay Wall, and the incremental answer not being offered; yet

update 4 03 10 : This post is turning into a thread of links on the issue of fractionalization of demand and the market's current refusal to accommodate it. Links added at end. Dave

Paying media companies to produce high quality content is an idea that feels reasonable to everyone.  As we collectively move through this period of changing technology and shared values toward them we will also have to decide the many nuances surrounding this issue. It is not all so straight forward.  On the surface, however, a larger issue is being tested right now. Kind of.

Just about anyone weighing in on the issue of effectively monetizing content knows that the market for content has changed and that is why we find ourselves and our media companies where we are today. The psychology has changed along with the structure of the market,altering the fundamentals and the larger business trends.  Yet even though dramatic change in the market for content is acknowledged, it is not being acted upon in a manner that seems to really address the changes. Like an endless one-sided conversation in the headlines where management and unions negotiate during a strike, fairness and balanced perspectives are skipped in favor of grabbing an opportunity to make a soundbite that will be repeated endlessly.

Let's try for some balanced market perspective here:

In his own "Network"-like moment Rupert Murdoch opened up the window and yelled I'm mad as hell and I'm not going to take it anymore!' (Did he really do that? No.) But by adopting a total pay wall strategy that is targeted toward an audience that largely writes off the subscription expense of the WSJ, he is trying to justify paying so much for it two years ago. Because of the WSJ's unique audience, he may succeed in saving that over-leveraged investment, for now. That option will fail with most other newspapers, and has already, spectacularly in some cases (like Cablevision's Long Island Newsday).  

It was newspaper companies that first adopted the internet strategies that led us to this moment. So it might also seem reasonable that the newspaper companies now are erecting barriers that ask to be paid for the same content provided seemingly free for years. Of course, you and I still see ads when we read content on the web but because they do not get paid as much for those ads and we are led to believe that our end (as consumers) is somehow not being held up. Make no mistake; the story is being skewed in favor of why consumers should replace lost revenues of the traditional media companies as they struggle to adapt to our changing habits using technology. The companies that exist today want you to believe that we must all pay to make them profitable or we won't get high quality content. We will. Just not from them, unless they can adapt.

This is the key point in the discussion. Who must adapt and how? The media companies serving us our content needs must adapt. It is common for dying companies (that were previously successful) lash out as if their plight was the product of some nefarious forces in the market that must be defeated. (see this post on business models from The Root Trend) 

Newspapers are not the only place we are seeing this battle right now. If you live in the US you are probably aware of how cable TV bills have been going up and how TV production companies are asking for more money from cable companies and still running as many commercials. Cable companies are distributors that have little competition so prices are not yet checked like the are in almost all other realms of monetizing content. The consumer has no appreciation for why this is happening unless they really dig to understand the deflationary forces at work. I am guessing most of the execs in charge of pricing do not fully understand the deflationary forces either. Cable just happens to be the one market unchecked by competition as yet.(see link at end of post) The record label business was the first to see deflation happen. Radio and magazines too, have been hit hard by deflationary forces. Deflation in any industry that is leveraged is a nasty combination. We just saw this in the banking industry and we all paid to bail them out. I really doubt the US electorate will tolerate a bailout of the media companies that have leverage hangovers from the 1996 Telecommunications Act (consolidation era). This time, those that survive the revolution will be smarter about how to make and sell content (or which to do).

With the launch of the iPad days away, we see a new channel for content about to come on-line and more than ever it seems like an easy answer to old profitability problems may be in sight.  No matter how successful (or not) this launch is during the first few months, no one will deny how technology has changed how everyone gets content, uses content, and what kinds of content we increasingly spend our time with every week. In just the past few years, Americans now dedicate substantial time to user generated content that does not cost anything. You cannot dismiss this important dynamic as part of the overall answer. 

I suspect the iPad will be an important disruptor even if it is destined to be a narrow market that is defined by Apple's proprietary software that deceptively limits Choices. 

The most common discussion I have with non-media people (over the years) is the perception how the industry is like a monolithic entity that hides in the dark shadows of government protection. Nothing could be further from the truth. Sure, lots of media companies try to use Congress to do their bidding but the only reason that exists is because substantial barriers to entry in the business existed for many decades and that concentrated the power of select companies. That advantage is rapidly disappearing as content producers are no longer protected from competition and competitive advantage is based on product quality (and not infrastructure or licenses) these days.  For instance, the cool market dashboards that the WSJ web site offers can be replaced, if you go looking, on other free sites (and those sites are glad to have the targeted traffic).

I call this the era of Choice because with the advent of search and ubiquitous internet connections we consumers of content are now in control of our own destiny. Tune in Sunday at 9pm is no longer relevant if we choose not to set our schedule by a company's. This may seem simplistic but the change it represents to a large and complex industry is very dramatic and brought us to this moment. Newspapers feel as if offering a web based option is allowing Choice but here's the thing: Until a new kind of content company is built and accepted, Price will be the issue that seems most important. Remember the 4 P's of marketing? Product, Price, Place (channels), and Promotion.  The way to a more profitable media industry is to specialize in specific functions, just like factories did with labor to become more efficient. Each of these specialties will have a very different mix of the 4P's.  And since the world is consuming more content and not less, this idea is for a growth business born from a mature industry. Only right now, many highly leveraged companies cannot see past next quarter and even though the digital world is moving at warp speed. These older, leveraged, media companies are struggling for every breath. These are the symptoms of deflation, and correction in a market, and not an industry that is about to die off and send us into information blackness. Why? Again, we are consuming more and more content, not less.

I am skeptical of the iPad's potential because of how I expect media companies to limit Choice through the device. For instance:

50 cents a day for the WSJ on the iPad would be a step in the right direction though I am sure that idea will be resisted, until someone else does it, of course.That is not likely to happen if Apple is allowed to build a monopoly in the distribution market similar to cable companies with no competition.  Why? Because the market is all of us and represents our collective shared values for things and ideas.This includes content, how we get it, how much we pay, and how it is packaged.

If the iPad is really to serve Choice, it will sell content more like a news stand and not like a Publisher's Clearinghouse subscription center. By only providing those Choices of long term sign up's, broad consumer appeal will be diverted elsewhere or they may even stop using it.  So the news stand $1.25 daily copy of the WSJ should be .40, .50 or .75 cents on the iPad, right? How much is an article in Time worth; one you could scan while standing in line at the checkout? Choice requires that companies selling content make these decisions. Fractionalization of demand is an important part of packaging Choice, like it or not.

Once you dive into this mindset of change you can begin to appreciate the discussions I began previously about much needed better quality metrics for media companies. For now, serving Choice means accepting fractionalization of demand and lowering operating costs by reducing leverage. That's a tough recipe to achieve but we are going there one way or another.  

also worth reading:

iPad makes cover of Time and Newsweek  WP 4 03 10  (article includes iPad cost for various pubs)

NYT's Jacks Kindle E-edition to $19.99/mo (wishful thinking) 4 02 10

Getting Media Companies to adopt Better Metrics requires honest discussion (part 3)

Google: 1100 Cities want us to build huge fiber networks (think: badly needed competition for Cable Co's)

Google suggest micropayments for online media consumption (previois iroM post with link)

Will the iPad unintentionally pierce the Cable TV Bubble? iroM post

added 3 30 10:

Why the future of Good news is not Free  London Times (another Murdoch asset) (blurb below)

..."Ultimately we think that other newspapers will follow, and that the only free content online will be of inferior quality or supplied by the BBC. Even that organisation is finally beginning to realise it should stop trying to become a publisher online, and is cutting back on its massive internet spending.

We are in the midst of a publishing revolution, and if we get our finances right, you, our valued readers, will benefit from a new golden age in which we can devote more time and money to bringing you the very best journalism in the finest traditions of The Sunday Times."

What is rarely admitted by leveraged companies is how "getting our finances right" is being made the consumer's problem and used as an excuse to limit Choice. There are thousands of blogs and companies with web sites providing high quality, current, content for free now that somehow enhances the business' mission. Sure you have to go find it but that is exactly why Google, Yahoo, Bing and others are successful enterprises. Failure to admit this fact and attributing it to some form of malfeasance on the part of their customers is blatant, even if remaining unspoken...and terribly obvious. 

Viacom's suit of Google-You Tube is making media's long term challenges very clear

 For readers who do not realize, this is my second blog. The other other blog I write, The Root Trend is about big picture social trending issues that matter to marketers and business owners. Yes, that is a very broad subject area. It uses a specific model to see social trends that originates with the general idea called social mood. This blog  (iroM) is intended to be an extension of that view and a discussion about how three specific trending forces are impacting the business of media right now. Social mood, generational issues, and what I call the era of Choice are each worthy of separate discussion but can be viewed together to see where media is headed as a business (where we are taking our media tools).  Each of these three exerts a different pull on the business of selling content but together they offer a strong directional argument for how the business model for media enterprises must now change in order to better serve their markets. And while I have not shared that specific vision yet, I will in some format soon.  In the meantime there is plenty of connected issues to look at from this same perspective.

Oftentimes, I begin looking at current (social) trending dynamics over at the Root Trend blog and later it'll migrate here. That is how this blog came to be in the first place. This blog was first inspired by this lawsuit almost 4 years ago though it took 2 more years to develop into its own blog.  For instance, right now the latest post over at The Root Trend is about how shared values toward privacy issues change (over time) and how they are expressed as different trends depending upon from where you are viewing it. 

From the perspective of a media company, the issues surrounding intellectual property rights (IP) are being shouted about right now and for the past 3 1/2 years. IP rights are  being argued as if  they = expressions towards privacy in the world of enterprises. There's no better example of this pomp than Viacom's suit of Google/You Tube for $1 billion dollars. Viacom is not able to police their own products, does not want to pay to do it,  and in keeping with decades of media's protected market status, they are suing someone else to do it for them. Now, that last sentence contains a pretty strong opinion...no doubt. When you take the time to see where we (society) are taking media broadly and according to the large trending forces (read as "shared values), you cannot help see the falseness of Viacom's position while knowing they'll never admit that much. They can't. No matter how this turns out they'll lose money because the old media business model is falling further and further behind. Why? Because it is not serving the larger, changing social need these days....because shared values have changed (are changing) with the adoption of digital technology. The technology did not change us. We changed as we realized that more is possible from our media tools and there is no going back. The FCC and other large barriers to entry into the business of selling content that previously existed, have now disappeared. The flood of competition was inevitable. The sharing that exists as a result is part of the emerging social norm. In the years ahead many cases surrounding this core issue will be decided in courts incrementally but right now it has already changed the business of selling content. The unspoken truth is that no one realizes how to do it differently. The best businesses surf the unfolding social trend....and do not fight it.

In a article last night in the FT, Viacom and Google's lawyers exchange jabs in initial arguments, only now in a 3 1/2 year old suit. 'You Tube is an obvious attempt to circumvent copyright infringement laws and Google should be responsible as if they are a media company'. And, in order to prove the position, Viacom has been seen uploading protected materials to the You Tube site and then complaining about the material being there. First, get the free promotion, then a slap em with a suit "as if". It's the American way!

The fact that this last statement was alleged in the FT, a paper usually beyond reproach, I submit that millions of our own tax dollars are being wasted by a company gaming our own system instead of doing the work they should be doing...or paying another competent company to do it for them.

Google is a behemoth. It is a giant that is almost an oligopoly. Many believe they deserve to be watched closely. They certainly deserve considerable praise for delivering us Choice even if it is disruptive. The age of broadcast began dying with Google. I suspect it is hard not to blame them as if they are responsible but social trends this big are not caused by technology or a single business.....social momentum is required for trends to happen and history shows us clearly how technology has often existed for decades before being adopted and used. The industrial revolution in the US was just such a trend. It took the rift between large generations to expose this overdue need for change then, and now again....and these times are exactly when history shows us huge examples of social change!

The most obvious lessons of the new industrial revolution are simple and straight forward. They are also remarkably similar to what we learned last time: 

1. Recognize the fact that we have all changed for the better;it's not a fad.(How we values things changes as social mood changes and different time horizons matter a great deal when using this view)

2. Understand that generational rifts are where the largest changes happen to social contracts. The generational perspective is essential to understanding how to prioritize social developments but is always secondary to social mood.

3.  Specialize your function to gain competitive advantage. Competitive markets require more specialized focus, not broader. Vertical integration and exclusionary software strategies will be socially rejected as a business strategy unless it is demonstrated to add value not available elsewhere for market participants.

The FT article link above is worth reading.

NYT story 2 24 10 re Italy's bureaucratic courts on Google:  Larger Threat is Seen in Google Case (in Italy) NYT  (read the entire article because every time this story is told it is like hearing two different movies)

For further reading @ The Root Trend: What is social mood?

Social trends reflect the polarity of shared values

More on the link between social mood and consumer behavior: the most basic social expressions

Revolution or Evolution of Our Media Tools?

A question I see often is, what is the difference between the evolution of media and the industrial revolution of media? There are a few ways to answer that and each are relevant to seeing 'right now' as it is.

For instance: In 1789 the Bill of Rights was drafted and adopted in 1791. That's the document that gives us the first amendment to the Constitution and a "free press". 143-145 years later in 1934, the FCC was created to lord over the airwaves in the US and regulate the scarce public resource for the good of The People. 55 years later we witnessed the birth of the world wide web in 1989.  Several years after that the name Yahoo entered our consciousness as we bought shares in the future of Search (1996). During the first 13 years of search we witnessed many new wrinkles and conflicts in the markets for information and content.

From this broadest of perspectives, we see the evolution of media as a primary social tool in our society as it has become increasingly important in our daily lives to both individuals and as a nation. The shorter spans between critical changes suggest dramatic transformation is possible right now. The main thing holding media back, right now, is the business structure wrapped around this most important social tool(s).

Anyone who has read of evolution is familiar with how long periods of stability are often punctuated by rapid periods of transformation.The same is often true in significant social trending processes too.

The industrial revolution that occurred after the US Civil war was a dramatic social trending process. It was based on the mass social adoption of technology that had been conceived many decades earlier. The key development was the social momentum that swept our society. This all happened during a time of social expansion and that characterized and fed how the trend unfolded in the US (and other parts of the world too).

The industrial revolution of media has begun but the critical growth part of the trending process has yet to begin. When it does it will occur during a period of social correction and that is an important dynamic to consider. The social momentum that brought about the adoption of technology and processes to use these tools effectively is exactly what is happening right now to our media infrastructure. Our use of content has, and continues to change. Digital social technologies are helping to more clearly define what really matters. Enterprises will soon make major changes to better reflect the changing shared values relative to content use.

Both the similarities and critical differences between this time and last time are a great vantage point from which to view this approaching growth phase of the media trend. Differing time horizons are a critical part of seeing right now properly.  I am excited to be living in such a time even if it means creative destruction of key aspects of the existing tools need happen in order to move towards what really matters. And since all macro social trends develop slowly, outside of the daily hustle and bustle of quarterly earnings, we will not wake one morning to a new media universe. The point of our evolution of media is to make us all better at being individuals within the productive groups we associate with in our lives. Media is not some monolithic institution outside of ourselves. It is us. It is a clear reflection of who we are as Americans. And while many of the enterprises we build cross societal boundaries, the emphasis must be about Americans exercising their freedom as granted in our founding agreement to empower ourselves to a brighter future. Entertainment fits neatly into this macro discussion but the tools we use to share ideas and information are a critical part of being a productive, free people.

So, we see media evolution continuing on as it has for 234 years as a republic. And at the same time, we see a brand new revolution occurring around one of our most basic freedoms as Americans. It goes well beyond profits, even if the result will be more profitable enterprises in the not too distant future. What really matters? That is exactly what will drive the next phase of the media trending process.

As social mood changes what people pay attention to changes and that how's to figure out what really matters.