If you make an effort to understand particular macro social changes in a market (let's say, the market for content used by all Americans) you can begin to see how a business must change in order to continue meeting the changing needs of their market. You may not be able to pin the month on a calendar but, if you begin in the right place you can point in the right direction. Without the extensive detail let's look at the outline of these very important coming changes:
Q: What really matters?:
A: How are shared values changing amongst people in a market? Traditionally, this kind of information gathering was considered to be a function of the marketing department.(right?)
This blog is a spin-off discussion from my main site, The Root Trend, where I discuss how using a specific understanding of social changes shows us how & where businesses might adapt to broad changes in their markets by understanding a set of ideas called socionomics. It is the science of "social mood" that explains the path of social change and it has a lot to say about the business of selling content right now, if we listen closely.
Media, in all its forms, is a core social business service that is actually mentioned in our founding agreement as a society. (This fact is very important just as founding fathers like Thomas Jefferson went out of their way emphasizing the importance of an independent press.) Media's role as a higher order tool of social communication is central to free expressions and our creative capacity as a nation. Yes, even the supermarket tabloids participate in this "expression". As our nation's parts (and the whole) have been changing in the past two decades, our needs from media tools (the businesses offering us content and platforms to share) have changed and will continue to change dramatically because our shared values will change more. If you only consider the technology as the cause for the changes you are not seeing deep enough into the challenges posed to the business of media today.
In order to grasp the bigger ideas central to social mood is not hard but, it will feel new and take some time. Why is it worth it?
The buzz all around the US today is how big changes are happening to the business of media since the internet has changed all the traditional ways of competing for ad dollars. Just about every part of what I read discusses the symptoms and not the causes. If you mine down into the actual causes you can see very broad answers that are directional and no one seems to be looking that way. These directional answers do not offer easy fixes. Fundamental change to the business of media is needed now as "We, The People" have changed a lot and will change even more in this next decade. Using social mood as a guide goes a long way to opening an important conversation about how to serve tomorrow's content consumer.
In a nutshell, social mood is about the collective outlook of markets (large groups of people) to the always uncertain future and how we feel about it. When optimism pervades, the sum of this macro moving average says we are expanding socially as a nation. When pessimism pervades we are correcting socially. What does this mean? It means that We The People produce, on average, visibly different kinds of trending processes in expansionary periods than corrective phases of our nation's history. This can be back tested and forecast when looking at the future. No matter how simplistic this may sound, this idea can be used much like basic computer code to build bigger ideas and watch for specific kinds of trends in the past to gauge how we will behave in the future. (This is way over simplified in a few paragraphs but check into my other blog and review the post titles to see the range of ideas this method can shed light upon (and my blog is no where near thorough so check out other resources listed there too!).
The key to seeing What change is needed in the market for media content is to first understand how businesses operate now is based on many decades of limited market competition based on FCC regulation that intentionally created barriers to entry in the markets for content. This is neither being characterized as good or bad by me. The fact that existing media companies are not prepared to compete broadly while earning lower margins than they are used to has strained the entire politically connected system. Further complicating the situation is how publicly traded companies are often forced out of existence when facing secular profit change whereas private companies can often be more flexible in the face of similar challenges.
The reason existing old media companies need to change is not because of their existing public or private structure even though it is a tricky complication that may speed the rate of change soon. Consumers of content have seen they can now have their Choice of content and that still newish dynamic has changed so much in competitive markets for content. Knowing this, they have gone looking for more Choice and the market has responded using the new technology to dramatically expand distribution channels for content. And while this pathway might seem easy to extrapolate endlessly, I do not think infinite channel options is the likely answer either. Why? This is where social mood helps us to see further.
During periods of social correction, like we are in now, We The People tend to produce specific kinds of trending patterns: The following jpeg borrows ideas from Prechter's socionomic model. See if you can recognize many underlying themes all around us now:
Ok, how does any of that translate into changes we will see in the media industry and specifically to changes in the business model?
Let me point out that I worked at three different broadcast companies over fifteen years and the model for conducting business did not change and was essentially a four function orchestration. This basic understanding did not need fifteen years to build but it helps to appreciate just how complacent and embedded the systems for production-distribution-monetization are in the industry. It is not equipped for wholesale change. It is however, tuned for fine movements to milk mature profit margins based on existing industry best practices. Any new media efforts by old media companies have contributed little because the larger enterprise is still looking backwards at yesterday's shared values and this is reflected in their current operations. (Having a Facebook fan page is not thinking ahead.)
Like it or not media companies now compete with the broad realm of social media tools and user generated content. An odd mix of disparagement and cooperation has evolved so far between the two forms of content. I believe the most important message is being missed by almost all competitors while a small subset of industry statisticians work quietly on a key challenge. Better Measurement.
All this new available Choice has done two critical things: Besides adding the new universe of user generated content options, it has added the dynamic of complex interaction. The Google click oversimplified this and the Twitter and Facebook era have added to this potential dynamic change in markets for content.
If you go back a year or so I wrote a few posts about the need for better metrics. We are living in an analytical age where measuring behavior is getting more sophisticated and also bumping into concerns arising from changing social mood (social correction) dynamics. The way radio, TV, newspapers, and magazines measure consumer interaction is very basic and "approximate" and the system of ratings values large numbers over the tremendous new value potential through "feedback" and the previously unimaginable possibility of census quality use data. The Google click may have been a watershed moment but it has evolved considerably since then and still, media companies mostly reflect the shared values of many decades ago (the CPM). Why? Because the business model in use is geared toward using those metrics to produce revenue and measure performance. But that is not really an answer is it?
The title of this post deserves at least 50+ pages but that is not going to work here, so:
Q: Why will the business model for media companies be forced to change?
A: When 15% (+ or-) of the people decide that Choice means serving them more directly somehow, the innovators that have specialized their once aggregated functions will grow quickly. (Those four function businesses need to break up and specialize.) This version of "when?" will undoubtedly overlap with the de-listing of numerous public companies that see large scale changes in profit forecasts looking forward and decide to sell, close the doors, or go private to adjust for the needed competitive changes.
Q: How will this happen?
A: Maybe the most important part of When? is really How?; when We The People decide that privacy is a shared value that each should personally take control of on as many levels as possible (not only Facebook) because of a period of overt experimental social sharing that was highly productive in showing us what parts need to be continued and what parts need to change considerably based on our (now )changing shared values. Social mood gives us directionality for these changes so it functions like a one way street in the middle of many social trends. The key is to identify the the correct applicable shared values at the right time.
How this ultimately happens is going to be like two or three rivers converging at one point (a lot of wild cross currents). Better Metrics (census quality metrics) can only move forward into a world that values the depth of individual interaction if and when the sponsors supporting the ad based model themselves value it too. If the market had been open to competition this would have happened a long time ago. I think of this coming moment as one where the appreciation of census quality data will merge with the realization that the fractionalization of demand is recognized as a good thing so that qualitative observations could improve and also when service to both customers (consumer and sponsor) were fine tuned to meet the new levels of service necessary in an industry destined to be born again and to experience a brand new profit cycle that will commence with the eventual new social expansion in tandem. This is not a dream or even a distant event but, first comes the hard part.
This much and even more can be seen using a combination of social mood and industry experience in relation to the markets for content. Some readers may suggest I am speculating too much but these trends will all happen. The real question is will they merge like I suggest or will many other chaotic factors intervene along the way? Ultimately, I think the prescription will be surprisingly straight forward.
The beauty of either outcome is how the socionomic model (understanding social mood) will allow for deeper understanding of incremental change in any market when combined with deep market knowledge. Social mood makes sense of social change in markets we serve and the years directly ahead will be critical in this regard.
No matter what, trying days are directly ahead for many long established media companies as they struggle with declining profit margins and the human expense in the process. The important part to keep in mind is how this industry is essential to the well being of We The People and therefore it will go forward, with or without old companies. The major obstacle is money in the political process that protects big money interests over this very basic freedom of the The People in our Bill of Rights. IMHO freedom of the press should also include the notion of freedom to compete in unregulated markets for ideas. (This is not about controlling misdeeds in high finance.) We need entrepreneurs (Settlers) willing to experiment and try new ideas. Maybe the most encouraging part is how smaller, nimble enterprises will be respected in the years ahead because of the levels of service they will be willing and able to provide using technology. That in itself is a cycle in markets that never ever stops going round and round. Here we go again.(Remember the small owner operator era? It'll come back, only different this time)
For the uninitiated, the most important thing about social mood is this one fact. As social mood changes, how we value things and ideas changes, and that changes demand patterns in many markets. It is worth considering right now. Dave.
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