The (industrial) (r)Evolution of Media

Will the iPad unintentionally pierce the cable TV bubble?

A few months back in November I wrote a post titled The Cable Bubble Through the lens of Media's Dominant Trend

Back then the new iPad had not been announced and the notion of Price had been, as always, a tightly controlled feature of modern TV programming unexposed to the chaotic forces of a truly free market.  The value proposition offered by cable TV in the 1970's and 80's was simple. Free TV, plus programming not available otherwise, and the best picture possible, all the time. A small fee for such a service seemed reasonable in an age when chimneys were all adorned with TV antennas in need of frequent attention. We witnessed the birth of "premium channels" and in lieu of going to the movies (as often) we began recycling movies using this secondary distribution platform that was immediately in tune with a generation willing to relive the past over and over.  Cable companies had a virtual monopoly for a long time and even with the advent of satellite TV, the critical urban markets were in little danger of fragmentation.

The notion of "ala-carte" pricing of cable TV packages has never been seriously considered because managers know well that revenue would probably decline if people got to Choose. Lacking competition, the idea has been dismissed over and over.

Enter the iPad which may as well be called the "iPay". Cable companies get $5 a month for an addressable box that offers a universe of on-demand choices. Apple somehow generated a tsunami of promotion over a $400 box that allows you to pay for content on the go. They deserve an award for two reasons: First, they are being congratulated for creating a portable cable set top box-Kindle and got incredible amounts of free promotion for the launch as if was an innovation that would change our lives. Second, they may well have pierced the cable bubble's hold on pricing of content experienced previously by the record labels, newspapers, magazines, radio stations, and broadcast TV. In lieu of this development, ala carte pricing cannot be far off for consumers of TV content in the Era of Choice and the popping of the cable bubble may not be such a long wait because the cable itself may become an antique soon in urban areas. 

I've read some thought provoking ideas on this new market dynamic recently and from this perspective, the main ingredient of what I call the industrial revolution of media is the removal of barriers to competition that all media are experiencing in this digital age. Cable company's stranglehold on consumers in terms of pricing power has been exerted despite dramatic waves of technology enabled deflation in other segments of the media industry. Up till now cable execs on both the distribution side and production side have felt confident of their control on the market and yet, in the blink of an eye, Choice is being introduced to the market for content otherwise limited to cable TV.

I've admittedly been surprised initially at how much Apple seems willing to charge for TV shows in iPad. It feels a little outrageous but the dutch auction has only just begun and will play out over multiple business cycles where the market will bear out the true costs of delivering programming (with and without advertising) to desired markets. Moreover, the app market that has grown strong with Apple's iPhone is likely to expand, eventually, into multi-platform coding that forces competition even upon Apple's iTunes. This may not be the case right now but this is the direction of competition out on the digital frontier.(open source is a giant force that will not go away)

The era of Choice is media's dominant trend in the US right now. The second key trend to monitor is how generational dynamics are rolling over and how that will dictate changing values in all areas of American life. Finally, there is the idea of social mood, (a very macro social dynamic) that expresses itself amongst us and each of these three dynamics will shape the ongoing evolution of media in the US because it is a primary social tool to all Americans.

The next shoe to drop in the revolutionary phase of this evolution is the Cable bubble. Like most bubbles, it developed so large that it became the new reality. In a few years time it will be like those scary styles of the 70's and 80's. True market bubbles unwind faster than they grow. This may be best described as a damn being removed from the river of competition to sell video content to consumers.  Viacom's suit of Google's You Tube was the tip off that this development was overdue. Besides a virtual pricing monopoly for content in the market for cable TV, there is also the trend related to IP (intellectual property). Eventually this trend will be viewed from a very different perspective too and when that happens, the real revolution will have begun. For right now, however, I place my bet on how Google (and other search competitors) will be the surprise players in the leveling of the pricing field for video content. Free markets create change through Choice and that bestows benefits to the markets (people) they serve. Barriers to entry, like government sponsored monopoly, regulatory indifference to vertical consolidation, and patentable software do the exact opposite.   

Senator Franken comes out swinging against Comcast NBC deal (another worthy read in this area)

Tablet PC's, fences, and information ownership as seen through the generational divide

The PR buzz created around today's launch of a tablet PC device is astonishing and a testament to a marketing machine that is currently setting the standard. I've read no fewer than a dozen posts on it in the past few days and avoided three times as many on reputable sites.

It makes me think back to the larger trend thread in the media universe that began (for me) with Google's You Tube v. Viacom...a billion dollar lawsuit because Viacom is not capable of protecting their own content in this new age of technology. So much has happened since this suit began 3 1/2 years ago. It seems like it will die from old age and irrelevance before any real attempt is made to acknowledge that the issue is not framed correctly.

Of the content I did read about Apple's new tablet PC is how it may save old media by creating a new channel for content. Another new channel !?  It may be wrapped up prettier and more convenient than others but it will fail later (if not sooner) if it leverages itself on the incremental revenue from this new channel for content. Why?

Distribution Channels Continue to Multiply But Are They The Ultimate Answer?

The defining characteristic of the past decade in the media business has been expanding Choices of distribution channels for content. 

In today's NYT an article stating how Microsoft's Xbox will offer streaming content through its existing system and how it intends to compete with other providers, namely, cable.  Disney is mentioned as part of the discussion. (It's a quick read)

In the past I have saved articles like these for the trend thread as if they could be significant developing alternative channels of distribution (even if not immediately). In the coming months and years efforts like this have great potential to serve the Era of Choice since pay TV is increasingly shifting the burden of slowing ad sales to consumers....while still running long commercial stop sets anyway. I see no mention of this dynamic anywhere in the consumer realm.

The NYT wants and needs a pay model but ads continue as an important a part of their culture now as ever.

Cable companies want more and more money for the most basic TV but commercial breaks are as long as they've ever been on prime time shows.

The Era of Choice is being ignored whenever convenient to do so.  Is it possible that the lessons of the record labels are pertinent as to why this is dangerous? This position is less my opinion and more an observation that reflects the single minded determination to do business one way; the old way.

Silent customers do not mean happy customers. An Xbox distribution platform is a long shot outlier right now but, if and when present dynamics change in the market for content, it may move up to "definitely worth the effort". Indeed, if it serves Choice it is already is worth the effort.

Is it unrealistic that many content distributors hopes remain pinned on a national recovery in disposable income that won't come for years**...and that will then only spur the changes demanded by Choice deeper into our behaviors as consumers?  Xbox is demographically skewed and therefore remains a limited threat.  It is not a far stretch to imagine downloading a movie to your smart phone on the way home at a good promotional price just for that night and pointing it at your home system to watch. How far away can that be?

The Era of Choice is media's dominant trend in the US and other places too. Cable's business model is rigid and inflexible in an economy where the supply and demand (for content) has shifted forever. So it is easy to see how distribution channels will continue evolving and in the short to medium term (2-5 years) and will be a dominant theme.

What are the other facets of the era of Choice?  Choice is a broad idea that reflects our shared values and will expand beyond new distribution models. Ultimately, the new two way street in the media universe is telling us that solutions can no longer be two-dimensional. The real obstacle preventing media's new business model is its existing business structure and the relative inflexibility that public ownership presents. I suppose if we are perpetually stuck looking back over our shoulder, then you can just heap blame for this on the gang from Wall Street for transforming media companies into stock owned entities(back in the late 90's)....yet again....hey, they are used to it by now.

I submit that it is all part of a larger social correction where we examine our allocations of our available social capital (and other kinds of capital) in many directions at the same time.  US media companies have become risk averse at a time when experimentation is demanded. Beyond this fact is a key question: Just how much of our national economy is leveraged toward selling content for profit and how beneficial is this allocation to our future? Yes, that's a deep question. Maybe a better question is this: In an era when barriers to entry no longer exist as they did in the past, can we rightfully expect content to be valued the same when there is five or six times as much available? And if your answer finds you quibbling about quality issues, isn't it up to the consumer to distinguish what is reasonable? 

The Era of Choice will not be denied; any part of it. It will, however, reveal other changing shared values that will go beyond who, what, where, and when. Two or three years after the tipping point in "social media", the drum beat from the market keeps throwing ever more ways to get content of all kinds from every conceivable source.

The key question is; what's missing? Is it really all about price?...the latest cool gadget? Limiting Choice (or availability) is the antithesis of the Choice trend. It seems like a very good time to revisit the 4P's.

**  15.6 million unemployed in December &  26.5 million underemployed in December...with these kinds of numbers how long will even a slowly recovering economy take to put the fundamentals back in good shape? Link here (the link suggests at least five years, if it doesn't get worse before it gets better)

The Search Business Offers an Important Lesson For American Media Companies

This blog is about a very large & important trend involving a key part of the American infrastructure. As a nation we are presently doing to media what we did to establish the US as an industrial force more than a hundred years ago. Many naturally occurring circumstances surrounding the first industrial revolution helped the US to a quick competitive edge. This time, however, many of the key mitigating factors (think technology) are matched around the world so American's main advantage will be our very freedom, creative flexibility, and development speed attached to these defining alterations.

In the US during the 20th century broadcast media was a great business and the rules that confined and defined these markets allowed it to develop both deeply and broadly. Now, the digital era has changed so much in a very short time and the pace of this change is increasing.

My perspective (because of my age) is naturally divided between pre-digital media and AS (after Search arrived). To some extent, we are all products of our experiences. For instance if you learned how to use Yahoo and Google as an adult then these powerful tools are an adjunct to the universe of media in your head. If however, you are younger and have come of age in the past 13 years (when search entered the mainstream) then search is more than a thick phone book option for when you do not have a first choice; the process is more thoroughly integrated into a pattern of behavior. Different generations think about (organize) media differently and that is evident in how search is utilized. 

Yesterday's NYT offers a brief discussion of how the Search business is now splintering its efforts to distinguish real time search from query oriented search. When you think about it, this is the equivalent of a wizard bottling the magic power of TV or radio's immediacy into a universal potion for access to the collective consciousness without regard to geography. wow! If you are a user, it is a great development. If you are an established media company, your challenges just got more complex.

Building The Era of Choice (a smaller increment of media's most important trend- Net Neutrality)

Net Neutrality. It sounds technical if you've not taken the time to understand the issue. If you have, it is relatively simple.  So, what really matters?  Choice.

Apart and above all the doings of this smaller increment is the larger trend. The Era of Choice. This is an era when humans, guided by technology have reversed the dynamics associated with commercial channels of communication to such an extent that entire industries are seeing forced change across America (and worldwide societies)to adapt to people's new behaviors and expectations.

For analytical purposes I use the idea that societies function according to social mood and that this slow moving "root of all social trends" shapes our creative endeavors, especially business and industry.It is only one dynamic in the big picture but it is exceedingly important.

Just before launching this discussion as its own blog (more than a year ago) I looked closely at social media tools and offered my perspective on what they were telling us about where we are taking media in general. My conclusions were simple and straight forward.(look at the links in top right column of this blog) They are worth revisiting now. First, social media tools scream out for Choice and while this social trend can be seen from many angles, social media tools demonstrate most clearly that two way communication in channels for content is being directed by the social impulse toward Choice. Second, how each generation grew into adulthood with some or all of this technology in their lives shaped their experiences and attitudes and therefore, the generational divide offers a critical perspective on the psycho-graphics of media consumption, marketing endeavors, and the developing social protocol of the digital universe. In a nutshell how you engage Boomers and Millennials requires two differing standards but the long view on a number of core issues must be shaped by those immersed in technology and not those who saw it develop in their lifetime. Third, social media is a blazing indication of the specialization to come, and it has barely begun. As this dramatic process fans out throughout our creative endeavors in America, the tide of social mood will shape this process very broadly.

Each of these three social dynamics must be seen separately and together and only then can you appreciate where the social tool, guaranteed in the first amendment to the US Constitution, will be taken by a free and creative people. Media is a higher order social tool that we use to create other things everywhere. And despite how the editorials in respected papers are calling for ivory towers of journalism to be rebuilt, I submit that this tool will be managed properly by the People and for the People. In the years ahead the government bureaucracy will endeavor to build large awe inspiring structures that seek to better control outcomes. In the meantime, people will take the critical functions produced by media organizations and break them up into smaller pieces, specialize them, and produce an altogether new social infrastructure. (It is going to happen whether I say so or not.)  And if you are one of those already suspicious of the free market (aka the American people) I suggest you spend your angst elsewhere while the people get together to do the heavy lifting of building of a better media infrastructure, one that is primarily social, with the profits/payoff always out on the horizon of group endeavor, and not next quarter (as was promised by big media companies if only they were allowed to get bigger). (If you are sensing a theme in the previous era you're not alone or wrong.)   

So, net neutrality is about the market's access to information and it is critical that it reflect consumer Choice and not the channel provider's choice. This conflict of interest is telling us that further specialization in the market for  digital access providers is needed, and in time, it will happen. What really matters most is that we let the American people design the solutions and keep special interests relegated to the tools in the tool shed. If we do that, America has very bright prospects as we navigate this unusual period of social correction. If we do not do that then the market for content will struggle for freedom until we do, because it is what really matters right now. There is no better stimulus than a free people doing what needs to be done. Better media (on many levels) makes people better at what they do. That is exactly what we need most right now. Any new rules must protect the consumer's ability to get their Choice.

Net neutrality is essential. Click on keep reading and you'll see a letter a friend sent to his Congressional representative voting against it in Congress. No matter what your opinion is or how it was shaped, Speak up! Social corrections end when we create our way out of them; you do not spend your way out unless the money goes to things that are creatively productive. Limiting creativity for the sake of profitability is socially and politically foolish if you are looking beyond the next election cycle. 

Better metrics = Better media part II

This follow-up post is long overdue because the first few drafts each became chapter length discussions on the larger theme of this blog.  So here's the short punchy version without too much detail:

The current business model for media enterprises is based upon the idea that more is better in alignment with the idea of the CPM.  This approach worked wonders for many decades because everyone felt the same way.

The Era of Choice that began with new supply side dynamics of the digital environment changed this at the most fundamental level. Now, we feel the current recessionary psychology all around us as the marketplace is seeing demand for quality over quantity. This change is typical of a recessionary environment but the underlying cause, this time, is very different.

social media, social business, social tools

I choose to look at media very broadly, as a societal tool, because doing that allows me to appreciate how people (as a group, not individuals ** very important) in general see themselves in relation to the tool they created, and how they are evolving it to meet needs over time.

Go all the way back to the first third person stories shared around the campfire and then begin moving forward in very large chunks of both time and events related to media's development.  The FCC licensing of airwaves created a seemingly enduring social structure that damned up creativity for decades. right? And rather than getting stuck on any one point, keep flying forward focusing upon the smaller increments now because we are in the midst of a social revolution where time relationships are changing and incremental events speeding up.  

Media, the tool,  is universally attached to human progress and conforms to the largest social trending cycles we can view...suggesting longer legs of individual trends (from a socionomic perspective) as we work our perception of these events from largest to smaller in viewing its progress. 

 so what?

Media's Brand New Business Model - What the four primary metrics tell us Part 2

editing in progress...

The point of this discussion is to help make clear the underlying changing dynamics of supply and demand in the broad business known as media.  Specifically, this perspective looks at very large social trends that are changing what we want as consumers of media, and especially how we will serve these varied markets as profitable businesses. If I can clarify the issue of strategy using a broad historic perspective and the benefit of how changing social mood will impact the demand (in general) to help see opportunity better, then my highest goal will be achieved. Since businesses are created as tools to serve demand, these basic and big picture observations can be helpful while leaving lots of room for creativity in the broad market for making and selling content. I believe this can be particularly helpful because, in the rush of short term events, we are inclined to lose sight of these bigger picture influences. Times are tough in the media vertical no matter where you are. There's no doubt about that. Those who are in tune with changing demand in their market,(really in tune), will be more able to evolve successfully in turbulent times.

The benefit of using the four metrics I will discuss next is to see how the immediate and longer term momentum in competitive markets is reflecting changing demand. These observations call for immediate shifts in the underlying business model. From this very broad perspective the business model used for many decades can be viewed as a social contract. There are a lot of details in this contract but a few major factors shaping supply and demand can be isolated, discussed, and used to see how we must better serve the various segments of the market in the future. This perspective affords significant opportunity to those who push the obvious obstacles out of their way first. As you will see, however, these are not small obstacles.