[opendtv] Forbes: Old Media Can Still Thrive, But Business Models Need To Adapt
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Sat, 27 Sep 2014 01:52:39 +0000
"So the key to competing in the age of digital is realizing that your business
model will not last. How you used to create, deliver and capture value is
irrelevant. If it doesn't make you money now, it's just baggage. As Vivaki's
Rishad Tobaccowala puts it, the future does not fit in the containers of the
past."
That says it. Not like ESPN and HBO haven't noticed.
Bert
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http://www.forbes.com/sites/gregsatell/2014/01/10/old-media-can-still-thrive-but-business-models-need-to-adapt/
TECH
1/10/2014 @ 6:13AM
Greg Satell
Old Media Can Still Thrive, But Business Models Need To Adapt
My first media job was in New York, where I learned the radio business. My
company, Katz Media, had an outstanding training program, where for three
months we were drilled
in the basics of radio formats, research techniques, sales skills and marketing
strategy.
So when I first arrived in Poland in 1997, I felt well prepared. Surely, in a
newly capitalist economy, where the entire concept of a media business was
novel, my experience and expertise would give me a leg up. Alas, I found that
often the opposite was true.
You see, I had not only changed geographies, but business environments, with
important structural, cultural and economic differences. I found that what I
had learned as eternal truths in New York were often, in fact, principles
derived from circumstance, not necessity. Today, every media business is
facing a similar dilemma and everyone needs to adapt.
A Tale Of Two Models
It used to be that the business of publishing content was dominated by two
models: free and paid. TV and radio broadcasting, historically, were fully ad
supported, while movies relied almost 100% on box office receipts, with some
residual revenue on the back end. Newspapers and magazines were hybrids,
earning money from copy sales and ads.
As the media market matured, the water muddied a bit. Paid channels like HBO
came to the fore and increased TV fragmentation made it easier for films to
garner ad revenue. The one constant has been that marketers have been more
willing to pay for consumers than consumers have been willing to pay for
content, so free models have dominated.
Yet the "free vs paid' dichotomy is misleading, because neither represent a
full model. To truly innovate your business model, you need to look at the
full range of how you create, deliver and capture value. What makes media
today so exciting and so full of opportunity is that the options are exploding
in each area.
Creating Media Value
It used to be that publishing was focused on owning and controlling content.
Print publications would maintain a large staff and license a certain amount of
output from contributors. Broadcasters would produce or procure programming
and so on. Rights were almost always exclusive, at least during a specified
time period.
So it's important that many of the new media juggernauts, such as Huffington
Post, Bleacher Report and RealClearPolitics emphasize curation. By collecting
and linking to content they feel is interesting, they've been able to build
successful businesses. All have been acquired, in whole or in part, by major
media outlets for major money.
Others, such as Forbes and Business Insider, have been able to create value by
building large networks of contributors (disclosure: I work with both), many of
whom are not professional journalists, but subject matter experts in a
particular area. Amazon Video has taken a slightly different tack, developing
new programing through crowdsourcing.
Still another way to create value is through satellite brands, where a major
media outlet syndicates its own content to a vertical brand it owns. Ted
Turner pioneered this strategy with thematic cable channels in the 80's and
others, such as The Wall Street Journal, have used a similar approach with
verticals like All Things Digital.
Delivering Media Value
For a long time, business strategists argued that to attain competitive
advantage, you need to dominate the value chain. So, not surprisingly, the
wisdom of marrying content with distribution was taken as gospel in media
circles. TV networks built studios; newspapers delivery infrastructure and
magazines sophisticated databases of subscribers.
But of course, distribution was the first thing that the Web blew apart,
starting with the walled garden model of AOL AOL +3.68%. Rather than having
to go through proprietary distribution, whether that be a delivery truck or a
technology platform, consumers can now access the content they want through a
web browser and everybody is on a fairly level playing field.
While many legacy media companies complain about this, it's generally a good
thing for everybody. Consumers, of course, get more choice, but content
producers benefit as well. The truth is that distribution was generally a loss
leader and companies invested in it mostly to get better ad rates. It was
rarely a stand-alone profit center.
Nevertheless, there are ample ways to innovate distribution. Firstly, zero
cost distribution has opened up a wealth of opportunities for content
producers, such as the burgeoning video ecosystem that's building up around the
web. Some, such as Politico, have repackaged reporting as e-books and others
have profited from events and conferences.
Capturing Media Value
Incumbent businesses have generally been very protective of their traditional
revenue streams. The movie studios waged a legal battle against video
recorders for over a decade, before they realized that video sales were a
goldmine. The music industry thought the Internet would kill its business, but
now is minting digital money.
The truth is that for all of the talk about "trading analogue dollars for
digital pennies," the reality is just the opposite. Never before have so many
media brands become so valuable so fast. Even AOL and Yahoo-often thought of
as has-beens in the digital game-have multi-billion dollar valuations.
And the reason is that there has never been so many ways to make money. In
addition to advertising and subscription revenues, affiliate programs such as
Amazon Associates make it possible for web sites to earn as much as 10% on
e-commerce sales. Other opportunities, such as sponsored content and native
advertising, also show promise.
For many media companies, the biggest opportunity is web video, which is
expected to grow almost 40% in 2014. After years of salivating over TV money,
now anybody can compete for those budgets. The truth is that most legacy
publishers really haven't made much of an effort.
The Future Does Not Fit In The Containers Of The Past
Today, every media business is experiencing something similar to what I did
when I moved to Eastern Europe in the late 90's, except they didn't need to
change geographies to change environments. The world shifted beneath their
feet. It's possible that I had it easier, with obvious linguistic and cultural
challenges to overcome, I knew I had to adapt.
And in time, I did. It wasn't easy, but I learned the new rules and, as I went
to do business in other countries-I lived and worked in four separate markets
during my fifteen years overseas-I found that every place worked differently.
I eventually realized that there are, in fact, limitless ways to make money in
the media business.
So the key to competing in the age of digital is realizing that your business
model will not last. How you used to create, deliver and capture value is
irrelevant. If it doesn't make you money now, it's just baggage. As Vivaki's
Rishad Tobaccowala puts it, the future does not fit in the containers of the
past.
Once you accept that, all that's left is opportunity.
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