Old Media as a Commodity

Is Old Media dead? Nope. It just smells a bit funny (to misquote Frank Zappa). But let’s start from the beginning. Media as a business is a mere pipsqueak in the troublesome world of high finance. Exxon Mobile as a single company has probably a large turnover than all media companies combined. And my fav example has always been the music industry, ogling the mobile business – when in fact Vodafone has a larger annual EBITDA than the whole music industrie’s cumulated revenues.

But media as a business has always been really attractive, too. Not just because of the Swarovski-glitz that comes with it (nice for us involved). And the potential of coming from rags to riches (and vice versa). Media mostly lacks direct financial power. But has the incredible leverage of making matters matter. Just ask Silvio Berlusconi. Or any given (former) Russian Oligarch. Or the people at Gazprom. Or, maybe, General Electric.

Sure, Old Media has been a quite good business, too. Maybe a bit volatile (yesterday’s hit is today’s fad). With some superstars milking their companies for the last cent (most investment bankers can relate to that). But if everything runs smoothly, the return was constantly pretty good. And if you’re in production, too, a real hit would mean a serious income peak (at least in movies, publishing or the music).

As any given business, the Old Media is based on scarcity: if you’re a broadcaster, spectrum is finite. If you want to produce movies, you need access to lots of capital, some rare talent and finite distribution. If you’re into books, you better own the printing press and know your distribution channels.

All those ventures did share some things: production and distribution are expensive. Sustainable stability of sales is a matter of expensive branding. And, with the notable exception of film, where you need an army or two to get a movie done, the creative part will be handled by just a handful of people.

And that’s why online media makes most old media companies a little queasy. In a peer to peer system, distribution cost is, well, distributed. There’s no real scarcity of spectrum or shelf space. And the technical expertise needed to setup a blog is worth a cup of Frappuchino per month. OK. Making money is still the hard part. And probably will be for the next foreseable future (AdSense just isn’t enough).

But the effect on media companies, after dabbling a bit in the New Economy bubble, has been quite soberng. Media outfits increasingly are abandoning the pretense of being “growth” companies—like Silicon Valley tech titans—and instead opting to return cash to shareholders, like boring but profitable electric utilities or food companies, writes Robert Marich for Kagan Research.

Meaning: the party’s not over yet. But don’t look for anymore bottles of Bollinger. If you want some sparkle, get used to Prosecco and Pellegrino. Of course, Old Media still means good business. But the old mainstays are eroding. Despite loosing market share, the US broadcast networks still sell their ad inventory for a premium (compared to cable networks). Because their still the only way to reach out to the masses. But those masses reached are shrinking. Local newspapers are still the opinion leaders in their communities. But webbased publishing and user generated are is already making inroads.

Sure, it’s a glacial process. But opinion making is changing from one to many communications to a more distributed process (where one to many still will be a major force, but not the only one).

It’s a process of commodization. But what’s in it for a media company? One reaction cold be: embracing the new media world order. News Corp buys MySpace, German powerhouse Hubert Burda Media picks lots of brains and everybody tries to extend their brands into the digital world. But a completely different thing seems to be going on with Bertelsmann. As, at first glance, the singlemost interesting activity of the company hadn’t been related to media at all.

Entry into ‘Public Service’ Sector in Great Britain is not the stuff you get some headlines out. Essentially, in July 2005 the Bertelsmann subsidiary Arvato took over 500 employees of the County of East Riding (a project, which seems to be running just fine). Is this the future of Old Media? Let’s not forget. Old media is quite good at competitively running large systems for subscriber management and other back end processes, sometimes involving millions of customers and subscribers. And running a town isn’t that new an idea for a media company. In Florida, Disney isn’t just the service provider for a municipality, but wholly owns Celebration. But then, real estate development is a completely different track (so don’t expect TimeWarner to take over New York City any time soon).

getting YouTubed

Mark Glaser of PBS’ MediaShift did a short interview with Chad Hurley, CEO and co-founder of YouTube. The timing couldn’t have been better. The next day, YouTube received another 8 Million USD in VC capital.

For the still uninitiated: what’s YouTube anyway? Well, have some looks:
The pro’s voice. A user speaks. A user’s prank. And in their own words (huh?).

But seriously. YouTube, built as some sorts of Flickr for Videos, is most likely the best thing what could happen to video on the web. Think about it: streaming video is around since 19hundred umpteen. And nobody did ever really care. Why? Let’s start with the user experience. Proprietary players which had to be started before they started buffering the video. One of the worst offenders: Microsoft’s Windows Media Player, an unwieldy chunk of counter-intuitive interface design. With Real coming in as a close second in the jack of all media-trades category. And Apple killed of any love for QuickTime with their constant Windows nagging screens.

Secondly, serving video always came with a hefty price tag attached. Even if you didn’t need any expensive server software to get the video files out. The fastest thing to kill your business hass been: success. Serving one video is fine. Serving a million is still a major head ache. If you don’t put your stuff on sites like YouTube, Google Video, vSocial, Veoh.
What those guys achieved, Glaser puts it in the right words: There is a simple truth about video-sharing site YouTube, and an enigma. The simple truth is that this web startup has bottled up the viral video idea and made it eminently drinkable by anyone.

But what’s the enigma? It’s how YouTube will profit on its own spectacular popularity. Yup. Good question. Being VC funded or not, sooner or later you’ll have to make money. The numers are spectacular (35 million videos per day, and users upload 35,000 videos per day, with 100 million page views per day).
So what’s YouTube’s idea to monetize this kind of success?

Hurley’s answer isn’t that clear. It will be an advertising-based model. We are exploring ways to serve up relevant advertising that will benefit the viewing experience since we know a lot about each of the videos based on how they are tagged.

Sounds good. But it’s going to be hard to deliver ion this.

Let’s start with the content. 35,000 uploads a day and a staff of 23 means: It’s impossible to double check all the posted material. Actually, YouTube is doing a good job in not putting up any porn on the start page. But if you look at the numbers, most viewed means mostly copyrighted material coming out of nowhere.

Probably 90 percent of the images hosted at Flickr are genuine user generated content. Looking at YouTube, you’ll have to define “user generated” a bit laxer. Does recording a tv show snippet and posting it on YouTube already qualify you as a user generating content?

With this premise, selling advertising looks tough to me. Tagging a stolen clip with a paid for ad would definitely be a bad business move. Copyright holder don’t tend to be too amused. And advertisers most likey will shun to become an accessory after the fact.
We have been moving cautiously to ensure we don’t disrupt the goodness of the community, says Hurley. But at the end of the day it’s the viewers that decide what is entertaining whether it be user-generated content or professionally produced videos — our community is still in control and will decide what rises to the top.

Yes, at the end of the day the users might still decide what’s entertaining. But currently, YouTube et al. aren’t in the business of Flickrization of the web video space. The name of the game is napsterization. Remember: Gazillions of hapyy users. But not even a serveral million Dollar backing of a major media company could save Napster from being sued to death.
Yes, YouTube’s a great service. But, in most likelihood, not a great business model.

Via MediaShift

Size does not Matter

Small paper – big site. Poynter points to a South African Newspaper, Grocott’s Mail, which is a running a pretty tight digital operation. OK, it might help, that the local university’s journalism school is now owning and running the paper. But then: shoe string budgets and interns running the whole operation isn’t that rare outside of j-schools, too …

Via Poynter Online – E-Media Tidbits