This is my second-to-last column for ClickZ. Teaching graduate school courses in new media business robs me of the time necessary to devote to the issues that make ClickZ valuable to those employed in new media. So I want to yield this column’s fortnightly space, which I’ve been privileged to use for the past 79 columns, to someone who can better provide you with what ClickZ does best.
As I bow out, let me make some predictions based on what I’ve learned in the past 31 years working in media, including the past 16 years full time in new media.
New Media Revs Won’t Equal Past Traditional Media Revs
In almost all cases, new media’s operating revenues, when discounted for inflation, will never equal those that used to be generated by traditional media companies.
Sure, there will be exceptions (Google being the most obvious). But most of the traditional media companies trying to adapt to new media are finding, or will find, that their online and mobile revenues won’t compensate for the print revenues they’re losing as more consumers switch media consumption from traditional to digital.
Likewise, many startup companies operating solely in new media will never grow to generate the revenues that, similarly indexed for inflation, major media companies earned during the late 20th century.
Why? First, the economics of new media are based on surplus; those of traditional media were based on scarcity. Consumers had few media choices, but now have a surplus. Advertisers had to purchase the scarce space in print or scarce minutes in a broadcast hour, but now can purchase from among the infinite Web page space or time available online.
Second, in traditional media the media companies were the middlemen between consumers and content or between consumers and advertisers. The Internet tends, more often than not, to eliminate middlemen. Advertisers can now reach consumers directly.
Likewise, anyone can now publish or broadcast content directly online to anyone else. Media companies had derived huge amounts of money from exploiting the scarcities and inefficiencies of traditional media, but new media eliminates a great many of those scarcities and inefficiencies. New media is simply more efficient than traditional media for consumers and advertisers.
Newspapers and News Magazines Can’t Catch Up
It’s nearly too late for almost all daily newspapers and most news magazines in the United States, Canada, Western Europe, Australia, and many other post-industrial countries. To adapt to new media, those periodicals needed to make many major changes to their practices, to their infrastructures, and even to their industries’ infrastructures.
None of those changes would have yielded returns on investments within two, three, or even five years, but all those changes were absolutely necessary for those industries’ long-term survival. Those changes should have been made 5 to 10 years ago, when those industries were profitable and when the majority of their readers hadn’t yet switched media consumption from print to online.
Those changes weren’t made. Now, amid the worst recession in 80 years, those periodicals and their industries’ trade organizations have slashed their staff and their budgets too far to make those changes at the 11th hour.
U.S. Radio and TV Will Implode
Speaking of things 80 years old, the affiliate structure of America’s radio and television industries is about to implode due to broadband new media. When the broadcast industries’ affiliate networks arose, they were necessary. Television studio production houses needed the networks to purchase their programs and show them to consumers; the networks needed affiliate stations in local markets to broadcast those programs to consumers; and the affiliate stations in local markets needed that programming to fill 90 percent of their airtime.
But thanks to broadband Internet access, the production houses, networks, and affiliates are leapfrogging over each other, cutting each other out of that chain. The networks are offering programming directly to consumers via their own broadband channels, streaming media sites (e.g., Hulu), or YouTube, iTunes, or other online retailers.
Likewise, some television studio production houses have been selling programs’ online syndication rights directly to the affiliates, cutting out the networks, or by selling the programs directly to consumers via iTunes. Moreover, Sony, Samsung, LG, and other television set manufacturers announced earlier this year that within two years all their sets will have direct Internet connections, which will make it all the easier for any of the old affiliate network chain to bypass the others and go directly to consumers.
Why should a network continue to split commercial advertising time with the local affiliates when it will be able to deliver programs directly to viewers’ TV sets? Won’t that extra commercial advertising revenue more than compensate for any affiliation fees those networks now get?
And if the networks or production houses can make more revenue selling advertising-sponsored or subscription programming directly to consumers, how many of the local affiliates that lose that network programming and its commercial time will survive? We’ll see bloodbaths and major restructuring in the U.S. television industry in the coming decade now that broadband Internet access is making the traditional affiliate business model obsolete.
Next time, I’ll make three final predictions.
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