Why Aren’t Major Media Companies Software Companies?

What ever happened to the dream machines?

Nick Carr made an interesting point at his SES London keynote last week, one that’s been on many an industry observer mind since Microsoft made its bid to take over Yahoo.

“Software suppliers,” he said, “have to act like media companies. Some sell subscriptions, but most of the home software industry is going to look like a media business — and be ad-supported.”

Obviously, Microsoft wants (and needs) to become more of a media company, as its chief rivals Google and Yahoo already are. What I can’t figure out is why the major media companies — the Disneys, Sonys, Time Warners, News Corps, and Bertelsmanns of the world — don’t aspire to become software companies.

For over a decade, broadcasters, film studios, the recording industry, and newspaper and magazine publishers have watched their revenues and business models erode in the face of new technology offerings.

At the World Economic Forum in Davos this year, a panel of futurists pronounced print newspapers would cease to exist by 2014. Magazines aren’t faring well, either. Wal-Mart recently announced it would stop selling 1,000 titles. According to the Audit Bureau of Circulations, “Ladies’ Home Journal,” “Woman’s World,” and “Redbook” each lost 6 percent in circulation over the past year. “Time” magazine’s newsstand sales free-fell over 19 percent in the same period.

Television ad revenues are eroding — as viewers increasingly fast-forward through commercials. CBS reported its net was down 15 percent this week. The Washington Post Company saw profits drop 13 percent thanks to flaccidity in both its print and broadcast divisions. Even the DVD is on a deathwatch, threatened by VOD.

And the music industry? Don’t even get me started on the music industry.

Threats, or (Lost) Opportunities?

Oh, alright. Let’s start on the music industry. This week, iTunes nosed into the position of No. 2 music retailer in the U.S. (after Wal-Mart). Why should this glory go to Apple, a computer and software manufacturer with scant experience in retail and none whatsoever in entertainment? Because Steve Jobs possessed the vision and the engineers to built the platform. The music industry didn’t.

Why didn’t one of the major telcos build (or buy) Skype, now part of eBay’s portfolio? It’s 276 million users may have spent 100 billion minutes yakking to one another on the company’s free platform, but the company also racked up $115 million in revenues in Q4 2007, its fourth consecutive profitable quarter.

Another eBay plum is Craigslist, the site decimating the classified sections of newspapers across the country. Why aren’t newspaper companies building — or buying — companies like Craigslist? HotJobs? Zillow?

Why didn’t the entertainment giants envision, or buy, YouTube, rather than let it slip into Google’s clutches? As Carr points out, all the aforementioned Web businesses have radically fewer employees and dramatically lower overhead than the media companies and telecoms they cast ominous shadows across.

The major media players should have been building, buying or investing in companies along the lines of Blinkx and Singingfish (now part of AOL), or developing products that insert video advertising onto Web content like Google (and a myriad of others) are doing.

Culture, Take Out Your Checkbook

Excepting the less-than-spectacular AOL/Time Warner marriage eight short years ago, major media companies have done little, if anything, to invest seriously in new technologies. Sorry, but News Corp.’s acquisition of MySpace just doesn’t cut it (but if Murdoch buys Yahoo, things could certainly get interesting). Sure, the reason these companies aren’t conceiving of and building technology solutions to their business problems is culturally rooted. Technology isn’t a core competency. Developing and engineering software involves arcane and unfamiliar processes, not to mention new expertise. Yet it’s not as if media companies can’t afford to make these commitments and investments — not just monetarily, but for the sake of their future survival. The two purportedly most creative arms of Old Media, the motion picture and recording industries, have focused more on suing their customers than on imagineering — and building — iTunes and YouTubes (they’re threatening the latter business with legal action, too).

It’s getting late. It’s time the dream machines woke up to the reality Nick Carr expresses thusly: “If you’re one of the digital elite, you’ve got it made. If not, the prospects are less bright.”

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