Tough words for those in denial
In London, former Financial Times editor Andrew Gowers — who left the newspaper last week in a dispute with his boss — wrote a damning commentary in the London Evening Standard on the whole print industry.
“Working in print, pure and simple, is the early 21st century equivalent of running a record company specialising in vinyl,” Mr Gowers said.“The future lies with the internet, and those newspapers that survive will be those that produce truly original content and learn fastest how to translate it into the all-encompassing, all-singing, all-dancing new medium of the web.”
The article quotes two executives deeply entrenched in the broadcast industry, Bob Prather, president of Atlanta-based Gray Television Inc. and Brent Magid, chief executive of Frank N. Magid Associates in Marion, Iowa.
Mr. Prather:
“Look - technology’s here to stay, and anything that gets people content from television stations when they want it, where they want it and how they want it, we’ve got to give it to them,” Prather said. “As broadcasters, we’ve got to be quick on our feet to do what the public wants.”Prather called VOD a “reasonable idea.” He added that he believes most consumers’ viewing habits won’t change very much. “I think a lot of people will watch these things and pay for them, and then turn around and watch them on free TV the next week.”
In any event, Gray’s network affiliates will “get our money one way or the other,” Prather asserted, since their contracts with the networks stipulate exclusive rights to air current-run network programming in a particular market.
Mr. Magid looks at the disruption and brings forth a line that I’d wager was heard in the board room of Kodak ten years ago.
Local news is still the main source of cash for television stations, and remains irreplaceable, even as the Web grows as news source, says …Magid…“Sure, what’s being [taken to VOD] are primetime shows, so I suppose that you might see some diminution in ratings on those shows,” Magid said, which could lower ratings for local 11 p.m. newscasts. “I think that’s what everyone is fearing, but there’s no evidence that suggests that that’s absolutely going to happen.”
The author of the article, David Wilkerson, sums it up well this way.
Like so many other media in the past 50 years, local TV stations won’t go away, but will simply evolve into something that retains much of its original role, but takes on others, as well.
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The Unbundled Newsroom
Here is the latest essay in the series “TV News in a Postmodern World.”
As the consumption of media in our culture continues to move to that which is unbundled, we’re going to have to address how we can best compete in such a paradigm. This means very difficult questions, because to effectively produce unbundled news, we have to think opposite of our instincts and training. Instead of repurposing our bundled content, for example, it might be best for us to actually create unbundled bits and repurpose them in the production of our daily broadcasts. If nothing else, I promise this essay will make you think.
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BIG news: AP taps Microsoft for online video net
In a joint announcement, The Associated Press and Microsoft MSN have announced that they will partner to deliver online video — complete with ads — to 3,500 AP member sites. I cannot possibly overstate the significance of this, because it brings newspapers and other print members of AP into the video advertising world. And in selecting MSN to deliver the technology, AP video will be delivered in high-end, extremely reliable form.
“We are thrilled to help The Associated Press bring online video to thousands of AP member Web sites,” said Todd Herman, director of advertising and business strategy for MSN Entertainment at Microsoft Corp. “The combination of AP news excellence and Microsoft scalable technology will enable our advertisers to better reach the huge audience of people who now turn primarily to the Internet for their information.”Initially, AP will provide approximately 50 video clips per day covering national, international, entertainment, technology and business news. The AP Online Video Network will grow over time as network members and other content partners contribute their own video.
But the biggest impact here is the redistribution of video advertising revenue. That, my friends, is what to watch.
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Print on the precipice
The story of the potential forced sale of Knight-Ridder has everybody in the newspaper business nervous, and rightly so. The Los Angeles Times has an excellent story today called As Knight Ridder Goes, So May News Industry, and I don’t think that’s overstating the case. According to new circulations statistics, newspaper circulation is down 2.6%, and while we’re finding the occasional rationalization, the preponderence of reaction is that the industry is in real trouble.
To get some insight into the what’s happening here from a business perspective, I turned to old friend and industry stock analyst, James M. Marsh, Managing Partner of Hanover Square Capital Management, LLC. Marsh is one of the brightest and most candid analysts on the block, and I’ve come to appreciate his insight. He says it’ll be harder to sell newspaper properties than it may seem. Here’s his e-mail response to my questions:
It’s an interesting situation. I see a number of divergent themes.On one hand, the economy has grown at a real rate of 3% or higher since the middle of 2002, yet newspapers cannot jump-start their top lines and are increasingly focused on cutting costs. Secular issues seem to be swamping cyclical ones.
The stocks are trading at 10 times forward EBITDA (at the upper end of their typical 7-11 times range), yet have lowered their growth expectations consistently for the past three years. Public investors seem to have not adjusted their expectations to the new slower growth outlook.
The industry is apparently for sale, but there seems to be no buyers. Private equity players seem to be on the sidelines for now.
I think this is a classical case of disrupting technology ravaging an incumbent. The signs are everywhere:
Circulation trends are increasingly negative. Even worse, the coveted younger demographic is long gone. Competition from the Internet is the big problem, but TV and free newspapers are having an impact.
High margin classified advertising is under assault. Both from Monster.com and Hotjobs.com, but soon from Google and other vertical search services. The natural monopoly that classified once enjoyed is gone.
Newspaper managers are not sure what to do. Cutting costs in a desperate attempt to maintain EBITDA margins.
I am skeptical about a take-out boosting stock prices for a few reasons:1) They are not cheap enough yet.
2) Private equity metrics don’t yet work.
3) There is no obvious exit strategy for financial players.
4) Consolidating newspaper properties results in very few revenue or cost synergies.
5) Unions will make financial engineering more difficult
6) Newspapers have been cutting costs for 5 years, not much fat is left to cut.
7) Some newspaper managers believe they answer to a higher calling of journalism, so may not be willing to make the tough choices necessary to bolster returns.
8) Many of the companies have super-vote stock so they would need to be a willing seller.
TV stations groups are not in a dissimilar position. I thought the news from CBS and NBC was ominous. Networks will disintermediate their distribution partners at some stage, it is really only a matter of time. TV stations generate more free cash flow than newspapers so might be more easily taken private or LBO’d.
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Calling for a “creative awakening”
In another one of her thoughtful and compelling essays, Diane Mermigas writes that content must catch up with the new media world. I couldn’t agree more.
What’s required is a call for a genuine creative awakening not only in Hollywood and New York but everywhere in between where artists, writers, producers, animators and performers reside. The demand will be strong — even as attention spans are shorter — to fill these new devices and pipelines with differentiated content that big media so far has defined only by what it knows best. This innovation will require assigned funds and resources, artistic freedom and a corporate mandate to think outside the box.The other call must be for a far-reaching, all-inclusive anti-piracy effort on the part of those who make their fortune from content — whether they produce, distribute or service it. Such a forceful, unified effort can be justified by the single notion that every company with a stake in the digital broadband market ultimately lives or dies by the protection of copyrighted content and service patents.
Read the article. Diane is the best.
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The unbundling continues
I was on The Chris Pirillo Show show last week talking about unbundled media, and the show is now available in mp3 or Windows Media for download.
Where networks, newspapers and magazines once defined our relationship with our media, we now control the experience to some extent. Terry explains how these new opportunities are changing the face of mainstream media and how it presents new opportunities for independent media producers.
First, NBC has teamed with DirecTV to sell shows like Law & Order SVU for 99 cents a pop within hours after they aired — and without commercials. Second, CBS has finalized an agreement with Comcast to offer four of its shows — CSI, NCIS, Survivor and The Amazing Race — on video on demand for 99 cents each. The CBS shows will be available by midnight after airing, and subscribers can watch them for up to 24 hours after download. “This is an incredibly exciting evolution for CBS and network television — video on demand is the next frontier for our industry,” said CBS Chairman Leslie Moonves. While discussions have been going on for quite some time, I can only wonder if the Apple-ABC deal helped push them along. Today’s announcements — in conjunction with ABC’s iTunes deal — mark a major development in network television’s transition to an unbundled universe.
Welcome to the unbundled media world.
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Dear Broadcaster…
Must read: George Simpson’s Internet 101 For The Profit-Hungry in today’s Online Media Daily. It’s a biting commentary addressed to old media:
What was once a pretty straightforward producer-advertiser-consumer continuum now has more twists and turns than a Claria strategic plan. Where media used to be in tight control of what was content and where, when, and how it could be consumed, the power has shifted to the consumer who increasingly is seeking information and entertainment produced by a variety of content providers, most of whom don’t live in Sherman Oaks, Georgetown, or on the Upper West Side. The monolithic control of information the government and private sector enjoyed for the first couple of hundred years of this nation is going bye-bye. Either you are part of the process, or it will simply pass you by–or, as in the case of traditional media companies standing in the road like deer caught in the headlights–it will run your ass over.
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Online versus off: two burning questions
Two questions were asked during my session with students at the University of North Texas this week that I want to repeat for readers here. These questions come up ALL the time, and they signal to me the struggle between the logical mind and the personal media revolution.
The first question is the most common.
Aren’t you afraid that if people read only what they want (via RSS subscriptions) that they won’t be informed about what they “need” to know?
- That isolation in an “only what you want” paradigm is absolute.
- That everybody in the “only what you want” stream is similarly isolated.
- That people will never reach outside their isolation.
- That there aren’t or won’t be filtering agents within the paradigm.
- That “what they want” is an all or nothing proposition.
- That people are essentially incapable of defining their own information “needs.”
- That people are essentially incapable of finding things they “need” on their own.
When I answer this question, I always say that the only real evidence I can offer is my own experience and the experience of my friends and colleagues. I find myself easily able to filter that which is important and that which isn’t. In so doing, for example, I find that the mainstream spends an incredible amount of time on issues that — in the end — matter little in the big picture view of things. For example, an obsession with politics leads often to the conclusion that, well, it’s just politics. Who knew?
I don’t watch much TV news anymore. I don’t read a single newspaper. I don’t read magazines or “browse” mainstream Websites. I do peruse aggregators, and I read a ton of blog entries that link me to mainstream pages, and I find it vastly more informing to follow breaking news online than I do on TV. It’s not as entertaining, but that’s not what we’re talking about.
So I view this question as specious — a smokescreen put forth by those who use it to assuage their own fears of irrelevance in the new paradigm (They’re not really irrelevant, but that’s their fear.).
The second question is similar.
Aren’t you afraid that spending so much time in the cyber world will lead to a lack of human contact?
- That cyber contact isn’t human contact.
- That cyber contact is an “all or nothing” proposition.
- That getting to know people online is inherently problematic (whereas “real” human contact is not?).
- That cyber land is a dangerous place (whereas the “real” world isn’t?).
- That the addictive power of cyber contact is absolute.
- That cyber contact doesn’t allow (or require) people to develop interpersonal skills required in the real world.
- That somehow people are incapable of figuring out the difference between real and cyber.
Again, experience trumps belief when realistically examining this question. I have found that meeting people online and getting to know them there produces an incredible sweetness when meeting the same people in person. I think that’s because meeting and interacting with people online doesn’t include any of the surface bullshit that goes with getting to know people offline. We meet others “at core” here. We’re less judgmental, as a result, and we find that we’re attracted, perhaps, to people with whom we’d normally not associate. Surely, this cannot be a bad thing for humanity.
I’ve been a part of bringing bloggers together in two different communities, and the social gatherings have been amazing. The good-looking people chum with those who are “challenged” in that regard. Older folks hang with younger. Big, small, black, white. It’s really quite fascinating.
There are certainly potential dangers online, but nothing that education can’t overcome. The benefits, however, far outweigh potential problems, imo, and the more we obsess about those dangers, the more likely we are to miss the benefits.
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“Tasting the edges” of unbundled media
Wayne Friedman offers food for thought on the unbundled distribution of network TV shows in an insightful article in today’s MediaDailyNews. Right now, he says, it’s mostly a marketing thing, but the door is open for by-passing local television stations.
“Networks are dancing around–tasting the edges,” said Harold Vogel, president of Vogel Capital Management, a New York-based venture capital firm. “Management doesn’t have a choice. They don’t want to slice their own throats [with their affiliates]. But they don’t want competitors to slice their throats either.”Virtually none of these shows carry TV advertising sold by the networks. That would have network affiliates up in arms, if the WB were looking to profit from these specific moves.
If networks were to sell advertising for these Internet versions of shows, affiliates would see this as a hostile move. As long as the networks don’t sell advertising, this current Internet activity only acts as a pure marketing tool–to get viewers to sample shows on TV airwaves. That’s something that benefits TV affiliates and networks.
But down the line, if more complete episodes run on the Internet, both advertisers and affiliates will have issues.
Good article.
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Unbundled video downloads: an exploding market
In the first 20 days after the unveiling of its Video iPod, Apple sold more than a million video downloads at $1.99 a pop, according to a press release this week.
“Selling one million videos in less than 20 days strongly suggests there is a market for legal video downloads,” said Steve Jobs, Apple’s CEO. “Our next challenge is to broaden our content offerings, so that customers can enjoy watching more videos on their computers and new iPods.”
Things are moving rapidly in this space, which I believe is the leading edge in the burgeoning unbundled media field.
CBS is in talks with Apple to provide programming downloads via iTunes, which prompted these thoughts from the folks at Engadget:
We were hearing some rumors of NBC talks as well, and we’ll try not to get ahead of ourselves here, but we have to believe that once all three networks get up and running on iTunes, the fight will be for who can offer the most and freshest content, a veritable paradise for the consumer…
HellHouse Video has begun selling iPod-compatible titles, including This Little Piggy and Sindi’s Wet and Messy Adventure. Suicide Girls, which specializes in an updated (piercing and tattoos) take on pinup girls, has put free clips of its offering on its Web site. And both Playboy and Penthouse are reportedly considering moving into the market.
…executives for each of the major sports leagues either confirmed existing discussions to make video content available on iTunes, Apple’s online digital download store, or said they expected such talks to begin soon.
To get the videos, Heavy.com sent out masks of the King and the Subservient Chicken to a group of their especially active users who submit content on a fairly regular basis. “They [Burger King] came to us and said: ‘We’ve got these masks, can we do something with your users?’” Heavy.com co-CEO Simon Assaad said: “We just sent about 20 masks out, and people just started turning up at our front door with videos.”
Developments here are coming fast and furious, and I expect that to continue. While it’s terribly exciting for consumers (although I think the price point is too high), network affiliates have to be aware of the sword above their heads. My response to them is, “What are you waiting for? Get onboard with YOUR unbundled offerings.”
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Dallas bound
I’m headed to Dallas and the opportunity to speak with Phyllis Slocum’s media class at the University of North Texas in Denton. Phyl and I know each other from the Wayback Machine, and I’m looking forward to sharing my unbundled media message with her students.
I’ll be back Thursday afternoon.
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Moving web ops up the priority chain
Mark Glaser asks the musical question “Is there a bubble brewing?” in an interesting Online Journalism Review piece today. The article features the thoughtful views of investment banker (and PaidContent columnist) Tolman Geffs:
I think the idea of everything a newspaper writes being available online for free will be regarded as a thing of the past. AP rip-and-read will continue to be free, but value-added, local, feature reporting, columnists — those will move behind a pay wall…You just can’t support the cost of that newsroom and maintain that journalistic quality without subscription revenue.That’s a broader issue as well that the major media companies are facing. They are reshaping their business models around the Web. Their previous models involved moving their offline content online, so that NYTimes.com is 90 percent New York Times content. The same is true at the IBS sites I used to run. The WNBC.com content comes from WNBC. That’s a good business, but not a profitable enough business [to counteract] the profit squeeze at the parent company. I think these folks will be moving even more aggressively online, and that’s what they’re doing to lift their online revenue growth above the trend line and it will help offset the profit pressure on the core business.
…I think the more profound thing you’re going to see is them looking to either buy or create original content online, because ultimately content is king, and the audience and advertising follows original content. I think a lot of these companies are going to be focusing much more resources on creating original content and original programming online.
I agree with Mr. Geffs that simple repurposing of content will never feed the corporate beast, and I think he’s right that newspapers will drift to a subscriber model. It won’t work, however, because the economics just don’t make sense. You simply cannot scale Web subscriptions to the point where it will feed the operation of a newspaper. The demand simply isn’t there.
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Unbundled playback: Sony adds conversion software for PSP
While the video iPod is getting all the press, Sony has announced the release of PSP Media Manager, software that lets you convert and download files from your PC for playback in its popular Play Station Portable. According to Podcasting News, the features include:
- Two-paned view lets users see media on a PC and PSP system at the same time
- Automatic file format conversion
- CD extraction — transfer CDs to the PSP system
- Podcast and video blog support — download and encode feeds for PSP playback
- Customizable compression options for music, movies, and images
The PSP has a much bigger screen than the iPod video, and it’s a more versatile piece of hardware. The software is a $20 download, or you can buy the boxed version after December 1st for $30.
This is only the beginning.
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The Remarkable Opportunities of Unbundled Media
This is the 51st essay in the series “TV News in a Postmodern World,” and it’s the beginning of a new drift in the series. That’s because I firmly believe that the creation of all news in our increasingly postmodern world will be unbundled — that is to say disconnected from the “packaging” of the media we currently offer. Therefore, I view discussions about anything other than unbundled media to be increasingly irrelevant, and I want to devote my time to what I view as most important. Future essays will likely assume knowledge presented in this one.
Some people call this “media 2.0,” but that term conjures the MBA-speak of a bubble to me. I’ll call it simply “unbundled media.”
The disruptive technologies of the personal media revolution produce unbundled media, and that’s one of its value propositions. Mainstream media is playing with it by an occasional toe dip into the pond, but we will never discover what’s really possible in so doing. We have to let go of the bundle before that can happen, because the bundle blinds us to the new reality.
The most important quote of the 21st century (so far) came last year from then FCC Chairman, Michael Powell. “Application separation,” he noted, “is the most important paradigm shift in the history of communications, and it will change things forever.” I would argue that application separation at the macro level enables application separation at the micro level, and this is what I mean by unbundled media.
The Remarkable Opportunities of Unbundled Media
I appreciate the support you’ve shown in the three years I’ve been exploring the new media world via these essays, and I hope you’ll join me now in this new adventure.
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