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Tuesday, March 18, 2008

THE INTERNET, MOBILE MEDIA, AND YOUTH ARE NOT TO BLAME

Traditional media industries and companies are overwhelmed with an atmosphere of consternation and fear today.

Trade publications and industry association meetings are filled with news of diminished budgets, reorganizations, consolidations, and layoffs. People say traditonal media are declining and will soon disappear. Potential employees are wondering if there is a future for them in the industries and senior employees are hoping their jobs will last until they reach retirement. Everyone is pointing the finger,but most of the blame for killing traditional media is laid on the Internet, mobile media, and young people.

There is just one problem with their scenario. IT’S NOT TRUE. We have deluded ourselves into thinking that well established media are dying and that young people are uninterested in traditional text and audiovisual media.

Although new distributors of information and entertainment abound and video on demand and consumer-created content are increasing daily, consumers’ greatest time allocation and advertisers’ greatest expenditures remain with traditional media. Although young people have adopted newer media technologies more rapidly than other population groups, most of their media use still involves film, television, magazines, and non-traditional newspapers.

If the death knell for traditional media is not ringing, why do industry personnel keep hearing bells in their ears?

The reason is that significant changes are underway and most people don’t understand them. We have reached a era when the collective weight of expanded offerings of traditional media and the appearance of new types of media are ending the relatively undemanding operating conditions that existed due to lack of media choice and are removing the effortless profits that traditional commercial media enjoyed for a half century.

Suddenly there is competition. Suddenly there are financial losses. Suddenly there are company failures. Suddenly audiences are no longer satisfied with the “take content on our terms when we want to deliver it” approach that traditional media have offered. Only it wasn’t really sudden. Those factors have been growing incrementally for at least three decades. The problems were certainly compounded by the arrival of Internet and mobile content distribution, but they were not caused by them.

Let’s look at the case of the newspaper industry in the U.S. Readership problems have been evident for half a century. Although actual circulation rose continually throughout the twentieth century, reaching a height of 62.6 million in 1993, penetration has declined steadily at 1 to 2 percent each year since 1950. The pace has been steady despite the appearance of additional types of media. The expansion of network television didn’t increase the loss, the arrival of cable channels didn’t amplify the decline, and the arrival of the Internet didn’t boost the pace.

Today, the Internet is having an affect on advertising, but even that is not disastrous despite the wailing and gnashing of teeth. Total U.S. newspaper advertising was $46.6 billion in 1999 and $49.3 billion in 2006. In financial terms newspaper advertising is rising, but when accounting for inflation it has basically plateaued so one can not say the Internet is killing papers. If we look at classified where the biggest substitution exists, classified advertising in newspapers reached a height of $19.6 billion in 1999 and it was $16.9 billion in 2006. Clearly a decline occurred but it was offset by the fact that newspaper online advertising produced $2.6 billion in 2006. Overall, the business has stopped growing and investors are unhappy, but the industry isn't dying.

Certainly, the Internet is having many effects on established media. Research shows that print media business models have been least disrupted, unlike audiovisual media, but that print media work processes are changing most among media. However, Internet, mobile and other new form of distribution are providing all types of traditional media new opportunities.

Similar things have happened in the television business. The change from a limited number of television channels to hundreds of television, cable and satellite channels spread the audience, reduced the viewers of dominant stations, and made advertisers unwilling to continue paying previous prices. The big 3 networks could count on ratings in the 20s to 30s in the 1970s, but today they achieve ratings in the teens and are fighting to stay among the big 3. Nevertheless, viewers want network programming--on TV, as DVD, as syndicated programming, as downloads. There is no sign that demand for interesting programs is diminishing even if the basic television ratings are falling and new ways of monetizing the content are being developed.

We all need to recognize that changes in traditional operations are painful for industries, companies, and their personnel and that the contemporary changes are placing a lot of stress on management and employees. Everyone would prefer to continue doing things in the old ways they know well, but because of the new conditions those business models, processes, and market techniques aren't working as effectively as in the past.

The biggest challenges facing people in traditional media today are pessimism and lack of vision. Morale in publications and stations continues to drop, and doom and gloom are everywhere. That negativism makes things worse internally, reduces confidence of advertisers and investors, and makes it difficult to think about trying new things or even trying old things in new ways. The first step out of this condition is to stop lamenting the passing of the past. Things will never be the way they were. So get over it. Move on. Discover and embrace new ways of operating and new opportunities to prosper and grow.