Archive for Media

What’s to do for the media business in turbulent times?

Posted in 1, Digital business, Digital media, Digital news, innovation, IT and communication, Web 2.0 with tags , on February 7, 2010 by Geir Stene

 The media business has struggled greatly, worldwide. Advertising and circulation revenue have dropped greatly. Throughout 2009 we heard weekly about the problems, cutbacks, reductions and layoffs. Are we looking at a dying industry, or at best, a sharp change of the industry? 



There is an ongoing change, a paradigm shift between print media/ digital media. Traditional media houses have still not managed to sort out how to transform themselves, which last year’s poor results confirms. 

The real challenge is to manage the existing business model, and at the same time to build sustainable business models for the digital markets. 

It is important to be realistic, but realism has to be based on future expectations, not the history of a great past. Organizations that manage through tough times do not focus only on the problems they have with the existing business model. Successful businesses are able to focus on innovation and re-structuring as well. The winners are those who are able to position themselves in a favorable spot – quickly. 

Increased demand and a lack of willingness to pay at the same time?
There is no evidence to suggest that that the demand for knowledge and stories will drop – – in fact, we need easier access to more information.  At the same time media companies do not get paid for content in the digital world. Isn’t that a paradox? 

To answer this we must look at what customers traditionally feel that they have already paid for. Is it the content itself, or is it a combination of delivery media (paper), the transport of the content (to the news stand or at the door) and the trust of the supplier (that you can trust that the content is of quality) In the traditional business models, where these elements have been “inseparable”, the question has merely been of academic interest. On the other hand, digital consumers experience that they have already paid for digital services such as the news online by having paid for the PC, software, Internet subscriptions, etc. At the same time consumers are willing to pay for the ability to send SMS, to download “apps”, games and music to their PC and mobile. The point is that the willingness to pay for services online is there, consumers just don’t want to pay for the content itself. 

But in the digital world well functioning business models already exist — just look at what Google, Facebook, YouTube and Twitter have established. What scale of users they have gathered and the value this represents in ad revenue alone. If we look at Amazon, Barnes & Noble, Kelkoo, to name a few, we notice that the business models are based on interaction, behavior analysis, profiles and user statistics in order to maximize sales. The business models vary, but one common feature is often “split revenue models”, where several players sharing knowledge and parts of the value chain.

Our recommendation would be learn from this, and evaluate what is the real value of the media business at hand. We believe that it is essential to connect traditional instruments with new ways to manage content. There are great opportunities to establish commercial services and products towards both advertisers and users.  

Perhaps content isn’t the future value for the media business. Perhaps the real value is the knowledge and management of users / participants and their behavior.  We believe the media industry as a whole has already been subjected to “Disruptive Innovation” and the only way to survive in the industry is to adapt very quickly. The main point is to create added value for the sum of buyers in the digital universe, through business models that also provide revenue to media houses. The most important prerequisite for success in this is to have the right combination of business strategy, organization, competence, and not least technology platforms, that can realize the goals 

Technology is part of the product
 Products like Apple’s new iPad will be a very important force to change the way we use PCs, Internet and handheld devices. When the major players (Apple, Microsoft, Amazon, Sony, etc.) facilitate easy deployment and use of digital content, it is obvious that the demand is increasing dramatically – and fast. 

Technology is the most visible instrument of the business model that until now has succeeded. Pervasive and holistic thinking assumes that the technological platform is part of the product being sold, and includes suppliers, distributors and consumer’s own infrastructure. The most important change is that technology is no longer just a tool to produce the goods, but an important part of the product itself. The development of consumer technology has both driven and been a part of the new successful business strategies, and has – in our opinion – matured the digital media market. At the core the major players have a complete set of technology platforms that implement the business model’s financial structure, production and distribution lines in a holistic strategy. 

The development of mobile phone and laptop computers are the consumer technologies that have contributed the most visible for the consumer for this development. Now, these devices meld together, and become smart-phones and reading lists that give users a unique experience. At the same time the digital distribution channel – the Internet – both increases their availability and opens the opportunity to deliver better quality, and ease of access, to the consumer. The development of broadband and mobile broadband will continue to contribute to increased quality of the services. 

The digital distribution has created many questions about the copyrights that both the business and organizations have tried to answer. Due to the fact that the internet characteristics are ‘open and free’, this will be a continuous discussion that will ultimately lead to answers. 

Our conclusion is that the willingness to invest in technology and include technology in hardware/ software/ infrastructure as a part of the business model is an important success factor in the development of new media products and services.  

Change Management
When the technology and framework conditions change, when value chains change and new players arrive and threaten the industry’s traditional players the only way to survive will be to defend their position by being willing to change the way the organization works, the processes of workflow and the perspective of how the market functions. The digital world is in its nature interactive. “Readers”, “listeners” and “viewers” are descriptions of users who will vanish from our vocabulary in a digital environment. We see a huge, rapid growth in use of social media that turn “users” into “participants” and “co-producers” of content and discourse. 

By this, the media businesses have gotten a new set of challenges in terms of how content is established, produced, presented and managed. In addition to completely new ways of defining products and services, media organizations have to change the production lines and workflow. As the manufacturing process to produce a book, news story or a magazine, has become irrelevant in the future digital media world it will affect, workflow and requirements of professional competences and organizational conditions. It will also be necessary to break down the strict distinctions (silos) that have been in different companies within a media group. 

It’s needed to establish a close relationship between the various divisions, products and services, in order to cultivate and manage the knowledge about user patterns, and transform that into added value towards the market of advertisement, subscriptions and services provided. 

Next step
We believe that quite a few media houses will need external expertise in business strategy, change management and technology. We know that coming from the outside of the organization and facilitating processes that help media corporations discover new perspectives will enable them to create profitable solutions. To make the move from “traditional” to “new” reality is a mission where a holistic perspective is one of the needed assets to ensure a strong strategic foundation to make such a transformational step. Media houses must implement innovation processes, replace business models, develop new concepts for products and services, invest in appropriate technology, ensure smooth organizational processes and implementation, and simultaneously develop criteria for success and value propositions. Establishment of  new, digital value chains and multi-channel strategies are essential elements in future business models for all media houses. Some newspaper has taken some steps along the road, while parts of the publishing industry (book / textbook / magazine) still have some distance to go before the necessary technological elements are in place

There must be a sharp distinction between content on the one hand, and the products and services on the other. This is the only way to profit by what structured data provides in the way of opportunities. There is no other way to take advantages of the semantic options in the triangle of editorial content, profile and participant’s content and commercial content.  A key point is to “Produce once- and deliver it on as many surfaces and channels possible”. This will be eReading lists, mobile devices, web, PC desktop applications, etc. It includes the ability to integrate content of various formats merged into a total user experience of text, sound, image and video.

Some tips concerning the mix of business models we would be able to help establish:

  •           Behavioral & profile targeted advertising
  •           Contextual marketing
  •           Product/ service and contextual advertisement
  •           Classified/ Community/ social media advertisement
  •           Demographic, Geo – demographic, Techno graphic
  •           Subscriptions mobile/ desktop/ ’apps’ prod and services
  •           Traditional DM activities, banner ads, campaigns, branding
  •           Multichannel & SCRM  action
  •           SEO & SEM, Conversion rates

In combination with the knowledge of these business models the media industry needs to keep a strong focus on where they come from, and what is valuable in today’s experience. They need new sets of competence in new areas, such as change processes, digital value chains and multi-channel strategy.

By Geir Stene, Bjørn Hole
This article is written on our own initiative.