By Stephanie N. Mehta
July 16, 2009

Friendly advice for the muckety-mucks of traditional media

By Jeremy Allaire, CEO and Chairman, Brightcove

Earlier this month the media industry elite gathered in Sun Valley, Idaho, for the annual Allen & Co. pow wow, and there are plenty of interesting tidbits and threads coming out of the discussion. I thought it would be fun to pretend that I was there. Here’s what I’d have to say to the old guard – some doom, some gloom, some rays of hope and a few prescriptions.
Your existing businesses are in an inevitable slide downward, and this will only accelerate and continue over the coming decade. Two thousand nine will widely be viewed as the “Year the Media Died,” with a record number of newspaper bankruptcies, closed magazine imprints, and sliding revenues from traditional TV and radio advertising.

Traditional local broadcast affiliates (TV and radio) will continue to see their audiences (and advertisers) erode. They’ll be the next wave of bankruptcies after the newspaper industry. More magazines will shutdown from shrinking audiences and sponsors.

For major broadcast networks (terrestrial/cable/satellite), viewership has held up well, but that model is changing, too, as consumers embrace video over the Internet. A wave of “over-the-top” consumer electronics that are connected to the Internet (from iPhones to Apple TVs, to new DVD players, to who knows what next) are going to bring on the inevitable tsunami that open Internet standards and protocols have brought to every major technology platform. There is no hiding from open Internet TV. This means end-users will be able to access any content, from anywhere, on-demand, and without a traditional cable/telco/DBS subscription. Distributors are fighting back with “TV Everywhere,” a patchwork solution that is more of a finger in the dyke.

The deeper reality is that consumers today have a lot more choice over how they are entertained, informed and engaged. For a huge number of people, that means hanging out on social networks, gaming sites, consoles, and other environments rather than consuming long-form video on TV, listening to the radio, or reading newspapers and magazines. That is a fundamental structural shift in how people use their time, and it spells less time spent on traditional national media products. That sucking sound you hear is the inevitable shrinking of the pie of attention.

It’s not all gloom and doom though. There are several things to focus on to help get past this structural change and prosper. Here’s a short prescription:

  1. Get more aggressive online. Explode and expand the volume of content you make available. Fully embrace open distribution. You’ll be thrilled in the end as you will have gained more control over your destiny than you’ve ever had. Build great branded destinations, empower your viewers/users/consumers to spread your content across the social Web, and syndicate everywhere. Fire your old sales force and hire talented digital media sales people who know how to package and sell for this medium.
  2. Do more with less. The cost structure of traditional offline media is dramatically higher than the cost structure of online media. Sell off the old media assets that aren’t growing or where profits continue to erode, and take the best talent you have from those operations and put them into your online efforts. The cash in the bank from those asset sales can be put to use on new digital initiatives. You’ll have a better growth story and profit story, and more cash for smart acquisitions (per below).
  3. Embrace “dual-revenue streams.” This was all the buzz at the ‘D’ conference and I’m sure it was similar at Sun Valley. Nearly all successful national media products are supported by a dual-revenue stream of consumer payments and advertising. This is true across newspapers, magazines and television. The online industry, with Stewart Brand’s early manifesto of “information wants to be free”, has rejected premium / for-free in favor of advertising. That is going to end and for online media to be a successful medium it will need to find great ways for consumers to both pay for content and experience it with advertising. If the Internet can’t support that, it will fail as a medium for professional media. Or at least the volume and quality of professional media that it can support will shrink dramatically. TV Everywhere may be part of it, but more likely we should embrace a world of distributed, open identity and payment services that any website can tap into. The future of media payments will come from Facebook, Google and PayPal, not Comcast and DirecTV. Embrace it.
  4. Acquire new digital assets. There’s been lots of this over the past several years, but I continue to believe that major national media companies should continue to aggressively invest in and acquire great digital assets. But, don’t just focus on traditional content categories. Focus on assets where end-users are spending time in quality environments. Casual gaming, mobile applications, relevant vertical social media sites and communities, focused vertical content and ad networks, high-quality blogging outlets, new online media publishing and distribution platforms are all smart and relevant examples. There’s a ton of innovation happening. Wait and watch for the businesses that are relevant to your core (or not).

There will be winners and losers in the race to adapt. Winners will take advantage of the evolving terrain and harness the power of the open Internet. For others with their head in the sand, the future is less bright.

Allaire is chairman and CEO of Brightcove, a Cambridge, Mass.-based company whose online video platform is used by businesses to publish and distribute video on the Web.

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