The bundle is the problem

The bundle is the problemThis will be redundant for long-term readers here, but I’ve just read a James Rainey LATimes piece (his last regular column, BTW) about newspapers and tablets that cries out for a reality check, so I’m going to repeat a central theme of The Pomoblog:

The media industries will not find a solution to their problems — no matter how much we “digital first” — without accepting that our infrastructure is what’s being disrupted, not our content.

This concept doesn’t “sell a lot of tapes,” as we used to say in the church business, but it’s the truth, and it’s why I cringe whenever I read articles like Rainey’s. It’s about newspapers getting into the tablet business — as in selling their OWN tablet devices, preloaded with news applications — and especially the experiment in Philadelphia by the publisher of the Philadelphia Inquirer and Daily News. The tablet, the Arnova 10 G2 (huh?), runs for $285 for one year and $339 for two years. The price includes subscriptions to the two papers. Here’s a key paragraph:

The two digitized papers can be downloaded each morning in a couple of minutes via Wi-Fi. What the company calls the “digital” edition looks just like the newspaper, rendered in miniature on the Arnova’s 10-inch screen. Readers turn pages with a swipe of the finger. They open pictures and articles with a tap.

The downloads take time. Another version of The Inquirer ” looks more like a standard news website in compact form.” Access to “live” requires a click to Philly.com and a WiFi connection. Rainey also reports that the Chicago Tribune is about to launch its own tablet, too. Where will this end?

Honestly, folks, Hollywood writers (comic or tragedy) couldn’t create a strategy this off-the-wall. It is so far from reality that I’d really like some of what they must be smoking in Philadelphia.

You see, many if not most newspaper people think the disruption is all about distribution channels, that consumers want their newspaper in electronic form. There’s powerful motivation for believing that (can you say “millions?”), but that doesn’t make it true. What consumers really want is to escape the relentless bombardment of advertising that surrounds and interrupts the content for which they believe they are paying, and technology is enabling that. Time is the new currency, and people want à la carte choices. The bundle is history. Unbundled content is the thing. Unbundled content can be passed around to friends, and you can’t do that with a “digitized paper.” What you can do with it is convince (some) advertisers that their display ads are still being placed in front of large groups of eyeballs. The problem with the news industry isn’t that people have lost their interest in news content. Recent studies show it’s just the opposite. What they have lost interest in is the bundled infrastructure that robs them of choices and wastes their time.

And as I’ve said a million times, the biggest mistake with these kinds of strategies and tactics is that they divert energy and resources that could be better used fighting the real problem (playing offense) instead of protecting the status quo (playing defense).

The bundle is the problem. Fix the problem!

For more information, see these old essays from December of 2005:

The Remarkable Opportunities of Unbundled Media
The Economy of Unbundled Advertising
The Unbundled Newsroom

Dissing Harvey Levin (and entirely missing the point)

TMZ logoOccasionally, the comments posted in response to an online article are more revealing of media that anything in the story itself. Take the case of Paul Farhi’s Washington Post piece, TMZ founder Harvey Levin’s unsolicited advice to mainstream media: Adapt or die.

Mr. Levin addressed the National Press Club with a dire warning for the institution it represents:

Your business model is broken. Your future is in jeopardy. Adapt or die.

It is clinging to this broken business model that’s the problem, Levin said, because media is afraid to mess with it.

Newspapers and magazines should get out of the print business, he added, if they want to survive. And if the upheaval of the Internet over the past decade hasn’t been enough, just wait: The next five years will be even more tumultuous for the hidebound and hoary.

But rather than investigate what Mr. Levin told them, Farhi chose to insert the content of TMZ into his article, which was done with just a hint of snark. Calling him a “gossipmonger” and dismissing him according to his appearance (“pint-sized, tanned and California cool in a blazer, open-necked shirt, jeans and slip-on sneakers”), Farhi shifts the article from what Mr. Levin said to the content of his product, TMZ. The article questions tactics like paying for information and raises the matter that Levin’s TMZ has gotten some things wrong, all designed to invalidate anything offered in the way of advice. After all, cough-cough, we can’t trust, cough-cough, anybody who would do, cough-cough, something like THAT!

This opened the door for comments supportive of Farhi’s distaste. “God help us…sensationalist trype…appeal to the lowest common denominator…Internet version of yellow journalism…character assassination…his “newsroom” of stoner kids…new media for a dumb nation…TMZ is the real life idiocracy…tabloid pornography…you can’t take his news seriously,” and so forth. Some readers noted that the Post should be paying attention, but for the most part, everything that Levin brought in his message was overwhelmed by criticism of the content of his enterprise and how it’s presented. This is the big — and, frankly, pathetic — mistake that most journalists make in analyzing the success of TMZ. This is because, by training, tradition and instincts, journalists believe it is the news content or its subjective “quality” that matters, so the content is what gets the attention. TMZ, however, is so much more than content, and that’s what Levin was trying to say.

TMZ was created of, by and for the Web. It’s TV show grew out of that base and functions in a secondary role. The stories are presented in blog format, with the latest on top. It has never wavered from this, not for a moment. The stories are all unbundled and can be distributed elsewhere. The language is conversational and assumes a live audience. Its franchises and gimmickry all serve a content point (e.g. “What do they look like today?”); it isn’t there simply to be there or to justify hokey marketing. It lives within the continuous stream that is news in the 21st Century. It satisfies a niche that, like it or not, is important in people’s lives. You can’t join the watercooler discussion about the Jackson trial unless you know about it, and that discussion changes throughout the day. Just as ESPN dominates the world of sports (“If it happened today, you’ll see it on ESPN”), so TMZ dominates its niche in the entertaining world of make believe. We can all take a lesson from that.

Levin’s business model is still advertising, but he’s able to emphasize dayparts. He also delivers a very sellable audience for advertisers, while the Big-J types are content with the +55 crowd. What the journalists miss is that its not all about the content of TMZ.com; it’s at least as much about its definition of the story, how that’s presented and distributed, talking with people instead of at them, its ownership of a popular information niche, and the pure passion evident in everything the company does.

Harvey Levin does have an important message for media, and it isn’t simply “gossip sells.” We need to get off our high horses and listen.

 

The big, dumb audience

a fool's errandThe central tenet of mass marketing is that it “works” by dropping messages into large groups of people. Whether it’s the pulpit, the stage, the stadium or mass media, the best advertising can do is a one-to-many paradigm. It doesn’t matter who or what these groups are; what matters is the size of the gathering, because the more eyeballs, the greater the likelihood of “hitting the target.” It was the wonder of this that drove newspapers from their activist, partisan nests in the late 19th Century and birthed the absurd notion of “objectivity.” The crowd had to be large, diverse and passive, not small, strident and active.

Making money became the fundamental reason for media, and industrial age managers began to see their news customers as a mass instead of people. It is this idea that’s being turned on its head today. People can be smart. Masses, to be effective, are best considered dumb. Whether it’s the audience, the readers, the listeners, the viewers or whatever, what we see is a vast sea of faceless “consumers” held captive by the breathtaking marvel of our content and into which we can drop messages that they neither want nor need. And, of course, people will pay us to deliver those messages.

Along comes the Web and shatters that perfect money machine, because it’s not a one-to-many paradigm. The Web is a 3-way phenomenon — down, up and sideways — and it’s much more suited to direct and content marketing than mass marketing. This is causing a huge conflict for those whose money comes the old fashioned way.

For example, Shawn Riegsecker, the founder and president of big online ad network Centro, told eMarketer last week that “brands increasingly pushing to pinpoint their exact target audience” is a “fool’s errand.” The quote caught my attention, because Centro is THE giant in the non-targeting ad game — the old money machine — a pertinent fact that eMarketer left out of its interview (Wait a minute, Shawn. Isn’t your company the main benefactor of a purely reach-based ad model?). Centro commands big money from ad agencies and dictates which sites in the market get paid based on their reach and often old school, run-of-site CPMs. The company is at the very heart of the Madison Avenue illusion that the Web is just another playing field for mass marketing.

We’re driving ourselves insane by trying to get to the right audience when close enough is good enough.

Right. Riegsecker is to ad innovation what the New York Times is to new journalism. Everything’s fine. Now just shut up and send us your check.

For sure, Centro offers targeting, but its bread and butter is dumb masses. Notice also that he references sellers as “brands,” another moniker compliments of the mass marketing industry. It’s all about “brands” selling into big, dumb audiences, not products and services being sold to human beings. Ad networks and agencies are the middlemen of this sophisticated big money machine, and the Web finds all middlemen to be inefficient. This, too, is driving people nuts, especially those whose livelihoods depend on status quo maintenance.

He’s partially correct in that a lot of people are trying very hard to find the “perfect” target, but a lot of that is driven by businesses who view the Web more as a lead generator than a brand lift mechanism. There’s nothing wrong with that, but it doesn’t stop the ad industry from playing defense against the direct marketing magic of the Web’s data. There’s simply too much money at stake. As I’ve said here often, however, that money is living on borrowed time, because advertisers are themselves becoming their own forms of media companies, and nobody has any idea where it’s all going. Meanwhile, those with skin in the old game keep fighting to defend their model, and that’s a problem, because every day you play defense is another day you could be playing offense in this age of disruptive innovation.

Gordon Borrell, who studies these trends in online advertising, agrees that “advertisers need to stop fretting over the absolute perfect audience target or metric and get their message out to the best possible target.” He adds, however, that “getting as close to the audience ‘truth’ as possible is more or less a mandate with digital media, and I don’t want to see an end to that quest.”

Borrell noted that digital data is the real problem for traditional media.

We all know how traditional media believe that it’s all about size. They’ve railed against measurements that make them look puny while embracing other measurements that prove their dominance. With the Internet, I suppose it boils down to advertisers wanting to hit that exact target — which seems to be getting smaller and smaller — rather than buying mass. So therein rests the big conflict: a big dumb audience versus a small group of wallet-ready buyers.

So Riegsecker may be right from his perspective, but it’s exactly that perspective that’s being challenged by the data-centric Web. This is why those companies who’ve invested in data — the best examples being Google, Amazon and Facebook — have such a big future leg up on their old school competitors. As ad money continues to move to the Web, it’s going to want specificity, not just big, dumb audiences.

The real conundrum in all of this is that we’re in a slow transition period, so mass marketing is still extremely valuable. The smart companies who’ve long depended on dumb masses, however, are also getting their feet wet in the other, even though it feels uncomfortable and a lot like competing with ourselves. The stakes are simply too high not to diversify our business models, and the people formerly known as the audience are now in charge anyway.

The real fool’s errand, therefore, is acting as though it’s otherwise.

The Netflix blunder: engaging God with arrogance

Netflix logoThe dramatic implosion of new media TV darling Netflix will be a lesson in 21st Century business school courses. It’s an example, frankly, of applying old hierarchical business thinking to the age of the Great Horizontal, and every traditional media institution should be taking notes. If you want to know how to FAIL in the new world, take a look at what Netflix did almost overnight.

First, a 60% rate increase for its DVD division. Then renaming the division. The business school types all head-nodded, because the money is with streaming, and this is where Netflix wanted all its customers to go. I’m not sure if it was the cavalier attitude that accompanied the announcements or the sheer underestimation of its customers, but the whole thing has blown up in its corporate face.

This week, the company reported it had lost 800,000 subscribers, and in a letter to investors dated October 25th, the company said, “We greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser extent, with the proposed-and-now-cancelled rebranding of our DVD service. In doing so, we’ve hurt our hard-earned reputation, and stalled our domestic growth.” Netflix stock tumbled 35% today, continuing a slide of 104 days during which the company has lost $12 billion in market value, all over this strategic blunder. The stock is down 56% year-to-date.

The Netflix miscalculation is one that we’re going to see repeated over and over again, and that is that you can’t behave this way in a hyperconnected universe, because horizontal disapproval spreads instantaneously. It also opened the doors for rivals to come to the rescue, and this is a powerful and important lesson for anybody doing business in the 21st Century. Netflix was once a story of incredible success through serving the needs of customers efficiently and with class. It was a textbook disruptive innovation, but in its quest to be king of the mountain, it shot itself in the foot.

Netflix is still a major player in the world of film distribution, but it’s very doubtful it will ever get back that which it has lost. When Rishad Tobaccowala said in 2004 that we’d “entered an empowered era in which humans are God, because technology allows them to be godlike,” he followed it with a question: “How will you engage God?”

I suspect Netflix is taking that a little more seriously today.

Oh-oh! Press trust stays low.

The opening sentence in the press release from Gallup says it all:

The majority of Americans still do not have confidence in the mass media to report the news fully, accurately, and fairly. The 44% of Americans who have a great deal or fair amount of trust and the 55% who have little or no trust remain among the most negative views Gallup has measured.

Here is the new data from Gallup tacked on to old data from Gallup, so that you can get the big picture. This is in 3-year increments going back to 1973. I’ve been updating and showing this image for ten years, because it immediately ends arguments about the viability of continuing down the same, tired paths.

Gallup press trust, 1973-2011

This slide evidences the insurmountable problem for media companies today, because it slams the door on any attempts by the press to right the ship doing things the way we’ve always done them. It ain’t gonna work. Period.

The standard journalist response to the decline in ratings or circulation is that we’re not doing enough “hard” news, whatever that is. Or we’re not doing enough “investigative” news, whatever that is. Look at that graph. The nostalgia with which most journalists sincerely believe will fix what’s broken has to go back a very long way, for the decline in trust goes back 35 years. Thirty-five years! It’s broken, and we need to start over, not go back to the good old days when the people were spoon-fed by our “expertise.”

This is why contrary opinions, like the one expressed by AP’s David Bauder this week in New life in television’s evening news, are so disappointing. Bauder takes a look at some numbers and concludes that the network evening newscast is back.

…the networks have just completed a TV season where all three grew their audiences for the first time since 2001-02, when terrorists struck and the Afghanistan and Iraq wars began. The growth is continuing for the first few weeks of this season.

The reason he and his list of experts cite is concern about the economy and what he calls “the curating function of the evening news,” which is necessary because, you know, the audience is incapable of figuring out anything for themselves.

People follow news, “but they want someone they trust at the end of the day to explain it to them, to show what it means to them. Somebody credible,” said Michael Corn, executive producer of ABC’s “World News” with Sawyer.

Brand name journalists mean something when people can’t trust the accuracy of what they see online, said Dave Marash, a veteran journalist who worked at ABC News and Al-Jazeera English.

What Bauder and those like him fail to do is overlay the Gallup graph onto attempts to justify the hole in which we find ourselves. Michael Corn apparently believes that people “want someone they can trust at the end of the day to explain it to them.” Right. Now take a look at that graph and repeat that to me.

Folks, let’s be honest. The rise of new media is, in part, a direct response to the Gallup graph, and we make fools of ourselves every time we try to explain it otherwise. Before we say people trust us, we’d better be sure of the facts.

Broader-casting, what the…?

NAB logoWhen any industry is confronted with a disruptive innovation, its first response is denial in the form of a collective “so what?” The disruption counts on this, and when it advances to the point where it can no longer be ignored, the industry’s next response is an attempt to somehow assimilate the new concept into itself. Around here, we call that bolting the disruption onto the existing business model. What starts out as a logical Ries and Trout Marketing Warfaredefensive strategy turns into a disaster, because the disruptive innovation doesn’t need that which is being disrupted.

The local television industry is in an awful spot right now with so many things working against it that the future is really quite uncertain. The FCC wants its spectrum. The Internet wants its audience (and money). People want their content unbundled from the infrastructure that supports the industry. The economy sucks and seems to be getting suckier. Media companies are swimming in debt at a time when they can’t even afford the interest. Advertising is in a full blown revolution. The networks want more and more of the money earned from cable companies.

But perhaps the worst thing the industry has working against it is a trade association that seems bent on bolting new media onto the old. The National Association of Broadcasters (NAB) has trademarked the word broader-casting® and provided a definition that positions multiplatform distribution as the new thing. I suppose they’ll next change their name to the National Association of Broader-casters®.

Broadercasting definition
The NAB has so embraced the multiple screen concept that its 2012 show in Las Vegasis being built around what the organization believes is a shift from broadcasting to this “broader-casting” environment…

From expectations to players to technologies to strategies, there’s a great shift taking place in broader-casting® — with or without you. Driven by the demand for content anytime, anywhere, this evolution has set in motion a kaleidoscope of consumption options with infinite new profit centers. To capitalize on yours, use our Limited Time Offer and register today… For more than 85 years, the NAB Show continues to be the essential destination for broader-casting® professionals who share a passion for bringing content to life on any platform — even if they have to invent it. From creation to consumption, this is the place where possibilities become realities.

The NAB is also helping to fund the Syncbaktechnology, which allows local stations to live stream their broadcast signals online to only those who can “see” their over-the-air signals, thereby shifting the broadcast model to the Web. Is there any demand for this? Perhaps in certain situations such as breaking news, weather and sports, but people are already fleeing the “lean-back” prime time advertising flood (one hour out of three is dedicated to marketing), and the reasons for doing so are only exacerbated in the “lean-forward” environment of the Web.

Theme for NAB 2012

The NAB’s “Great Content Shift,” redefining digital media and entertainment.

The weakness of the broader-casting® strategy is that it’s a brand-extension effort built around the value proposition of advertising adjacent to scarce content. However, this is precisely what’s being disrupted, so any effort to sustain that — or spread it to multiple screens — is highly problematic and shifts attention away from different businesses and business models that could actually position local broadcasters for the future.

When the core competency is disrupted, we have no choice but to shift to edge competencies, and there’s plenty of money to be made within the disruption by engaging in our edges. When brand-extension is your only strategy, then your competition remains those within the same space. In any of these multi-platform distribution plays, therefore, a television station’s competition is the other television stations, and this completely misses the point of what’s taking place.

The Web isn’t hurting TV by taking away its viewers; it’s hurting TV by taking away its money.

Perhaps the biggest issue with “the shift” strategy is that it is defense at a time when we must be playing offense. It sounds like it “might” be offense, but anything that attempts to maintain the status quo or sustain the broadcast business model is actually a defensive strategy. You cannot play offense within the paradigm of “casting,” whether it’s broad or broader.

This is all personally very sad to me, for local broadcasting was much more than just a job for me for a very long time. I still have many friends in the industry, and they’re mostly terrified of tomorrow and desperate for opportunities outside broadcasting. At AR&D, we’re about to launch a major initiative that we hope will lead broadcasters down a different path, and I certainly hope they have “ears to hear.”