Wednesday, November 19, 2008

IN THIS ISSUE:

NEW IBM STUDY REVEALS CHANGES IN MEDIA HABITS
DESPITE DOWNTURN, THE INVESTMENTS KEEP COMING
SLEEPING WITH THE ENEMY? BLENDING RESOURCES TO COVER NEWS
ALL TOGETHER NOW: WE LOVE ADS, WE HATE NOISE
MEDIA 2.0 101: SIMULPATH™ EXPLAINED

NEW IBM STUDY REVEALS CHANGES IN MEDIA HABITS (Terry)
IBM released its second global online survey of 2,800 people this week, and like the study last year, it’s chock full of interesting information. The headline is the growing acceptance of television shows on computers and mobile devices, while traditional TV use is declining.

The Hollywood Reporter:

“It’s really now having an effect,” said William Serrao, an executive with IBM Global Business Services.

Serrao said that IBM’s study, which will be published at some point under the working title “Beyond Advertising: Fact or Fiction,” surveyed two distinct groups: Media consumers between 13 and 35 and those over 35. PC and mobile viewing has grown substantially within the past year. For the 76% of those surveyed who said that they’re watching video online, more than 50% said it’s reduced their TV viewing.

Todd Watson of IBM’s On Demand Business Website provides an outline at Internet Evolution:

Last year, the study clearly showed the decline of TV as the primary media device even though it still dominated as a device. Flash forward a year, and we’re now knee deep in the digital media, with large-scale adoption and usage of digital content services accessed by PCs and mobile phones.

This year’s study suggests that adoption for most categories of digital content services doubled from last year, with services like social networking now at 60 percent penetration and Internet data plans for mobile devices at over 40 percent for respondents globally. Consumers both desire, and are comfortable with, wired and wireless content.

This year, 76 percent indicated they had already watched video on their PCs (up 27 percent). Thirty-two percent indicated they had viewed video on a portable device or mobile phone (up 45 percent). And interest in mobile video content has more than doubled in a year, to 55 percent.

A significant finding for traditional media deals with digital advertising and a willingness on the part of consumers to receive advertising. By a three to one margin, people prefer ad-supported content models to those that require them to pay.

But whatever else you do, don’t get too much in the way of their content. When asked how they prefer to view advertising associated with online videos, a majority of respondents said they prefer to see it before or after a video. And respondents from all six countries polled protested traditional television models such as interruption advertisements during the video or the use of product placements within programs.

Watson wrote of his surprise at the degree to which people in the study were willing to share personal data online. 60% of the total survey said they would willingly provide information such as age, gender, lifestyle, or communications preferences in return for something of value. The numbers are higher in Japan and India than they are in the U.S., but it’s still significant. This is a key understanding about the online world, and one in which media companies must be willing to participate, because that attitude is even stronger among younger people in the study.

Studies like these are important, because they document the course in a stormy sea. The trendlines here are pretty obvious and not unexpected. TV online or on a mobile device isn’t TV in the traditional sense, and must be handled differently, especially in terms of advertising. For local broadcasters, PC and mobile viewing are growth areas that we must be pursuing, and the adoption rates revealed in the IBM report are another reason why Steve and I are bullish on mobile digital video for local broadcasters.   <Link>

<<< >>>

DESPITE DOWNTURN, THE INVESTMENTS KEEP COMING (Steve)
even in down times, VCs investBecause of the utter panic in the markets, everyone has frozen their money and has stopped investing in media, right? Wrong. The venture capital money is still there, and the VCs are still churning out business plans. Are they just throwing money out the window? Or are they following that time honored maxim: “Buy low, sell high.”

A quick perusal of the excellent website paidContent.org shows us some of the recent investments:

– Digital media browser Boxee gets $4 million in first round of funding

– Social network multiply.com gets $5 million, with option for $4 million more

– Online ad production company DigitalArbor raises $5 million in first round funding

– Discovery to invest $100 million in Oprah network

– Video indexing firm Digitalsmiths gets $12 million in second round

– $2 million goes to fora.tv (which paidContent calls “the C-SPAN of the web”) which has already raised $6 million.

– P2P firm PeerApp brings total amount raised in two rounds to $11 million.

All of these have happened in the past week..

So far this year, only six VC-backed companies have gone public. Compare that to 2007, when 86 did so, and 2000 when 265 went public at the height of the first bubble, writes Michael Malone at ABCNews.com.

For starters, look at what all these companies have in common. They’re video and they’re social. The Web is not dying. It is seeing an end to another bubble. But we’ll live through it. And those who come up with the models that work will do quite well. There’s no reason to stop innovating.

Writes Diane Mermigas at MediaPost:

“At a time when as many as 80% of startups could fail, investing in startups that naturally align with media’s evolving interactive future is imperative. For instance, most of Velocity (Interactive Group)’s 10 investments this year (much of the funding for which comes from large media players) are related to and help advance the state of Web video and advertising over a five-year time frame. The danger for the industry over the next year is that as capital slows, so will innovation.”

Investing and innovating doesn’t stop as the economy slows. Even the VCs who are getting hit right now recognize this. The change in our economy isn’t something you can wait out. It’s something you have to innovate through.   <Link>

<<< >>>

SLEEPING WITH THE ENEMY? BLENDING RESOURCES TO COVER NEWS (Terry)
WCAU-TV logoThat it hasn’t happened sooner is the only thing surprising about the news this week that NBC and Fox are entering into a joint operation to cover certain types of news in Philadelphia. The plan, according to Broadcasting & Cable, is to roll it out in Philly in January and later spread it to other big markets where the two groups each have stations. B&C called the move a “blockbuster local news partnership,” and it certainly should make people sit up and take notice.

WTFX-TV logoTentatively called “Local News Service, or LNS,” the idea is to create a separate newsgathering entity that serves both stations.

The Philadelphia venture will be comprised of 20-25 staffers culled from WCAU and WTXF. An LNS crew would be dispatched to the scene of breaking news. Both stations would receive content from LNS, would edit and package the material in the manner they see fit, and have the option of sending additional resources. LNS will also make the content available to other local media outlets, be it print, radio, websites or even rival stations, for a fee.

B&C calls the idea “similar to the role that the AP plays for newspapers. The leaders of both NBC and Fox local stations acknowledge the uniqueness of the concept, but are quick to point out that there are no real hurdles to making it happen. For the affiliates, however, it might be a bit more problematic.

Affiliates appeared curious to hear more about the project. “We’re in an era where any idea that helps us be more efficient in our newsgathering is worth considering,” says KING/KONG Seattle President/General Manager Ray Heacox (KING is a Belo-owned NBC affiliate), who pointed out that he wasn’t entirely familiar with the project. “But I would have lots of questions about how it balances the competitive needs in local markets.”

This kind of joint operating agreement was inevitable given the advance of technology and the current economic crisis for local media. The way this thing is being set up, it could easily evolve to its own separate business entity and function to serve the basic news needs of multiple media outlets in the market, including the newspaper(s). I made such a prediction five years ago, and I still believe it makes smart business sense. I think we’ll also see a rise of independent video journalists who will work as independent contractors, and many of them won’t have come through the local news farm system. It’s an obvious fruit of the personal media revolution.

For sure, a separate entity covering the nuts and bolts of local news for all media companies will mean a significant cost saving, and it ought to concern newsroom employees everywhere. “Efficiency,” after all, often means the loss of jobs. But I believe that people employed at the street level by television stations should examine this for its potential upside on their futures. If you want to stay in the community where you currently live, for example, a separate newsgathering entity offers a pretty secure cocoon in these troubled times.

One of the big raps against local TV news has always been the revolving door brought about by people jumping markets to get ahead, and these kinds of separate business entities will put a dent in that. After all, for a “Local News Service” to be successful, it’ll be all about the coverage, not the personalities delivering it.

Of course, the next logical step is a joint presentation arrangement between all parties online, a single portal where members of the community can access everybody’s content. That will take a level of cooperation, however, far beyond this deal between NBC and Fox, but we must always have in the backs of our minds the fact that our competition online isn’t necessarily our competition off-line.

While we duke it out in the open air, the pureplay companies are having their way with the local online ad market. In the end, they are a much bigger enemy than traditional media competitors.   <Link>

<<< >>>

ALL TOGETHER NOW: WE LOVE ADS, WE HATE NOISE (Steve)
Noise is killing advertisingYou hear it all the time – and you probably say it all the time: “People hate ads.” And I always have the same response: “We don’t hate ads. We love ads. We hate noise.” We hate advertising that is irrelevant to us. But when an ad comes on for a brand that interests us, suddenly it isn’t “advertising,” it’s information. It can even be news, as in “that Mac I’ve been waiting on forever is finally out!”

In fact, we’re probably at the most brand-conscious time in our history. Walk down the mall and you’ll see what I mean. People wear ads. People discuss brands. People go online and chat about brands. You aren’t what you wear – you are who you wear.

Global marketer Synovate, along with Microsoft (which is clearly seeking out where its brand stands in the marketplace) conducted a global study that shows just how “branded” the 18-24s are:

“When asked about their online brand engagement in the last month, almost a third (28%) had talked about a brand on a discussion forum; almost a quarter (23%) had added brand-related content to their instant messenger service; and almost one in five (19%) had added branded content to their homepage or social networking site.”

And here’s a stunner: almost 25% of 18-24 year olds have actively uploaded advertising or marketing video clips to social networking or video sites in the last month.

Write off this audience at your own danger. 80% are getting news and current affairs online. 34% are using the Mobile Web.

This is why Terry and I feel so strongly that local news needs to build sites that go beyond traditional, staid brands. Young adults aren’t talking about call letters. But they are interested in news and information. They are interested in sharing clips. They want to be part of the “conversation of news.”

Every market is different and you can’t “force cool” onto a younger market. You need to hire people who understand the audience and you need to empower the audience to work with you. That’s when you’ll have a brand worth sharing.   <Link>

<<< >>>

MEDIA 2.0 101: SIMULPATH™ EXPLAINED (Terry)
A true dual path strategyIn our work with clients, we’ve taken the thoughts and teachings of people like disruptive innovation expert Clayton Christensen to heart. Reinvention isn’t a static process, nor is it a blow-the-whole-thing-up-and-start-over idea. Local media companies need to “drive the car and fix it at the same time,” and Simulpath™ — our strategic approach — provides an executable model for doing just that. Everybody knows that a dual path model is what’s needed, but there’s not agreement on the tactics that are necessary for the execution of a true dual path strategy.

If you’re interested in this for your company, please drop us a line, because Simulpath™ is all-encompassing and vastly more complex than I could or would reveal in this newsletter. I want to give you a brief summary today, however, because the economy is forcing decisions I’ve been reading about that could make it more difficult to implement it downstream. Companies forced to downsize need to keep this in mind, because there are certain areas that not only should be untouched but even expanded.

A lot of people look at the idea of “dual path” and assume that one path is the company’s traditional output, while the second path is new media. There are lots of problems with this, but the biggest one is the assumption that the business of media is only ad-supported content. We argue that traditional local media products are really fruits of a much bigger business mission — the enabling of commerce in the community. As such, advertising is our business, not merely the creation of scarce content that can be used to “carry” advertising. The earliest forms of local media were subscription-based, but those evolved to the advertiser-supported model, because it worked so well at enabling commerce in the community.

So the two paths necessary for downstream success aren’t different versions of the same thing; they’re based on different ways of enabling commerce in the community through advertising. This is the dividing line — the one that separates the two paths — that makes the most sense for local media, because ad-supported content — that which governs path one of Simulpath™ — is diminishing in its viability in a networked world. To be sure, there’s still a lot of money to be made in this arena, but that revenue stream will never return to its former glory. Its value proposition has always been based on delivering scarce eyeballs to ad messages, and people are increasingly able to tune them out. As Doc Searls says, “There is no market for unwanted messages.”

Looking at the dual paths as separate business channels, therefore, is what separates our thinking from that of most conventional media types. Mass marketing, ad-supported content — in whatever form and however delivered — is the business model of path one. Direct marketing is the ad model of path two. So while most companies are working to blend their staffs to successfully execute both their legacy content and that which is on the Web, our position is that this is really all just path one. Path two is entirely different, and it is what will provide sustenance of the work of path one in the future.

The most important governing principle to understand with Simulpath™ is that it’s not an all-or-nothing thing, and this is where most problems exist in dual-path execution. Christensen, for example, writes that a separate business unit with authority to “kill the mother” is what’s necessary to overcome true disruptions. We think that means a separate entity for the Web. But information isn’t a product, and neither is a delivery system. Did radio “kill” newspapers? Did television “kill” radio? Will the Web “kill” everything that came before it? Moreover, it takes precious resources to enable a separate content business unit for the Web.

Path One resembles a double-helixIn our view, everything that relates to the creation of content all belongs in path one. It involves the company’s brand and the use of technology to extend that brand. Since your brand is associated with your traditional media output, efforts to extend your brand largely involve the products and services you normally create. If your product is a newscast, for example, then this path would include efforts to extend that product into all things new media. This includes multi-platform distribution of ad-supported content. Even the Continuous News model that we promote is a brand-extension play. Multi-purposing content to create niche verticals is also path one, because the business model is aggregated mass and ad supported content.

So path one, therefore, consists of many tactics, which, when assembled together, resembles the double-helix of DNA. Each “tube” may be separate, but they are interconnected and held together by the staff and resources assigned to create and support ad-supported content.

Path two, though, is an entirely separate path, driven by the laws of direct marketing. To play in this space locally, one needs only the ability to serve ads and build a database of web users in the market. This is the future cash cow of local media, and it operates under different rules than that of ad-supported content.

  • Its infrastructure is the Local Web, not any individual property therein.
  • It seeks out individual members of the community, so it doesn’t require any form of mass.
  • It is action-friendly, which advertisers love. Brand-friendly, not so much.
  • It’s cost effective and highly profitable.

Online advertising is evolving at a frenetic pace and at such a level of sophistication that local advertisers can “target” whomever they wish, based on behavior and known interests, and they increasingly don’t need media to make their online reach/frequency goals. This is what we hear directly from the horse’s mouth.

And it’s why we so strongly endorse Gordon Borrell’s admonition for a separate sales unit dedicated to the Web. A separate sales staff can handle both forms of online advertising and deal with both dual path business models. That’s why any path two application should flow from the revenue-generating unit, not the content unit. We need to train and free our sales people to become effective agents in the enabling of commerce in our communities via the Web. That is our new mission.

I’ve written previously that the most valuable current asset of any local media company is its sales department, and I hope this has given you a little clarity about why I feel that way. A highly skilled sales force with the right technology will make the difference between those who survive and those who do not in the years to come.

Business development is all about path two right now, folks, because this is where we’re getting killed by outside pureplay companies. We need to stop them, because our future depends on it.   <Link>

<<< >>>

QUOTE(S) OF THE WEEK
“We are moving from news papers to news brands. The form of delivery may change, but the potential audience for our content will multiply many times over. I like the look and feel of newsprint as much as anyone. But our real business isn’t printing on dead trees. It’s giving our readers great journalism and great judgement.” Rupert Murdoch, in a speech aired by the Australian Broadcasting Company.