My heart was first broken in the 7th grade. Her name was Linda, and everything was going along fine until a boy named Steve moved into our neighborhood. He turned Linda's head, as it were, and the rest is history. His blonde hair disrupted my courting. I didn't know how to react. The more I tried to make him look bad in her eyes, the more wonderful he became. I lost, and not so much because he was the better guy. His entry into my space turned me into a defensive, conniving twerp. Ah, the stuff of youth.
In the business world, competition comes from many places, but the most deadly is called a "disruptive innovation" or "disruptive technology." Disruptive technology was first described in a 1997 business best-seller, Innovator's Dilemma, by Clayton Christensen. It's basically a treatise on how new technologies can disrupt core business, and makes the case that how companies deal with disruptive technology determines their survival or failure, whether they get the girl or not.
A good case in point today would be the photography industry. In a recent report, Peter Conti, Jr., a partner in the research firm, Borrell Associates, said of Kodak, "How did Kodak react to digital photography, and then when they did get involved? It was to support their core business, but they couldn't separate what was a new, fast-growing business from their core business. They spent a fortune trying to save their core business. Today, Kodak is not the largest seller of digital cameras, by a long shot. They weren't paying attention. They tried to put in digital developing kiosks, and you were supposed to go in with your digital disks and print out your own photos, but that was trying to prop up a dying business. It didn't allow Kodak to look ahead to new business."
And worse than Kodak is bankrupt Polaroid.
This is a critical lesson for broadcasters today, who find themselves caught in a similar vortex. Disruptive technologies abound in the media world, and broadcasters who cling to the belief that their age-old business models will carry them through the 21st century are the Polaroids of tomorrow. The refusal of some television executives to accept as inevitable the need to change is a slow form of suicide. The death threat is real and imminent.
Leonard Sweet, the cultural historian and Postmodernism guru, says, "The word is out: Reinvent yourself for the 21st century or die!" Kodak has made sweeping (and painful) changes through restructuring and reinventing its business model. They're counting on their brand to bring them back to market dominance, and one hopes they'll ultimately succeed.
And for broadcasters to succeed, I believe we need to reinvent ourselves as multimedia distribution and production companies. The creation and transmission of video, formerly the sole purview of TV, is now spread over a wide variety of technologies. (Even television production itself has changed - what used to require many people can now be done by one.) Video production houses have become multimedia production houses, yet broadcasters themselves cling to video production alone. How does a TV station's sales department sell online advertising when it has no mechanism with which to produce the online creative? The Internet is the best hope for TV stations, but most don't truly understand it and run from it as a result.
And the biggest online competition a TV station faces downstream is not the other guy across town with the antenna. It's the local newspaper. Incoming Associated Press chief, Tom Curley, says the A.P. will be working hard to turn newspapers into broadcasters by providing video for them to use online. "It's not my decision," Curley said. "It's a marketplace reality. I've heard from publishers of 30,000-circulation newspapers who believe they have to have video for their Websites. That's an indication of a profound change."
Video News On Demand (VNOD) will be the way people get their video news in a Postmodern world. The news wars of the 21st century will be online, and TV stations who're content to provide text-only news services to their constituencies are giving up ground to smart print counterparts, who're more experienced with the Web and see where it's really going.
Dirck Halstead's Platypus Movement is equipping newspaper reporters and photographers to create local video for their employers, as video journalism bridges the divide between TV and print. The consummate photojournalist, Halstead writes, "We are trying to look for a way to create leverage to make our storytelling appeal to an ever-changing marketplace. We are using some of these new tools and skills to give us a higher place to stand so that we can exert that leverage." He conducts popular workshops twice a year, and the work of his protégés is beginning to show up on newspaper sites throughout the country.
By denying the reality of the Internet, TV stations are abdicating their position as the purveyors of video news in the community. This is a death sentence for local television, because local news is the only video niche that cannot be filled from afar. And disruptive technologies may even change that! In some big markets, cable companies have had success doing local news, and I think the next player in this game will be satellite TV. The economics make sense, for video journalism is a lot less expensive to create these days than many think.
It's time for broadcasters to stage an all-out war against their newspaper counterparts. The theater of operations for this war is online. Like broadcasters, newspapers are caught in the disruptive technology of the Internet. Traditionally, 70% of newspaper revenue came from classified advertising, which is its New Media Achilles' heel. An October 2002 study by Borrell Associates reveals newspapers had lost a combined $5.4 billion in recruitment revenues in the previous 18 months. That's a 40% loss. Online job sites like Monster.com have transformed the recruitment services industry, and the best newspapers can do is include them on their Websites. "Classified Ventures" is a business formed in 1997 by an alliance of newspaper companies to create online classifieds, including Cars.com and Apartments.com. But all this has done is to shift what used to be a high-margin business to a low-margin business, and it's cutting into newspaper profits.
Broadcast Internet networks, such as IBS and Worldnow, have deals with some online classified providers like CareerBuilder.com, but these offerings are treated as tabs that get lost on a row of site links. I've yet to come across a television Website that uses the word "Classifieds." That makes no sense, because the online niche is there for the taking.
Auction sites, like eBay are the New Media form of buy-and-sell newspaper classifieds, but nobody is pursuing doing this at the local level. Using the technology of companies like ePier, it's easy to set up a completely hands-off form of classifieds online, then feed those sections to targeted advertisers with a variety of other technologies. Rather than charging people to post ads, stations could take a commission off of items sold, all without hands-on management.
Event auctions, where the Website auctions items provided by advertisers in trade for advertising, are being used successfully by newspapers and some radio stations to generate new ad revenue, introduce new advertisers, motivate staffs, increase walk-in traffic for sponsors, and, most importantly, take dollars from competitors. Television has yet to discover this method of revenue, because it doesn't fit into a reach/frequency, broadcasting mindset.
Broadcast owners who ascribe the loss of business over the past few years solely to the economy haven't fully accepted the reality of disruptive innovations. The Borrell newspaper study says disruption impacts established industries in three phases: "In the first phase, both the traditional business and the disruptive business grow without disturbing each other. The second phase is characterized by a slowdown of the traditional business, and the third sees the traditional business enter precipitous decline while the new, disruptive business begins to erode the traditional business' core customers." Disruptive technologies have impacted broadcasting companies at varying speeds, but those in or approaching Phase III are in serious trouble.
WB Network chairman and CEO Jamie Kellner said recently that technology was becoming the enemy of broadcasting in the same way the Internet has been an enemy to the recording industry. He's talking about the disruptive technology of Digital Video Recorders (DVRs), like TiVo, where users can and do skip commercials. Here is an executive who has chosen to fight the disruptive innovation instead of finding creative solutions to work with it. It's Phase I thinking. As such, he's risking his entire network, because DVR industry growth continues unabated.
The Postmodern World doesn't care about any of this, of course, for it's simply the next stage in the evolution of Western culture. But Pomos ARE the customers of tomorrow, and anybody wishing to do business in the new millennium needs to understand where they are and what they're all about. They want their Internet. They want their DVRs. They want and demand choice, not to sit back passively as television continues along the path of same-o, same-o.
Technology is NOT the enemy of broadcasting. It's the friend who will take us back to more favorable revenue positions, if we'll just pay attention to what it's saying. Who knows? Perhaps if I'd welcomed Steve to the neighborhood instead of trying to run him off, all three of us would've become friends, and Linda would still be together today.