In the world of business economics, few words frighten the market leader like "commoditization" or "commodification." In plain English, this means that the market for a unique, branded product that the leader produces is transformed into one that's based purely on price. It takes time, and competition is the cause, but over the lifetime of many products — especially those that cross the line from luxury to necessity — they become commoditized.
Consumers are usually the winners when products are commoditized, because the market produces lower prices. Recent examples would be generic pharmaceuticals and commodity silicon chips. Once you know that the active ingredient in Tylenol is acetaminophen, there's no need to pay more for the branded variety. When drug patents expire, the companies who held the patents usually alter them somewhat to produce, for example, a "timed-release" variation in an effort to maintain market share. This only works for so long.
In the silicon chip industry, there are specialized, highly-sophisticated chips, and there are chips that perform basic functions. The latter is a global market that is highly commoditized.
Sometimes, commoditized products become a part of other, bigger markets. For example, you don't see a lot of ads for gas stations anymore, because, well, gas is gas, or so it is with consumers. While not a true commodity (crude oil has avoided commoditization), things other than brand are at play in consumer decisions. Purists may argue, but this is a form of commodification.
In my younger days, the petroleum companies battled over the airwaves, trying to convince consumers that their gas was better, cleaner or somehow made your car run more efficiently than the station on the opposite corner. Does anybody else remember Pure's old "Be Sure with Pure" slogan?
Nowadays, people make decisions based on the price sign, which side of the street it's on, or what's inside the convenience store.
Qwik Trip makes a great iced coffee. Who cares about the gas? Gas is now a part of the convenience store industry.
To fight all this — to delay the inevitable — a whole manual of strategies and tactics exists, whereby the market leader attempts to crush competition and protect the company's investment. Branding is a big part of that, and so companies spend millions to convince the public that their brand of what's becoming commoditized is better than the other versions. Ultimately, though, the choice belongs to the consumer, and usually price becomes the paramount consideration.
In the world of media, products used to be divided into categories: newspapers, magazines, television, radio, etc, but the personal media revolution (a term coined by J.D. Lasica in his book Darknet, Hollywood's War Against The Digital Generation) is eliminating the infrastructure and distribution mechanisms that make each of these unique. Not only is the digital generation taking advantage of this to create their own media companies, but the incumbent companies are using technology to transform themselves as well.
The Washington Post's online division has not only been running videos for many years, but their video journalists have actually won National Press Photographers Association news video awards. The AP is now becoming more video-centric, spreading video news to newspapers through the country. Most major newspaper companies — seeing the handwriting on the wall — have adopted video strategies. Online ad revenue growth is predicted to come from video, so everybody's a TV station now.
Content management systems for television station websites were originally text-oriented, because that's what the early iterations of the web could handle. Spellcheck suddenly became an essential tool for TV newsrooms, as stations began to compete in the print world of newspapers.
Dan Mason, president of CBS radio division, told Jack Myers recently, "In the near future, every radio station will have the ability to become a TV station. We will see webcasts and webisodes. There's no reason we can't have our own webcast shows with talent (in the same way Imus was simulcast on MSNBC). Radios will soon be developed with TV screens. The terrestrial radio medium will evolve and occupy more share of the digital space."
In TNS Media Intelligence's "StrADegy: Advertising In The Digital Age" report, President-CEO Steven Fredericks argues that in the future, "Content is defined not by its old media name, but by its core property: text, video and audio. All content, clarified and freed, can be distributed via any converged technology."
The world of blogs, video blogs and other forms of citizens media is exploding, and media companies are frantically trying to get in on the action. Anybody can do video. Anybody can create text. Anybody can make audio. Media scarcity has been turned on its head. The only real scarcity that matters today is the attention of the people formerly known as the audience in the decaying mass marketing paradigm.
The point is that media itself is being commoditized and, along with it, the content it provides. This is a key fruit of the personal media revolution, and already the economics of media are shifting in response. No longer can news content alone carry the burden of supporting the specialized infrastructures and distribution models of media of the past. No longer is "news" sufficient to justify subscriber fees or high dollar ad models, because consumers are increasingly deciding that it's all the same.
The New York Times' decision to drop its Times Select subscription service is a direct response to the commoditization of news. It was a tactical error in the first place to create such a foolish venture — a quick revenue fix that cost them in the long run. We must never forget that revenue isn't about revenue with public companies; it's about revenue growth, and there was no way a subscription service was going to grow revenue in an era of commoditized news and information. Moreover, Times Select cost the paper dearly in its need to be a top-dog news authority, because its "voice" — its unique positions on issues — was kept behind a pay wall.
Last year, CNN dropped its pay-to-view service in favor of an ad-supported model, because it wasn't producing the kind of revenue growth they had hoped it would produce.
But both of these organizations — and every company in the professional news business — are fighting commoditization, because the whole world of media is morphing into one, giant glob of sameness, and it's hard to convince people you're special when they think everybody's the same. This is the breakdown of Media 1.0. This is what's destroying the foundation upon which our businesses have been built.
The idea that "the people" are in charge is the most difficult bridge to cross for media people who are used to having it their way. It is at the core of Media 2.0, and it needs to impact everything we do from here on out. Aggregation and context are king now, because that glob of sameness is a puzzle to many consumers. Information has always been like that, but the tools for filtering it are now in the hands of the people.
Brand matters, and it matters more than ever, but what does that brand stand for? If it's "we're special" or "we're unique," it's not going to work. The audience is in charge and they will determine your brand based on performance, not promotion. Promotion is a Media 1.0 concept; the Law of Attraction is what works in today's marketplace. Attraction is the defining dynamic of influence in our increasingly postmodern culture, and it is 180 degrees from what mainstream media companies currently practice.
Here's part of my essay, The Power of Attraction, that was published three years ago:
In life, there is intended influence and unintended influence. The former is the work of, among others, journalists, entertainers, PR flacks, advertisers, politicians and all sorts of bullies. The latter is that which resonates within, a picture that inspires, the voice of a friend, human touch, a laugh, a right word spoken in time of need. The line between them cannot be deliberately bridged, for the right to be unintentionally influenced belongs to the individual, and that is powerfully enabled by the internet.
The net allows people to determine nearly every influence in their lives, although most people don't yet use it that way. It's just a matter of time, however, because the technology to do so is advancing in both sophistication and ease of use.
This is extremely important for people in the media business to understand, because news in a postmodern world isn't a product and, therefore, not a commodity. It's a conversation.
Doc Searls, one of the authors of The Cluetrain Manifesto and the creator of the phrase "markets are conversations" has this to say about the concept of news as a commodity:
The Net revolution has always been about radically improving the connections between demand and supply, and about equipping profusions on both sides of the relationship — while reducing intermediary costs and frictions in the direction of zero.
As a term for describing this development, "commoditization" is a misleading failure. Roles are changing far more than "content" — a term which itself misleads by reducing the informing of people to deliverable commodities. People still need to inform other people. More ways to do that will emerge. There will be business models there. Supply and demand will find each other. We need to figure out how to make new and better money with new and better roles. Advertising will still be part of that picture, but it won't fund the whole thing.
I certainly don't disagree with Doc, but there's an important distinction between what he's saying and the theme expressed here. News as a product is very much a part of the Media 1.0 world and the economics thereof, and I don't believe that mass media and mass marketing will ever completely go away. It's a part of human nature to use a crowd to draw attention to oneself.
It's actually likely that new masses will be created through the tribal aspects of postmodernism (note Jeff Jarvis's excellent analysis of new Pew research "the emergence of media tribes") and that those will be advertiser-supported. However, the growing of revenue through the scarcity of content in a mass marketing, one-to-many paradigm is surely bound for extinction. In many ways, it's already vanished, replaced by a nostalgic illusion. Media companies, therefore, who are able to successfully detach themselves from this illusion will survive and thrive in the new world, but those who can't will become mere shadows of their former selves.
When confronted with this, many ask who will function as the fourth estate when this happens? The people will, because the fourth estate is more than the institutional press.
First Amendment press freedoms apply to everybody, and we cannot, as a culture, allow this to be redefined by changing the meaning of its words. The earliest dictionary that can be applied to early American documents is Webster's 1828 classic. Note carefully, the appropriate definition of the word "press" as used in the First Amendment:
The art or business of printing and publishing. A free press is a great blessing to a free people; a licentious press is a curse to society.
So "the press" is a business or an art, which opens the door to include anybody. This doesn't sit well with the status quo, but it does paint a picture appropriate to today.
The role of professional news and information in a Media 2.0 context is just beginning to be defined and articulated, and it will certainly have to play by the rules of engagement, beginning with Dan Gillmor's discovery that "the readers (audience) know more than I do." This moves it to conversation status, and the web's ability to facilitate that. We already know, for example, that the professional press is often the conversation starter, and that ought to be deemed worthwhile in Doc's supply-and-demand chain.
This is all very unsettling for people who are trying to figure out the new while managing the old. We must fix the car while driving it at the same time.
Like changes in culture, changes in media aren't all or nothing, and we can't let ourselves lose sight of that. If it were so, video really would have killed the radio star. Postmodernism doesn't "negate" modernism anymore than news as a conversation completely obliterates news as a product. The business problem, therefore, is one of evolving to amphibian status — the ability to live and breathe both under the water and above it.
We can do this, but it begins with the courage and the willingness to try.