Fernando Samaniego - International New Media Consulting

Studios and Cable Operators Launch Joint Project

 "The Video Store Just Moved In," according to an advertising campaign launched in March by some 15 media companies, including studios and cable operators who are putting $30 million on the table as initial marketing investment. This is one of those pieces of news one can easily downplay, but the fact is that it constitutes a reference for content industries in general. To get there, many players had to agree on many issues in order to offer consumers a simple aggregated offer to watch videos from the comfort of their own living rooms.   

For several years, studios had expanded video on demand (VOD) offerings without risking initiatives which could impact solid DVD retail partners like Best Buy and Wal-Mart, but the growth of VOD seemed unstoppable.  The studios have learned from the music industry: as if to reinforce the new project, the same week Blockbuster announced that a “fall into bankruptcy could be inevitable”. 

Learning from Music 

Studios seem to have noticed what has happened to the music industry, plagued by piracy and one in which digital companies are imposing the rules, perhaps due to the larger, and increasing, fragmentation on the part of the music right owners. 

Just as consumers of music display brand loyalty for their favorite artists, and not the music label, so it is for video: studios know that customers care about the films as opposed to the studios behind them.  Brand, in this case, has to do more with the movies than with studios, which has facilitated the integration of rival players in one project.  No less important, each movie is a differentiated entity, it’s unique, even if it’s a remake.  

Mutatus mutandis, the Movies On Demand project highlights the current situation of the music industry where hundreds of digital stores and hundreds of song owners have been unable to offer a simple, aggregated offer to their customers.  In this case it has been an outsider who has put all the pieces together and is now writing the rules: Apple through iTunes.

Lessons for Newspapers 

Movies and cable operators have joined ranks while music right owners still have a long way to go to offer a comprehensive platform to customers, (the exception being Sony and Universal partnering with YouTube in Vevo, a project which still needs to take off).  In the case of newspapers an aggregation a la Movies On Demand is unthinkable because of their territorial characteristics. Still, as almost any time something good happens in the content industries, some lessons can be learned.

News companies have to strive to create unique content, since it’s that uniqueness which best reinforces their differential market position. Agencies, press conferences, official communiqués add little or no value to the brand of a newspaper.  Illustrating, explaining, relating events and data, charting, digesting the flows of agency information…etc, do add value.  As JasonFried and David Heinemeier Hansson say in their book Rework, “decommoditize your product”.

Hiring good writers, planning the day and the week, filtering the flow of attention as expressed in social media, paying attention to technology but not getting distracted by it, focusing on the readers, excelling at using marketing tools to best reach audiences, deciding how to best express your community watchdog vocation, relating in your media to your audiences, keeping the whole operation fresh...is the only way to build a long lasting brand for the benefit of the audience, the shareholders, the workers and the advertisers.

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Newspapers and TVs Could Learn from the Music and Movie Industries (and Part 2)

On free content

 There is a similarity between the music industry and newspapers in regard to their content. Songs in their basic form are considered by many individuals as free merchandise, the purpose of which is to attract attention to the artist. This belief is reinforced by the artists themselves, by those who are generally less traditional and more innovative in their approach. Take Lil Wayne, ho received the Grammy’s Best Rap Album, for example.  He built his fan base by freely giving hours and hours of his music away.  The surprise is that, in spite of that, his ‘Tha Carter III’ album was the top-selling album of 2008.  In this case, giving away content and being the top seller were not alternative strategies.  I am sure his success will inspire others.

Similarly, I believe newspapers will have to attract their readers/users by giving away ‘good’ content while charging for other content that the audience perceives both costs the company and is useful for their lives or their small businesses.  Basic news (at least the commodity part of it) will remain free despite all the buzz, while special reports and differential content/services will follow a different track.  Fighting the perception of the users is always a risky mission.   After all, as Tony Wadsworth, former head of EMI for a decade, says ‘The development of technology has meant music” (you can substitute by ‘news’)  “is consumed in more places in more ways than ever before – that is a great thing...; the future business model of this industry might not be based on transactional music sales for much longer. In the space of a year, the proportion of income derived from other sources – live gigs, merchandising, advertising, digital licensing, broadcast – has grown from 11.4% of total revenues in 2007 to 18% in 2008”.  To continue with the parallelism, newspapers may have to obtain new sources of income by fulfilling new tasks in their communities.

Cherry Picking

Another similarity between music and news lies in the fact that in the past you had to purchase the whole product even if you just wanted a single song in the CD or just the classifieds section of the newspaper.  In the digital world you can choose to acquire a single song and not pay for the unsolicited merchandise.  One study says that iTunes-like platforms have cost the music industry more than piracy!  We may not like it, we can even say that the user is losing the opportunity to discover unexpected jewels in the package…but the fact is that unbundling is the increasingly preferred option and fighting it is useless.  As music is consumed digitally, mixed bundles may be losing their appeal.

Likewise, newspapers may end up charging for specific pieces of content when it’s clearly justified in the eyes of the user.  Deciding when to charge or not requires a lot of trial and error as well as sufficient internal expertise in analyzing that information.

“Publishers for the most part have already begun preparing as if this process [unbundling] is irreversible. They are implementing new ways to replace revenues that are lost when customers no longer buy the whole ‘package’. This new repackaging can take many forms. Subscriptions to popular online journals, such as the New England Journal of Medicine, increasingly offer unique features, including email alerts, user communities, access to unique data sets, and multimedia content designed to make the value proposition of buying the “whole package” greater than the sum of the parts.” Nothing to add.

Conclusion

The music industry has taken too long to learn new tricks and has lost big revenues in the process.  Newspapers can learn from the ability of the most adapted labels how to diversify revenues, to relate differently with their environment and how to reach audiences less with recorded content and more with live gigs. Faced with a transformation of this magnitude, change has to affect all and every single area of the company (yes, even accounting) and the profile of the professionals has to evolve.  Changes should not be done in one day, but on the other hand, wasting time with excuses is not an option.  As I said in a previous blog, save money in legacy activities and invest in exploring new avenues of income.

From the movie studios, newspapers and conventional TV channels should imitate their ability to move (relatively) fast while not discarding any possible way of reaching clients.  After all, all legacy content industries share the same basic challenges and the logic of any responses to them.  

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Newspapers and TVs Could Learn from the Music and Movie Industries (Part 1)

One decade at a time

One could argue that the perfect storm now affecting the Media and Entertainment industries started around 1982, when the first music CD was sold.  But it was in 1985 that CD began to gain popularity in the larger popular and rock music markets (Dire Straits’ album Brothers in Arms was the first one to sell a million copies).  At that moment, consumer content became digital. Later on, the compressing capabilities of MP3 and the extension of the internet greatly facilitated file sharing.  

As I wrote in a previous post, it was some 10 years later that another digital birth took place that would soon affect the placid businesses of established newspapers.  It was Craigslist and its ability to volatize classifieds’ revenue. Lastly, 10 years later, a pre Google YouTube was launched and the lives of incumbent TV channels first, and the film industry later, began simmering.  For the last 20-30 years, usually during the middle of each new decade, a new phenomenon has been born, destined to uproot the functioning of complete industries. As a matter of curiosity, does anybody have an idea of what 2015 may bring to us?

First the music industry, then newspapers and magazines, and then finally TVs and movies, they all are struggling to cope with the radical changes.  The slowest one to react was the music industry, perhaps because it was the first casualty (forgive me for using the incumbent’s terminology, not the customers’) and there were no examples of how deep, and redefining for the whole industry, the changes brought about by the new digital innovations would be.  That the music industry has lost a full decade is evident since its response to these digital challenges has coincided in time with the newspapers’.  TV and film industries, casualties of the third wave, may be reacting a little faster.

The Film Industry, the Last to Feel the Pinch

From observing the film industry, newspapers can learn the determination to reach audiences however the consumer wants it, in almost any possible format...  Even though things are just starting, we can legally get films online, - rented, purchased or free with advertising, - via multiple devices.  Hundreds of web sites offer movies (Netflix, iTunes, Hulu, Babelgum, Joost, The Auteurs…and long etc).  Other established players in the digital arena have also become digital retailers: Xbox Live and PlayStation Store, Amazon Video on Demand...etc.  You can even watch a movie on your smart phone.  Of course, you can still buy or rent DVDs and watch films thanks to the growing VOD offer of cable and digital platform operators.  Lastly, you can enjoy a film in the most traditional outlet of the business, movie theaters.   

Digital delivery has been growing SO FAST that film studios have identified 250 digital formats. Yes, two hundred and fifty! And now they are trying to reduce costs by agreeing on an interoperable digital master format (IMF) which will also help promote their digital business.  Are studios moving fast enough?  Perhaps the answer is no, but in any case they are moving faster than the music industry and newspapers did.  Now, in how many formats are papers reaching their readers and delivering their content?  Are they expanding their new media reach at a proper speed?  Whatever the answer, newsrooms have to develop their own open technical architecture and be ready to deliver in more vehicles (unfortunately, sales departments are frequently the laggards and end up delaying the whole experiment, but this is another topic).

Lessons from the music industry

On one hand, any internet novice can download songs and bypass the incumbents’ structure to collect royalties. To add insult to injury, the record industry has had to face the stampede of brand-name artists moving away from them (remember Madonna leaving the Warner for Live Nation, a live-events and concert promotion company?) Many others have followed.  In their quest for a proper set of business answers, labels are gathering experience with paid downloads, ad-supported streaming, subscription services, ad-supported and ad-integrated P2P download services…etc. But perhaps most relevant is the music industry’s fierce determination to redefine its role and its artists while at the same time creating links with audiences.

In the past, the record industry was strategically placed in between audiences and artists and supposedly had the talent and experience to decide in the name of the audience which songs/artists had the quality to be recorded.  That paradigm has changed.  Many artists are flying solo.  Instead of focusing on getting the attention of the labels’ execs in order to be chosen to record songs and sell CDs, artists are now getting more focused on getting the attention of their potential fans in order to be able to sell tickets to their shows, to license songs…etc.   Multiple companies and web sites have started to “provide online music business lessons, exclusive video interviews and advice, career and business planning tools and thousands of hand-picked resources designed to help you achieve success in the new music industry” (about us, Music Power Network).

Closer to the audience

The incumbents have understood that revenue from recorded music will continue decreasing and that their activity cannot be limited to seeking out the best singers and bands to sign. Instead, they have to learn new skills, such as mentoring artists to develop their performing style, and hone their public skills to better connect with their potential audiences.  They are becoming business advisors, career planners as well as permanent managers of organized tours and all kinds of live performances, which represent the fastest growing source of income in the industry.

The exhibitionist and theatrical Lady Gaga has learned to be closer to her fan base and be coherent in all her public appearances. Her dominance in the charts has proven her right.  When she received five Grammy Nominations she did not thank anyone other than her “Little Monsters”, aka her fan base. On the scenario, as in any digital format, she has established a solid link with her audience.  To them, she offered her own DNA (some follicles) in her GaGa Fame Monster Bundle, as well as a collectible puzzle, pullout posters, a paper doll collection and a personal note for USD115.

Other artists are finding their own unorthodox methods of reaching audiences’ attention and pockets.

Newspapers need to address new ways of getting to their audiences and interacting with them. From the early formula of posting a comment to a piece of news, to the way the most advanced players are trying to harness the traffic and commercial potential of local bloggers, there is an array of possibilities.

As I have written before, the main strategic areas in a newspaper or a TV are brand/image and content.  From each one of those two areas they have to persevere in reading the consumer’s interest.  The old journalism days of waiting for agencies’ content is (partially) over.  Now, the journalist’s network, his/her roots in the community and ability to scan what the community is interested in, are required skills to add value and differentiate the final product from other local players. Following readers’ interest, via marketing tools, as well as discovering what interests them via social web sites, is a new skill media companies have to turn into a habit.  (End of Part 1)

You are free to use this article in your publication as long as you credit the author Fernando Samaniego