Wednesday, February 3, 2010
The Convoluted Media Ecosystem
I have been thinking about this for quite a long time. My view point comes from several places. First is my Finance Degree and CFO view. Second is my many years in Sales/Business Development. Third is my new Advertising Career. Fourth is my view as a consumer. When it comes to Business Models Media is the hardest to be successful in because of all the competing special interests. It is almost like Politics. People love entertainment. They spend a lot of money on entertainment. And without the content the rest of the ecosystem is dead. We all love great content.
But to create great content and be profitable you need your revenues to exceed your costs. And the middlemen inflate the costs and your end user views of your content's value after all the middlemen add their take onto it. And there are parasites like Journalists and Media that use the content for monetary gain without being forced to Ad Value. But the parasites can often Ad more value to the content creator than the middlemen. And everyone wants to defend their business/revenues even if you don't have an inalienable right to exist. See I told you Convoluted.
One great example is the music industry as it was vs. how it is now. The old industry is crying because revenues are down. But consumers and the content creators are consuming and selling more than ever, just cutting out the old industry middlemen. Who is being cut out? Record Labels. Packaging Companies. Radio. Media like the Grammy's. Do we need them? Not really. When CD's cost $14 each the artist only got $1. $4.50 was for packaging. And a band with 4 members plus management if they sell 1 million units making them platinum only made $1 million to split between them all. A nice bit of change but won't make you rich.
But now I can create music. Promote it free online. Sell it myself. And tour and make as much money or more than when I had all the bloat.
What about TV-Cable? Similar situation. They create something but added onto the cost is the technology to send it (cable, internet), the technology to view/consume it (TV's, Sound Systems, Computers). The media that is used to promote it all.
And while Ads can help reduce the costs for the entities that make money off the Ads, the rest of the entities really don't care. TiVo and DVR OEM's do not care about Cable Channels needing Ad revenue, or Cable companies needing subscription revenue. Apple doesn't care that I-Tunes destroyed the CD packaging industry. Or the internet/social media destroying the Record Companies/Radio niche of promoting music. But the fact remains if the people who make the content can not make a profit, the whole ecosystem collapses.
So what really happens is the creators cut costs. That is why TV is filled with cheap reality shows vs stellar content. If we are only willing to pay enough to support crap we get crap. See You Tube! And sadly as sheep most people watch the crap, because they refuse to either not watch and find something else to do, or they have decided they will watch anything. But this does a big disservice to the content creators and artists who are forced to dumb down what they do just because we are all lazy and cheap.