The big picture

We’re in the middle of a flood. The ongoing media transformation has brought a growing deluge of new books, blogs, videos, and everything else. Each new medium sparks a new conversation, making the flood a self-reinforcing phenomenon.  More and more people are both media consumers and producers.

In the decade I was born, about 28% of the world’s people were still illiterate.  Now it’s down to about 12%. The various forces spreading literacy across the world are bringing the first step of participation in the media conversation—reading and writing—to the last few dark spots on the globe.

It’s amazing to think how far the world has come.  Poverty and illiteracy used to be the norm.  For example:

(7:25) [In England] when people died inventories of their goods were drawn up and from them we can learn every single possession that they had, and it’s striking how sparse domestic interiors were in this period. To give you one example, a craftsman from Lincolnshire… who died in 1540: his inventory survives and he possessed only twenty-two items in all, twenty-two items, and they were items connected with the three basics of household life: places to sleep, places to sit, and things to eat with, horn spoons, wooden bowls; twenty-two items in all, not untypical.

The BBC has a great demonstration of the statistics describing the changes in global development: 200 years, 200 countries, 4 minutes.

It’s exciting and optimism-inspiring. Education and development are sweeping the world.

What this means for business is something that should be obvious: There’s a lot of room for development in the developing world.  As was discussed in our last two Media Transformation classes, the developed world is approaching “saturation” in terms of social media and mobile telecommunications penetration.  Most growth over the next century will come in the developing world.

The middle picture: Modern trends in the U.S.

After a market reaches development and approaches saturation, as in the U.S., come changes of a different character like those described by Alan Wolk (for television) and Ben Sisario (for music).

Television has already reached every part of the potential US market, so changes here come in the form of “disruptions” of the existing market rather than pioneering whole new markets as in the developing world. Wolk identifies 7 key players in the television industry and points out their conflicts and potential for disruption:

  • “The most powerful force in the industry” is the networks like CBS, ABC, etc. who produce content and use their control over content and ownership of multiple channels to influence the other players.
  • The “multichannel video program distributors” (MVPDs) are distributors like Cox Cable, Comcast and DirecTV selling pay TV packages, broadband, and landline services.  They’re threatened by streaming services like Netflix and Amazon Prime, which distribute over the Internet and bypass the traditional distributors. Our previous guest, CJ Letts, built much of his business success on a similar idea—“disintermediation.”  Cut out the middle-man.  The MVPD called Dish Network is responding to that threat with the SlingHopper, which allows owners to view content from their set-top box anywhere they can access the Internet.
  • Premium networks like HBO and Showtime make their living selling subscriptions to their premium content through the MVPDs.  HBO has developed its own version of “TV anywhere” called HBO Go and has threatened to use it to bypass the MVPDs, though it would be difficult for HBO to handle the challenges of running its own massive collections system.
  • The streaming or “over the top” services like Netflix and Hulu are easy and cheap, but have relatively limited selection.  They come in either subscriptions like Hulu or sales & rentals like Vudu.  Wolk says that “Industry expectation is that the various OTT services will all cut deals with the MVPDs, where they’ll either be just another premium channel (Netflix) or a Pay Per View option”.  I’m not so sure about that.
  • “Smart TVs” that can connect to the Internet are relatively difficult to set up and haven’t really caught on yet.  But they probably will.
  • Third-party Over The Top devices like Roku and Boxee make money through direct sales of devices and content to consumers.  They’re getting smaller and cheaper to make, so they may just wind up being incorporated into the televisions themselves.  They hope to help the developing world to bypass the cable-to-the-house phase of TV.
  • Social TV is the intersection of social media like Facebook and Twitter with TV.  People in the TV industry hope to capitalize on the way social media can help generate “buzz” for a program or event, and also hope to use the data-mining potential of social media to better track viewership.

Ben Sisario of the New York Times says that “as music streaming grows, royalties slow to a trickle.”  As with television, the Internet offers a cheaper and often more convenient alternative distribution model for music.  Because it’s cheaper, there’s less money to go around for those producing the content and those distributing it.  People in the industry hope that as streaming subscription services like Spotify grow, economies of scale will allow more room for profit:

Artists didn’t make big money from CDs when they were introduced, either,” Mr. Passman said. “They were a specialty thing, and had a lower royalty rate. Then, as it became mainstream, the royalties went up. And that’s what will happen here.”

The little picture

So what does all this stuff mean for a guy like me, who hopes to ride these waves?  I’m not such a big player just yet.  The trends and obstacles that are relevant to me exist on a smaller scale.  That’s what our guest Jill Miller discussed and that’s what I’ll talk about in my next blog post.  Where will my quest take me?