<videovortex> Bambi Francesco: How consumers hijacked the media model

[Geert Lovink]

http://alwayson.goingon.com/permalink/post/12073

Bambi Francesco: How consumers hijacked the media model
   
It is no secret that the traditional media are under assault from 
audiences.

Not only are some consumers not paying for content, some are displacing 
those heretofore assigned to create it and others are affecting the 
economics by their online-sharing behavior.

That additional power given to the audience is evident in the financial 
results of many companies.

In the magazine industry, advertising pages at Time Warner Inc.'s (TWX) 
Time magazine were down 23.8% in 2006 from 2000, according to 
Publishers Information Bureau. Newsweek's ad pages fell about 17.6% in 
the same period.

In the newspaper industry, the New York Times (NYT) stock has been 
halved since trading above $50 in 2002.

In the music industry, sales of CDs have been declining in the last 
seven years and fell 20% in the first quarter of this year. And a 
significant distribution channel of music in the last two decades -- 
retail outlets -- saw 800 music stores shut down in 2006.

So how are media companies responding? In more ways than I can 
enumerate in this column. Each week, there is no shortage of a new 
response to the Internet-era's audience participation phenomenon.

On Thursday, News Corp. (NWS) and NBC Universal joined forces to create 
a joint site that will host both their popular shows. Additionally, the 
two entertainment giants inked deals with the Web's leading portals -- 
Yahoo Inc. (YHOO), AOL and Microsoft Corp.'s (MSFT) MSN -- to 
distribute their shows and movies. The new site, which will accept 
user-generated content, is being created to serve the new TV audience, 
which to date has preferred YouTube-styled showcasing. See related 
story.

The audience also will determine which shows or movies, News Corp.'s or 
NBC Universal's, will get top billing on the joint site, according to 
News Corp. Chief Operating Officer Peter Chernin and NBC Universal 
Chief Executive Jeff Zucker. Again, the ability for the audience to 
vote or rate the content they wish to see is changing the way media 
companies are operating. See blog post.

Moreover, this week Time remade its magazine cover with skyboxes 
plugging other stories that highlight brand-name voices. In my opinion, 
what the magazine is doing is countering the easy information that's 
accessible all over the Web, thanks to the audience now contributing to 
the news- and information-gathering process. The breaking news bubbling 
up from the crowds is found everywhere on blogs as well as on new 
sites, such as NowPublic, which collects stories or eyewitness accounts 
from anyone willing to share.

In order to compete, the monolithic traditional magazine, newspaper and 
television networks appear to be relying on reporters to move up the 
value chain and become brands themselves to attract the audience. Why? 
It's not a one-size-fits-all media world. The audience is learning or 
becoming conditioned to identify with a personality or expert or show, 
rather than one big institution. So each reporter/columnist must 
provide more analysis, more insight and more dedication to his or her 
trade to outperform and outshine the crowded stage of free stuff.

Regarding Time, the Wall Street Journal writes: "In addition to the new 
look, editors have invoked the Economist as a role model for the new 
Time -- less of a news digest, more of an opinion journal." It goes 
onto to say: "It's a risky strategy for a mass-market magazine. If the 
appeal is too narrow, circulation could suffer, bringing advertising 
down with it."

Risk worth taking

But throughout the last half-dozen years, I think that many people 
who've led traditional companies have looked in the rearview mirror and 
saw that the risk was, in fact, worth taking. Blockbuster Inc.'s (BBI) 
slow move into the online DVD-rental business underscores the risks of 
not adapting to the new audience, now influenced by automated 
recommendations based the collective rental habits of others. Today, 
it's fighting to get the customer base now loyal to Netflix Inc. (NFLX) 
Essentially, the greater risk for Blockbuster was not changing or 
accommodating to new consumer behavior.

In like vein, the media are undergoing a significant overhaul of 
business models, and this is driven by the customer, now involved in 
producing and marketing content. The consumer or audience has a lot of 
power today.

It is with such power that magazines, such as Time, are trying to 
relate to the new consumer while not abandoning the old by testing out 
new models.

One new business model is in the economics of sourcing content and 
talent. At least for now, new sources of content can be bought cheaply 
-- meaning free.

The media are undergoing a significant overhaul of business models, and 
this is driven by the customer.

At some point, however, the 1% of those who create the majority of the 
content that's retaining an audience will demand some form of 
incentive. That is why we are seeing an enormous amount of competitions 
as incentives.

Viacom Inc.'s (VIA) VH-1 just launched Acceptable.tv to find talented 
undiscovered filmmakers and producers. On the new site, amateurs can 
upload their 2-minute short comedy clip and submit them for a vote. One 
winner will have the chance of getting his or her production aired on 
national television.

According to Michael Hirschhorn, executive vice president of 
programming at VH-1, some of the user-submitted videos are 
"surprisingly good." (Go to my blog to watch my interview with 
Hirschhorn.) Though VH-1 has no plans to hire any of these would-be 
filmmakers, it might have to consider this option down the road, since 
talent that attracts an audience will always go where the money is.

So what appears to have changed in the economics (at least for now) is 
the winnowing process of finding talent. Perhaps it's cheaper than 
hiring an agent? Still, there are new costs. The costs are the burden 
of exposing talent for free for someone else to capitalize on. Will one 
talented filmmaker go to Google Inc.'s (GOOG) YouTube or other sites, 
such as Metacafe, to get paid and be in front of a larger audience?

The economics for freelancers in media also appears to be changing. 
Google just introduced a "pay per action" advertising model, requiring 
a potential customer to do more than click on a page for the publisher 
of the advertisement to get paid. This pay-for-performance model is 
also finding its way to the content-generating process. On Metacafe, 
video producers only get paid after their content is viewed above a 
certain threshold.

Higher-quality demands

What about the editors, now that there are the people who want a say in 
what is news, like on Digg.com? Will there be fewer? Not necessarily. 
Editors and those who are paid to make decisions have been given their 
posts because of their ability to make good judgment calls. Those 
editors become more important to keep the audience who are more passive 
about ranking and rating news, but would prefer someone to spoon-feed 
it to them.

It's even more important for journalists to resonate with the audience 
as well. Time magazine seems to be doing just that with its big print 
announcements of its star columnists. Those are the new costs of 
supplying content, thanks to user input.

What other ways are models changing? The models are changing in the 
distribution of content. In a recent panel on citizen journalism, I 
noted that user-generated content isn't just in the form of creating 
it; it's in the form of their actions -- such as sharing, e-mailing or 
embedding little widgets on their social-network profile on News 
Corp.'s (NWS) MySpace or blog. It is in these actions that they are 
changing the distribution economics on the Web.

At MarketWatch, the power of big-media distribution has been at our 
roots from our early days with CBS. Now we're part of Dow Jones & Co. 
(DJ) But distribution can also be had in new ways.

Today, users get their media content piecemeal, and they get a lot of 
it from their friends who share bits and pieces of information by 
e-mailing or tagging or posting single stories on their social 
networks. Sharing news via word of mouth has become an incremental way 
of getting distribution thanks to today's users.

In the old pre-Internet days, consumers went to the newsstand or 
subscribed to periodicals. They also paid for cable channels to get a 
bunch of shows they liked and didn't like. They bought albums with 
songs they liked and didn't like. On the production side, talent moved 
up the value chain within big organizations to broadcast or publish 
their creations. This is all changing thanks to the audience.

Is it good or bad? Neither. It just is, and everyone will have to 
adjust to this new world order.