Hey, I have a question for you. What are all these discussions about media revolution?
Let’s look on traditional media business models:
Film: production companies raise funds and make movies. They distribute them through distribution companies that has relation with cinema owners across the globe. Marketing companies promote the movies worldwide. Money made from selling tickets goes to the production companies, distributers and license owners. Popcorn profits are going to the venue owners.
Newspaper: reporters create content that is printed by publishers, next to ads. These ads finance the whole operation. Some newspapers also have subscription models.
TV: Production companies make TV shows, that are aired by a network. Networks and production companies sell ads or product placement and cover or profit beyond the production cost.
What is the basis of these industries?
1. Cost – it is expensive to own a film camera. It is expensive to hire a crew to make a film. Therefore, one should raise a considerable amount of money in order to make a film. It is expensive to print and distribute a newspaper, pay reporters and so on. It is expensive to create a season of a TV show. In some cases, more than 100 people are working on one drama show.
2. Ownership and scarcity of distribution channels — there is a limited amount of movie theaters in the world. If you have distribution agreements in place, you create scarcity in distribution of films. True, there are zillion TV channels, but if you are the 500th channel, no one will zap to your channel just like that. The same goes for news stands.
3. High marketing cost — how can you persuade viewers to go to your movie or watch your show? You need to do three things: advertise, advertise, and, well, advertise. Billboards, banners, and TV spots cost money. Loads of money.
Cut to the chase. I am paying you by the hour.
Three important developments changed these industries:
1. Stronger computers – I am writing this post on a Dual Core 2.4 GHz Mac, a machine that render, edit and present HD video. It costs around $2000. The fact that I have on my desktop the equivalent of a computer that used to cost tens and hundreds of thousands of dollars changes the market place fundamentally. Video is the most resource draining technology. When talking about text or audio media products, everybody could be a writer or a radio talent.
2. Cheaper cameras — with $6000 one can buy today high end HD camera, and become a movie maker. But, even with less, one can create content in fraction of past costs. Almost every cellphone has a video camera, every laptop has a webcam, and a cheap point-and-shot camera can shot HD today. Shooting video is no longer an economic barrier. It is all about talent.
3. Higher bandwidth – The increase of available bandwidth means that High Definition video can be distributed over the Internet directly to consumers. That, coupled with the proliferation of computers at homes, made the computer screen a viable source for media and information.
And yes — number 4 – almost everyone in the western hemisphere has Internet access today.
Cool. But how does it affect the media business, or my company?
These developments affected the whole value chain:
1. Strong computer and cheap cameras made content creation cheaper than before. Therefore, more content is created by amateurs, semi-professionals and professionals. Your mom can shot and edit a short movie.
I hope she won’t
2. Higher bandwidth made video distribution available to the masses. Sites such as YouTube made video publishing as simple as sending an email. Other companies are focusing on HD and long format distribution. Now, everyone can distribute their videos, for free. So, more content is made, and it is freely distributed, directly to consumers. Slowly but surely, the computer screen is competing with TV sets and Movie theaters on viewers’ attention.
3. The Internet changed the promotion game. Though marketing is still a major expense in the media business, new ways of content promotion are created, through search engines such as Google, and social networks such as Myspace and Facebook. An effective social media campaign is much cheaper than a TV spot.
4. Everyone can publish everything on the Internet. It can be a rumor about your company, an expert opinion, a story, or breaking news.
This is a unique period in time, where the media business is being disrupted across the whole value chain — from content creation, through marketing, to distribution and consumption. This change affects not only media companies, but also corporate marketing, and consumers.
OH MY GOD! Now what?
Well, you’ll need to keep reading this blog for that…