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Don MacAskill recently ranted on how much of a closed community traditional print media companies impose on their users. While I would agree that some if not most large media groups are seriously lacking the insight necessary to monetize today’s generation of consumers, it is a little too early to say that all traditional media is doomed.
Gannett and Tribune recently invested more capital in MetroMix, the Tribune’s original foray into the hyper-local scene. While the site may not have the best functionality or user interaction, it is a good start. You cannot ride the subway in NYC without seeing their ads plastered all over the inside of the trains. The question is not how traditional media companies will succeed or participate in the web 2.0 space, but when. These companies are sitting on a large regional or national footprint and an executive guard that does not understant how publishing content online can bring in revenue.
Web 2.0 Is Not That Obvious To Most
For most of us it sounds very obvious, we see the online space as unlimited “print” real estate….pages upon pages of space to throw edgy content and targetted advertising. So its obvious right? Not as much as you would think. Do any of you remember trying to teach your parents, mostly successful business men and women, how to use a computer? Even to this day they struggle just doing basic things on the internet. They are definitely not part of the Digg Nation.
Imagine how the executives at Print Company Inc feel when they hear Facebook, created and run by a 20 something Harvard drop-out is going to put them out of business very soon. They will come around because they have to. Zell did not buy the Tribune because he believed in a rejuvination of print media, he has an idea (we assume its a dam good one), of how to leverage this vast media empire in today’s world. I would be very shocked if upon hearing about the Digg mis-functionality on the LA Times website Zell brushed it off his shoulders as if it was nothing.
Tech M&A Is Not Always The Best Strategy
Acquisitions are one way to enter this arena, but once a Media News or a McClatchy acquires a hot up-coming web 2.0 property, then what? You have a sexy sirloin and no one to supervise the grill…that is to say, the staff on hand that understands the technology and how to leverage it across the existing properties is not there. Online ad-sales folks are in high demand right now, and for good reason. Someone inside those companies needs to really understand the power of users, their attraction to content and how to charge advertisers for it. Looking back, it would have made more sense for Double Click to have been purchased by one of the old print companies than Google. Imagine the power of having access to that online-ad sales force!? Perhaps there are something Mastercard can’t buy.
Herd Mentality
I think that a sudden panic attack will happen sooner than later. Just looking at how much better the internet has become in the past year in terms of delivering relevant content, we should expect even more ad dollars to shift online than we saw in 2007. It is at the point the point where a web 2.0 love bug bites the print guys, where they start acquiring as much as they can; headcount, aggregators, bloggers, startups, you name it. You are all marked. I mean at this point it’s either them or Google.
One of the points I make in a Newspaper Association of America article I just wrote is that print media doesn’t grasp culture of openness on the internet. Watch the video below for more:
What do you think? I think it brings up a lot of underlying issues between the old guard and the new folks.
An interesting article fell on top of my desk today. The WSJ reports:
Many [copyright] warnings “materially misrepresent U.S. copyright law, particularly the fundamental built-in First Amendment accommodations which serve to safeguard the public interest,” the complaint alleges. CCIA President Ed Black said the warnings create a “chilling effect,” dissuading consumers from using portions of the content in ways that are lawful.
The conflict illustrates the shifting concept of fair use in the digital age. “Fair use” of intellectual property revolves around the question of how much, if any, of movies, books, music and other creations can be used without permission of the owners. As Internet platforms have made it easier to redistribute chunks of content without asking for approval, copyright owners have become more protective about enforcing their rights.
So, Google, Microsoft and others are banding together to help consumers realize that they can reproduce a certain portion of copyrighted work. I think it’s pretty interesting that CCIA cares so much about warning labels. Warning labels mean very little in a world of easy access to copyrighted content. Are consumers really intimidated by something like this? I highly doubt it.
Update: And illegal music downloading is at an all time high… yes those labels really help.
A local Circuit City employee introduced me to TV-Links.co.uk . I don’t understand how this site is legal, but I did notice a significant decline in the number of watchable videos over the last several weeks.
The most interesting thing about TV-Links was that it linked to Stage6.com which is a website devoted to showcasing the DIVX In-Browser player. It is very impressive. While Joost and Veoh want to remove bandwidth issues associated with video, their technology isn’t nearly as usable or user-friendly as the DIVX player.
DIVX In-Browser Player delivers a more enjoyable user experience with easier installation, quicker downloads and fullscreen HD quality
Need you ask for more? You could ask for legal content. But it isn’t too long before another company (I’d put my bet on an existing media company) decides to build a web-based platform with DIVX running the user experience. I’d put my money in that direction.
Good read: 33 Ways to Watch Free TV Online – Although they must have missed the DIVX HD fullscreen content when they said “…not if you have one of those 47” plasma ones, but…you know what we mean.”
I wasn’t too surprised to read the WSJ article that discussed the potential GE and Microsoft bid for Dow Jones. Well, I’m a little surprised that after the rumours that GE was considering spinning of NBC that they would consider a major acquisition. I have commented on the need for technology companies to own content companies many times in the past. My articles include:
- March 5th, 2007: Tech firms must own content
- May 9th, 2007: When will technology companies buy media companies?
The “when” is still being decided, but this rumour goes to show you that there is increasing interest in the value of content when combined with a technology focused company. Would this deal make sense for Yahoo?
I’ve been following startup/VC news for a while now and I’m beginning to wonder about the viability of these business plans. Market verticals need better solutions. Every day it seems like a new RSS feed alerts me to a social networking/new media site devoted to the _______ vertical. Ironically, TechCrunch talks about Cut/Paste innovation as if it isn’t happening in many places.
My theory is that cut/paste innovation is crowding the social media; but being “guised” as different verticals
Examples include Fishing Doctors and Sailors
Your user community will no longer come to you
MySpace and Facebook were early market concepts that have broad appeal. Looking at increasingly smaller fragments of markets is not sustainable from a business perspective; your market is just too small. You also need a substantial product that has advertising value. You need critical mass.
The Technology Expertise is a Commodity
If you don’t take my word for it, read this. Janko explains:
We’ve seen tons of startups lately that essentially aren’t anything but glorified mashups. Social network aggregators, video and web annotation tools, media conversion platforms: They’re all based on remixing data feeds. Some of these might actually be quite useful – but are they really worth business plans, VC money and acquisition talks? Or are they just tools that someone in some remote place of the world could develop in a day out of boredom?
I totally agree with this. If newspaper companies are still having trouble figuring out “how to get to the next level” they should call me. I’ll tell you about everything.
Social media platforms are free and ready for the taking
The opportunity for a startup using these various platforms are not so much in the target vertical, but rather in being the expert for a larger media company with existing resources (and the hunger) to make investments into new, properly aligned spaces.
VCs are so 90s
I admire VCs immensely, but as Business Week points out, they are facing increasing competition from Angels. It’s that cheap to start a New Media company. But, Angels really aren’t that interesting either. Maybe they give startups more favorable terms, but when the technology is so cheap to create and terms are more favorable to the founders, success will increasingly be determined by the “value” of the money.
What the hell is the “value of the money?”
$100 is not worth just $100 dollars to a startup. Take a look at the “selected partners” of Joost. Think about money above and beyond the number of Benjamin’s. Partnerships and networks are more valuable. Maybe there are different return requirements for different VC arrangements, but let’s just say in a competitive market, the return requirements are substantial because of the losses. Everyone is promising you capital and each one saying they have a better network. But times are changing…
Traditional media companies (TMCs) are the New VCs
Well, maybe they aren’t raising capital from institutional investors, but they do make much better investment partners. Here is why:
- Established content businesses with an existing sales force, customer relations, supplier contacts, etc.
- Much lower return requirements
- Shareholder-driven need to aggressively pursue “new media” type strategies
- Opportunity Cost of not having the next YouTube, MySpace, Facebook, etc
- Access to high quality content
Still Don’t Believe Me? List of “Established” Funds by Parent:
NBC, Disney, Bertlesman, Die Zelt, Holtzbrink, and Time Warner all have investment arms for startups.
This list doesn’t even include the non-formally established VC arms. CBS, Fox and many others are all looking to deploy capital into new media investments. I suggest you consider them as valuable partners and investors for taking your startup into the next level.
Where to go from here?
First you should be very picky about whom you go to bed with. Look at their current strategy/property portfolio, and see if you fit in. How will company A deliver your product to market quicker than company B? Not all TMCs are made the same. Some, like TMCs in print media (newspapers, magazines, journals, etc…) have great relationships with their individual communities/towns/cities. Does that kind of TMC make sense for a YouTube type site? Probably not. TMCs in the broadcast space “get” the power of video and have the established video-ad networks to deploy pre/mid/end rolls on the videos. Should a social networking site focused on user generated recipes/cooking videos approach Viacom? I would suggest approaching Scripps Networks, which has the Food Network in its expansive portfolio.
In the context of this post, these suggestions seem logical, but how many of you have done this? How much VC money have you swallowed and how much more would you have benefited from the platform TMCs could have given you?
As much as you think TMCs don’t get it, they really do. They have weathered and survived storms from “category killers” such as radio, TV, and now the internet, but they are here to stay and grow. Pick your mates wisely and grow with them. Salmon fight the current to live, but it doesn’t mean you do too.
As I’ve said before, Google is alienating content owners with its views on the value of content. This reuters article contains some very interesting points. The best quote was:
“We’re in a world where we’re a partner with everybody and we’re fighting everybody,” News Corp. Chief Operating Officer Peter Chernin said on the panel.
A relationship with Google is love/hate. Google has now has the critical mass. The traditional media companies sat on the sidelines and watched the internet grow beyond what was expected. But, they do sit on valuable IP that can and will be protected by the courts.
I think the solution is for the technology companies of the world to admit they need to own content. I’m still waiting for the day one of the media companies gets acquired by a technology company.
Berkshire Hathaway had their annual shareholder meeting on Saturday, May 5, 2007. You can read the PDF of the meeting schedule here. The WSJ highlighted a very interesting point:
Mr. Buffett suggested he isn’t planning to buy more newspapers, which he predicts will increasingly fall into the hands of owners who are willing to pay more for them than their economic value because of the notoriety or political cachet a newspaper can confer on an owner.
Woah! Are newspapers really so dead that people will buy them for personal reasons? I’d wager that newspapers sit on a tremendous amount of value. Berkshire Hathaway doesn’t invest in technology companies and perhaps this is the disconnect.
Embracing technology and enabling a digital sales force will unlock newspaper value
Newspaper companies own the brand, the local advertising market, local market knowledge and have all the information necessary to create a destination site for a given community. Newspaper companies must focus on using technology to leverage these existing strengths. If Buffet saw the potential of technology when applied to newspapers he might think otherwise. What do you think?
*Warren Buffet is obviously a smart person, but I think his perspective is from an traditional view of the “newspaper.” New media enables so much more community interaction. Newspapers just need to be thought of in a different way.
Looks like NBC just joined ranks with Viacom against YouTube/Google. Who is next? Anyone care to wager? I’d put my money on News Corp.
CNet reports:
“Any ruling on YouTube’s motion will have far-reaching ramifications for the owners of video content,” NBC and Viacom said in their filing. “And especially for content owners such as Viacom and NBCU, whose works have been copied, displayed, and performed and disseminated by YouTube and others without their authorization.”
This case will result in a landmark ruling for industry. Unfortunetly, we are going to wait several years until we hear anything. In the meantime, I wonder if a technology solution will solve the problems asserted by content companies.
I suggest my readers to go read “A Reality Check for Newspapers” by Jason Fry. It discusses the love-hate relationships have with Google. Mainly:
These disputes are about money, of course — the newspaper groups think Google’s making some off their efforts, and they want a piece. But more broadly, Copiepresse objects to the idea that Google and other search engines should set the rules for linking, contending that such standards should be set by copyright laws, not technological standards. That’s a bid to turn back time and declare a do-over on the basics of search engines — a quixotic effort that flies in the face of the reality of how content is consumed today, and one in which Copiepresse has inadvertently lined up against its papers’ own readers.
What do you think of shifting the copyright burden to Google? Sounds very similar to the Viacom case. I have an issue with Jason’s conclusion:
It should be said that at times Google and its champions fall prey to thinking that they know what’s best for everybody else. Beyond the fact that no one likes being told what’s good for them, there’s something undeniably coercive about Google and other Web technologies. But what significant technological shift hasn’t been coercive? At its heart, the Web is driven by users, not publishers. Whatever pain that causes content creators, opposing that fundamental idea became a revanchist fantasy long ago.
Jason, sure, the web is driven by consumer choice, but as I’ve said before, “I want free music, I want free clothes, I want a free Ferrari F430, and I want a free Gulfstream 550. Do I get all these things? NO.“ Consumers want things to be free, but Google is playing with fire with all the content companies. Content is just an easy thing to distribute freely despite it’s production cost. If Google could send you a brand new Ferrari without paying for it, I’m sure you would take it. Newspaper articles aren’t really that different (except the Ferrari is infinitely sexier).
What is the appropriate treatment for newspaper content?
I don’t have an answer, but if people could just steal technology and make their own technology solution would that be any different? Companies need to respect IP in any form.
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