I just read a fascinating article about YouTube in Wired Magazine's December issue called "YouTube vs. Boob Tube". The article does a great job of talking about the issues involved with "New Media" companies like YouTube in regards to advertising money.
What the article does not really cover is why, the root cause. Why is media changing?
Simply put, traditional media is changing because it did a poor job of servicing customers and it is no longer able to keep alternatives away from consumers.
Keep alternatives away from customers? For the cynical out there, companies that make money the old fashioned way have resisted changes whenever they could. Broadcasters have avoided HDTV as long as they could, even in the face of FCC mandates and laws. Broadcasters have resisted TIVO and personal video recorders. Cable companies have resisted selling individual channels (you know, like pick the 10 channels you actually want and only pay for those) instead offering big packages for amazingly high costs.
Television and cable companies in particular are huge monopolies that have enjoyed prestige and massive profits for years thanks to government protection. (Protection like the monopoly status granted to cable companies and the free airwaves given to TV and radio broadcasters.)
The problem is that their product is out of step with what consumers want, that difference increases with every year and consumers are realizing there are options. Options like Tivo, iTunes, and renting the DVD next year. Sure the common experience that we all used to share will suffer, but people make decisions based on their daily needs not some societal common social needs. (Who really talks around a water-cooler anyway? Even that example is no longer a common experience.)
companies <-> advertisers <-> broadcasters <-> consumers
Media serves two purposes. Companies that want to advertise pay media companies to reach consumers. This is where the big money comes from. (Currently over $260B per year in the USA according to Ad Age.) The current system may not be terribly efficient but it is the devil we know and the rules of the game have been around a long time.
The other purpose of media is to serve the customers who watch/pay for it. Media companies bring the audience to advertisers because media provides something that consumers want. The problem is that what consumers want is changing.
Qualities of traditional media
Before talking about what consumers want, lets look at the key qualities of traditional media, whether it is television, radio, or print:
- It is broadcast from a single (or small group) of providers to all the consumers.
- The content (what you get to consume) is centrally controlled by planners and media experts and pundits.
- The schedule (when you get to see it) is also centrally controlled. If you miss that episode of Lost, you missed it until it reruns in the Summer.
yesterday's consumers != tomorrow's consumers
The problem for traditional media is that all of these qualities do a poor job of matching today's (and tomorrow's) customers. What consumers want has changed because consumers have changed.
We work more, as in all the time. Lots of people cannot get home by 8pm to Jericho or by 5pm to watch the Michigan State Basketball game. What they want is an easy way to watch the show when they are ready to watch, maybe from 10:45pm until midnight or Saturday morning.
We are busy and dont necessarily have 30 minute or 60 minute or 120 minute blocks of time to be entertained. What we have is small breaks, maybe at the office or on the bus for 2-, 5-, 15-minutes.
We increasingly live in urban centers and in smaller places. Housing costs more so lots of us live in apartments or share space with roommates (or even parents). We spend time on mass transit or on a plane. In other words, watching a big TV in the living room is not always an option.
Times have changed since Leave it to Beaver. Life is much less scheduled and predictable and the idea that we all come home and have dinner together at 6pm and then watch TV just isnt realistic anymore.
all we want is love
So what do the new consumers want?
- We want "snackable" entertainment. Something we can see for 2 minutes or 5 minutes or we can watch in pieces whenever we have a break.
- We want small screens that we can take with us, like a laptop or an iPod or a cellphone.
- We want to be entertained anywhere, like on the bus or on a plane or at our desk.
- We want it whenever we have time - which could be anytime 24/7.
- And we want more personal entertainment.
None of these things are well served by traditional media but they are well suited to the digital media world.
something new
Think about that last bullet for a moment: personal entertainment. The key word is "personal".
Traditional media, such as broadcast TV, radio, newspapers and magazines, basically provided three things to consumers. (1) Information on events (ie news), (2) information on products (ie commercials) and (3) entertainment (ie shows). We all have these three needs and the only question whether traditional or digital media serves them best.
But now we have a new need: communication. We want to communicate with our friends, our family and even strangers that share common interests. This is personal communication and it turns out this is a strong need and one that is only served by digital media. Broadcast media talked to us; only digital media lets us talk to each other.
Peer-to-peer communication is a powerful need that is sucking up a huge amount of our time, time that we used to spend watching TV. We all spend a LOT of time on cell phones, in chat rooms or instant messenger sessions, reading and writing emails or on blogs. There just isnt any way to satisfy this need in in the broadcast world.
closing
Looking at the money is always informative (which is why "follow the money" is always my first rule) but the key lessons here are about customers. The changes we seen and will continue to see are all driven by serving customer needs (and by the need of companies to reach consumers).
The iron-grip of traditional media companies is finally loosing its stranglehold and consumers are awakening to both their new needs and their options. There is a LOT of money involved and as consumers become more and more dissatisfied with the status quo (like that $100/mo cable bill for commercials and channels they dont watch), the market will change accordingly.
Exciting times.
