Media Companies Must Divide To Conquer

The following essay is also my Forbes.com column for August.

Media Companies Must Divide To Conquer

The media is something that for most, if not all, of our adult lives, we have taken for granted. Media giants form the terra firma of the marketing industry, both its paid and earned disciplines. They provide the lifeblood of services and bring us the audiences we need to do our jobs.

However, underneath it all, the harsh reality is that there's a new digital dynamic present today. This will mean that many media companies divide themselves into dozens of smaller independent operating companies if they wish to survive. Many won't.

First, there is some good news.

Over the last few years, to their credit, traditional media outlets have done an outstanding job adapting to new technologies, including social networks, mobile and tablets--and helping marketers do the same. Rather than see Twitter, YouTube, Facebook, the iPad, et al, as threats, most media companies have embraced them as potentially lucrative revenue opportunities. And they've innovated too.

Nevertheless, the media business, as anyone who is in it will tell you, is still reeling in pain. To paraphrase NBC head Jeff Zucker, analog dollars are not being replaced quickly enough by digital pennies.

There are at least three currents contributing to the pain.

First, there's the sheer ballooning of information. According to TechCrunch,Google CEO Eric Schmidt recently said that every two days we create as much information as we did from the dawn of civilization until 2003. "The real issue is user-generated content," Schmidt said at the Technomy conference.

Despite Google's best efforts to organize it all, this is one of three new realities that will force us to make choices about what we consume and from whom.

This leads to the second current: time. Despite our Herculean efforts, time and attention remain finite quantities. And, increasingly, we are burrowing deeper into social sites. According to Nielsen, time spent on social networking climbed 43% since 2009. It now accounts for 27% of the time Americans spend online, and is the most popular online activity.

What this means for media companies is that, like it or not, social networks and social information networks are becoming their largest distributors of content, perhaps only second to Google.

Finally, and not least of all, we have mobile. According to Morgan Stanley, in just a few years digital content consumption from mobile devices will surpass the same from PCs. No matter how sophisticated these devices get, the rise of mobile will have a dramatic impact on how our global society interacts with digital information. The devices lend themselves more to pervasive media snacking over meals.

The upshot of all of this is that the era of one-size-fits-all media is coming to an end. Faced with infinite choices (and competition from people we know), finite time and attention and form factors that favor short over long, consumers are going to--as a coping mechanism--increasingly drill to find sources that align with their worldview and interests, and let the rest float by.

Media analyst Ken Doctor, in his outstanding book Newsonomics, makes a strong case that there will be only a dozen major global news players. This is down dramatically from the hundreds we have today. Given the above trends, the rest many not make it. But I am optimistic that they can if they see the light now.

To survive many media companies will need to divide themselves into dozens of smaller, independent units if they wish to survive. Although few will say so publicly, some are already moving in a direction of verticalization and specialization.

Consider, for example, ESPN. The juggernaut of sports news has been aggressively rolling out a network of local-interest sites, like ESPNNewYork.com and ESPNLosAgeles.com, in order to cater to rich sports towns. Now it's in the process of adding similar mobile apps to the mix.

This approach is smart. It slices and dices content into micro chunks that cater to diverse interests, rather than trying to be one size fits all. Granted, ESPN itself remains a whole, but others may not be as lucky.

Just as Ma Bell divided itself up into dozens of baby bells back in the 1980s - and arguably to the benefit of consumers and the telecommunications industry - many media companies will need to do the same to cope with the new digital dynamic.

Let's hope that they are just as open to structural change and verticalization as they have been to embracing new formats.

Image credit: Ma Bell by TheTallest on Flickr.

Comments

[JimSchoch]

So Where is the share button for Facebook? Great article!

[JinAtSmilely]

More specific demographic units are emerging as social media appears, and it is in every company's interest to address each specific group individually.

[Dino Dogan]

@JimSchoch Posterous doesnt quite have the Facebook-share button yet but they have the "like" button on the bottom of the post....hthMore on the point of the article. Jack Welch (to use one example) divided GE into separate units decades ago so much so that each unit had complete autonomy over their biz decisions. They even had to pay full price if one biz unit had to buy something from another. He also demanded that each unit be first or second in their respective "space" otherwise he'd sell them off. If my RAM serves me correctly, Welch was a GE's CEO for about 20+ yrs, and he made that company into a profit behemoth during that time. Separation I am sure played a huge part in that. The small is the new big lol

[zee tv]

hey i have read the same article somewhere else........i think on forbes.com.any ways its gonna be the one of the best articles from your collection.