Tuesday, August 23, 2005

Even Largest Media Companies Could Disappear if they Don’t Adapt to Changing Consumer Usage. Does Anyone Remember Korevtte's? Bradlees? W.T. Grants?

That the make-up and competitiveness of television has changed dramatically since the 1980s can be gleaned in the following list of the ten programs with the highest rating since Nielsen began measuring audiences. Only one of the ten is from the time since the start of the fourth network (Fox) in 1986 and that single event was part of the Winter Olympics from early 1994. Four of the 10 were from the 1970s. Since then, not a single Super Bowl, Word Series game or last episode of a popular series could muster an audience to rival the days of limited choice.

Although I haven’t put together the numbers, I would venture that not one network owner would break into the top 10 even if we added together all their corporate-owned programming-- i.e., broadcast and cable networks -- available at any given hour.

Other data I’ve presented shows that the five largest providers of television programming networks (Viacom, Disney, NBC, Time Warner and News Corp) account for a smaller proportion of television viewership than only three owners of three networks regularly aggregated in the 1960s into the 1980s. This undercuts the notion that fewer owners are controlling what more of us choose to watch, certainly if the comparison point is some supposed “Golden Age” of television a decade or more in the past.

Even though they continue to be profitable despite smaller and smaller audiences, the large media companies know that they need to change and adjust to the changing media mix if they are to survive. That could happen if they didn’t morph as they have been. News Corp, for example, recently announced it was buying Myspace.com and some related Web sites for something close to $600 million. I can’t predict whether that is going to be a good investment or not (I would say “not” unless News Corp has some strategy to keep MySpace from being the hot site du jour, only to be replaced by fickle surfers next year).

But it is possible that if today’s media companies simply try to circle the wagons their future is not guaranteed. I recently was leading graduate students in a Strategic Planning class on a case study (by purchase) of Wal-Mart. Here’s a sobering lesson from that case:

“Of the top 10 discounters operating in 1962 – the year Wal*Mart opened for business—not one remained in 1993.”

Korvette’s, W.T. Grant, Woolco, Zayre, Two Guys, among others had been at the top and were gone. More recently, established chains such as Bradlees, Caldor and Ames have closed their doors, usually not voluntarily. Wal-Mart has learned from their mistakes.

We shouldn’t expect to see media companies—no matter how large or seemingly entrenched—stand pat as the technologies change around them, as consumer behavior adjusts to the choices and broader range of technologies available, and as advertisers follow their customers.

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Thursday, August 18, 2005

"Rebuilding Media" Blog a Welcome Addition as a Forum for Discussing News Media Structure and Mission

I want to call you attention to a new blog has been created at the Corante site called Rebuilding Media. It was organized by two journalists with impressive news and online credentials. Vin Crosbie, a fifth generation news man, was the first director of online publishing at News Corp. Robert Cauthorn is a former vice president of digital media at the San Francisco Chronicle and was the third recipient of the Newspaper Association of America's prestigious Digital Pioneer Award.

As might be expected with the solid journalism background of the co-founders, the emphasis of Rebuilding Media is on the news media-- a subset of the larger media landscape but at the top of the list of types of content for which we are so concerned when we discuss the state of the media industry. While it's certainly important that the First Amendment places few restrictions on broadcasting fluff content, such as the personal live of celebrities, the reason there is such contentiousness about media ownership is that news and information is needed for a democracy to best function, for the civil discourse that so many Americans often take for granted.

The mission statement of the blog holds that
The news media has lost touch with people's needs and interests during the past 30 years, as demonstrated by rapidly declining readership of newspapers and audiences of broadcast news. How we rebuild news media appropriate to the 21st Century from the growing rubble of this industry is the subject of this group weblog.
In a recent entry asking "Are Metro Papers Outdated?, for example, Bob Cathourn writes "that the scale of the metro newspaper has become a central liability of today's press." He continues:
As our cities have grown, metro newspapers evolved with them. That brought a necessary giantism -- giant presses, giant distribution mechanisms, giant staffs. And because of the size of the enterprise, metros require giant advertising revenues to stay afloat.... Perhaps we should now begin asking whether there is a maximum size that a newspaper can achieve before it outgrows its ecosystem and begins to fail its community.
His ideal remedy:

Clearly the lame efforts at zoned editions at metro papers haven't succeeded. Zoning was always more about revenues than coverage anyway.

Let's talk about real structural change instead: partition the giants. Maybe the LA Times should actually be broken into three or four or five distinct papers to better cover the market one giant lumbers across today. If you did it smartly, you could still retain many of the economic benefits of large scale while gaining the focus of smaller organizations.

He doesn't really think that is likely to happen (nor do I think it even adviseable), but he does expect challenges -- and I would add, opportunities-- to the metro papers:
Instead, we should keep our eyes open as multiple, small upstarts -- ala the [San Francisco] Examiner -- arrive to do the local job the metro daily refuses to complete. Add citizen journalism to that mix and you get a spectrum of media that is downright hopeful.
The future of the newspaper is very much on my mind these days. In October I will be making a presentation on the topic to a small group of publishers from around the world and I'm trying to hone my message. Long term trends are very negative, as circulation continues to fall along with advertising lineage. More localism may hold opportunity for some form of media product or service. But it won't reverse the decline of the metro newspaper as we know it.

We need the kind of discussion that is taking place at Rebuilding Media.

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Thursday, August 11, 2005

FCC's DSL Ruling Will Help Spur Competition for Broadband "Last Mile"

There’s been much ink and many bits written about the FCC’s unanimous decision last week largely freeing the telcos to wholesale their DSL service on their own terms—including not at all. This puts them on a level playing field with the cable operators, who were ruled to be freed of such wholesale requirements in the recent Brand X Supreme Court decision.

Those who disagreed with the decision were unusually muted, though still out with their statements. They knew that the outcome was probably inevitable once the Supreme Court had spoken. The non-telco ISPs were predictably displeased, but there was no talk of litigation to overturn the ruling at this point. Earthlink, among the largest resellers of both broadband cable and DSL, at least publicly was nonplused, stating , “…We are confident that we will extend our existing commercial agreements with the Bells so that we can continue to deliver DSL services” and adding, significantly, they will “explore next generation broadband alternatives to give consumers competitive alternatives for their high-speed Internet service.”

The self-styled consumerists were likewise less shrill than I would have expected. (I always call them “self-styled” or “self-appointed” because they rarely seem to be speaking about my self-interest as a consumer and I suspect their positions are rarely, if ever, favorable to the interests of all consumers. I never appointed them to represent me. Nor perhaps you). Andrew Jay Schwartzman, the oft quoted President and CEO of the Media Access Project, a very nice guy with whom I rarely agree on policy, typically lambasted the FCC’s ruling, but added, “Even so, it could have been worse. By asserting its authority to stop the most flagrant kinds of abuse, the FCC has made it somewhat harder to block or impede access to information.”

Indeed, Schwartzman picked up on a generally underreported piece of the FCC’s August 5 Report and Order. Concurrent with the ruling they released a policy statement “New Principles Preserve and Promote the Open and Interconnected Nature of Public Internet,” which states:
(1) consumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers.
This addresses the fear expressed by some advocates, as over reported in a Wall Street Journal front page piece (subscription required) on Monday, that “Technology has evolved allowing the broadband companies to block Web sites from their customers.” The industry pooh-poohs that scenario, insisting, they won't ever block access to competitors' Web sites because customers wouldn't stand for it. Regulation freaks (and others with a self-interest) are pushing for Congressional legislation for so-called net-neutrality. Some even acknowledge there isn't a problem now, but say there might be. "The temptation is always there by the owner to favor his own content," the WSJ quotes Rep. Rick Boucher, a Virginia Democrat.

A strong response to this paranoia is in a thoughtful piece by David Berlind, at the Between the Lines Zdnet blog. After first admitting that his initial impulse was to be concerned about an apparent telco-cable duopoly in broadband, Berlind notes:

Recent history is beginning to prove that that technopolies aren't very sustainable and that innovation somehow has a way of breaking them down (although maybe not as rapidly as we'd like). In some ways, trying to keep technopolies at bay through regulation turns out to be a crutch that can only slow innovation down. The innovators are much better off with a less complex labyrinth to deconstruct.
Just recall: In the early 1990s AOL developed what seemed to be an unassailable position as the largest proprietary online service. In 1994 Microsoft launched its competitive MSN. I was part of an active Listserv, On-line News. The preponderance of participants (traditional journalists and new online journalists) agreed that with Microsoft’s hegemony in the PC world that they would quickly overwhelm AOL. Just then the World Wide Web made the Internet an unstoppable force. Despite its near monopoly on the desktop, MSN never got traction as a proprietary service, quickly converting to a free Web service, plus an ISP model that AOL quickly adopted. AOL continued to grow, to the point that it could acquire Time Warner. But with the demise of dial-up service, AOL has been losing subscribers by the millions. Its name was removed from the corporate title, which is again Time Warner.

Similarly, innovators are in the labs and in the field with technologies to compete with the telco and cable guys’ only real competitive barrier—the last mile. Berlind points out that “one big fat digital backhaul to your neighborhood and a wireless mesh can take over from there providing voice (VoIP voice) and data, completely disintermediating the cable/DSL guys in the process.” Entrepreneurs can following the lead of Philadelphia in promoting the build out of city-wide Wi-Fi or use WiMax (though hopefully not as city-owned enterprises). The FCC ruling should give new momentum to the long-running potential of using electric power lines for the last mile.

Both the Brand X decision and the FCC’s rule-making on DSL will likely do more to further broadband competition than a mandatory access ruling ever could have. That would have maintained a cozy two-technology backend duopoly even if many players were doing the marketing on the front end. These decisions are the right ones to encourage truly new technologies that will lead to real competition. Win-win.

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Wednesday, August 03, 2005

And the Largest National Radio Programming Network is....?

Quick: What’s the largest group of uniformly programmed radio stations in the U.S.? Did you say Clear Channel? Wrong. Infinity? Wrong. The answer is….National Public Radio--NPR.

Non-commercial radio has become a major media force. Primarily on the FM band, it has grown faster than the number of radio stations overall. Accounting for 6% of all stations in 1970, public radio stations multiplied in number 560% by 2000 and more significantly more than tripled in proportion to over 20% of all radio stations. Non-commercial radio stations are often affiliated with higher education, municipalities or public television stations.

Their growth has been accompanied by the emergence of National Public Radio as a programming network that rivals the reach of the largest commercial owners. NPR’s most well known programming includes “Morning Edition,” “Fresh Air” and “All Things Considered.” The role of NPR is important in the context of radio competition.

· NPR provides content for much of the programming day on a national basis for the 780 public radio stations it serves.
· Its reach is so pervasive it claims “Just about anywhere you find yourself, you’ll find NPR.” According to NPR’s Web site, “Morning Edition” is the leading morning radio news program in the United States and is the second most listened to radio show nationally. (“All Thing Considered” is number three).
· NPR reaches 26 million listeners on a typical week, double the number of 10 years previously. In the 1980s it claimed an audience of about 2 million weekly.
· Public radio listeners outnumber the combined circulation of the top 35 U.S. daily newspapers.

For comparison, the nationally syndicated talk show of political commentator Rush Limbaugh has a weekly audience of between 15.5 and 20 million on about 600 stations.

With 99% of the U.S. in range of one or more NPR stations, virtually all Americans have a very differentiated choice should they seek an alternative to the music, talk, news, religious or other programming choices in their area.

What’s curious (well, not really-- I’m not surprised) is that media industry critics do not seem to complain about the common programming that emanates from NPR’s Washington, DC headquarters. Whether in Minot, ND or Los Angeles or Baton Rouge or Bangor, there is little local news or information being transmitted during the highest listening times of the day on NPR-affiliated radio stations. Whether broadcasting “Car Talk” or “World Cafe,” it is the same programming everywhere.

Don’t get me wrong here—NPR has some quality programming. I think it’s great that it’s available nationally. My point is that when the high decibel critics take on a commercial radio chains for programming out of some central facility for many of their stations around the country (which is far less common than they suggest) but don’t criticize the NPR-affiliated public station network, they expose their real bias. And that is that they just don’t like the programming that the commercial stations provide. If Infinity produced the NPR schedule I suspect they would have to be silent. When you look beyond the rhetoric on media ownership structure, what many of the angriest and most active of the self-styled media reformers really want is media that will provide content they think the audience “should” have: NPR for everyone, all the time. What we have now is choice—to listen to Rush or Neal, Al or Bill.

Works for me—and most others as well.

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(Note: In the original version of this entry I included "A Prairie Home Companion" as being an NPR program. Rather it is a program of American Public Media, the other major national programming service for public stations, with primary headquarters in Minneapolis.)