Friday, April 06, 2007

Flow chart and new ad data reinforces competition and fragmentation in the media industry

I posted an entry today at the Rebuilding Media site which was primarily focused on media strategy.

Figure 1

However, I can use much the same data to further bolster the point that the media industry today is far more open and competitive than ever. Although Figures 1 and 2, originally created by Winnipeg-based Ken Goldstein of Communications Management, repurposed here, illustrate how the television business has opened up and fragmented, similar charts for other legacy media industries would be quite similar.

Figure 2

The number of players has proliferated exponentially. Indeed, considering peer-to-peer and aggregators such as YouTube that provide easy access to materials from content creators that range from the highly professionals to the rank duffer, the close circle of content providers is blown apart. And this is possible because the gate keeping function of the broadcasters and then cable providers has been undermined by satellite and the Internet, not to mention offline conduits such as DVDs.

Meanwhile, advertising expenditures, the primary funding sources of our subsidized media, are quickly being transferred to Internet-based outlets. I graphed that trend last month here. The latest data on this front shows that 65% of online advertising is accounted for by four providers: Google accounts for 25%, Yahoo, 15%, AOL, 8% and MSN, 7%. Note that only one of these, AOL—-part of Time Warner--is associated with a traditional media company.

(There may be some legitimate difference of opinion whether all these companies should be classified as “media” in the sense of newspapers, magazines, radio, etc. But I have never seen a widely accepted definition of who can be included within the media rubric. I would argue that Yahoo certainly qualifies, with its original content in finance, news and sports. Google, on the other hand, may be the weakest candidate, though I could make the case that Google News performs a legitimate media function (Reader’s Digest qualified as a condenser of articles from other magazines and the original Time magazine was a compilation as well.)

Whatever the case, these players, along with Apple’s iTunes, Netflix, Wal-Mart, among the literally countless others, are playing a critical role in providing outlets for content, much of which continues to come from traditional players. But central to my theme of media competition is that the avenues illustrated in Figure 2 are providing all of us with more options than ever to be creators of content, with an option of finding an audience (Exhibit 1: you are reading this post. How large an audience could I have reached—and how—before the Internet?) And for anyone who so desires we have the tools to cheaply and readily find this content.

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