February 25th, 2007

The Great Media Industry Schism

by

The once monolithic media industry is undergoing a radical schism, dividing itself into content creation, on the one hand, and content aggregation and distribution on the other.

The nature of this transformation suddenly crystallized for me when I read Tom Foremski’s piece on the new West Coast/East Coast media industry divide. Tom seems to be focused more on media as defined by publishing, since New York has traditionally been the center of the publishing world, while Hollywood has been the center of the video-based media industry. Regardless, I think Tom gets it half right, because the schism in media has nothing to do with geography.

The real divide now emerging is between companies that create original content and companies that create platforms for aggregating and distributing that content. Newspapers embody the old media world where content creation, aggregation, and distribution were inextricably linked. But the digital media revolution has made it possible to separate these functions.

For traditional media companies, original content creation still straddles both coasts, but geography is quickly becoming irrelevant as an army of newly empowered individual and small enterprise content creators are storming the web from every corner of the globe.

The radical shift in the newly disaggregated business of original content creation is that, with so much competition (one might even call it a content creation bubble) and no control over distribution, content creation is no longer an easily scalable business — in fact, many players in the new content creation game are not in it to build scale business, or even to make money at all.

Individuals can now make a good living as content creators, without ever creating or becoming part of a scale content business. What’s more disruptive, however, is that in the market for original content, the attention economy is draining dollars out of the cash economy. There remains a zero sum game for consumer attention, so for every minute a consumer spends with content created by an entity whose compensation is in form of attention, there’s a minute not being spend on content created by a for-profit entity.

In contrast, the content aggregation and distribution side of the divided media industry has all the advantages of scale, with the technology-enabled platform (e.g. MySpace, Facebook, YouTube, search) serving as the organizing principle for the new scalable media businesses. Content creation is asymptotically approaching commodity status, while platforms that can effectively aggregate content and allocate scarce consumer attention can unlock immense value in the new media marketplace.

YouTube is now ground zero for the battle over the new scalable half of the divided media industry. Content companies like Viacom who have lost all of their distribution leverage are fighting YouTube to control the new platform-based media economy. The future of media will be determined by how well legacy media companies survive the unbundling of their business models, how much better legacy companies like News Corp who have acquired a platform (MySpace) can restructure their business, and the degree to which the new native platform media companies like Google can position themselves to dominate the new media landscape.

Comments (42 Responses so far)

  1. audio fingerprinting, and share revenue rather than pulling the videos from the site. But while Wind-up adds a minor label to the lineup, not to mention the official launch of the NBA Channel yesterday, YouTube’s TV deals are causing trouble. As Scott Karp points out, this is really a battle over distribution: the record labels and TV stations used to have it, but they’re being reduced to content providers by outlets like YouTube, which command bigger audiences.

  2. audio fingerprinting, and share revenue rather than pulling the videos from the site. But while Wind-up adds a minor label to the lineup, not to mention the official launch of the NBA Channel yesterday, YouTube’s TV deals are causing trouble. As Scott Karp points out, this is really a battle over distribution: the record labels and TV stations used to have it, but they’re being reduced to content providers by outlets like YouTube, which command bigger audiences.

  3. Media Industry Schism Scott Karp writes: The real divide now emerging is between companies that create original content and companies that create platforms for aggregating and distributing that content. Newspapers embody the old media world where content creation, aggregation, and

  4. audio fingerprinting, and share revenue rather than pulling the videos from the site. But while Wind-up adds a minor label to the lineup, not to mention the official launch of the NBA Channel yesterday, YouTube’s TV deals are causing trouble. As Scott Karp points out, this is really a battle over distribution: the record labels and TV stations used to have it, but they’re being reduced to content providers by outlets like YouTube, which command bigger audiences.

  5. The Great Media Industry Schism

  6. The Great Media Industry Schism

  7. Scott Karp has kicked off a nice little debate on the question of the media’s future, (as in 20th century publishing and broadcasting models, will they survive?). “The once monolithic media industry is undergoing a radical schism, dividing itself into content

  8. MySpace or a bunch of yahoos posting their juvenilia on YouTube, but it is really much more than that. Not a magical transformation by any means, but more like a rapid evolution, and a turbulent one at that. One of the pieces that got me thinking was Scott Karp’s post over at Publishing 2.0, which he calls The Great Media Schism. In a nutshell, he says, the media industry is “dividing itself into content creation on the one hand, and content aggregation and distribution on the other.

  9. Shared by: don l on 2/26/2007 at 9:00 AM – Details The Great Media Industry Schism » Publishing 2.0

  10. Scott Karp has written a great piece summering what we here at Touchstone has been alluding to for quite some time. Individuals can now make a good living as content creators, without ever creating or becoming part of a scale content business. What’s more disruptive, however, is that

  11. “One of the things that the internet extinguished was the need for accidental sociality, for post-kinship connections that depend on spatial or institutional proximity.” Tags: networking culture socialnetworking community attention The Great Media Industry Schism “Newspapers embody the old media world where content creation, aggregation, and distribution were inextricably linked. But the digital media revolution has made it possible to separate these functions.”

  12. http://zero.newassignment.net/ (interesting experiment) Newspapers brought financial woes upon themselves, says Craigslist boss – http://www.out-law.com/page-7800 The Great Media Industry Schism — (good read) http://publishing2.com/2007/02/25/the-great-media-industry-schism/ Gannett’s New Lease On News – http://www.businessweek.com/magazine/content/07_09/b4023023.htm?campaign_id=rss_daily Indy Media Organizations and Their Web 2.0 Tools – http://newassignment.net/blog/steve_anderson/feb2007/27/indy_media_organ

  13. Really nice summary of the high level stuff going on here – thanks, Scott.

  14. good post – ground zero for sure.

  15. A fantastically succinct post on what’s going on and what it means.

  16. Great overview Scott,

    We have been talking about this for quite some time at Touchstone – it’s key to our strategy. Here’s a manual trackback for ya!

    http://www.touchstonelive.com/blog/2007/02/major-media-outlets-are-starting-to.html

  17. [...] of the pieces that got me thinking was Scott Karp’s post over at Publishing 2.0, which he calls The Great Media Schism. In a nutshell, he says, the media [...]

  18. [...] You can read Scott’s full post here. [...]

  19. [...] The Great Media Industry Schism » Publishing 2.0 [...]

  20. [...] The Great Media Industry Schism Content creation is asymptotically approaching commodity status, while platforms that can effectively aggregate content and allocate scarce consumer attention can unlock immense value in the new media marketplace. (tags: distribution ddcgroup aggregation digitaldistribution) [...]

  21. Not sure I really agree with you, Scott.

    You use newspapers as an example of an ‘unschism-ed’ media. What about syndicated content providers in that model? Aren’t they content providers to the content aggregators?

    Ditto radio. And hasn’t TV pretty much always had ‘schism-ed’ content creation (the individual producers), aggregation (the networks and latterly the cable channels) and distribution (cable)?

    Ditto movies (though in the last 20 years there has been considerable concentration of ownership in the distribution (theatre) side)?

    It’s always been possible / practical to separate those functions. It’s just cheaper now to be either. It seems to me the real story – and this has been told many times – is that there are more producers and distributors now because it’s so much easier to be either. Distribution is pure technology, so it scales better. OK, but the same was true 20 years ago. Now it’s purer technology, so it scales better still. But this is a difference of degree only.

    Had it been this easy / cheap to produce content twenty years ago, radio would’ve largely (more than it does now, anyway) consisted of small and large content producers providing syndicated content to broadcasters (aggregators) – who perhaps would’ve produced some of their own content as well. Newspapers too, surely.

    Costs of both creation and aggregation / distribution have fallen. Now one can be both (Rocketboom) or only one of them (Rocketboom could simply provide its content to someone else) or even a hybrid (produce and distribute yourself, and also syndicate so others can aggregate and distribute you), depending on the niche you serve and the way you want to serve. But this isn’t a schism – it seems to me it’s just the atomization of creation and distribution, and the passing of the torch from the old aggregators to the new, that everyone’s been talking about for a while now.

  22. Well said by Rob Hyndman. Saved me the trouble. Great post, though, Scott.

    The media process has always been about creation, distribution and aggregation. Now, it’s just a lot easier to enter any one of them. Which makes it a lot of fun. We’ve seen the democratization of the creation process. And we’ve seen aggregators arise from nowhere like Youtube, Myspace and google. And there are many smaller aggregators like vertical search engines, group blogs and memetrackers. But, they are fairly insignificant in the scheme of things and difficult to launch.

    My guess is that as the new distribution (RSS, open schemas, OpenID) takes hold, we’ll start to see more niche aggregators that can scale quicker. I’d like to see this happen because it’ll reduce the hold that the big aggregators have on our attention, as well as our ad dollars. If open schemas don’t happen, we’ll likely see the rise of great distributors (Zillow, Zvents, Simply Hired) that will enable them and take unstructured date, structure it and license it (or pay people to distribute it if there’s a transaction at the end of the tunnel). Either way, we’ll see a lot more growth and entrants in aggregation. I just wonder what the role of distributors will be and if there is a business there.

  23. The aggregators’ ability to organize and deliver relevant information will be content creation — to most end users.

  24. I left some additional comments on Mathew’s blog post on this.

  25. Rob,

    What about syndicated content providers in that model? Aren’t they content providers to the content aggregators?

    Yes, but it was a very limited and highly controlled system, only a shadow of what is possible and already being done now.

    Now it’s purer technology, so it scales better still. But this is a difference of degree only.

    It’s always been possible / practical to separate those functions. It’s just cheaper now to be either.

    Technically, you are correct, but I think you are understating the case by several orders of magnitude, which, with all due respect, is often a flaw in the “it’s nothing new” argument, which is often proffered in the comments of this blog. It’s precisely the speed and magnitude of the change in “degrees” that has turned the industry on its head.

    But this isn’t a schism – it seems to me it’s just the atomization of creation and distribution,

    That’s a bit of a semantic quibble, don’t you think? The fact that content creators can no longer seek to profit from their content by controlling the distribution channel for that content is a massive shift. Why do you think YouTube has everyone up in arms? Why do you think so many newspapers are on the verge of going out of business? How is it that a company like Google can be so MASSIVELY profitable without creating any content? Google itself is emblematic of the schism.

  26. [...] Karp has a nice summary of the creator vs. aggregator split going on in the media industry right now. The real divide now [...]

  27. Scott –

    I didn’t actually state any degrees of magnitude, so I don’t think I understated anything. The point is that the novelty here isn’t a schism between creation and distribution. “Technically corrrect”? Er, OK. Yes, it’s “much” cheaper, not just a little, and so on. But that ground is very well trod. I just don’t think your model – this “schism” as you call it, is an apt model. The division has always been there, and for good reason. If anything, I suspect that technology is blurring those lines – perhaps leading to, if anything, an ‘un-schism’ to some extent.

    As for disruption, you’re preaching to the converted. Atomization is itself of course a destructive process – that’s why YouTube has everyone up in arms, and so on – it’s easier to be a content producer and a distributor. I’m not saying the changes aren’t dramatic. I’m just saying that what you’re pointing to seems to me to be what we’ve all been describing as atomization. And of course that’s what creates the opportunity for Google – lots of eyeballs to monetize and at the same time lots of difficulty finding the content. Search as a proxy for aggregation, essentially. And since the technology is hard to replicate, a role that will likely not be commoditized for some time.

    Frankly, I’m wondering whether the real commoditization won’t be in the aggregation side of things. Sure, YT created a lot of value. But how hard was it and how hard is it (not hard in terms of gathering the audience, but in terms of building the platform)? I’m wondering whether as the cost of building the aggregation platform continues to drive to zero, search will begin to make aggregation less relevant. The only reason I visit YouTube is because the content is relatively easy to find there. If there were robust video search, I probably woudn’t visit it at all – I wouldn’t need it to be aggregated because I would be able to find it. Brand can to some extent be a proxy for search too, of course, so I see a continuing opportunity for strongly branded aggregators, but perhaps we’re approaching a time when search and other discovery tools make even brand – except for the creator’s – less relevant.

  28. Rob,

    Interesting question on the commoditization of aggregation. Yes, search may in the end commoditize everything. But I think you’re actually pointing to the commoditization of distribution, not aggregation. You go to search to look for something when you know what you want, but what about when you don’t know what you want?

    Perhaps the traditional notion of “channel” is useful here. Channels, whether newpapers or cable channels or whatever, were in the past owned by the entities who created most of the content for those channels. Sure, they bought some content from syndicators, but to a very limited extend.

    Digital media has blow up the traditional channel model. Search is one component of that, but aggregation is the other. The foundation of YouTube’s base (or so Google hopes) are the users who go there for the channels and communities. The people like you who go there to search are only losely tethered.

    Or maybe search is just a form of aggregation, driven by user keywords rather than some third party editorial control.

    In any case, the schism is evident in the standoff between GoogTube and the big media companies, i.e. the aggregator/distributor over here and the content creators over there. Perhaps what is more precisely radical in this divide is that GoogTube has an advertising model. Sure, cable companies have been in the dedicated distribution business, but it has always been fee-based, while the channels controlled all of the advertising. Now, GoogTube, the aggregator/distrubtor, threatens to steal advertising away from the the content creators. Hence, the divide.

  29. [...] outlets are starting to understand the zero sum game of Attention Scott Karp has written a great piece summering what we here at Touchstone has been alluding to for quite some time.Individuals can now [...]

  30. “But I think you’re actually pointing to the commoditization of distribution, not aggregation. You go to search to look for something when you know what you want, but what about when you don’t know what you want?”

    IMO, that’s what brand is for. That actually requires the aggregator to have one, though. Hence magazines with strong identities, hence the specifically conservative bias of Fox news. And hence the forthcoming decimation of the music labels and film studios, which have no brand (the brand is in the content providers – actors, directors, and so on), except for the micro- versions that have a coherent brand. And hence my comment about its continuing importance – maybe :). It’s the only defence against the Googles of the world, I suspect. (Was the same with Expedia. Very quickly became the most important driver of traffic. And it was only brand that protected the content providers that could resist it.) I don’t see search as stealing revenue from the content providers. I see as it as displacing the aggregators who can’t really defend themselves well with brand.

    My sense is that the only good reason for aggregation has been the high cost of content creation and distribution. Aggregation provides economies for high capital cost, and creates brand to aid with distribution. But as costs drop, I don’t see that there is as much reason for this intermediary to exist. So I see the real story being the atomization of content and aggregation, with each clustering around definable brands. I see search providing a very useful role for unbranded content, but for the rest I’m not really sure. I suspect a variety of tools will emerge to help us relate to content. Search in different flavours, community tools that key in on our preferences, and so forth.

    As to YouTube’s foundation, I’m not sure you’re right – I suspect most people go to surf what’s popular or to find something they want to watch. But perhaps not. In any event, I think it’s easy – or very soon will be, I suspect – to replicate channels and communities across different kinds of content.

  31. BTW, I think we should keep talking about this long enough to drag it back onto Techmeme’s main page :)

  32. excellent post.

    this divide presents many opportunities for disintermediation of traditional media companies.

  33. [...] interesting discussion today on Scott and Matthew’s blog about media disruption. [...]

  34. [...] in form of attention, there’s a minute not being spend on content created by a for-profit entity. nice summary on the status quo. published february 2007 aboutphotoshubfeed [...]

  35. [...] More video choices or better quality video is unlikely to greatly affect video watching. Talk of a schism between content creation and content aggregation and distribution seems to me to miss the main [...]

  36. [...] The Great Media Industry Schism Individuals can now make a good living as content creators, without ever creating or becoming part of a scale content business. What’s more disruptive, however, is that in the market for original content, the attention economy is draining dollars out of (tags: interesting media entertainment social_media attention aggregation) [...]

  37. [...] Karp wrote an interesting post on the the difference between the creators of media platforms and media content.  It would seem [...]

  38. [...] The Great Media Industry Schism — Scott Karp nails it (again) regarding content creation and distribution. [...]

  39. [...] the official launch of the NBA Channel yesterday, YouTube’s TV deals are causing trouble. As Scott Karp points out, this is really a battle over distribution: the record labels and TV stations used to [...]

  40. [...] Karp has a great post dissecting new media along the lines of the historical 3 pieces of the puzzle: Content Creation, [...]

  41. Hi Scott, I just discovered your great post. Just one little remark which addresses one of the core arguments but did not seem to be disputed in the comments (as far as I could see):
    I don’t think that consumer attention is a “zero sum game” – at least not for the still growing market of podcasts and especially not for audio podcasts. Listening to podcasts means often to replace the habit of listening to dull radio shows filled with standardized music and short news clips (f.e. while driving to work) by a “radio on demand program” which I compiled individually for myself. The former is – at least by my definition – not really “content” any more although it is for profit.
    As soon as the attention given to any content passes a certain threshold it will create the desire to generate cash – so the realms of “not for profit” and “for profit” don’t have fixed borders, and from a certain point on “attention” is just another expression for “profit”.

  42. [...] model. But what is this business model in case of a magazine publisher? Is it indeed, as Scott argues, dominating the total media value chain: content production, content aggregation and content [...]

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