February 25th, 2007

The Great Media Industry Schism

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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.

  • 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".

  • excellent post.

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

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

  • "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.

  • 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.

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