March 21st, 2007

Is Content Still A Business?

by

Is it possible that the future of the content business is worse than being less profitable and worse even than not scaling anymore — is it possible that content creation will cease to be a business?

I was struck by this quote from a music business manager in the WSJ article about the complete collapse of CD sales:

Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” says Mr. Rabhan. “It’s the vehicle that drives the tour, the merchandise, building the brand, and that’s it. There’s no money.”

No money. The content that used to be at the center of the music industry has been reduced to a loss-leading marketing platform for the real business, which is live entertainment and related merchandise sales. Apple’s iTunes is not really a platform for selling music but rather for selling hardware.

It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer the same fate as music? There’s one critical commonality to what the Internet and digitization has done to all content that would support this theory: disaggregation

All the focus on the digitization and online distribution of music — and now video — has been on piracy. But what if that’s just a red herring?

You could argue that the most striking consequence of digitizing media and distributing it online is that all content is now available in a discrete, granual form. Music file. Article page. Video clip. Podcast. Photo. There are very few places on the web that require you to buy a whole package in order to get one item.

This is a radical transformation of the content business. Think about it.

How many CDs have you bought for just one song? How many magazines have you bought just to read one article? How many cable channels do you subscribe to in order to watch just one channel? How many radio stations have you kept on in the car because you heard one song that you liked? How many newspapers have you bought just to read one section?

The media business has always been about selling you content that you don’t really want by stapling it (literally or figuratively) to the content that you do want. The digitization of media on the network has obliterated this model. What if music is just the canary in the coal mine?

There’s already one high-profile instance of this trend in the video content business. TV clips on YouTube. I’ve heard a thousand times the argument that media companies should embrace YouTube as a “free promotional channel.” Let users upload clips of your shows — don’t sue YouTube– it’s free promotion.

This argument has bothered me every time I’ve hear it, and now I know why — because it’s following the pattern of music sales in the quote I cited above. Can’t make money off the content in one channel? Use it to promote your other channel. BUT, that assumes that the other channel is not, in fact, being eaten alive by the channel you’ve written off as free promotion.

Henry Blodget posted a dialectic about whether Google is the “King of Media,” which was based on this assumption:

For the purposes of this debate, I’m going to assume that to be “King of All Media” one can’t just be a distributor.

I would assume just the opposite — that content distribution businesses, or more accurately in digital network terms, content platform and content aggregation businesses (think Google, YouTube, MySpace, Facebook, Digg) are the only real media businesses left.

Oh well. If Google has its way, maybe the content business can transform itself into a direct marketing business.

Comments (57 Responses so far)

  1. Is content still a business?

  2. Is Content Still A Business?

  3. «Is it possible that the future of the content business is worse than being less profitable and worse even than not scaling anymore — is it possible that content creation will cease to be a business?» fragt sich Scott Karp, Managing Director bei Atlantic Media, nach der Lektüre dieses Zitats. Und weiter: «It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer

  4. Gems) Forum: Sons of Ben Posted By: Bryan76 Post Time: 21 Mar 2007 at 08:52 PM. youtube /google vids Forum: The Computer Room – Computer Talk Posted By: Marvin Post Time: 03-21-2007 at 08:15 PM. Is Content Still A Business? TV clips on YouTube. I?ve heard a thousand times the argument that media companies should embrace YouTube as a ?free promotional channel.? Let users upload clips of your shows ? don?t sue YouTube? it?s free promotion.

  5. Eyetracking points  Az utóbbi időben kissé elhanyagolt OJR cikke arról, hogyan nézik az emberek a weboldalakat, hogyan lehet növelni a layout hatékonyságát. Is Content Still A Business?  Scott Karp írásait mindig érdemes elolvasni, de ez mostani cikk különösen fontos kérdéssel foglalkozik. Van-e  jövője a tartalom-biznisznek? – (szerinte nem sok) Ezzel a bejegyzéssel a jövő héten külön is foglalkozni szeretnék,

  6. Google AdSense: Facts, FAQs and Tools | Smashing Magazine[business] Creating Passionate Users: User Community and ROI[business] How To Market Your Web App[business] O’Reilly Radar > Innovation in Business Models[business] Is Content Still A Business » Publishing 2.0[business] Sales of Music, Long in Decline, Plunge Sharply[business] Fractals of Change: Morph of a Nerd CEO – The Power of Silence[business] gapingvoid: “cartoons drawn on the back of business cards”

  7. I like Scott Karp’s take on disaggregation: All the focus on the digitization and online distribution of music — and now video — has been on piracy. But what if that’s just a red herring? You could argue that the most striking consequence of digitizing media and distributing it online

  8. 하나하나에 포커싱을 하고 있다. (물론 블로그 업체의 공동대표를 맡고있는 입장에서 해야 í•  말… 커피믹스를 사는 사람이 없어지진 않을 것이다.^^) 불과 몇년만에 음악 비즈니스에서 CD 는 공짜 T셔츠처럼 마케팅 수단에 불과하게 되었으며, 이는 ê²°êµ­ 디지털화된 컨텐츠가 분절화되고 돌아다니는 현상을 여실히 보여주는 예다. 그런데 이런 트렌드에 대해서는 모두들 알고 있지만, 이러한 현상이 가져올 수 있는

  9. a phone screen and a phone screen has little to do with an interview. While your situation isn’t as tenuous as the 30 seconds you have to make an impression with your resume, you’re still not in the building and nothing real is happening unt” [MEDIA] Is Content Still A Business? (publishing2.com, 14 saves) (content, media, trends) You could argue that the most striking consequence of digitizing media and distributing it online is that all content is now available in a discrete, granual form. Music file. Article page. Video

  10. Skots ir izteicis savas pārdomas savā blogā

  11. ekonomin är värda viss diskussion. “Medie-affären har alltid handlat om att sälja pÃ¥ dig innehÃ¥ll som du inte riktigt velat ha, genom att vidhäfta den till innehÃ¥llet som du vill ha. Digitaliseringen av media här undergrävt den modellen.” Högst läsvärt, hos Publishing 2.0!

  12. Is Content Still A Business?

  13. Is Content Still A Buisiness?という面白い英語記事を見つけたので、要約してご紹介したいと思います。ちょっとざっくりとした翻訳ですが、主旨だけでもお伝えでければ。ご興味を持ったかたはぜひ本文を読んでみ

  14. Scott Karp上有更多内容。他对知识到底是不是一门生意提出了自己的质疑。Unattributed, http://blog.edugator.net/node/50 March 22, 2007 [原文链接] [参与评论] 通过Trailfire使用GReader

  15. in content and how it’s going to pay for itself online and offline in the future. How will the old ‘interrupted advertising’ model will evolve, blend, mesh into something more accepting and engaging. One of the most constantly imaginative bloggers is Scott Karp of publishing 2.0 blog is constantly questioning the validity of the current models

  16. is content still a business?

  17. Is Content Still A Business? » Publishing 2.0 – “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream” – Jeff Rabhan

  18. Aanbevolen leesvoer Mainstream Media’s Problems Lie WithinJobster Now Offers Pay Per Applicant Job ListingsIs Content Still A Business?The New Economics of AuthenticityE-CentralizationWeb 2.0 businessmodellenThe Radical Changes in Content Creation8 Strategies To Get Paid On NewsvineGoogle’s Video PlusBox May Be Its Most Disruptive Feature Ever

  19. to be a great one. But, as it turns out, this is not my final post at all. But if this were my last post, I’d want it to be a very special one. I’d want to write a post in which I connect February’s announcement of a Free Ozzfest to a rationale for making cds free as marketing tools to notions of a Freemium business model to the current Fergie tour that’s fully branded, supported and free. But I didn’t write that post and as time passed it really needed to include some reference to

  20. Is Content Still A Business? » Publishing 2.0

  21. Scott Karl’s recent post

  22. I never really got into Todd Rundgren, but I read an interview that he did several (>10) years ago, where he admonished up-and-coming musicians to stop approaching their music as a product, and instead treat it like a service. Thus: Concerts, not CDs. His rationale was that people have to leave the house to come see you perform, whereas CDs, etc can be commodified – as as we now know, to such an extent as to render them virtually worthless as a revenue stream. Well, for the artists. I’m cynical enough to dismiss any corporate-level whinging as crocodile tears.

    Clearly a man ahead of his time, regardless of whether anyone likes his music.

  23. [...] content still king? No. Why the content aggregation business will be the only real media businesses [...]

  24. [...] was just now reading this interesting post titled Is Content Still A Business where the author refers to the dropping CD sales to claim that the business of content [...]

  25. [...] Scott Karp has a terrific post about the future of content businesses and I think it’s spot on. [...]

  26. Check out this one about piracy and how pop stars in China cope with it:

    http://mncc.com.my/ossig/lists/general/2003-03/msg00056.html

  27. Scott, thanks for the inspiration. I’ve blogged about your conclusions and how this might point to a role for content creators and media brands in future HERE
    Would welcome your thoughts.

  28. [...] YouTube, MySpace, Facebook, Digg) are the only real media businesses left. Couldn’t agree [...] Scott Karp has a terrific post about the future of content businesses and I think it’s spot [...]

  29. [...] Karp’s post ‘Is Content Still a Business?’ (on Publishing2.0) poses a very logical question and one drawn from a series of trends anyone can [...]

  30. Great post and discussion about the content business! What are magazines, newspapers, etc., however, if not highly refined mechanisms that use dead trees for aggregating content? What is Google? An online mechanism for aggregating content. A problem right now is that for all of its sophisticated algorithms and page-ranking abilities, Google is still an unsophisticated, blunt force method of retrieving information about a particular topic—but it does it really fast. A list of 1,900,000 discrete pieces of information about a topic delivered in 0.05 seconds is a neat trick, but not everyone wants to spend their time sorting out the wheat from the chaff. Having access to all the world’s information through the Internet means that those who analyze and package that information online in a meaningful and useful way are all the more important (disclaimer: I’m a content creator/packager!).

  31. I love these theories as much as the next guy and don’t even disagree. Content is no longer king. But what happens when everyone is an aggregator and no one is a producer? Why is no one worried about what happens to Google or Digg when all of the “good” sources of content go out of business? Newspapers and magazines are dying from lack of ads and Google’s little ad service on their websites won’t make up the difference. In the Western world and especially in the U.S., we have relied on content producers (press) as part of our democracy — the fourth branch. So, what happens when all the newspapers die and Google aggregates nothing but spin?

  32. Great post Scott. So aren’t these “content platform and aggregation businessess” actually disaggregation businesses? One uses Google to find highly selective, granular content, not to find Orbitz. Perhaps it’s only semantics, but once content business producers figure out how to monetize disaggregations on a large scale (and I have no reason to believe it will not happen), won’t these “aggregation businesses” become redundant? Not that they’ll disappear; only their profit margins.

    I, for one, still don’t believe that the fundamental valuation of “content” (aggregated or disaggregated) has undergone revolutionary changes. Whether the money is made off tours, merchandising, or guest appearances, the songs (the single — isn’t music history simply repeating itself) — the content — still drives the business. Take that away and you have NOTHING.

  33. [...] Publishing 2.0.) Tag this post These icons link to social bookmarking sites where readers can share and discover [...]

  34. I have been considering this issue on my blog as well – inspired by a recent Wired article.

    As for Jeff Rabhan’s quote in the post, I wonder how many different SKUs he gets from a CD these days – ring tones, singles, cell phone wallpapers, etc? Maybe the CD sales are down, but I’ll bet his industry has and will continue to make up for that downturn with new delivery methods.

    I tend to agree with overseer – content is always necessary, its the delivery, pacakging and pricing that will be the challenges for publishers in the future.

  35. [...] a little deeper into the argument. It might work best for you to take a detour right now and read Is Content Still A Business?Karp’s interesting speculation takes off from the observation that music no longer sells well [...]

  36. Very interesting and provative as always Scott. If we take your conclusion as valid (and I think it is) then I wonder if the monetization of digital content will shift to content platforms and aggregators as you assert but also to “long tail” or niche content publishers. Take TechCrunch, for instance, a popular online publication with a very specific purpose and audience. I would think as eyeballs and advertisers continue to stream online, there will be room for the business of content to exist, though it will be moving a greater number of smaller channels.

    I’m positive that someone (or someones) else has already articulated the above in a far more coherent way!

  37. [...] labels, however, there is little sign that they have woken up and smelled their fate.” see also Scott Karp, who asks whether content is even a business. Unattributed, http://blog.edugator.net/node/50, March [...]

  38. [...] to whether the existing aggregators get to decide the fate of content, turning it into a commodity. Scott Karp has a great post on this and it’s exactly the issue I have been thinking about for quite a [...]

  39. [...] like Scott Karp’s take on disaggregation: All the focus on the digitization and online distribution of music — and now video — has been [...]

  40. tree hugger,

    Content filtering is a HUGE value creation opportunity — Google and search are only the tip of the iceberg.

    Overseer,

    You raise a good question. But you’re assuming that quality content needs to be produced by BIG businesses. It doesn’t. Take Gigaom.com, for example. Om Malik is a smart, principled journalist who hired a small team of smart, principled journalists to create great content. I don’t know how big Om’s business will get, but I’d hardly call his output “spin.” As for who’s going to do the Fourth Estate work, like investigative journalism, in a disaggregated media world, that may become a nonprofit endeavor. Look at what NPR does, investigative stories, reporting from war zones, etc.

    Ben,

    how to monetize disaggregations on a large scale

    But that’s the rub, isn’t it, especially with an advertising model. How does a content producer seperately monetize thousands of discrete content items? Oh, that’s right — with Google AdSense.

    I agree that without content you have nothing — good thing a lot of people are willing to great content without ambition to create a BIG business out of it (or even a business at all).

    Eric,

    Yes, content business will still exist, but they will either be small or in support of other businesses, like aggregation.

  41. [...] nails the problem with the argument that clips are free advertising in a great post on whether content [...]

  42. Scott – great post – you really nailed it. But I think you could take the point to its natural conclusion – a point I just made in my post riffing off of yours. The problem exists because clip culture rests on the assumption that one can simply create clips at will. But this is not the way creativity works.

    The clip (the single, the best article in the magazine, and so on) is the best bit, generally. It’s what the crowd has selected as the artistic moment worth highlighting. But artists don’t just switch on and create ‘clips’ – they have to invest in and produce the whole piece in the hope that there will be a moment of artistic serendipity in that creation – the clip. If we give that away for free – the best bit – why would anyone buy the rest (unless they were a particularly avid fan)? Why give away the best and ask people to buy the worst?

    Artistry requires that the artist invest in the process in the hopes of producing ‘the clip’ – the great single, the great photo, the great article – whatever. We need to pay for the whole to get the serendipity that produces the clip. Give it away, and no one buys the rest. If they don’t buy the rest, we can’t afford to produce it, and there will be no serendipity that produces the clip.

  43. The answer lies in this question: What did our world look like before content became big business? Now imagine that world equipped with current technology, and you get a sense of what lies ahead.

    But you won’t find me crying over the demise of the content kings. I’ve been making my own content for years, for a select group of appreciative friends. I won’t miss a thing in the future, and will welcome the rebirth of genuine community.

    The kings are dying. Long live our content.

  44. [...] a great post over at Scott Karp’s blog tonight about the recent 20% drop in music CD sales this year over last. He asks the question, Is [...]

  45. Scott, I couldn’t agree more with your reply: “Content filtering is a HUGE value creation opportunity — Google and search are only the tip of the iceberg.” But isn’t content filtering just a more sophisticated method of aggregation? Traditional print publishers figured out the right package that would sell–lots of money to be made by figuring out the online analogy.

  46. Rob,

    That’s a fantastic observation, which has significant ramifications for how this all plays out.

    There’s a novel by the Itallian novelist Italo Calvino called If On A Winter’s Night A Traveler. I contains the opening chapters to ten different novels, all of which make you believe that there is an entire novel behind them, even though the rest of each novel was never actually written. But’s it clear that Calvino had to have thought through the entire plot and character for each of the ten novels to make the first chaper of each work.

    It’s a work of heroic art. But an effort, as you point out, that we’re not likely to see reproduced in Hollywood.

  47. Scott, you have a point. I do see real journalists producing quality content online today. But they’re not taking down presidents. And I also see “citizen journalists” falling for the the oldest PR tricks in the books and being gamed by politicos, flaks and marketers. Not to mention blogs owned by companies with financial interests in the outcomes their content can generate. Right now, newspapers investigate issues under a set of rules that at least try to guarantee that the story is true and free of bias. NPR hasn’t done an investiative piece that I can recall. TV and radio just don’t do it. I don’t have the answer, but if the consensus is that content isn’t worth paying for because it is all free on Google, then we are in trouble. Up to this point in our history, journalists have been our watchdogs. If we disintermediate them, we have no replacement.

  48. [...] Copyrights, business — philobuster @ 3:27 pm I was reading a post by Scott Karp dubbed “Is Content Still A Business?” and was struck by his claim that creating content is fast becoming something you can’t make [...]

  49. [...] Karp of Publishing 2.0 relates it this way: “Is Content Still a Business?” His argument, in [...]

  50. It’s all about controlling the channel. It’s not that the content has no value now, it’s that there’s no way to protect the content. The best example I can think of to illustrate this point is with Real Estate listings. I know this because I’ve been recently looking at buying a house. If you go onto MLS.com, MLS.ca or a private sale website and you see all that fantastic information on there, you think, ‘Why do I need an agent? Everything I need is right here!’ Not exactly, the good content – the listings that don’t make it to the public site because they’re sold behind the scenes – are restricted in access to Real Estate Agnts who send controlled links to their buyers that expire after a week or two. Only Real Estate Agents get access to that info. You might think, well, once you have the listing, you could post it – no because that info changes almost daily – so once the link expires, you don’t know what’s happening behind the scenes. Thus, the content is of value and … it is protected. The same is true of music. It’s not that music has suddenly become without value it’s that there’s no way to protect it at the moment. You might say ‘Duh! Of course! Tell me something I don’t know. If the only way that the music industry will recover is if tighter constraints on musical content, how could that be achieved?’

    It seems impossible at the moment, but as ways to restrict and control access and distribute information become more accepted, it will get harder and harder to openly trade music. A recent example of this for me was of a television show I watch. A commercial during the show said ‘See all the old episodes on NBC.com’ You could go there and download them. However, if you go there and you weren’t using a US IP, you couldn’t download it. Sure, I could go online and look it up on a sharing network where some unscrupulous US person had uploaded it and then download it there, but the point is, that constraint never used to exist. If something on a Web site was there, I could download it from ANYWHERE. Now, they check where you live, and block you. Imagine they also check outbound traffic, so if you tried to upload a file to a site like torrentspy, they block you. Those constraints will grow.

    The transfer of files and what people do online will become more trackable. Actually, it already is pretty trackable, but it will become more acceptable. Just like in the old days – there never used to be *69 or call display. In the movies, you used to have to keep someone on the phone long enough for them to run a trace, but now you know who it is before you pick up the phone. Making phony phone calls is a lot tougher to do. Same will be true of transfering data. Quotas will kick in for large data transfers – some ISP’s already do charge for over a certain amount of data transfer per month. In future, you can imagine people will need to have to have licenses to move large volumes of data online and, if you don’t have one, they will look into what it is you’re moving and investigate.

    It’s sort of like tracking Grow Ops for drugs. They run heat vision from helicopters to monitor houses emitting large quantities of heat and then investigate to see if they’ve tampered with electricity meters and then investigate to see if they’re running hydroponic lamps to grow pot.

    Tracking volume by IP and things like DOI (digital object identifiers) and their distribution will be monitored and it will get tougher and tougher. There will always, of course, be a pirate networks, but the ability to track and administer control it will grow. As it does, the incentive to trade content illegally will diminish and the content will regain value. How do we know this? Simple economics! As long as something has value, which music does, somebody will find a way to make money on it. Count on it!

  51. [...] listings, again loading them into our memory slots so we can compare them and make our choice. As the business model for creating content erodes, and web entrepreneurs get better at recycling content, those who get the presentation and [...]

  52. [...] listings, again loading them into our memory slots so we can compare them and make our choice. As the business model for creating content erodes, and web entrepreneurs get better at recycling content, those who get the presentation and [...]

  53. [...] More evidence that Scott Karp is on the right track that content creation is no longer a business. [...]

  54. I for one am confident that content is not only a good business but a great business. The internet has yet to see that tremendous amout money that can be generated with content. The biggest problem the content ownwers have to face is piracy. I feel piracy is the reason for the lack of growth in the content delivery revenue model.

    Also the misunderstanding or lack knowledge of the customer’s needs or atleast the “we don’t care” attitude to understand what the customer wants are is the main reason piracy is here to stay.

    I have a relationship with a company in upstate NY that has what many feel will be the real world solution to on line piracy and when they release thier platform the content business will go through the roof. My thoughts for the entertainment industry, hold off on contracts with the wanna be solutions. Keep your eyes open for a company that will introduce themselves as mMedia. Then come back on and tell me that the content business is dead or dying.

    T

  55. [...] Link. [...]

  56. [...] Scott Karp asks: [...]

  57. [...] cartoonist who sometimes makes her living with her comics, and sometimes does not, told me that the Publishing 2.0 post that I linked to the other day depressed her. “I’m a content creator. If content [...]

  58. [...] Is Content Still A Business? » Publishing 2.0: It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer the same fate as music? There’s one critical commonality to what the Internet and digitization has done to all content that would support this theory: disaggregation [...]

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