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The medium is the message?


April 1, 2003
By Pulp & Paper Canada

Media consumption is red-hot and growing, but therein lies a curious dilemma; nobody is making any money! The reasons for this have been cited as an intensifying battle for consumer attention, piracy …

Media consumption is red-hot and growing, but therein lies a curious dilemma; nobody is making any money! The reasons for this have been cited as an intensifying battle for consumer attention, piracy that is destroying established business models, and the mismanagement of creativity in attempted adjustments to change. There are some messages here for how we may view ourselves — are we in the paper sector or the media sector? As the headline says maybe Marshall McLuhan’s famous 1960’s observation needs a change — the message is the message!

One of the many fall-outs from the booming IT-driven 90’s is the inability of the media sector to make profits. This is in spite of the fact that over the period 2000-2002 consumer spending on media products has grown by 7% annually [Veronis Suhler] and that the time spent consuming media in the US is 3% higher. Forecasts to 2006 are for 6% annual growth in consumer spending, with a further 4% more time spent consuming. Media, which includes everything from music, film, TV, sports, radio, Internet services, as well as newspapers and magazines, may be imagined as a fire hydrant, spewing out bytes for the consumer to access with a media choice. The hydrant pressure (total information volume) is increasing and the hose diameter (media choice) is getting wider. The consumer bathes in the flux of bytes, making media choices based on need and convenience. In short, media and entertainment are growth industries that are struggling to find the right (profitable) business model. No doubt about it, there is structural change afoot and in the future there will be other media options to further diversify consumer choices!

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Three structural explanations have been proposed (The Economist):

The consumer has more choices, which leads to an intensifying battle for the entertainment dollar. Consumers’ have shifted their time and spending budgets toward less on newspapers, magazines, books, recorded music, and more on video games, DVD’s, pay TV.

The spread of online piracy has particularly hit the music industry, but it is also touching newspapers and Hollywood. The problem is that new technology has made obsolete the old business models and new ones need to be devised. Furthermore, this dilemma for the entertainment business will not be solved by the legislation and consumption tax approach to retain the existing food-chain. TV, cablevision, and the videocassette did not kill the film industry; recordable DVD’s and file-swapping will not kill film and music.

The deepest explanation for media’s woes can be found in the distraction from its core competence of manufacturing something that people will pay for. The convergence strategy was flawed, consuming huge amounts of time and cash. The critical importance of content and its relationship to consumer attention has been largely ignored. Instant commercial returns were favored over long-term investment in content and business creativity.

Another trend of note is that not all consumers are cost minimizing and many will pay for the higher value “personal experience.” Live music, the theater (movie or stage) experience, live sports, reality TV, autographed books, the personal note, person-to-person meetings are examples of this. Recorded entertainment, like e-mail and conference calls is a lower value substitute that doesn’t work all of the time.

Why is this important?

Consumer attention is the most valued new commodity. Media ad spending per consumer hour viewed is highest for newspapers and magazines (Veronis Suhler). This indicates that the paper medium captures consumer attention and offers the best bang for the ad buck. The paper medium needs to exploit this “personal touch” attribute; the fire-hose of bytes offers a key to personalization. An example of this is the successful NewspaperDirect [see FutureViews Column for August 2001]. I can also imagine a personalized magazine that would be printed off the Internet.

Successful media companies who have generated profits through the last two years of downturn have successfully managed the tension between creative freedom and operational control. The future lies in devising a habitat in which creativity can flourish, yet within the requirements for tight operational constraints. Finding this balancing strategy is the competitive advantage.

Alan Procter is a senior consultant working with organizations to find creative solutions in a rapidly changing business environment. He can be reached at futureviews@alanprocter.com#text2#


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