Separation Anxiety

Capsule:  On the threshold of a likely consolidation of Comcast and NBCU, some members of the press are questioning the wisdom of another content and distribution alliance.  At the same time, one media company after another is increasing its Google dependence in hopes of being delivered to a virtual promised land.  And, giant Cisco Systems has formed a vertically integrated cloud consortium called the Virtual Computing Environment.  Why do we mind the consolidation of traditional media companies without giving online media combinations a second thought?  (http://intelligencesquaredus.org/)

Intelligence Squared US produces debates featuring luminaries from government, business, politics, non-profit and the media on issues of national interest.  Their October 27th debate presented arguments for and against a motion called "Good Riddance to Mainstream Media."  Award-winning new and old media journalists from WNYC/PRI, Politico, Vanity Fair, ABC News Nightline, the Nation, the New York Times and the San Francisco Examiner debated whether traditional media models should stay or go, culminating in an audience vote that bid them stay.

A debate on whether or not mainstream media is dying is like a debate on climate change.  It would be wacky to pit scientists and academics against one another on an issue that unites most of the scientific community.  Just imagine a televised debate called "Good Riddance Mother Earth."

Yet, we insist on conjuring up the death of newspapers, broadcast TV, radio, magazines and cable with fierce certainty, aided by precipitous declines in advertising revenue, especially the classified form, that have undermined traditional media revenue models.  When classified advertising began its move to superior online products, where were the replacement revenue plans in the newspaper business?  The classified shift didn't merit a debate; it merited a new plan, including the kinds of intelligent risks that building alternative revenue streams generally require.   Did newspapers refuse to see the inevitability of their own ill health by failing to recognize an urgent need to change direction?  Other than consolidating classified sales through newspaper consortia, not a lot was done to change the course of newspaper advertising revenue.

The same may be happening today with an insistence on over-fishing the online advertising revenue waters.  Some media thinkers are advocating increased commercial insertion inside lightly-loaded online TV content.  The argument for more advertising assumes a replacement need--in this case, the replacement of traditional TV broadcast and cable advertising with online TV content and advertising.  Did somebody die and nobody reported it?  Are broadcast and cable distribution companies going somewhere that will require online TV to assume complete ad revenue replacement responsibility?  We better hope not.

Instead of learning from what happened with the early stages of decline in classified newspaper revenue, some in the media seem intent on snuffing themselves out.  With classified, new superior advertising products and firms arose online that created an important intersection between local markets and aggregated online commerce communities.  Because online became better at telling the classified advertising story, it achieved a natural dominance.  The problem was newspapers' failure to respond with an alternative revenue and product plan.

This type of media failure has been widespread and oft-repeated.  When Google attained traction for its brilliant search business, the mainstream media either fawned--the "Google is God" school of media evangelism still practicing today--or yawned.  Again, print media took a special hit in retail advertising revenue as well as in the appropriation of their content resources.  Did anyone complain about the fact that there was an over-correlation towards Google's business model spreading like a contagion through the media advertising world?   Google couldn't say much--not while its stock price and user base were multiplying.  What was at the heart of the matter?  Traditional media's failure to see that an important part of its foundation was once again being overtaken by the online environment.

Google's mildly cranky book deal and its advocacy of Open ID as the single sign-on linking all US websites are two examples of traditional media challenges in the making; yet, there's a dearth of quality business and media reporting on where Google's giant ambitions might lead and which business segments it might overtake as an outcome.  Google continues to do what it's supposed to be doing: expanding, making money, hiring people, supporting its employee base, supporting other businesses and innovating in a way that will create new revenue lines for itself and others.  In the meantime, some players in traditional media are doing a lot of the same: expanding, making money, supporting their employee bases and supporting other businesses.  What very few in traditional media are doing is innovating and hiring people.

Some combination of masochism and market capitalization math mastery has resulted in a media mind that thinks growth is all about M&A activity that extracts surplus equity value from the markets.  Growth is about innovation that creates new or expanded revenue lines for a business as well as jobs.  The worry over Comcast and NBCU reconsolidating content and distribution has a serious basis in the historic challenges faced by Time Warner and AOL.  But the real issues inside the Time Warner AOL marriage came from a prolonged failure to seek true consolidated value amongst the diverse interests inside. It's unlikely that Comcast will make the same mistake given the chance. 

Media consolidation is inevitable, particularly in a tough economy that can only support a small number of leaders at the top.  Creative destruction is a part of creative business development, accelerated in the media because of its critical reliance on the latest technology for compounded efficiency and growth.  Neither of these inevitable forces presages the death of traditional media.  But traditional media can cause its own ill health by refusing to replace the segments of the business it has lost with new money-making initiatives (beyond rate increases.)  Over-consolidation is most dangerous when just being big seems like enough protection in a technology world that has started coming apart.

Consolidation isn't the problem.  Just like divorce, eventual corporate separation through spin-offs are inevitable aided by economic cycles.  As long as there are enough fractional new upstart alternatives to a fully consolidated media view, we won't wake up in an Orwellian media nightmare--all extreme progressive arguments to the contrary.  

The real insult to traditional media has been too much separation, beginning with superior online products that separated classified and retail advertising from print vehicles of great social value hard pressed to come up with revenue replacement products.  Superior online search has supplanted many traditional advertising forms, separating Madison Avenue from its wallet.  Urgent burdens sit on the media pressing the consolidation of traditional and new media businesses en route to new profit lines.  The first handful of traditional media companies that can produce new products that take the quality of traditional content and duplicate it through place-based traditional and mobile online distribution will change the trend.  The great challenge is to perfect addition by addition in an environment that seems to prefer addition by subtraction to the continued detriment of whole segments of the US economy.