Quality Stimulus

Capsule:  The media should announce its own DIY economic stimulus program to begin in 2010. The impetus?  Curbed regulation and improved commercial prospects at a crucial economic stage.  The benefits: becoming a true partner in US job creation, environmental policy, broadband and wireless expansion; and, potentially, a second life. 

BroadbandUSA
On the Media


Hundreds of US companies and institutions, from start-ups to the majors, have applied for Federal stimulus funding on media projects.  The likelihood that tax dollars flowing in the media's direction in this way will create jobs on a meaningful scale, improve the environment, expand the US economy and lead to sustainable media innovation is slim.  At best, the Obama Administration will have signaled its desire for strong public/private partnerships in US media regulation and hoped-for expansion: a laudable and, let's hope, a good start.


Given that the Federal stimulus program is not yet fully funded--when one considers all of the other uses of taxpayer-sourced money in our new public/private blood flow--there may be a better way.  It's too late to change our stimulus course; but it could be meaningful if private media companies became true partners in achieving the best combined intentions of their businesses and their government.  


Why should the media take on its own transformation as a DIY-project?  Because most public and private leaders don't really understand the interplay between distribution and content.  Most of the media doesn't understand the media.  Why should the government?


On this week's On the Media WNYC-FM broadcast/podcast, Wired's Dan Roth was showcased for his thesis that the cable industry would soon be overtaken by new media forms like Netflix.  Dan Roth is a frequent OTM subject as he routinely yearns for media disruption in the form of the self-inflicted detonation of imaginatively-placed traditional distribution bombs--mainly inside cable and the telcos.


Netflix sent its chief product officer to On the Media to comment on its recent content deal with cable-and-satellite movie network Starz.  The Starz-Netflix deal blew a door through many of the movie rights management windows that make media money.  Netflix and Starz are new partners in an alternative distribution deal for Starz-licensed content through Netflix distribution. Netflix minimizes the potential impact of the deal; rightly so, given the many hurdles it will have to jump from idea to sustainable execution.  But the idea of the deal is brilliant, temporarily disrupting the master deal-makers of cable, satellite, broadcast, alternative retail and Hollywood and signaling a Netflix intention to grow.


The fact that Netflix is most constant as a distribution hybrid of the video rental business, online services, FedEx and a Playstation game controller, super-charged by the happy accident of a near-term non-exclusive appropriation of Starz' movie content, makes it seem more of a new-fangled Blockbuster online model than new media.  But a lot of media disruption is birthed through similar happy accidents.  Traditional telcos grumbled quietly about Vonage--if they really considered the Vonage potential, they would have worked to buy it or block it--until the Vonage concept morphed into cable broadband voice.  The lesson?  Don't minimize what you don't understand.


What do US media leaders need to understand now?  Federal tax dollars have gone begging for a sustainable structure that will push the economy by pushing money through their businesses.  If US media companies become partners in solving public sector woes--from sluggish media equity values to limited infrastructure support for consumers and small businesses--they can help build new versions of themselves to substantial selfish and selfless advantage.


Here are five ideas for a quality 2010 stimulus plan from the private media sector.


Fix the advertising business.  Really.  Fix the advertising business as if you were rethinking the US highway system, along with state and local bridges and roads.  


Advertising is your transportation infrastructure: it's how ideas, people and companies get around.  Media content businesses know this, but seem unwilling to take risks that will establish new media advertising values.  Content should take a leadership role in creating the rationale for viewers and users to opt-in to targeted advertising for the products they want and are willing to learn about.  Distribution should put its substantial data to intelligent use collaborating with content partners and advertisers.  Distribution should also invest substantially in its ad-serving infrastructure on everything from TV spots--which haven't moved progressively forward since the real Mad Men--to broadband video, VOD, display and search.  Interactive advertising looks primitive because few distributors want to invest in winning alternatives.  Real media visionaries should chart and invest in the infrastructure ROI of the new media world.


Build and sell better TV and online navigation.  Content and distribution can find the right cooperative economics to support cross-media navigation for TV, broadband and wireless services.  


If customers are willing to ask for the advertising and content they want to watch--which means opting into some level of interactive audience measurement, like Tivo, that facilitates content and ad serving based on actual behavior--the media business can build a new GPS for mass and personal media.  Online search already does this across hundreds of retail sites.  The technology exists to make this happen yesterday.  The controls on several potentially winning versions of new media GPS are coming from a content and distribution leadership unwilling to risk what it thinks it already owns even as media economics soften.


Make products that make the environment better.  Even though media invented the rerun, telco, cable and satellite companies commission, make and resell products that most often end up outside the recycling bin.  Given its pervasive place-based presence at home and at work, it's time for the media to make an environmental difference.


Wired and wireless phone systems, cable, broadcast and satellite hardware are the big infrastructure costs that insulate the media from competition; but they also contribute to environmental deterioration.  Cell phones, batteries, transmitters, computers, receivers, fiber integration hardware, modems, screens--virtually all of the B2B and B2C products making the media tick make the environment unsustainable.  Distribution runs trucks that install, disconnect and repair media plant.  It's time to think about media models in terms of what the combined content and distribution businesses can do to promote sustainability.  A good start: using home and business-based cable, telco and satellite systems for energy measurement and integration; home health care monitoring and synthesis with private and public health care systems; retail sales, order management and fulfillment; video-based teleconferencing as a supplement to travel; home and business monitoring while we're away. 


Be the bank.   You can't sign up for a media subscription service without connecting your entire home or business to the cable, telco or satellite infrastructure, making your personal economy into a distributed piece of the media economy.  New wireless and satellite subscriptions require Social Security numbers, driver's license copies and, only where mobile, credit cards.  They already know where you live; it's time for distribution companies to turn their considerable knowledge about collections economics into bankable media securities that we can all enjoy.


Distribution companies, led by the cable industry, manage their bad debt with an acumen banks sorely lacked in the economic collapse of the last two years.  While competition has strengthened and the economy weakened, distribution bad debt and collections management has traded off some standards for growth, but only slightly so.  The media communications industry has built a stronger economic relationship out of subscription businesses than even it needs.   If the media became the bank--like mobile technology is trying to invent a new credit/debit capability into its wireless applications--homes and businesses could buy and see home delivery of more than content.  Rather than trading off collection standards, distribution might trade investments in new retail partnerships for growth of the best kind: customer loyalty, product differentiation and real contributions to personal, local and national economic stability.


Invest in broadband.   Media investments in broadband are greatest amongst wired and wireless distribution, where extending plant and improving quality of service requires serious capital and intellectual investment.  Still, distribution media profit enormously from broadband subscriptions and should reinvest in service even more equitably.


This week, new FCC head Julius Genachowski announced the strengthening of Federal broadband regulatory principles into rules, the prohibition of focused pre-emption of broadband content, the inclusion of wireless in broadband regulation and new transparency requirements that will ask distribution businesses to share their network management policies in running US broadband networks.  Rather than seeing broadband as a business, Genachowski's remarks leaned towards the idealistic view that purity should be the only filtered result of broadband regulatory policy in this best of all possible worlds.  It's also possible that truly big distribution, content and retail businesses like Google, eBay, Amazon and others were the utopia and regulation builders behind-the-scenes.


What if cable and telco distribution companies asked for a regulatory standard that separated public benefits into two categories: growth in terms of plant capacity and expansion; and, competitive choice.  For those distributors who can demonstrate that they are continually reinvesting in capacity expansion as well as plant expansion to their aggregate subscriber base and to under-served consumers and institutions, network management policy review at the Federal level should be light.  It should be light because the larger public good has been met and it is a public and private cost and distraction to increase regulation outside of clear standards for the larger public good.


On the issue of promoting rather than pre-empting competitive choice, there's already a big US legal weapons chest to draw from for violations.  This issue is well-protected already and only a light, judicious hand wielding a potentially huge FCC regulatory stick is required.  Major distributors should agree not to limit the services or the content of competitors.  On the way to such an agreement, distribution should help define who the competition is and who it is not yet.  If the media fails to play an active partnership role in the formation of FCC rules, it risks nebulous definitions of potential competition that will tax consumers, businesses and governments at the worst of recent times.


Federal stimulus funds need a village stronger than what was hastily crafted in the early months of 2009.  Private industry has already forgotten the media lessons that the government has yet to learn.  The problem: we've got an expansive menu of stimulus funds without a core mission.  Happily, the media can supply a mission and a narrative if it's willing to draw its ambitions from within the context of broader public benefits as well as customer and business growth.   

I C U

Capsule:  What gives new media celebrity power?  Is it novelty or perceived technological complexity?  Are algorithms sexier than fiber and antennas?  As new media forms emerge, we worship them until they're understood and fully exploited.  To ensure the healthiest balance between new media and the more traditional foundations on which they're built, the FCC may want to reaffirm its own transparency on the new media power exchange. 

Advertising Age


In New York this week amidst the UN meetings, President Obama's on-site presence, Letterman's coup and the balled-up NYC traffic (especially around the UN, the Waldorf and Convivio,) Advertising Week hosted a panel, moderated by editor Abbey Klaassen, on building an online advertising "bill of rights."

At the center of the discussion were Google's behaviors and policies as one of the world's most powerful international ad sales and serving platforms.  (This blog is written on Google's Blogspot/Blogger.com platform, so please let me know if the blog disappears from your screen in mid-sentence at any point from here on.)

Harvard Business School professor Benjamin Edelman--a commercially independent voice by definition, except for HBS's own commercial power--was elected to the job of describing the market concern.  Edelman summed up Google's indiscretions with an anecdote from Australia, where he recently read Google's Ad Sense terms and conditions for Australian advertisers and was alarmed to note that the advertisers' only complaint route was via certified letter to Google's Dublin, Ireland office from which Google would respond via e-mail with the authoritative complaint resolution.  While this seems ad-senseless, it isn't the strongest example of market power abuse. 

At the same time in the same week, President Obama's new FCC head Julius Genachowski described in a speech to the Brookings Institution his intention to strengthen the FCC's net neutrality principles by codifying them into rules.  Genachowski added two new principles to the government's net neutrality stance: one that would specifically forbid targeted content pre-emption by broadband and wireless distributors (what's not to like in concept?); and, one that would require distributors to provide "transparency" to their network management policies (okay....)

Genachowski's comments have been greeted so far by a large media sigh--not quite out of boredom, but media policy this week has been understandably upstaged by President and Mrs. Obama, David Letterman, Secretary of State Clinton, the new season of Curb Your Enthusiasm, many and various global Heads of State and NYC's restaurants (including Wall Street Village macher-haunt Il Mulino, where Presidents Obama and Clinton ate earlier this month.)  That's a shame because there's a lot to think about in the organic chemistry behind the FCC's regulatory desires.

WNYC-FM's Brian Lehrer responsibly covered Genachowski's remarks this week in a short piece, including a call-in from a University of Virginia professor who painstakingly laid out the content position, revering every content form from tiny websites and blogs to Google and Yahoo, and representing his distaste for distribution by making reference to how companies like Verizon, AT&T, Comcast and Time Warner would "extort as much money as possible from consumers if allowed."  Lehrer, liberal but usually sharp and often fair-minded, let the characterization go as common wisdom.

Is this media topic too hard for the media to understand?  Is the opacity of the screen around it intensified because the issue is a new media issue and the new news only kicks the tires on its older vehicles?  Is the media carelessly looking away from the complexity of what's at stake because this is what we all do and have done until we're at the cliff?  No one wanted to know from a collateralized debt obligation until these complex instruments were made as sexy as Enron's market timing by a major market collapse.

When grouping the media into content and distribution, one can't err seeing broadcasting and cable, satellite and the telcos as distribution.  And, of course, Google is distribution too--ingenious but endangered distribution that doesn't own its own distribution pipes but benefits economically for each capital upgrade that makes US broadband and wireless service better, wider, clearer, faster.  In American media, the largest businesses are distribution businesses, reaching customers with advertising and subscribers with services and often monthly bills.  Distribution brings in the money that forms the economic foundation for content.  It also provides the technological and capital barriers to entry that give media businesses room to grow before being overtaken by each other and the next big thing.

Content is a business because of distribution.  If it weren't for distribution, content would be an idea fairly early on in the media's evolutionary course.  We're all carrying books (content) around in our heads that can only come out on paper or a screen (distribution.) 

Content is the sexy sum of the distributed ideas inside of broadcasting and film, cable and satellite networks, phone conversations and texts, news and online games.  While distribution wouldn't have ideas or stories to distribute without content, distribution technology, exemplified by voice and e-mail, could still connect individuals in a personally powerful way.  Distribution is made into a vastly more powerful industry by content--it was imagined with content in mind--as individuals group their thoughts into content businesses based on distribution.

Google is a distribution business that promises to do no harm by editing or influencing our ideas--although by summarizing the news, as an important example of our ideas, it edits and influences our collective thinking.  Google's pure genius began in its brand promise to redistribute internet content according to how often people wanted to see that content.  Today, Google redistributes content in order to distribute advertising and this is how it can afford to redistribute and host other content and communication as effectively as it does.  The money-maker inside Google is the search business--by its own claims, a distribution business powered by the public and the advertisers who want to sell us ideas and things.

Google also sets and times advertising rates.  By providing a utility search distribution service that is better than the competition, Google dominates in audience numbers and now runs the tables on online advertising and, as media content businesses have been drawn to internet distribution, just about all advertising.  Google is king of the hill in the media world because of its technological innovation, building on the internet and the broadband networks that bring it to our homes as a distribution source.  Google redefines internet content by combining it with an ad serving mechanism better than the printing press, the broadcast tower or the cable network operations center.

According to the FCC, Google is one powerful example of a company that would be disadvantaged by media distributors if the FCC allowed it.  There is a quoted fear that AT&T, Verizon, Comcast and Time Warner in their collective network management policies might interfere with Google's efficiency.  This is hard to imagine given the enormous value Google provides as global navigation for broadband services.  Google has preferred search contracts with many of the major distributors, acknowledging an interdependence that is unlikely to be exploited.


The few examples that have been shared of the FCC's focused pre-emption concerns in real life have not involved cable or telcos messing with Google or any search engine.  They have involved concerns over packet-priority that might disadvantage free internet phone service Skype and low-cost voice competitor Vonage.   The concern builds on cable and telcos who give their voice-over-cable/fiber services dedicated routes, and therefore a quality advantage, on their networks to support their business. It's logical that distribution companies will pay to maintain the quality of their own vertically integrated media services on their own networks.  How much packet priorities disturb the development of new businesses must be examined according to each business case, without assuming that the distribution "extorters" are taking every advantage without giving many advantages back to the new products that bring both media players their business.


The FCC has also voiced concern over distributors' capacity shaping on live broadband traffic that can slow down peer-to-peer file sharing.  Aggressive file sharing can dominate a network's capacity and no cable or telco platform has the infinite capacity today to operate without rules and restrictions.  Peer-to-peer file sharing can be highly desirable for consumers; but it needs to feed and clothe itself as a commercial or institutional product if it's going to buy an adult ticket on the "information super-highway", as do we all.

Peer-to-peer products can be highly commercial--in the sense of a world-wide gaming application that serves a huge, addicted audience while challenging the capacities of the internet, the broadband networks that distribute it and the wallets of the players in the game; but the public benefits of these examples are hard to imagine in conflict with smoothly functioning US broadband and wireless networks continuing to appreciate in quality and capacity.


Is it possible that the concerns Google, eBay, Amazon and others have brought to the FCC are more about future products than the media world today?  Google search adds great value to cable and telco broadband services, as do the retail aggregations of eBay and Amazon.  Is the worry that each of these companies--part distribution and part content--wants to maintain ultimate flexibility to drive its business to the greatest profit and would like to have a government partner who can limit the power of big distribution to compete with them?  This was how AT&T overtook other message-carrying businesses in the last century; it struck a public/private partnership that brought phone lines to underpopulated markets and locked in payback levers on taxes and international tariffs (as well as government access to the phone systems and their calls as required) for the good of the country. 


What good will the FCC serve with its new transparency requirement? If the rule-making goes no farther than to say that major distribution companies must comply with general rules regarding how they manage network traffic and submit their policies and practices to regular review against these rules, the FCC may birth useful regulation that can achieve its good intention without falling off the other side of the horse in favor of more nebulous and future-oriented new media dreams.  


All around, it will be interesting to see what the government means when it speaks about commercial transparency in practice--in media, banking, car-making, environmental protection.  Will the burden be on the private sector to make sure regulatory agencies see all there is to see inside their business and technical considerations?  How practical will that be?  Or might the government lead with a vision of how it would like to see excess contained and institutional needs served without assaulting those businesses that have served the country well--well enough to have attained the adult status of paying their own way, nurturing new younger media forms and not requiring constant monitoring for fear of a balance shift away from dreams and toward a more concrete reality. 

Net Profits

Capsule:  What will the Obama Administration do to uphold their campaign commitment to the opaque ideal of "net neutrality?"  They should invite real value creation and regeneration in the media.  They should not let big ideas without clear plans carry the day. (http://www.openinternet.gov/.)

The Obama Administration will define its communications legacy on wired and wireless web regulation with a September 21st speech to the Brookings Institution.  Julius Genachowski, Obama's head of the FCC, will outline the core principles of planned regulation designed to attain the best standards of US web content availability, presentation and benign pre-emption. 


Genachowski's remarks will walk the line between promoting net neutrality and avoiding the destruction of economic value inside media distribution.  He will also add a regulatory principle to the FCC's current net neutrality crop--a fifth principle designed to ensure that media distribution doesn't target specific media content (i.e., specific competitive web sites or products) for pre-emption without regulatory scrutiny and legal remedies.


The first four principles of web regulation, upheld by the Bush administration, gave media distribution enough cover to run its business and to shape capacity on its networks according to its business plans without running afoul of the government, generating excessive lawsuits or drawing much fire from free speech activists.  Let's hope the Obama administration follows suit--which means listening to the telecom and cable "suits" who have been persuasive on their economic case over the last eight years.  At least, in Genachowski's attempts to demonstrate this Administration's knowledge of the power of media distribution, let's hope he does no harm.


Big distribution has a lot at stake in this debate.  Telecom giants Verizon and AT&T have bet their second lives on maintaining some of the gatekeeping capacity they've enjoyed in their first.  The FCC under President Bush was a remarkably sympathetic listener to all things telecom, to the point of angering newer distribution giants like cable when it came to calling the coin tosses between these two increasingly co-dependent industries.  On this issue, telecom and cable are thinking mostly with the same brain nourished by a revenue blood supply they compete bitterly with one another to control.  Whichever industry prevails, Genachowski should be the neutral best friend.


Current examples of how cable and telecom distribution think about net neutrality (an evolution in terms from the earlier, more threatening "open access" idea pitched through the Clinton FCC) are mostly liberal and non-threatening, except when a little easily reconsidered muscle-flexing and bat-swinging has blipped (and disappeared) into the atmosphere.  Comcast, Time Warner Cable, Verizon and AT&T run distribution networks that carry the nation's internet traffic with increasing efficiency and gradually improving service quality with few focused attempts at competitive pre-emption.


But big distribution does categorically, geographically and mathematically pre-empt certain types of internet use without clearly aiming at specific brands, according to self-protective standards that keep the US media from being brought to its knees.  Such pre-emption is allowed under the current regulatory structure because it links to the actual traffic capacities of the telecom and cable platforms, built by the distributor, financed by the banks and equity holders and paying their tribute to the government in the form of franchise fees and taxes.


The AOL Time Warner merger, mischievously reverberating through the last 20+ years, was a vivid example of mass value destruction brought about by the commercial sector failing to think through necessary network self-protection and future expansion.  AOL ran a high capacity server platform that served up a major consumer brand with few cares and little progressive sense about where dial-up internet as a distribution form was headed.  An early major crash of AOL's server capacities that was well covered in the media signaled the company's lack of necessary respect for distribution and the need to refuel and rebuild its engines regularly.  By the time AOL overtook Time Warner, little had changed in the brand's preference for sexy content and marketing without a viable distribution or economic plan.   We know the carnage that resulted, particularly for share-holders. 


And we now know even better some of the rotten fruits of creative destruction in the marketplace.  Given the inter-dependencies amongst even the most bitter corporate rivals and international commercial structures, letting big failures occur through free market worship or regulatory mis-steps invites massive consequences that can be worse than unintended.  They can be massively lethal to businesses and individuals with known and unknown correlations.


High-performing distribution companies will continue to shape the use of their platforms according to what they can handle and what their customers require. The government shouldn't want a seat at the network management table that decides which capacities should be built, maintained or reserved for future use.  Private enterprise has moved towards profitable bandwidth growth and increasing broadband speeds on its own.  If the government wants to contract for faster wired and wireless networks, it can show the way.  But it can't force the way in this economy without risking another crash.


At the same time, high-performing and enormously profitable media distributors need to show net neutrality good faith while growing net profits.  The idea of setting premium pricing plans on high utilization web behaviors has creative potential--provided it is creative product expansion that the media pursues.  If premium pricing plans are administered as a forced reshaping of consumer broadband pricing to even out product losses in wired voice or TV, the heavy hand of an activist and web-savvy (without being distribution-competent) government may be felt with unintended destruction in its wake. 


Pre-emptively, it's time once again for vertical integration in the media--virtual and real.  Distribution companies have to care about the development and protection of new media products and content, which means they have to be allowed new ways to profit from them.  Content companies have to understand and pay real tribute to the distribution systems that provide life support.  And the government has to let it all happen in the most commercially and intellectually progressive way possible, using its knowledge of how technology and business work to encourage their growth and independence. 

Taking Stock

Capsule:  How big will media losses get--reflected in declining advertising rates, lost equity value, wealth destruction and reduced creative adaptation--before content and distribution mature?  Media industry executives need to focus their substantial smarts, their love and their money on a new mix of experience and reinvention. 

(http://www.npr.org/templates/story/story.php?storyId=112861651 ;
http://www.telegraph.co.uk/news/worldnews/northamerica/usa/6173399/Charles-Darwin-film-too-controversial-for-religious-America.html)

To mark this week's anniversary of the 2008 Lehman Brothers collapse, NPR reporter John Ydstie summed up the past year's dollar damages, helped by former Fed Vice Chairman and Princeton Economist Alan Blinder.

The range of ill effects--including US government losses on Fannie Mae, Freddie Mac and AIG, as well as loans to the auto industry--started at $600 billion, moving to several trillion dollars when federal stimulus spending, increased unemployment and welfare benefits were added.  Not included was the massive value destruction suffered by the US economy in yesterday's dollars and in tomorrow's prospects.  Also mostly outside the tab range were whatever future effects we might anticipate from the Fed and FDIC take-over spending.  Small comfort: Blinder believes that Fed and FDIC spending will be recouped through a well-managed monetary and banking system returned to pre-Faustian proportions over time. 

So what's it to you?  In real terms, your equity-holdings are diminished; you may have lost your job; and, your future employment and retirement prospects have dimmed.   If you work in the finance industry, you're twice as likely as your neighbors to be out of work; in the auto industry, three times.   If you're a trained financial executive, your world has changed dramatically and the likelihood that you'll be back in a saddle you recognize anytime soon is slim.

If you work in the media business, your saddle is likely the same but your horse has morphed.  Content and distribution companies have lost close to $50 billion in market capitalization because of the overall market faint as well as real declines in advertising rates.  Some of the ad declines are directly related to reduced auto industry spending.  But some of the decline has occurred because media companies were caught unaware by online search, news and retail competition that ate everybody's lunch (including the Apple) beginning in 2005.

Search is replicable.  The most lucrative searchers are internet shoppers who'll keep searching for new uses of their time and money.  Google, the media king in market capitalization, product efficiency and worldwide usage, is seeing its advertising rates enter their own slow growth phase and may be capped in some categories.  Yahoo Microsoft finally got its merged search act together in time for a mature market without great expectations.  Facebook announced this week it was heading for a profit on advertising volume pumped by 300 million worldwide users searching for a "friend" (and finding political and brand advertising.) 

The maturity of search doesn't mean the end anymore than the maturity of other big distribution businesses--newspapers, magazines, broadcasting, cable and satellite--did from the mid-70's through 2007.  Maturity in even a slow-growing economy (like we've seen several times over the last 30 years) can mean content and distribution expansion with new players entering the field and mature players expanding their revenue-yielding products--think Mac, Apple and iPhone--with reinvested profits and borrowed capital.

Unfortunately, capital is in short supply in this Lehman anniversary year--particularly so in the US.  Money is moving, but it's moving in the mid-range where magic is generally scarce because the scale of big companies and the adventurism of start-ups are both hard to fund.  Are we making the media harder to fund because ideas are in short supply?

Today's crop of US C-level media executives is smarter and more experienced than any other in the mass media's short history; and that, like the ingenious genius of the financial and insurance whiz kids and eminence grises, may be just the problem.  Sometimes, the smarter you get, the easier it is to talk yourself into an old idea, particularly a sure bet--the king of idea efficiency.  The financial services business surrounded itself with "sure bets"--building derivatives onto traditional wins like a stairway to heaven.

What the media needs in addition to sure bets is some magical thinking.  A few original, even premature ideas--like Facebook was until this week and Twitter may be for some time to come--should sit next to the smart repetition and multiplier math of today's media management.  Examples abound. 

The brilliant and polished Dan Hesse, CEO of Sprint Nextel, was interviewed last week on PBS by Charlie Rose in a bipolar double-header with the completely magical E.L. Doctorow. 

Doctorow spoke about finishing his latest book inspired by opaque 20th century wanderers, a haunting first sentence and a cracked (meaning indulged) bottle of vodka.  In contrast, Hesse was so articulate he seemed smarter than the substance of his Sprint strategy, losing signal clarity in all the "G"'s inside his "4G" vision.  They were each as smart as hell and lost in translation--which works for Doctorow as long as our imaginations and Amazon are working for him too.  For Hesse, the brilliance of a break-away idea sharpened by the sale and supported by a sure bet strategy is essential.

AMC's Mad Men was an impossible full court shot that went in and has become the darling of the sure-bet-loving content business for the last two years.  If AMC's management hadn't been so smart and marketing-focused with its original products, the reinvention wouldn't have worked.  AMC was smartest in conceding what wasn't working, changing over to a new brand based on its Mad Men execution.  Buoyed by successful reinvention, AMC works now, a more mature and better-looking version of its original self built through original programming as well as distribution leverage and deal-making.

Reconstructing some of the media value lost in this crash year may require rethinking risk.  Taking on reinvestment opportunities and collaborative growth in the face of our hyper-rational risk-aversion will be tough.  A US-gazing headline from the UK in this week's Daily Telegraph seems lifted as a caution from the past: an award-winning film about Charles Darwin, that opened the Toronto film festival and has been feted by critics, can't find a US distributor--perhaps for fear of antagonizing politically vocal creationists?  As much as we'd like to yell "You Lie!" at the Telegraph's speculation, it's possible that we've lost our wits and some courage in service to our careful repetition of the past.

History can't keep repeating itself exactly if we're using technology and the intelligence of the market to our best advantage.  Whether through revolution or evolution, things change.  Since the economic crash, beyond a few highly concentrated examples, the media hasn't demonstrated enough of the creative adaptations that will power us into a healthy future.  Inevitably, this repetition compulsion will change if big content and distribution continue to suffer individual and corporate losses.  But how much will we have lost in the meantime?

Data Mine

Capsule:  If a tree falls in the forest, who owns the data that records when and where it fell?  No one knows--there are too many variables--and major fear factors are discouraging media companies from making the claims necessary to build new data-related products.  Concerns about the perils of media data mining are holding back a potent video evolution, from our wired TV systems to the internet.  It's time to move forward, before advertising challenges wreak more havoc and take more money out of the media. (www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=113863)

Whole industries were taken out and recast in the economic collapse of 2007-2009, including financial services, the auto business and, to a smaller degree, the advertising business.  Financial services are looking healthier, but they're still on a potent Fed drip, as is the auto industry.  Like doctors attending to seriously injured patients on morphine, the government is trying to find the best way to help the banks and the car-makers heal, after which they'll disconnect (we hope) and American industry and consumers will weather the withdrawal symptoms that will surely follow. 

Meantime, no one is rushing in to medicate the media.  Advertising has also crashed and has taken some of America's proudest media brands on a non-stop thrill-ride without safety belts, throwing a few newspapers from the train and leaving many other media properties, including two out of the three major TV broadcast networks, looking green--and, not in a good way.

If anyone had told us in the balmy days of 2006 what was ahead, we wouldn't have bought it--even though we were apparently buying everying else.  What ensued were two straight years of global economic disaster.  Are we done yet?  We'll see. 

These were also the years of the NebuAd and Phorm controversies--one, here in the US, and the other, in the UK.  Both NebuAd and Phorm were and are start-up software and network management systems built to place advertising online for wired customers targeted to advertisers' specific interests based on consumers' online surfing behaviors.   Congress and the FCC threatened to investigate NebuAd's privacy architecture, following a west-coast cable broadband test.  US citizen activists protested in advance and the cable company testing NebuAd backed away for now. 

In the UK, Ofcom, the official government media regulator, initiated a major review that determined that Phorm's "anonymized" data mining should be permitted; but, like their US brethren, UK-based privacy activists were vocal and persistent in descrying commercial use of surfing data.  Neither targeted online advertising effort has progressed in the US or the EU.

All the while, cable companies have been trying to figure out how to mine and use their TV viewing and broadband data.  The arrival of digital TV, complete with a significant share of two-way set-top box real estate, makes it possible for cable to use information about its customers' viewing preferences in the ordinary course of business, as long as that data is encrypted, not personally identifiable, secure from mischievous hackers and employees and not sold to third parties.  If a cable company is interested in selling data for any reason or in reviewing data in anything other than an anonymous form in the ordinary course of business, it must ask its customers to opt-in to the process regularly and explain what its data mining process will be as well as its target yield.

Satellite companies have been progressive in some ways with data collection through a small percentage of their set-top box subscriber base, but have not expended a great deal of capital on either this or their virtual two-way advertising capabilities, despite some impressive pilot projects.  The telcos have built two different very advanced data collection products--one that operates just like a cable system and one that operates like a complex amalgam of online services that we all know by now follows us everywhere, stores everything, and then sits paralyzed trying to figure out what to do with a now open data mine. 

And Tivo, always ahead of the crowd but short on cash--the quintessential American company, as it turns out--has a method and may have the beginnings of a cure to the data mining madness.  Like Amazon, Tivo has long stored and used its customers' viewing data, playing back suggested viewing choices based on what customers seem to like.  In other words, Tivo watches what you watch in order to help you get a better TV experience.  Shouldn't the cable, satellite and telecom industries be doing the same thing?

The ultimate TV GPS will help customers understand what's on their wired systems and what can complement those viewing choices on the internet from local, national and global sources.  In order to bring TV and internet viewers to their destination--better TV?--TV GPS will have to start by fixing on where its viewers are.  In the mobile world, that means literally identifying the physical location of a cell phone.  In the wired world, fixing on a viewer's starting point will start at home.

Wired systems already have a plethora of data sources identifying the media habits inside a house.  Pegging people inside the house is a different challenge, but our home sweet homes and all of the modems inside, including those inside of digital set-top boxes, are well known.  Some cable distributors have begun to update their data operations with linked data on cable modems and set-top boxes that can actually be "read" in order to enable customers to move video content from their PC screen to their TV screen and back.  The TV Everywhere concept will push most of the cable (and therefore the telco TV) world in this direction.

Why can't this data be mined for better navigation?  If it's possible to maintain, secure and encrypt the data bases that power suggestion engines, it should be possible to use mined data without falling too far afield of regulatory intention when the customer is doing the mining.   Cable companies have a propitious opportunity that could be a game-changer.  They also have a logical interest in offering navigation that, like Tivo, takes you to familiar places based on where you've been for a fee.  Think of cable TV GPS like a for-real TV Guide.  You pay the guide or, at least, tip him; why wouldn't you pay your distribution company for making sense of the media wilderness?

Up until this point, cable bandwidth concerns and the public equity markets' over-reliance on evaluating the cable industry according to its ability to reduce its natural (and winning) capital-intensive spending have held true TV GPS at bay.  Polling two-way set-top boxes for viewing data that can then be mined and played back as viewing suggestions is an elaborate and network-intensive enterprise.  It costs a lot of time and money to do on the cable platform itself. 

But, there are ways to combine network-based navigation and targeted promotion on a phased basis without breaking the cable bank.  All of the cable distribution majors have some version of a network-based navigation system in the works and in the field.  Of these, there isn't one yet that isn't design-constrained by a fear of digital rights management lawsuits, lost advertising monetization opportunities or inflamed federal regulators.  In other words, no one is designing TV Google...yet.

While big distribution (including alternative distribution companies like navigator Tivo) and big content keep their eyes and wallets on the game of "this is mine and that's yours until it can be mine too," some company or distribution-related industry will draw a simple conclusion: as long as the customer owns their own data and pays for a service that helps them use it to learn more and watch more and buy more, there are fewer risks in data mining than may meet the eye. 

The far worse risk of watching and waiting rather than improving content and advertising could precipitate another media storm enabled by the lack of a floor under TV advertising rates and its likely next effects on big content.  The cable content players have seen advertising revenue improve at the expense of their broadcast predecessors.  Over-confidence is unlikely to be rewarded anytime soon.   Media would be wise to get recession-proofed with new products that support its economic evolution as we all wait for the end of the recession itself. 

Back to School

Capsule:  In an environment where traditional business models are faltering, can partnerships between old and new media create the products and profitable growth schemes that last?  With all of our media choices, integrated products of real value in a changed economic landscape will be hard to build and, without collaboration, harder to sustain.

The Economist


It's back to school time.  The air is crisp.  Traffic swells.  Jay Leno debuts at 10 pm and we're in bed by 11.  Weary of the Groundhog Days of politics and the economy, we turn to the gym, football and the new TV season.  Even HBO's got something new to watch, proving that, despite its marketing slogan, it's still TV.


What will our kids do while we watch TV with our laptops?  They'll decline the shared experience of series debuts in favor of watching what they want how they want.  They'll still be susceptible to TV brands, especially those recommended by their friends, but since their methods of consumption are different, they'll speed through thousands of ads without remembering what they've seen.  They'll clock hours of broadband and mobile time in pursuit of connecting to friends, distraction, entertainment, information and their studies.  They'll be drawn to status, the environment and the edge.  And they'll be agnostic to economics.


Distribution media don't have an answer for the future when our kids become the buying public.  In telecom, texting only takes you so far and games economics while promising are still immature.  In cable and satellite, reliance on multiple TV screens in the home along with one wirelessly expanded internet connection is the business foundation.  In a third of cable households, the monthly rate also depends on value-losing wired voice.  In telecom households, wired voice is critical despite its increasing obsolescence.


For cable, satellite and the telcos, adding more looks like it means more TV choices of narrower or duplicative value since virtually everything we want to spend hours watching is already there.  For cable and telecom, adding more broadband speed is costly, as is raising network performance standards to take into account increasing wired and wireless consumption.  


More broadband speed is also an unmetered utility play without brand tethers to its biggest consumers.  The broad-brands to which our kids are loyal are the networks that seem to stream free from their laptops and mobile phones.  How will we create revenue-generating relationships with generations who believe they're entitled to everything of value for free?


The cable industry has a few pregnant options that may support the next generation of customers and management.  All of these options compete aggressively with free cash flow generation which secures virtual and sometimes real points on stock value.   The cable industry suffers because much of its amazing recent revenue and cash flow growth from diversifying into broadband and wired voice media was inappropriately discounted by an investment community that devalued cable innovation, preferring reduced capital expense.  


Bundled cable product growth also hit its peak when the economy was going into decline.  Bad timing is tough; cable's in great company, though, and that can mean business development opportunity.  Collaboration may become a real second-life for a non-collaborative industry that needs to engineer a few strategic grand slams in the next five years.


In addition to money and partners, investment in the next big cable growth opportunity will require an increasingly youthful fascination with technology as we age.  A few promising notes: inviting customers to opt into their own advertising choices; bundling eco-friendly and health-conscious new products that support customers at home and when mobile (including enhanced commerce and smart energy management;) enhanced communication as immersive entertainment, including interactive HD and 3D on TV, games and video conferences; and, enhanced integrated video and broadband GPS (meaning navigation and real GPS) on TV, the PC and mobile.  


Each of these options will require a deeper product bundling of content and distribution than we've seen in the media to date.  Business models will change as the media invests in new products that offer entertainment and communication, as well as meaningful personal engagement with global communities and ideas, breaking through company walls by merging distribution and content. 


Stepping through the choices: inviting customers to choose at least some of their own ads is fighting fire with fire following big advertising's decline based on the Google-power that overtook it.  Google is a massively efficient advertising network that sets the prices for media advertising at a value-crushing level for less efficient media.  Offering customers some control over the ads they see on TV, broadband and mobile simulates search.  It also invents a new value for a generation for whom the price-value equation of many products is irrelevant.


If--in addition to the ads that the new and old media majors are sending me on every screen I see--I can reserve some of my personal ad capacity for the brands and industries I want to learn more about, everybody wins.  If my cable company offered me a personal voice in the selection of the ads reaching me, I might look for more information about battery-operated cars or solar powered batteries or sustainable wood and paper products or the best grass-fed lamb and beef I could buy and cook for my family (while the endless mercury-and-methane-laden news I hear and read makes eating less of a daily pleasure and more of an eco-burden.)  Or I might look for polyester and porn, but putting these last on the promotional list would be up to the distributor.


Since cable companies have the capacity to link broadband and TV subscriptions, they can move content from screen to screen in the home.  A strong cable and telecom partnership can move content from the home to the mobile screen.  A new generation could find new loyalty for media brands that reserved 25% of their advertising capacity for ads that were personally selected.  


A new media business strategy should charge more for these ads, knowing that they would be viewed with more of an appetite than most content--meaning more brand loyalty and better retention for content and distribution.  Today, the part of the cable business that has an appetite for advertising is content; for the distribution side, the piece of the local avail business they keep amounts to less than 10% of their current revenue pie (without taking the percentage of avails they keep for their own product promotion into account.)  


If cable and satellite content and distribution were able to agree on a new economic distribution for advertising, targeting that was largely consumer-controlled would be possible.  And customers--not just advertisers--might pay more for the ability to double their self-selected personal ad capacity.  Isn't most internet content already a fusion of ads, entertainment and information?  Personal control, a huge value-enhancer, makes it tolerable.


Big distribution--cable, satellite and telecoms alike--might also consider adding a few real eco-friendly and health-conscious products to their bundles.   Triple Plays can become Grand Slams if the multi-product bundle offers new product choices with leverage on the distribution platform and the competition.  


Smart homes where customers can monitor energy consumption as well as their most treasured physical environments will support gold-plated household mobility.  Cable platforms have all of the elements to build and manage smart home products, but they've not been considered a big enough business until now.  As wired voice values diminish, wired communications services need to find new value levels and eco-friendly (meaning, economics-friendly as well as ecology-friendly) products can fill profitable growth gaps; as can health-conscious monitoring and data support products that link us with our aging, at times distant, often home-bound families and to each other when we're sick.


Cisco's John Chambers is all over immersive communications experiences as he and his huge complex build international networks between products, companies and business models.  It would be great, given the prevalence of Cisco inside the cable and telecom industries, if major US distribution companies built the products that would make collaborative connections profitable.  According to a recent interview in The Economist, Chambers believes in the video teleconferencing business and plugs his company and his home in accordingly.  Multi-player games and other interactive entertainment experiences "played" across cable customer bases, across cable companies and across media distributors, strengthened with immersive HD, 3D and music technology that brings everybody back for more, will be very sticky and as potentially profitable as HBO.  They'll also reveal a lot about customers for the smart companies who want to have and use self-revelatory marketing wisdom.


And, as choices grow, navigation--TV and broadband GPS--will grow as a business opportunity for traditional distributors--including cable, satellite and telecom--and for new distribution opportunists, including Sony, Samsung, Nokia, Microsoft, Apple and everyone in-between.


It's almost impossible to watch everything media offers us today.  If we try to add a good deal more, we'll cripple our growth opportunity.  It's hard to imagine true "Internet TV" merged with cable and satellite TV all within our reach.  New distribution and content products that make getting to our knowledge and entertainment destinations easier will require some sense of the starting line.  Internet and gaming companies have little passion for building on what's already available, taught by cable, satellite and telecom distribution behaviors that discouraged collaboration, preferring to start fresh.  In a bad economy, starting fresh may be a bad idea.  


Today, what's available is cable and satellite TV navigation, including DVR's, alongside diverse, unintegrated internet navigation.  If cable isn't the new cartographer between old media and new, its current multi-billion dollar stewardship of every screen in the house will be overtaken.  Better to strike a partnership with one or more likely technology companies who are building internet, gaming and real mobile place-based GPS navigation and teach them how to move that navigation around a real network as well as a real home.   Comcast and Time Warner Cable invest in media and technology start-ups with this intention, but bringing a high-tech intention into operation is virtually impossible.  All but the very brave and versatile turn away.


It's time for media companies to go back to school along with their kids.  Whatever the reason or rationalization--whether the economy has "changed everything" or content and distribution majors are willing to admit that they've been building businesses for a long time without strong long-term plans--it's time to use the crisp air and the change in seasonal behaviors to try something new.  It would be powerful if the new media products and business models were both profitable and sustainable; just like the cable tv business has been for the last 30 years.

Move On

Capsule:  Content and distribution should bundle their normally competitive media businesses across platforms with two goals in mind: improved products that are easier to buy and use; and, more profitable growth gained by leveraging the competition.  With the wreckage of 2007, 2008 and 2009 in our wake, can we agree it's time to build new business models and move on? (www.audiencedevelopment.com/2009/order+economist+demand+your+cell+phone)


Are the dog days of media value destruction coming to an end along with the dog days of summer?  In truth, the Summer of 2009 wasn't too "doggie" weather-wise, but it was on a commercial death-watch.  Let's hope we're back.


A slew of digital media announcements since September 1st suggests a revenue awakening.  The Economist, a news-magazine for thoughtful masochists willing to spend their week working through its dense, worthwhile content, announced the expansion of its UK impulse delivery program to New York.  New Yorkers will soon be able to order a print Economist on demand for next-day delivery before 6 am, in time for their morning commute or post-Yoga Mensa-stretch.


The Economist's typically earnest New York-launch prognosis: if our New York experience is anything like our London launch, we'll see impulse orders initially in the hundreds, not the thousands.  Damn; they're good.  The importance of what they're beginning is not about launch volume.  It's about The Economist's willingness to strike a new digital distribution model for a traditional product--print--with revenue attached.  


The Economist-on-Demand will cost $6.95, the same as its newsstand price.  But it will be physically delivered to the home.  Also available: the online, audio, podcast and video Economist versions, all neatly bundled for a monthly fee.  What courage it takes to launch a low-tech version of the news and to charge for it to boot.  The Economist shows a real respect for its customers: creatively enlarging the distribution menu in order to make a better meal.  


Ads for the Economist-on-Demand will come to prospects via e-mail and direct mobile connections and the ads will fulfill the sale of the on-demand magazine.  "Click" on impulse and get your smarts delivered to lobby and driveway without wasting your precious time.  The potential of impulse fulfillment makes print seem modern.


Speaking of the new low-tech, Google, smartly touting its developing video compression sensitivity--a must for digital distributors reinforced by the purchase of compression-aid On2 by these masters of digital and commercial efficiency--announced it would make YouTube a video store.  Google is shopping Hollywood deals for streamed new release films for "rental" through YouTube.  Just what we need in the middle of a recession: another video store.


But Google's ambitions are on the money.  A whole new audience for VOD visits YouTube every day.  Google's extreme talent for marketing through the distribution form means it will be able to work all of its generally mindless YouTube video avails into promos for the movies and other digital content (and products and services) it wants to sell.  Things may be getting exciting again.


Even better, a new modernity may be emerging in the digital world: one that seeks out collaborative partnerships in order to support new commercial ideas, even amongst enemies.  Comcast is placing its mPortal application onto AT&T's iPhone, bringing Comcast customers the ability to unify their broadband and mobile experiences.  The nation's biggest cable distributor will enhance the wireless profitability of its chief telecom competitor in order to continue to grow its customer base profitably.  It's a risk, but it's also common sense.


How about experimenting with some more media models combining the best of our brains and our instincts?  The news content and distribution challenges necessitating life support over the last two years were a marketing as well as a product failing.  Rather than continuing to view one another as competitors, could newspapers and online news brands market together as frenemies?


One of the biggest flaws in the thought process around moving from paid print subscriptions to free online content was the fantasy that each brand's news audience would grow without bounds once the friction of price was removed.  This idea--that there was no "typical" reader for each news source and that "everyone" would want whatever news they could get for free--was unsophisticated and wrong.  If every news source could count on replicating the growth success of USA Today and its massive distribution based on free copies at major hotels, the commercial world would be a lot simpler and more forgiving than it has turned out to be.  


Bulk distribution deals are tricky and can be highly lucrative for periods of time, but because they don't contribute to organic growth--I like your product and so I'll buy it and buy it again--bulk distribution is rarely a business foundation.  USA Today has scaled back its hotel bulk distribution significantly, partly because hotel chains can't afford to keep paying even a fraction of subscription prices for everyone who stays in the hotel, regardless of whether they read the paper.  The value of USA Today has been called into question relative to its cost.  This is a good thing.  Value should drive distribution and profit; just like consumers should think before they spend their money.


A new "bulk-hybrid" could spur news growth based on who the real audiences are for each news brand.  The readers of The Economist are likely reading The New York Times, The Wall Street Journal, The Financial Times and maybe The New Yorker or even New York magazine, if they're local.  Screen-reading all of this content assumes a reader without a life.  More likely, as The Economist intuitively believes, like-minded audiences are reading all over the place using every available print and electronic form based on whatever works. 


Comcast or any major cable distributor with video and broadband customers, in partnership with AT&T or any major wireless distributor, could profitably sell a collection of print, online, audio and video versions of any news combination to targeted segments of its customer base.  The cost to a Comcast AT&T partnership of making wired and wireless navigation that enhances these group news subscriptions by integrating topics, stories and utilities would be light.  (For example: links inside these product packages between related stories from different clearly identified brand sources could be a valuable navigation and focusing aid.)  


The news companies themselves, however, would have to accept being mashed-up with their competitors in order to make new news profits.  The business case for this collaboration would be built on the belief that news audiences--just like the prospects for different types of entertainment, cars, clothing and even food--are particular, finite and can be targeted based on tastes, lifestyles and beliefs.  There's cross-over amongst target segments for every product, but exploding past segmentation boundaries to new profits requires aggressive and thoughtful product and price bundling.  Cable distributors are master bundlers in search of new products to realize their amazon digital subscription dreams. 


When the cable industry began inventing cable TV networks, each brand established its niche value with strong marketing management.  Cable content pioneers thought deeply about the audiences for whom their specialized content would have relevance, sometimes more than the content itself.  Very quickly, cable distributors mashed up these distinct network brands into packages with a monthly bill attached. The economics became strong enough to enable content companies to expand their brand families with more networks and more advertising, enhancing cable's value and supporting rate increases all around. 


Cable forced a pay TV revolution that moved our commercial prospects on.  CNN was different from broadcast news: there seemed to be more of it and it cost money.  It was acceptable to charge for CNN because it was part of a package of even greater value and because generations had already accepted the idea that the news was worth something.


It all depends on priorities. Listening to the experts describe the new news eco-system, it's still hard to see the intended order of things.  (Like the well-intentioned but muddy mash-up of national health care strategies, let's hope this was an August problem.)  If the news costs nothing to consume, its cost basis and quality will shrink as well.  But if the news costs something--for those who buy a news package, something more for the package and less for the individual brands--it could grow according to its perceived value and its distributors' appetites for market risk.