Since this did not fit the response box on your blog, and also because I do not want to spam your blog, I am sending you this response by mail.
Thanks for sharing your point of view and experiences about developments in the media industry, very interesting. Allow me to add to the mind-sharing process with a short point of view about how the traditional media industry is faced with a challenging, but exciting quantum leap change in customer demand, while the subsequent required quantum leap change in business model, in many cases, appears to lag behind.
One of the most significant developments in my opinion is the growing divorce of distribution from content creation in the value creation process. This evolution became most visible with the entrance of iTunes into the music industry. The enforced role change of traditional industry players that used to fulfill a dominant role in the entire supply chain of artist intellectual property creation and distribution to end-users, resulted in a halo-effect on related industries in which value creation is (or: used to be) dependant on the connection of intellectual property creation and supply chain control.
Another, but similar, example is the upcoming rise and increased acceptance of e-books in general, and the delivery mechanism thru Amazon’s Kindle in particular. While e-books are not a new phenomenon, the increased acceptance makes this a transformational development that forces traditional book publishers to structurally re-think business models.
It is obviously easy to perform post-mortem analyses that rationalize why things happened the way they happened, however the key forward looking question remains how these developments are truly going to change the game of content creation and distribution in the future.
Most new entrants choose a business model that focuses on either content creation, or distribution. Besides differences in required resources and capabilities, this also makes sense from an investment perspective since both operating model and risk profile of these two structures are fundamentally different from each other. The former business model is mostly being structured around relatively stabile intellectual property driven revenue streams, such as licensing. The latter business model is mostly being structured around relatively volatile traffic driven revenue streams, such as advertising.
On the other hand, most existing players continue to exploit a business model that is a hybrid of structures. Rather than strengthening competitive advantage thru innovation within the core, many mature players in the media industry decided to expand into adjacent sources of non-competitive advantage driven value. Publishing businesses that entered the seminar and conference business form one example, while adjacent advertising models form another example of a commonly exploited incremental revenue generating tactic. As could have been anticipated ahead, in many cases these adjacent value creation tactics turned out to be non-sustainable under pressure (as seen in current economic downturn).
This seems counterintuitive because theoretically established players should be better positioned to win when the core game is changing. The hurdle however is that it would take a ‘strengthening by elimination’ type of strategy to unleash this potential, and such a strategy is usually perceived as a high risk strategy.
When ranking the utility of a ‘doing nothing’ scenario against the utility of making the wrong transformational decision, the typical course of action is a risk-averse staging strategy. This strategy, which parallels the ‘dollar cost averaging’ strategy as known from the investment industry, may be perceived as less risk-full but in fact lacks efficiency and fluidity to take advantage of rapid changes in a value accretive way. Consequently, the only option to end at the winning side of the table is to go all-in with a strong commitment to succeed. Said differently, there is no such thing as being a little bit pregnant.
At the end of the day the ultimate question however remains if existing mature players will be able to pro-actively enter the new game with a credible confidence to win, rather than a re-active participation to protect value.
Behavioral finance learns that the fear of losing typically outweighs the desire to gain, but time will tell.
Best, and look forward to read more of your point of views. Edwin.