Co-teaching with noted design expert Don Norman this spring, I created this lecture to help Kellogg students understand the universe of media as they applied design thinking to the creation of new media products:
Mass media can be delineated in three phases: creation, consumption and distribution. Each phase has an impact on revenues and expenses for a media company. And each phase is undergoing significant changes spurred on by new technologies.
- Creation: For decades the capital cost of equipment owned by large publishing houses, movie studios, music labels and news organizations effectively shut out competitors. The generation of new media content has been democratized by a wave of lower cost tools. There are new ways for projects to be funded and new means of automating the production of content.
- Consumption: Changing patterns are making consumers savvier and more fickle about their media diets. Content must be tailored to an individual’s preferences and made available in convenient forms or it will be ignored.
- Distribution: New services and devices are changing how content reaches consumers. The same content may be available in several forms at different price points. And consumers expect content instantly even in forms that used to take weeks or months to create and deliver.
Content Creation
Modern newspaper printing presses can cost upwards of $10 million per press unit and large newspapers have as many 40. The movie Avatar cost nearly $280 million to produce, according to the Los Angeles Times, including developing new 3D technology. But at the same time individuals have access to a $200 Flip Camera can record comparable HD video to cameras that a couple of years ago were only the province of professional videographers with $10,000-15,000 cameras.
For years mass media companies were the gatekeepers of news, information and entertainment in large part because they were the only ones with means to produce content in high enough quality to appeal to a mass audience. The processes they developed and the equipment they used meant that average citizens could never dream of producing content on par with what employees of these companies could create.
News organizations are co-opting user submitted content — often cell phone cameras or consumer-grade audio or video for breaking news content. CNN’s iReport reported by people on the scene — not journalists — have provided valuable coverage of many important stories like the shootings at Virginia Tech and the plane crash landing on the Hudson. This kind of content costs little or nothing for media companies but is only possible because of advances in technology, particularly the Internet. According to the Pew Research Center 37% of Internet users have participated in creating or reacting to news.
But CNN’s competition is not just other TV networks like Fox News, CBS, ABC or NBC. The YouTube video “David After Dentist†has 58 million views and was recorded on a mobile phone camera. According to David’s father, the video has earned almost $100,000 in YouTube ad sharing. Google does not share what the revenue sharing split is, but compare that to NBC’s 30 Rock: A single episode of that show brings in about 7 million viewers and very expensive to produce.
The book publishing industry has been especially impacted by the changing economics. Instead of prospective authors shopping their books to publishing houses who evaluate how likely they are to sell, entrepreneurs can pitch their own book ideas directly to the people who might buy the book. Using tools like KickStarter.com experienced authors, like Robin Sloan, can pitch their books, outline a timeline and explain what the project will cost. Robin thought he needed $5,000 to start his novel, but his pitch ended up earning him almost $14,000 in pledged money. Everyday people can pitch in and once the fundraising hits a target level the writing begins.
Rupert Murdoch-owned MySpace has its own record label — just for artists found on the website. And in 2009, MySpace launched a contest, “Rock the Space,†that has aspiring musicians submit demo tapes through the website. The winner gets signed and their album released. Instead of having to pay record label employees to find the next big thing, Murdoch has harnessed the fans to help tell him who sign. Over a three-week period in 2009 MySpace received more than 19,000 entries, 40,000 votes and 40 million views — according to Saatchi and Saatchi.
The performers, producers and stars are some of the largest costs for most mass media companies. And technology is even affecting this part of the business. Developed here at Northwestern, Stats Monkey is an automated software tool that ‘reads’ baseball box scores and play-by-play and — without human intervention —writes a baseball story. These new kinds of automated stories, pulled from existing data, mean that publishers potentially can cover far more events without ever increasing their staff sizes.
Content Consumption
Part of the changing media landscape is the death of appointment viewing. Media consumers used to have much more predictable media consumption habits:
- Reading a newspaper over breakfast
- Listening to car radios on a commute into work
- Watching television sitcoms or reading a book at night after dinner
But the explosive growth of both the Internet and web-enabled, mobile devices has meant radically altered consumption patterns. Now users consume news, information and entertainment in small bites throughout the day. Televisions shows like NBC’s the Office have created webisodes: short 2-3 minute videos that fit this much more frenetic consumption pattern.
Also families are far less likely to get together to watch television or a movie together. Research from Nielsen and the Pew Foundation has shown many people consume multiple media types at the same time. This means that movies are more targeted and that viewers are much more likely to publicly evaluate and rate them. Instead of having days or weeks to prove themselves, new movies rise or fall based on social media reviews like TwitCritics which gathers tweets about movies and aggregates by them sentiment or Rotten Tomatoes which aggregates reviews from a variety of blogs of other blogs or reviewing sites. This means that content producers cannot ignore social media and need to be an active participant in guiding their products debut.
Content Distribution
“Not that it’s anything we think the New York Times Company should do, but we thought it was worth pointing out that it costs the Times about twice as much money to print and deliver the newspaper over a year as it would cost to send each of its subscribers a brand new Amazon Kindle instead.â€
— Nicholas Carlson, Business Insider, Jan. 30, 2009
Perhaps most critical to the success of mass media companies has been their control over the means of distributing the content they create. Ensuring their content appears on televisions sets, at movie theaters, in your mailbox or at the bookstore meant that content producers had access to massive audiences and could generate equally large profits. However, the rise of the Internet has meant that individuals have access to all kinds of new tools. These content producers are no longer reliant on the media gatekeepers to get their information, entertainment or news into the hands of consumers.
Digital video recorders, like TIVOs, and the growing importance of web-based distribution have changed television strategies. According to the Nielsen ratings, some entertainment shows like ABC’s Grey’s Anatomy or Fox’s House are receiving a full-additional ratings point in the three days after their debut from DVR recorded viewings. Audiences are much less likely to flow from one show to the next on the same channel and television advertisers are no longer guaranteed that their content will be viewed.
When the Chicago tech company 37 Signals wanted to publish a ‘book’ about their process of software creation they completely cut out traditional book publishers. ‘Getting Real’ was offered to readers in three ways: Buy the PDF ($19), purchase a printed copy ($25) or read it free online. The PDF sold more than 30,000 copies and sales of the printed book made more than $500,000. But even the book was not published in traditional fashion. Instead 37 Signals used Lulu to self publish. Instead of earning 10-20% in royalties the companies received 80% of the revenue. Although self-publishers are still effectively blocked from bookstores this revenue disparity may pressure traditional publishers.
Self-publishing is not the only change impacting the book business. On-demand printing and digital books are even more likely to force changes to the industry. The Espresso Book Machine enables the on-demand printing of paperback books. Described as an ATM for books, this machine can produce a book about every five minutes and has more than a half-million titles stored in its database. Much as RedBox competes with Blockbuster with access at grocery stores, pharmacies or fast food restaurants, the Espresso Book Machine device means that a coffee shop can compete with Barnes & Noble. Or a smaller bookstore can offer the same number of titles of a superstore.
Almost all publishers are looking to new platforms to deliver content to consumers on the go. Digital music players like the iPod and platforms like iTunes have hurt most local music shops and are potentially weakening music labels. In the iTunes music store, all music is equally accessible. The Kindle, Nook and iPad make it easy for consumers to take digital books with them and to buy new content on the go. This means that marketing digital versions of movies, books and music does not have to be just about brand and title awareness. Instead consumers properly motivated can buy and begin watching immediately. But just as instantly, those same users can share their pleasure or displeasure about the content they just purchased.
Conclusion
This changing media landscape leaves lots of opportunities for new ideas: new ways of creating content, new models for how it will be consumed and new ways to distribute it. The only thing that is completely clear — historic models will not continue without changes.
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