Beyond content

The Difference Engine: Beyond content

Oct 29th 2010, 10:33 by N.V. | LOS ANGELES

THE old-media world of newspapers, magazines, radio stations and television networks has a daunting task ahead of it. New-media upstarts like internet TV, social networking, mash-ups, web stores and online gaming—with their ability to stream content direct to smart phones, tablets, e-readers, laptops and game consoles—have begun to eat the green-eyeshade brigade’s breakfast, lunch and tea. At last week’s Digital Hollywood meeting in Santa Monica, California, the question on a lot of people's lips was how to fight back.

A recurring theme was “beyond content”. By that, the gathering of film, broadcasting and entertainment executives meant how to turn the current threat to their livelihoods into a solution for at least survival, if not runaway success. All agreed that, apart from getting their content online in the best shape possible, they needed to move much further downstream in marketing terms. In short, they should start offering services—beyond content—that add to their audience’s experience and satisfaction.

The problem is rapidly becoming too big to ignore. In a recent survey of some 10,000 consumers, IBM found that the use of mobile music and video increased five-fold between 2007 and 2009, while readership of online newspapers more than tripled. Over half the respondents used social-networking sites like Facebook and Twitter. Two out of five regularly read newspapers online rather than in print. “In terms of digital content consumption,” the researchers concluded, “consumers have clearly moved beyond the trial stage.” And as they do, they take their value to advertisers with them, leaving traditional content suppliers scrambling for lost revenue.

It is not just gadget freaks and early adopters who are making this happen. Sure, the young and the technically nimble were among the first to abandoned print and airwaves for online content capable of being accessed anywhere, anytime. But the middle-aged have now also joined the fray. Indeed, Facebook recently had to pull the plug on chatting housewives because they were hogging large chunks of the social network’s bandwidth for hours on end. Even 55-year-olds and up—long the bulwark of print and broadcast media—are nowadays getting much of their news, gossip and amusement online.

This migration from old to new media is causing the industry to fragment, as publishers, record companies, film studios, television networks and other content creators butt heads with device makers such as Apple and Sony as well as online distributors and content aggregators like Amazon, Google, Yahoo! and YouTube. In the process, established ways of doing business are being overturned, calling into question how traditional content—whether print, graphics, audio or video—is produced and delivered.

The change is actually twofold, and much of the problem has stemmed from a failure to understand this. For one, not only is content going digital but, in the process, it is also becoming connected. This change from type and airwaves to bits and bytes has caused the balance of power to shift to those who aggregate and distribute digital content online. Take the way consumers are swapping from printed books, magazines and newspapers to digital versions that can be downloaded to e-readers, tablets, laptops or even smart phones. It is not only bookshops and newsstands that lose from this process. Publishers, too, are suffering as advertisers abandon printed pages and television slots for the online world.

It is not as though publishers can make up the difference by taking their wares online. A reader of a printed publication typically brings in 18 times the value of an online reader. In part, that is because newspapers and magazines are experts at selling their demographics to advertisers, while websites serving up information and entertainment rely more on generic services like Google’s advertising network. Also, there are simply far more outlets on the web than on newsstands for advertisers to choose from.

Television is not much better off. The difference in value between a broadcast viewer and an online equivalent is around three to one. But that discrepancy is expected to widen as traditional television sets are replaced with TVs that can download video direct from the internet, and more entertainment websites spring up to cater for this burgeoning “over-the-top” demand. Already viewers have started cancelling their $70 cable or satellite subscriptions, and downloading their favourite television shows from online sites like Hulu or YouTube for nothing or, at most, a small pay-as-you-go fee. Likewise, sales of DVDs are being clobbered, as Netflix and others allow customers to stream unlimited movies direct to their television sets for $9 a month.

The same disintermediation has long been happening to music, as consumers download single tracks direct from iTunes, Apple’s online store, for 99 cents a pop, rather than buy whole CD albums from record shops for $10 or more. In the process, Apple has flipped the “razor-and-blades” model of doing business on its head. Instead of subsidising the cost of media players like the iPod and iPad (the razor in the metaphor) and making tons of money out of downloads from iTunes (the blades), it has done the reverse. Thus, the device makers are joining online aggregators and distributors to capture an increasing share of the disposable income consumers spend on information and entertainment—all at old media’s expense.

The second change, in the way marketers are connected to consumers, is more subtle. New media make life easier, richer and more satisfying for the consumer. To do so, they exploit far more of the marketing opportunities that exist between the content and the consumer. Old-media companies have traditionally left that to others, pleased to collect just advertising and subscription revenues. Now they must learn to do the same.

Easier means things like having a single subscription to a publication or pay-TV channel that applies across a variety of platforms—from television sets and computers to tablets, e-readers and mobile phones. To make life easier still, each platform needs the same interface, the same set of navigational tools and the same quality of experience. Television sets—with remote controllers capable of moving on-screen cursors only up, down and across, and then just one step at a time—are leagues behind the swiping gestures pioneered by the iPhone. New-media innovators are bent on making the television set as easy to navigate as an iPad. Old-media laggards will need to do the same.

Richer and more satisfying means things like travel programmes that help viewers book the cheapest flight to the destination concerned and offer discounts on items of clothing and luggage, or cookery programmes that help them order exotic ingredients from local suppliers.

Even when they put their content on the web, though, publishers and broadcasters face the problem of getting it found. What they need is a discovery tool as intuitive and useful as, say, Facebook’s "friends"—something that offers trusted recommendations of what, from the user’s known tastes, he or she will really enjoy. Old-media firms have barely begun to address such problems.

They also need to become a lot more agile. That means collecting feedback from consumers while they are actually reading or viewing their content—so adjustments can be made on the fly to improve the experience. Video-game designers do this all the time. Many online games will even temporarily tweak the difficulty of a quest, so that a player showing signs of becoming frustrated or bored is encouraged not to bail out of the game for good. Zynga, the company behind hits like the FarmVille game on Facebook and the iPhone, is as much an online analytics firm as a creator of video games.

That is what old-school content providers have to learn to do, too. Whether traditional publishers and broadcasters have the ability to indulge in such technicalities, still less the stomach to dirty their hands on downstream marketing, is an entirely different matter. But those that do—and do so as well as the innovative newcomers to the information and entertainment business—will do more than merely survive. Some might even prosper. Here’s hoping The Economist is among them.

Picture courtesy of Simon Dickson, Flickr.com (Creative Commons)