Old Media Is Being Unbundled, Just Like Telecom Was

40 thoughts on “Old Media Is Being Unbundled, Just Like Telecom Was”

  1. Fantastic article.
    With respect to television distribution:
    There is a last bastion of defense for the networks.
    I call it the “multicast problem” and it has to do with live broadcasts.
    It’s the idea that the if everyone wanted to unicast a live HD video steam (say the superbowl or something more mundane like a presidential speech), the required backend bandwidth and server resources would be astronomicaly high and prohibitive.
    This is not a last mile “bottleneck” but a fundamental physical limitation of at the network hub that won’t be resolved in the foreseeable future.
    For millions of people to be able to watch a high bandwidth video stream simulataneously, the stream has to be multicast and the only entity that can make it happen is the network itself (e.g. the cable company or teclo).
    There has to be a box at each hub that takes one stream and converts it to whatever number is required for all the end points.
    What does this mean?
    “live” content will become super valuable. Cable companies will need it to remain relevant.
    The value of “live” content is in it being live. Most people don’t care to watch a sports event once the outcome is known. So in a sense, the content piracy proof.
    If I were a cable company, I would be buying sports teams to own that content.

    1. I agree and that is why the sports business is so important for tv companies. Fox and Comcast totally understand this. Ironically Time Warner sold of the Braves when they should have been loading up on that and selling off magazines etc.

      Anyway I think there are fewer unicast opportunities left and that is why I see the huge “events” becoming even bigger going forward. Look at the IPL Cricket in India. It is massive because it is must-see-tv

  2. Very interesting parallel to the Ma Bell story. I look forward to a follow up piece – you nailed implications to this seismic shift in the media world, and now there is a whole article on recommendations and possible future scenarios. Thanks for your thought provoking post.

  3. Very interesting parallel to the Ma Bell story. I look forward to a follow up piece – you nailed implications to this seismic shift in the media world, and now there is a whole article on recommendations and possible future scenarios. Thanks for your thought provoking post.

  4. Outstanding commentary. I don’t communicate less, I communicate more. I don’t read less news, I read more. Same for music. The unbundling of the “content/minutes/music” from the system of distribution creates the opportunity for new technologies and business models and in the end, lots of money will be made (and lost). Brands and content are getting more important not less important but the technologies and infrastructure to create the new ecosystem are just emerging. In full disclosure – we are working on just that at Vertical Acuity. Great article and perspective.

  5. Very insightful, with one small twist: AOL bought Time Warner, not the other way around. Yes, it didn’t work out so well and TW controlled AOL. But the actual “merger of equals” was an AOL acquisition of old media.

  6. Excellent detailed overview! 125 years ago in the US, “buggy whip” makes were in every town. They had a good sized chain of suppliers and controlled the market on personal acceleration. Oh, your could use a stick from a dead tree branch with a string or piece of leather attached to it, but the “buggy whip” was the standard. Then one day a man named Henry Ford had a different idea. Nice article!

  7. Great metaphor, boss, but I think TV networks are a little safer than it seems. TV ad spending has been hammered by the recession (and comparisons to an election/Olympics year), but it’s recovering now:
    http://kantarmediana.com/intelligence/press/us-advertising-expenditures-increased-64-percent-q3-2010

    TV networks roles will change, but maybe only subtly. A network can still fund content creation (and own studios), sell ads, and secure distribution (cable and online carriage fees could replace affiliate ownership dollars). They’ll have to get better at promotion as scheduling loses importance to time-shifting and Internet viewing. And they’ll have to get smarter about advertising.

    TV media buying and planning hasn’t changed much from the 60’s. But the measurement companies are working on it, as are targeting technologists like Simulmedia and Canoe Ventures – and even Google. Eventually we’ll figure out which 50% of Wanamaker’s ad spending is wasted, but that’ll make the other 50% more valuable. And expensive.

  8. thanks for thinking out loud. very needed in these crazy times. most are just talking out loud on their bluetooth headset!
    what you say is a truth that is finally making content producers see the value in their creations. dollars flow where eyeballs go.
    good content is the answer.
    good shows will be seen in many places and on many devices.
    keep up this great dialogue and think some more…out loud!

  9. A very good piece, but I think the metaphor falls apart a bit in longterm analysis. Wasn’t the net net of telcom unbundling – a decade later – a re-concentration of pricing control? There may be 2 or 3 providers who will drag that “last mile” of connectivity to my front door, but a) they achieve scale (and thus profit) through bundling, and b) they all charge prohibitive switching fees. I don’t see upstarts offering better quality or customer value-adds because the big boys will eat negative margin on one service to maintain marketshare. The revolution appears to have been re-aggregated.

    In digital media, I think we’re going to see content-centric buyers with cash (Disney/Google/News Corp/Facebook) start to gobble up the Twitters and Yelps. Fortunately this time the consolidation trend will be horizontal. And while this may be less restrictive to end users in terms of distribution/access, it could have a negative impact on editorial.

    1. John

      I think the unbundling was reversed by non-competitive forces — paying off lobbyists and politicians to reverse the rules of unbundling. In the US the bells aggregated, won the battle but lost the war. Look at their revenues — most of them are coming from data on wireless where they control the last mile so to speak. In the wireline world voice revenues have collapsed, broadband revenues are hard to come by because it is a competitive market. The revolution was not re-aggregated in the US, as much as it was re-purchased. Globally speaking, I think unbundling has had a more impact in Europe.

      As for digital media, my contention is that digital media doesn’t mean online version of a newspaper or TheDaily on iPad. Digital media is an entirely different and unique beast. Magazines of yesterday are information services of tomorrow. I wish I could see the future, but let me just say, for now being part of the big shift is good enough for me and my team.

      Thanks for your thoughtful comment.

  10. Om,

    Agree with the unbundling destroying the news business. National and international news have very low willingness to pay and that coverage has largely been subsidized by unrelated businesses of autos, employment, retail, travel, etc.

    Macy’s couldn’t care less about national news. But they advertised in newspapers because that’s where audiences were. It was the cheapest form of distribution for that size of an audience.

    Don’t forget another big change here: distribution doesn’t have to go through an intermediary any more. A travel provider doesn’t necessarily need a newspaper or even Travelocity. They can reach their most loyal customers for free via email, Twitter, etc. And they can do it better than ever before based on the rise of information technology (e.g. a massive database of my travel habits in the form of frequent flier programs.)

    I wrote a post on this a while back:
    http://blog.agrawals.org/2009/04/05/newspaper-companies-cant-unring-the-bell/

    These days, the physical newspaper is effectively a random collection of stale Internet content created by a bunch of people who don’t know my interests printed out and delivered to my door step by diesel-guzzling trucks.

  11. Om,

    You say that metrics like pageviews and CPMs are archaic. I’m curious what you (and fellow readers) think are more appropriate metrics for advertising driven sites?

    Uniques, pages/visit, minutes/visit, click rates on ads are pretty common already. thanks.

  12. Yes, the telecom industry was unbundled, first in the 70s when phone companies were forced to let people buy their own phones, and then, as you mentioned, with the 1996 deregulation act, when they were forced to provide access to their local copper wiring. But they are erasing all of those gains.

    The wireless carriers are effectively bundling phones with service now, as they (with the exception of T-Mobile) do not charge less for service if you provide your own phone. They use the subsidy as an excuse to lock subscribers into contracts, even though they allegedly have a choice. If the equipment was truly unbundled from the service, there would be a different price for service when you provide your own phone. But there isn’t a lower cost option, much to the detriment of consumers.

    And as phone companies morph into internet access providers, they are attempting to implement the virtual monopoly on access that they enjoyed with copper phone lines pre-96. They have successfully blocked all attempts to limit their ability to keep the internet open, and want to create walled gardens via mobile device-use policies and control of wired broadband access traffic flow. They will succeed at this, because politicians are either incapable of understanding the technology well enough to realize what the telcos are doing, or they like the idea of giant entities extracting far more value from their customers than they provide.

    So if the unbundling of old media follows the path blazed by the telcos, the ability of the populace to be accurately informed and educated is going to be seriously compromised.

  13. As KenG notes, I disagree with the premise that the telecom industry is unbundled. It is not, at least not in the U.S. In France and the UK it is, but not here, not anymore.

    On the iPhone, I can buy any kind of app I want, as long as it doesn’t need to insinuate into the telephony stream – apps cannot join calls, divert calls, intercept SMS or anything to do with the telephony side of the phone (other than blindly initiate a call and get out of the loop). But they can play a mighty Angry Birds. No carriers/phones offer such telephony side integration by third parties.

  14. Good article! The 1996 Telecom Act also transformed the yellow pages business. It required telco yellow page publishers to sell listing data to independent yellow pages competitors at a prescribed rate ($.04 per listing). That enabled competitors like Yellowbook to produce high quality directories and offer lower pricing to local business advertisers and win share in the $12B yellow pages industry from Verizon, AT&T, etc.

  15. Very interesting comparison, and it’s certainly true that ownership of the means of production and distribution were big barriers to entry in the past. I think the mistake was that media companies have — and continue to — undervalue the capability of creating first-rate, credible content as an asset. Rather than chasing page views, media companies should lead with their strength: content. In a world when “anybody can be a publisher,” quality content is a real differentiator — and the beauty of the transparency that comes when the barriers come down is that it’s easy to see the difference between quality content and poor content. The marketplace of ideas is amazingly efficient. yes, it’s not the medium any more. It’s the content. Or, I should say, credible, quality content held to some professional standards. but, while it’s too late for many media companies, the re-imagining you call for has already begun — just not by the old media players. While media companies continue to chase the old models — and horribly undervalue the talent that creates the content — new providers of quality content are poised to take their place. The next generation of media company are platform agnostics and understand the value of the content itself.

    1. I agree with you. I think what has happened is that creation of quality content has been mistakenly equated with big and not with good. I think in the end that is the key problem.

      I don’t think tons of money — writers who are good at indie pubs are paid peanuts and still do awesome work — is the key difference. it is about conviction in their own business, and then figuring out a new economics model that fits the new world. It is also about taking a different view of what is media.

      1. yes, absolutely. fascinating to watch. I think after the bubble of 2000, media companies privately declared victory over the upstarts. they misinterpreted the bubble as validation — and settled in to 10 years of status quo re: the model. I have a piece on it at MediaPost that says the next round of media innovation and disruption is being driven by a new class of challenger — the displaced media pro. (you can find it here: http://bit.ly/e322m0 )
        thanks for the provocative post and interesting discussion.
        @jpundyk

  16. Om,
    Arjun is on to something, and his ideas are near to what I would write. CPMs, etc, may be the ‘millstone around the neck’, true…but it is not one that Web firms necessarily put there themselves. There was, maybe by necessity, some “adaptation” to what was familiar to current buyers of Media, to get those dollars flowing. But we are all starting to see more flexibility, and ‘Engagment’ billing/abilities will be soon be kicking off that millstone; it already is.

  17. OM- great discussion.
    I see it as a constantly evolving marketplace. Consumers want the maximum flexibility (pick my device, my channel line up, my song list, my media) and want to pay as little as possible for it…

    Media companies want to create sustainable advantage and profits. The distribution networks are little toll booths that are incredibility valuable but are constantly getting disrupted by constant innovation. The real problem is the pace of the innovation. In the first hundred years you had phone, newspaper radio magazine and cable. In the last 15 years you added internet, wireless, handheld, tablet, and services like video, social media, location based services.

    Its almost like the business model can’t keep pace with the innovation.
    50 years from now it will be so obvious what happened but its always hard to see it while its happening……

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