Wednesday, January 25, 2006
BUSINESS MODELS: Anxiety attacks traditional media as devices get smarter
PUBLISHED: January 25, 2006
Convergence: As Gadgets Get It Together, Media Makers Fall Behind
By SAUL HANSELL
The New York Times
AMID the cacophony of the sprawling Consumer Electronics Show in Las Vegas earlier this month, the main action had little to do with electronics. Sure, booth after booth claimed to have the biggest TV screen, the smallest music player and the niftiest wireless gizmo. But that was to be expected. The real news was neither shiny nor tiny. The question in the air was what people will watch, listen to and do with these machines now that they are becoming interchangeable and interconnected.
This should not be a pop quiz. For decades, nearly every gathering of media or technology executives has defined the future in a single word: convergence. What exactly was converging remained in dispute, but most saw some combination of television, computers and an intelligent network that would give consumers much more control. For once, the visionaries were right. Video is popping up on cellphones, iPods, TiVo's and Web sites. And as for blogs, photo-tagging sites like Flickr, podcasts and the rest of the bubbling digital stew, it's clear that lots of media are coming together in lots of devices in lots of ways.
Yet for all the time that media executives - from the towers of Sixth Avenue to the back lots of Burbank - had to prepare for convergence, they are now scrambling to figure out what to do about it. "Convergence is possible now, and you are seeing the earliest breaks on the beach," said John C. Malone, the chairman of Liberty Media, who has been trying to profit from convergence for the last two decades. Now that it's here, he predicts there will trouble for many established companies.
"The 'anything, anytime, anywhere' paradigm is really going to shift the world of media," he said. "There will be a tough, grinding transition for an awful lot of businesses." Old-line media companies' fears can be lumped into three nightmarish categories:
¶Business-model anxiety. Will paid download services like Apple's iTunes, not to mention TiVo's and their ad-defying fast-forward buttons, undercut TV networks' huge advertising revenue? Or will video from advertising-supported Web sites become so rich that people will drop their cable and satellite subscriptions altogether? Or will they just steal what they want by using file-sharing software like Bit Torrent?
¶Creative anxiety. McLuhan is out. The medium is no longer the message. Anyone who wants to tell a joke, spin a tale or report the latest White House news can produce any combination of video, text, sound and pictures for viewing on a 50-inch TV, a laptop computer or a cellphone screen. No one in conventional media is sure how to manage all these options or what audiences barraged from all sides actually want.
¶Control anxiety. Since the invention of the high-speed printing press, mass media have been created for the masses, not by them. The rise of Weblogs has given everyone a printing press and even the opportunity to get income from ads that Google will happily sell. Now we can all be D.J.'s and film directors, distributing our podcasts and movies online without groveling before a studio executive. The career prospects for hit makers, gatekeepers and even fact checkers may well be in doubt.
Control anxiety may help explain why the media establishment has been so taken aback by the actual arrival of convergence. When media moguls talked about convergence, they often meant interactive television that was developed, operated and controlled by cable companies or the other usual corporate suspects. Accordingly, Comcast has invested billions to teach its old cables new tricks, like video on demand. But what really broke down the barriers in the last few years was the spread of high-speed Internet connections and the development of efficient ways to deliver high-quality video signals.
"There is this primordial soup brewing of more bandwidth, more storage, more devices and more people creating content which is inherently digital," said Ted Leonsis, the vice chairman of America Online. "The lightning that struck is that the people have rapidly adopted all this even faster than we in the industry conceived, and bypassed the traditional media."
What's new are the possibilities. Anyone can create a "mashup" by putting together pieces from any medium and any source, distributing it to anyone anywhere. Today, it's the mashup that is the message. "It becomes a game of three-dimensional chess when you are thinking of your digital audience in addition to your television viewers," said Jonathan Klein, the president of CNN/U.S. So the challenge is to overcome the fear of so many choices, and there are already people - in big companies and suburban basements - who are building information and entertainment hybrids that could be as compelling as books, movies and TV shows.
Take Daniel Myrick, a creator of "The Blair Witch Project," who is directing a new video drama called "The Strand," meant to be sold on a pay-per-view basis over the Internet. He has written a soap opera with oddball characters set in Venice, Calif. His Web site, strandvenice.com, will link to 20-minute video episodes as well as mock interviews with the characters and back-story information that typically fits in a novel but not a TV show."You still have to have a sense of narrative, a sense of the story and characters and do it in a compelling way," Mr. Myrick said. "But we can expand the universe that surrounds the show and give you a sense of place that expands the overall experience."
Another approach to weaving different media together to tell stories, albeit true ones, is "Kevin Sites in the Hot Zone," Yahoo's first foray into news gathering. It features Mr. Sites, a former network correspondent, reporting from the scenes of various wars. Traveling alone, he uses a variety of portable devices to produce reports that contain text, photographs, audio and video.
Mr. Sites has found it confusing to figure out how to manage all these choices. "Did I need to shoot the entire thing with my video camera, transcribe it later, and take notes off of it?" he said in an interview by satellite phone from Iran. "Or did I need to put the camera down and take copious notes?"
Ultimately he focused on the text, which he found conveyed the most information, leaving the video to do what only television can - show the viewer what it is like to be in a place or talk to a person.
That does not mean every project must use every new crayon in the box. Drew Massey, the 35-year-old founder of ManiaTV, a video Web site aimed at young people, is defying the new conventional wisdom that the Internet audience wants nothing but bits of video on demand. ManiaTV is a live, 24-hour Webcast, with chipper young cyberjockeys introducing music videos, comedy segments, video game previews, offbeat news reports and discussions of online dating.
The site's single-most popular feature - freshened slightly from AM radio - is the old-fashioned request. The requests are for videos now, and they arrive by text message from viewers who could just as easily click to play whatever they wanted on ManiaTV's site or on others."People love it when their song comes on," Mr. Massey said. "Even if they can play it on demand, they love the fact that, hey it's the only thing being played now, and everyone hears it at the same time." Mr. Massey has found, however, that the request line is not enough. His viewers want to take ManiaTV's videos and mix them with other material. "So we will offer ways for kids to have their own TV shows, sort of like 'Wayne's World' on steroids."
For better or worse, the media world of the future may well be Wayne's. There is no better way to see this than to venture into MySpace.com, a jungle of clashing colors, blasting sounds, lurid images and banter so dense that anyone over 25 quickly becomes lost. The lesson here is that on MySpace there is no distinction between personal and mass media. A teenager can post a photo from last night's party, a poem for a lost boyfriend, buttons that play her favorite song and a clip from her favorite TV show.
It is no accident that Google's new video service (video.google.com) lets users put its video clips on their own Web pages.
Here are truths about MySpace that even a septuagenarian media mogul can appreciate: In the last two years, 50 million people worldwide have created pages on MySpace, and 32 million people in the United States visit the site each month. You do not have to have a pierced tongue to know that anywhere that teenagers congregate, soda vendors and sneakermongers will pay to follow.That audience was enough to draw Rupert Murdoch and Sumner M. Redstone into a bidding war to buy MySpace last year. Mr. Murdoch's News Corporation beat out Mr. Redstone's Viacom, buying the site for $580 million.
For major media companies, buying popular properties is a time-tested strategy. The other move of the moment is simply for them to shift their programming to similar new platforms. Just as magazines and newspapers created Web editions, radio stations are churning out podcasts, record companies are offering snippets as cellphone ring tones, and TV networks have started selling downloads and putting some programming free on the Internet with ads.
The risk, as they had foreseen, was that these new distribution methods would undercut their existing businesses. A turning point came last fall when Robert A. Iger, the new chairman of the Walt Disney Company, agreed to sell versions of the most popular ABC shows for the new video iPod. So far, ratings for "Lost" and "Desperate Housewives" have not been hurt. Other networks are starting to sell programs through iTunes, Google's video store and soon similar stores from AOL, Yahoo and others.
Mr. Malone of Liberty Media contends that eventually these moves will erode the networks' advertising base."The public will increasingly pay for the content it wants, and advertising will be the secondary support," he said. "You have to scratch your head and say, What will fund the creation of all this entertainment content, which has been paid for by advertising?" Initially, Mr. Malone is betting on subscription revenue. So his biggest play in convergence now depends on fees, not advertising. Vongo, a service of Liberty's Starz Entertainment Group, lets people watch movies on their computers for $9.99 a month.
So far, the media companies are finding that convergence is lifting advertising revenue because advertisers want to place commercials on Internet-based video programs.The audience is responding. A year ago, 20 percent of visitors to Disney's ESPN.com played a video clip at least once a month. Today, 70 percent do. A growing number - Disney will not say how many - are watching clips on cellphones. And ESPN's condensed version of the Rose Bowl was the most popular paid download on iTunes in the first week of this year. "We have been saying we are going to serve fans wherever they are, however they want to get information, on whatever time," said John Skipper, a senior vice president of ESPN. "That is moving from the rhetorical to the actual."
Mr. Leonsis of America Online says all this shifting of programming from one format to another is a necessary first stage in the development of converged media.
"It wasn't CBS News that made CNN, and it wasn't Rolling Stone that made MTV," he said. "Each new medium has its own generation of breakthrough applications."
AOL, which at 20 years old may not count as a young turk, is certainly trying to revive its fortunes by mastering the convergence of video and the Internet. It has long offered Webcasts of original concerts, and is now developing program networks for entertainment news, old TV shows and sports. Similarly, Yahoo has hired the former head of programming at ABC, Lloyd Braun, to develop new video projects. One program under development is an Internet revival of "The Runner," a drama about a fugitive that ABC introduced and canceled in 2001.
Now the media giants are thinking about how to get creative. In recent months, the TV networks have begun Internet distribution of programs that cannot be squeezed onto cable systems. NBC Universal, for example, moved its Trio network, which focused on pop culture, onto the Internet, in a service called "Brilliant but Canceled." It will also produce original series for the Web.
Mr. Malone, who introduced the idea that cable systems could have 500 channels, contends that in this new world of infinite channels, less may well be more, at least for some existing networks. Discovery Communications, in which a company Mr. Malone runs owns a controlling stake, is considering spending more money to produce fewer programs with more appeal, he said."You want products the consumer really wants to stick around and watch," Mr. Malone said, "not simply because they happen to be there."
Copyright 2006 The New York Times Company
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