It’s Berlin, Circa 1989, and the Media Industries Are East Germany

by James McQuivey, Ph.D.
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Allow me to add my voice to the chorus of those applauding the fall of the Berlin wall twenty years ago this month. It was this event that taught me firsthand why revolution is simultaneously impossible as well as inevitable. In 1986 I sat with other students from around the globe just blocks from the wall and debated whether it would ever come down. The naïve among us insisted freedom was imperative: It was inevitable. The others asked if we had stopped to think about the massive relocation of people, economic resources, and government structures that such a revolution would require: It was impossible.

Until it happened, just three years later.

 

The author, pictured left, photographed in front of the Brandenburg
Gate from what was then the East German side

Such is the content industry’s less political but equally momentous dilemma. Walls are crumbling on every side: First the CD and now the DVD. Traditional structures that held entire industries together like little Warsaw Pacts are under threat. Media companies that deal in any flavor of print, audio, or video are under siege from the economic effects of content digitization, forever altering how content is created, packaged, and distributed.

At Forrester we call this the Media Meltdown and though we’ve been documenting its slow dissolve for some time, it’s high time we declare that 1989 is upon us – it’s time to actively tear the wall down rather than watch value continue to trickle out around the edges. We must rebuild the media industries anew: goodbye analog inefficiency, hello digital economics.We recently published a report called How To Rebuild The Media Industries, in which we issue this call. We’re no Reagan, but we issue the call with the same clarity: Stop building value on your supposed content and distribution monopolies because digital economics have forever reduced barriers to competitive entry. Publishers and producers, someone else can make that content for less money. Networks and distributors, someone else can package and bundle the content more efficiently. And movie theaters, retailers, cable networks – anyone who delivers content – there are new alternatives to you popping up every day. How? Because the analog assets and processes you built your empires on will soon hang around your necks like dead weights wile new digital competitors enter unencumbered. Some will dispense with analog assets in one fell swoop as Conde Nast did with Gourmet, others will whittle assets down to the bone like Disney did to Miramax, while some will cut as much internal fat as possible while keeping up external appearances as Newsweek has done.

And that’s just the internal wrangling over budgets. When you serve external customers, you’ll change what, how, and when you distribute content. Sony Pictures will stream Cloudy With a Chance of Meatballs to owners of Sony Bravia connected TVs before it’s available on DVD. This is just one example of how to seize the economic advantage that comes from serving consumers at a new, digital, level of convenience. You’ll have to embrace the devic consumers embrace – connected TVs, smartphones, and eReaders – offering content as a service that spans multiple platforms, and charging for the convenience of easy access to what you provide.

In the last two months I have been on the road presenting our view to dozens of clients and to others in larger, less private settings. Some chirp that this is all obvious and inevitable, why do we even bother to write about it? Others squawk that we can’t possibly be serious – have we never stopped to consider how impossible such a massive relocation of labor, assets, and economic value is? To the former, I applaud your naiveté and welcome your bold moves in the market. To the latter, I encourage you to learn your history lesson. Those who rebuild now will still be here to discuss the finer points of the digital transition ten years from now. Those who do not, will not.

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Note: a version of this post was also published on Paidcontent.org, though without the attractive retro photo

Why EMI's Launch of Abbey Road Live is a Peek into the Future

[Posted by Mark Mulligan]

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EMI have announced the launch of Abbey Road Live, a service that records high quality audio and video footage of live concerts and produces take away CDs, DVDs and USB sticks for concert goers.  Though this may not be as big a headline grabbing story as MSN Music’s attempt to take on Spotify, it is illustrative of an arguably much more important trend. 

 

Forrester clients and other regular readers of this blog will know that we’ve spent much of this year developing our big idea about Media Meltdown and the associated series of research documents.  (For those not up to speed see this blog post and this report and this report.)  The overly boiled down summary is that traditional media companies are having to reinvent themselves as consumers’ willingness to pay for content nosedives.  Hence 360 deals etc.

 

But why I like this EMI announcement is that it isn’t just about revenue diversification, it’s about recognizing which of its assets consumers still attach core value to an building around that.  For the music industry, live is one are where consumers still clearly attach a massive amount of value: a ticket for a U2 gig for example can work out more than ten times more expensive per minute than buying the entire back catalogue on CD.  

 

So in the context of the Media Meltdown, where online availability of content has washed away true scarcity for good, media companies need to coalesce around where consumers retain value (see chart below).

The reason that these events have value is because they are unique – their value comes from the personal experience in the here and now. The EMI Abbey Road Live venture explicitly builds upon this theme by giving consumers the ability to extend that unique experience into their homes and MP3 players.  

 

Rebuilding the media industries won’t exactly be an easy task, but what is clear is that there are vital assets that can form the basis of new, important revenue streams.  It is not so much a case of media businesses dying as of media companies building new media businesses around their core media assets.

 

This is a topic I’ll be talking about in much more length at Forrester’s forthcoming EMEA Marketing Forum in London.

 

I’ll be presenting on the 17^th November at 2.00pm on the following topic:

The Digital Transition Of Media: How Media Will Never Be The Same Again

I hope too see you there.