The real power to control the minds of the masses has truly arrived…
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Malcolm X said that the media was the most powerful entity on Earth because it had the power to control the minds of the masses. The shareholders of entertainment and media companies have done very nicely over the years, primarily because of their control of the message. But they are now in real trouble.
Today, the proliferation of alternative sources of information via the Internet, in combination with the growth of multi-channel television, has smashed old media’s control of the market. The travails of old media are highly instructive because they show investors how new technologies can completely destroy the profitability of businesses that have become too complacent and are unable to adapt in time.
A Business With A Great Future Behind It
The future for all types of media will be dominated by the Internet, largely because of its efficiency as a distribution channel. Their problem for old media companies is that they are stuck with massive legacy costs, such as the public service obligations for ITV, and that their old ways of doing business are increasingly unprofitable in the light of their heavy debts and the emergence of nimbler competitors from the Internet.
In the old days media businesses were a license to print money, notwithstanding the occasional owner who was more concerned with fanning his ego than making money. Newspapers had a near-monopoly over classified advertising and if you wanted to advertise on TV in Britain you had to use ITV. The music industry sold lots of singles and albums and if you wanted to see the latest film you had no alternative but to go to the cinema or wait several years for it to turn up on TV (if at all).
Nowadays magazines and newspapers are suffering for two reasons; the likes of Craigslist, Google and eBay are eroding their advertising income and their customers are drifting away to other sources of information and entertainment. Readers’ Digest magazine, the staple of the doctor’s waiting room, is suffering so badly that it has filed for bankruptcy. Trinity Mirror, the largest national and regional newspaper publisher in Britain, earned 22.7p per share in 2007 but lost 22.6p in 2008 thanks mostly to declining advertising revenue. British Sky Broadcasting, in theory insulated from much of the turmoil in commercial television thanks to its subscriber base, made a big loss in 2008. Pay-TV subscriptions are not as immune to the recession as was thought.
The Decline of the Music Business
Today the music industry is a shadow of its former self. Whilst it pins the blame for most of its problems on illegal MP3 downloads there’s a considerable body of evidence from academia such this report from Harvard University which shows that downloading had no discernable effect upon actual music sales. Oops!
The music industry did make a stupendous error, one that should be enshrined in management textbooks, in allowing Apple to establish a dominant position in the music download market. Thanks to Apple you no longer have to pay £15 for a CD to get the two songs that you do want. This, more than anything else, has gutted the music industry’s business model. Apple is one company that definitely gets it!
Old media’s problem is that nowadays there are so many alternatives competing for their potential customers’ time that didn’t exist twenty years ago. These new sources of entertainment and information include DVDs, computer games, the Internet (particularly social networking sites such as MySpace and Facebook), multi-channel TV etc.
Do aspiring bands really need a record company if they’ve got their own website? If you don’t like what’s on the radio why not start your own station? Or your own online TV channel?
Much of the finest war reporting in this decade has come not from the traditional war reporter but from independents like Michael Yon who is largely funded by his readers and is currently with British troops in Afghanistan.
Bloggers
Print and television journalists, in particular, have been blindsided by the emergence from the Internet of the blogger, a one-person band who is often an expert in a particular field with expertise vastly in excess of the average journalist.
Bloggers are getting scoops and are publishing stories that the media would prefer to keep quiet. People are starting to notice. The libertarian blogger Guido Fawkes, who broke the Damien McBride smear scandal, gets more daily hits on his website than some national newspapers.
The Daily Telegraph may have run with the ball over MP’s expenses, but it was bloggers like Guido who put the ball into play in the first place.
