The Internet Isn’t Just Another TV Pipe

Editor’s Note: Guest contributor Ben Decker works in corporate strategy at NBCU and does research on new media at NYU. Ben has recently begun an open dialogue around these issues and the future of traditional media. If you’d like to be involved, contact him @BDecker19

As everyone knows, Facebook schooled the web last week, and expanded its territorial ambitions to the world of media.  Launching with partners in print, music, and video, Facebook’s latest update pushes toward a world where consumption’s default has been switched to sharing, and social discovery sits not on the periphery of the media experience, but permeates it.

Zuckerberg presents this as a new model for media industries, one where you “discover so many songs (or movies, or articles) that you end up buying even more content than you ever would have otherwise.” Indeed, bringing users into the media discovery process is an important step. Ultimately though, it’s just a beginning, for it touches only the marketing component of the traditional model (consumers still passively consume content; they just get to tell people about it now).  The media revolution that’s coming will go further, fundamentally restructuring the relationship between media producers and consumers and often blurring the line between the two.

In my industry, television, everyone is scrambling to figure out the impact of Internet distribution.  How will it impact broadcast, for first-run airs and repeats?  What’s online’s relation to DVR and VOD?  How do its CPMs and sellout rates compare to other channels?   Questions like these, however, fail to capture the full opportunity inherent in the new medium.

The Internet isn’t just another pipe.  The Internet is an open distribution platform available to anyone, a fundamental change to the business landscape in which we operate.  And the Internet is bidirectional, which should fundamentally change the product we offer.  This first characteristic opens our business inevitably to the chaos and disintermediation that has plagued the print and music industries.  It this second characteristic, however, that I believe gives the TV industry a ladder out, and provides the opportunity for a dynamic, more sustainable, and ultimately more profitable business model.

In the past, a small number of companies held exclusive control over the TV distribution infrastructure. Today though, the Internet has opened up distribution to anyone, with production and marketing tools following suit, breeding an entirely new class of potential creators.  The Internet meanwhile is also making it easier to find and work with these creators, which is making the traditional model of publishing unsustainable.  It is no longer possible, competitively or practically, to keep our grip over everything, controlling the full production and distribution process internally, to push a monolithic product on a passive consumer we have no relationship with.

The problem of the web’s openness is fragmentation.  On the web, instead of a couple companies trying to assemble full packages of finished content, everybody throws everything out there, from individuals with camcorders to well-financed independent studios.  Most of it’s of course crap.  But the best can be quite great, even better than ‘professional’ content.  And more importantly, individual pieces tend often to be better, at least for a particular person, at a particular point in time.  The aggregate of the network—the best, most personally relevant piece of content from anyone, anywhere on the planet—becomes difficult to compete with.  There will always be a market for high-end, quality-assured content.  But as low-end tools move ever up market, as professional input resources become ever less exclusive, and as discovery mechanisms become ever better, that premium pie the big guys fight over will become ever smaller.  It’s the basic innovator’s dilemma.

You see it in the obvious trends plaguing television’s business model.  Monetization has always been about control . . . about setting up checkpoints, sites where people have to come to us if they want the services we provide.  In the broadcast era, we had no way to ask this of consumers, so we turned to advertisers, for whom we could gate and sell access to our audiences.  In the cable era, we found a way to establish a retail model, controlling the flow of content through pipes and selling access to consumers directly.

With the Internet though, these models break.  As we lose control over distribution, consumers gain the option of alternate content paths, both legal and illegal, rather than waiting at our checkpoints.  And as the world fragments, we lose our ability to aggregate audiences.  Of course, this latter point matters less and less, as businesses gain the ability to speak to consumers directly (first through web sites and now more effectively through social networks), and then even they get disintermediated, with consumers shifting their reliance from ‘push’ brand messaging toward ‘pull’ recommendations from their peers and reputation systems (think Amazon star ratings, and now Facebook).

I believe there’s a solution, one which doesn’t run from, but instead embraces the openness and interactivity of the web.  I believe television, and all traditional media industries, must shift to a collaborative model, where we use our premium resources as a vacuum to suck in value creation from partners and users, the way digital firms like Apple, Google, and Facebook do.  We should take advantage of external capabilities where they’re preferable to our own (eg distribution), and release our own differentiated resources to open innovation (eg content and ad sales capabilities).  The job of the media company will shift from producing and distributing content alone to orchestrating production and distribution ecosystems.

In all our interactions—with suppliers, but most critically with the audience—we must also shift from one-off transactions to ongoing relationships.  No longer can we simply push our products to people and call it a day—sell them a DVD and that’s that.  Me must shift to a services model, where we build ongoing communities of interest around our content and the service we sell becomes access to that content.  To this end, we must work harder to foster user contributions and user-curation around our shows; create second screen and social experiences that deepen the engagement of our viewers; offer games, gamification and, other forms of interactivity.  We must personalize media experiences and offer recommendations.

The opportunity here is extensive: continual subscription revenue streams, a secure distribution model (services are harder to steal than goods), a sustainable advertising model (based on deep user knowledge and a recurrent opportunity for persuasion), customized and continually evolving products, and the chance to capture free labor, knowledge, and creativity from our customers.  It’s what Blizzard and Zynga did with games, Netflix with video, Zipcar with vehicles, and down the line as all business gradually join ‘the mesh.’

As Netflix has demonstrated, disrupting one’s own business is perilous work.  But it’s been done.  Facing crises, companies like Cisco, IBM, and P&G have taken tens of billions of dollar restructuring paths to come out fundamentally different, vastly more successful companies.  Firms like AOL and Best Buy are in the midst of trying.  Of course, the alternative is the long slow fade to irrelevancy of a Yahoo, Borders, EMI, Tribune, or Blockbuster.

At television networks, digital divisions are creating innovative interactive experiences that take the audience beyond mere consumption into active participation.  But all of us in traditional media companies must realize that these digital products aren’t just dinky marketing vehicles for their on-air counterparts.  They aren’t cannibalistic substitutes, replacing analog dollars with digital pennies.  They are our gateway to a new world.