5 Reasons Why Traditional Media is Making a Comeback
What ever happened to those big fat sloppy media companies that “just didn’t get it?” Dead? Buried? Nope. The profits are rolling in.
Companies from Time Warner to News Corp to NBC have reported increased earnings that beat analyst’s most optimistic forecasts. Even Time Warner’s magazine division posted impressive results and, what’s more, the supposedly dead newspaper industry is showing signs of life.
What’s going on here? Weren’t these companies supposed to be steamrolled by the digitized social media colossus? Actually, the media rebound was predictable and, moreover, the comeback is here to stay. Here’s why:
It’s The Content, Stupid
As I wrote in an earlier post about the future of media, the core mission of media is to inform, entertain and inspire. That has not changed nor is there any indication that it will. While it might be fun to keep in touch with your fraternity brothers on Facebook, that’s not really content.
Leading media companies are full of extremely talented people who know how to uncover information the rest of us can’t and tell stories that we enjoy watching, hearing and reading about. It’s no accident that so much of what we see on social media is actually links to mainstream media.
While amateurs can often come up with worthwhile stuff as well, it shouldn’t be surprising that the most sought after content is produced by those who have devoted their life to their craft. The rest of us are just winging it.
The Newer the Media, The Worse it Works
Shooting a TV ad is pretty amazing, not least because of how efficiently modular the process is. Different people with different skills, sometimes coming from different countries meet, often for the first time, and get everything up and running in a few hours. In a matter of days, locations are chosen, sets are built and the ad is shot and edited.
Compare that to digital. When I was running a large media company, we had two programming environments: one for our portal and one for our content sites. When we switched a developer, it would take him months to get up to speed. Moreover, the interfaces between functions (i.e. marketing, development, sales, etc.) were even worse than within the developer’s group.
In new media, we just don’t have that much experience built up. Problems are not clearly defined, solutions are relatively untested and the context is constantly changing. Is it any wonder that nearly 90% of media budgets still go to traditional media.
Strangely enough, given the excess of bile coming from social media gurus, social media itself seems to be helping traditional media rather than hurting it.
As an article in Time magazine shows, social media contributed to the largest TV audience ever for the last Superbowl and TV viewing in general is at or near all time highs in both the US and the UK. One by-product of the paywall debate is that newspaper sites depend heavily on social media for audience.
As I noted in an earlier post about social media and power laws, social media and mainstream media are much more symbiotic than they are competitive. As long as there is a conversation, you can be sure that professional editors and programmers will have a major role to play.
Amid all the layoffs, one thing that got lost was the fact that media businesses were coming off some big, fat years. The creative side of the business has a lot of clout and when there is money lying around, you can be sure that they will have some great ideas about how to spend it.
Therefore, it shouldn’t be surprising that when there is a downturn a lot of the fat gets cut. Fringe ideas like Men’s Vogue get cut and aggressive new concepts get rethought. People learn to do more with less. The result is that media companies have pared down their product portfolios, streamlined their back offices and gotten rid of the some of the dead weight on their payrolls.
This has been a painful process with real human costs, but the business are a lot stronger for it. Many of the profits that exceeded expectations came from the cost side rather than from an up-tick in revenues. However, as ad market expectations are also being revised up, the future does look rosy indeed.
It Never Really Went Away
One of the most common misperceptions over the past few years is that media companies have lost money from operations. That has been largely untrue. Most of the enormous losses that were reported came from write downs, not operational losses. Since the Internet came on the scene, media operating margins have increased, not decreased.
The notion that a vibrant industry with some of the most creative people in the world would shrivel and die when faced with a tough economy and some new competition should have been ridiculous on its face. Nevertheless, many believed that to be the case and crowed on about the death of traditional media (and, in fact some still do).
“Old media” continues to be profitable because it has to be; there are no preferential valuations for simply doing an old job well. New media, on the other hand, still has to prove itself. Most start-ups fail because entrepreneurs generate new ideas much faster than consumers are able to adopt them.
It has always been thus and will always be so.