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5 Reasons Why Traditional Media is Making a Comeback

2010 August 11
by Greg

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.

Social 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.

Lower Costs

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.

– Greg

30 Responses leave one →
  1. August 11, 2010

    An excellent article. Thank you , Greg.

    Over the last 12 years, I’ve seen plenty of ups and downs in the Advertising industry. And I completely agree with you that as long as there is talent and passion in this industry, there’s opportunity. I can honestly say that the best digital and social media shop can’t match the experience and intuition that we have around consumers of brands, media and products.

    That said, I am also seeing another trend: Many of the brightest minds in Advertising are finding traditional agencies a little too stifling and rigid. Intuition seems to be leading the bolder ones into going at it on their own.

    I am certain that the Advertising industry will thrive as long as there are brands. About the traditional agency structure though, I’m not as confident.

    [Reply]

    Greg Reply:

    Shanty,

    You make a good make a good point. For the major Ad Agency networks, structure is a very big issue right now and rigidity is a major concern. I wrote about it a while back in a post about how ad agencies can capture value.

    Thanks.

    – Greg

    [Reply]

  2. August 11, 2010

    Greg –

    While you’re right that profits are up and old line media operations continue to boast impressive numbers, real revenue from ongoing operations continues to fall – particularly print revenue.

    I’m not ready to declare old line media dead – but it is in need of some serious revitalization. A focus on value-driven pricing models, efficient sales structures and an audience driven culture would be a good start.

    And before the debate gets going – I don’t see this as a content or distribution (i.e. circulation) problem. I agree with you – old line media companies are chock full of smart, talented people who know how to craft a story and capture an audience. I trust those folks to find their way through the emergent post-digital landscape.

    It’s the business side of the house that I’m worried about.

    [Reply]

    Greg Reply:

    Bill,

    You’re right about the revenue side being slow to pick up but, as I noted in the article, ad forecasts are being revised up. Moreover, with respect to print, as I wrote in a previous post, magazines are always the last to pick up (newspapers will continue to decline until they find a bottom, classifieds will probably never come back).

    You can find the magazine post here

    Thanks for your comment.

    – Greg

    [Reply]

    Bill Day Reply:

    point taken on magazines – the print side of their houses will almost certainly rebound against and awful 2009, and I think they are well positioned to take advantage of emergent tablet technologies

    newspapers are where the real pain remains

    [Reply]

    Greg Reply:

    Yeah, digital is just a much stronger direct response medium. However, there are some strong ideas out there. Free Newspapers, for instance, count on losing money on the daily issue and make it up with high margin supplements.

    Another idea is to build “satellite” brands on the web and leverage content further. For instance, a local sports site whose core content comes from the regular coverage, but is augmented with community services.

    – Greg

  3. August 11, 2010

    Greg –

    Thought I left this here before – if so forgive the double post

    While old line media companies have indeed been posting profits and maintain impressive margins, real revenue from ongoing operations continues to decline. As in selling less stuff (or similar levels of stuff at a lower rate). This is particularly true of print advertising.

    I’m not ready to declare print dead – but it is in need of serious resuscitation. A focus on value-driven pricing, rationalized sales channels and an audience driven culture would be a good start.

    To be clear, I agree with your points above about the smart and talented people who work in the industry. In fact, I have the utmost faith in their ability to craft content that engages and captures audiences.

    But we don’t have a content problem, or a distribution problem – we have a business model problem.

    [Reply]

    Greg Reply:

    Bill,

    Sorry, you were caught in spam. Thanks for both comments:-)

    – Greg

    [Reply]

  4. August 11, 2010

    Another great article Greg. You always provide a fair analysis of what is going on in traditional and digital media. I guess I’m still waiting for ad agencies and clients to stop treating them separately once and for all. Can’t the discussion simply be about how do we reach the folks that are interested or may be interested in your product/services and what’s the best way to do that, and how do we prove that it’s working. Traditional media will never die, nor will ad agencies they both need to evolve with the changes. They will just give them some time – it takes a little while for the big guys to change direction.

    [Reply]

    Greg Reply:

    Sue,

    It’s true. Having recently entered the “big agency world,” I am a bit amazed about how balkanized it is, especially regarding digital media (and I thought publishers were bad!). In any case, there are a lot of talented people around so I’m sure they’ll work it out.

    – Greg

    [Reply]

  5. Frank permalink
    August 11, 2010

    Traditional media is still the only place to sell something that you never knew existed or didn’t know you needed, and the most efficient means to brand a product.

    While Google in in effect the direct replacement for the phone book, it (and other online/social forms) assumes you know what you are looking for.

    Why else would Yahoo spend millions on radio/TV to drive traffic to it’s site?

    [Reply]

    Greg Reply:

    Frank,

    Good point. As I wrote before, one of the problems digital media needs to solve is that it it relies to much on direct response. Moreover, direct response marketing ignores many important communication tasks.

    Thanks for a great comment.

    – Greg

    [Reply]

  6. August 11, 2010

    Too true, Greg,

    Social media will never catch up with the value an editorial staff can provide. Besides, I think it will be another generation before we find adepts as good on the net, as we have today in print and television. Then, the equation might begin to change!

    Thanks for the post, but let us not forget that there is a lot of trash on print as well. May the best survive, whatever their means of expression!

    Shiv
    shiv vasisht´s last blog post ..3 Target Audience&gtTarget Person&gtWho- exactly- Mr Freud

    [Reply]

    Greg Reply:

    Thanks, Shiv.

    I agree that a lot of “trash” exists in print and in other media. However, beauty is in the eye of the beholder. One man’s trash is another man’s treasure. The great philosopher, Ludwig Wittgenstein, was hooked on cheap detective novels and cowboy movies:-)

    – Greg

    [Reply]

  7. Zahid Hussain permalink
    August 12, 2010

    Hi Greg,

    your article has inspired me to go through some material avaialable on the subject. However, I do not want to quote that without first authenticating the figures that are available at the following links:

    1: Internet World Stats: Usage and Population Statistics for quick view
    http://www.internetworldstats.com/stats.htm

    2: Why Circulation is Irrelevant: By Michael France and Justin Dini, Brunswick, New York
    http://www.brunswickgroup.com/index.aspx

    3: You will find the following interesting in addition to what you have written in this article:

    “The average American spends more than four hours each day watching television,
    according to a 2009 Nielsen report cited by CNN.com. Nielsen, the television rating
    company, claims that an American will spend the equivalent of nine years in front of the
    TV over a lifetime of 65 years.” http://www.answerbag.com/q_view/1951024

    “As many as 2.5 billion people tuned in to watch the funeral of Diana, Princess of Wales in
    1997. However, it has been estimated that as many as 4.5 billion televisions may be in use
    around the world. Because no worldwide authority monitors the use of televisions, the
    figure is impossible to verify.” http://www.answerbag.com/q_view/2038431

    “As of March of 2009, 430 million households worldwide subscribed to cable television.
    This number was an increase of 4 percent over the previous year. The United States holds
    92 million cable-subscribing households.” http://www.answerbag.com/q_view/2158821

    The three links statistically prove what you have written.

    The figures are self-explanatory as to what is happening across media. But I personally feel that the “MASS” print and electronic media are losing “depth of serious content.” They are living in today even in the very hour. The second element of repulsion is repetition and overlapping. The third repulsive element is lack of focus on research and verification.

    There is another important aspect of this repulsive scenario and that is the neglect of followup on the reports by most credible think tanks covering different subjects of national, regional and international importance.

    What I mean to say is that if the managements of mass print and electronic media did not pay heed to the need of improvement in content, they will ultimately loose ground.

    [Reply]

    Greg Reply:

    Zahid,

    Thanks for the links. http://www.internetworldstats.com/stats.htm is an especially good resource, which I have used extensively in the past.

    I also agree that all media companies need to pay heed to the creative side of the business. “Content” seems to me to be too small a term (although I use it too).

    – Greg

    [Reply]

  8. August 17, 2010

    Greg, Isn’t part of what we are seeing here simply cyclical recovery of the traditional big scale media businesses while secular shift toward the internet (albeit grossly hyped) continues?

    [Reply]

    Greg Reply:

    Roger,

    Yes, but I like the way I say it:-)

    – Greg

    [Reply]

  9. August 18, 2010

    Another way of saying it’s about the content might be to say “it’s about the goal.” New toys are always distracting and until we know what they do or don’t do, it’s hard to know how to use them. People are now refocusing on what they want to accomplish more than if they have a Twitter account. As you say, there are many reasons why mass media are still the best at doing certain things. There are things, however, that I think have irrevocably changed. There is a new psychology or set of expectations and attitudes about communication, speed, and self-referential value will drive the content, as well as a blending of boundaries between distribution channels will continue to drive information transmedia. New technologies will continue to shift the relative weight (and therefore profits) of information flows and, as we see with mass media, new technologies will become absorbed into the “old” tech delivery. The nonlinear benefit and cognitively compelling nature of participatory, transmedia narratives will keep multiple channels not only active, but intertwined.

    [Reply]

    Greg Reply:

    Pam,

    You’re absolutely right about objectives being primary. Moreover, new media is creating new objectives, like developing a community, building online visibility, etc. The problem is that we’re not that good at the new stuff yet.

    One thing I’ve learned from running media businesses is that trends move much faster than audiences do.

    – Greg

    [Reply]

  10. August 20, 2010

    Hey Greg! It’s me again. I was recently commenting on a gripping subject called “Is traditional marketing dead?” when I was told that I just didn’t get it and that the market has evolved beyond traditional marketing. Ok I get that without Social Media, you and I wouldn’t be conversing via a blog. I get it. However…experience has proven that if you are enamored by shiny objects, you get stuck in what I call “Candy Land.” Yes, the name was borrowed from the intellectually mystifying game of the same name. In Candy Land, there are lots of things to stimulate your senses, but nothing to stimulate your brain. I guess it’s designed to be a lower-level Maslow game without the food.

    When I asked how products could possibly be brought to market and create awareness, I was told that there were other groups in which I might feel more comfortable. One of my more endearing qualities is tenacity. So, I persisted. I was told that the product gets there when it gets there and customers are cool with having continual improvements instead of a single finished product. Also, because of Social Media, the need to create all of the content in a traditional model isn’t necessary.

    Ok. They gave me the inspiration to start a new LinkedIn group called “4Ps Marketing” about a week ago focused entirely on traditional marketing practices. Also, I started a couple of blogs dedicated to being a professional compass for those who want the new mystical ideas decoded, as well as providing the tools they need to be better at their trade. This lost is timely.
    Thanks!
    Chris
    Chris´s last blog post ..Strategy- You don’t bring me flowers anymore

    [Reply]

    Greg Reply:

    Thanks Chris. I’m amazed at how few of the social media maniacs ever bother to look at real market data. One of the paradoxes of the web is that the trends move quickly, but audiences actually move extremely slowly. Habits are habits.

    You might like this post about social media myths.

    – Greg

    [Reply]

  11. John permalink
    September 4, 2010

    Keep telling yourselves these things, folks. The truth of the matter is that many forms of traditional media will never completely die, but for the smaller day to day media marketing company who has to work with the local small to medium sized business they have already died. TV, radio, and most forms of print (unless your target demo is 45+) are on life support even at the highest levels. The only thing that is bolstering the numbers are larger companies that understand that when the competition drops out of the marketplace you can garner a larger market share with the same or a little bigger buy. In some cases, totally take it over! If you don’t believe that, take a poll of the advertisers on national TV any night of the week. If it weren’t for car companies, large food chains and pharmaceutical companies there would be no advertisers. I just checked my files and I don’t find any of those folks in my past book of business.
    The future of local marketing is online…like it or not….85% of everything purchased in the US is in some way researched online before it’s purchased and that number will do nothing but grow as the younger generation takes over.

    [Reply]

    Greg Reply:

    Thanks for sharing your viewpoint John.

    Good luck!

    – Greg

    [Reply]

  12. September 10, 2010

    Greg,

    I have been in media for 30 years. I love digital and live it everyday. I understand you 15 years of experience is worthwhile but you didn’t experience the start of the digital revolution in 85 and 93.

    Traditional media is only existing because like oil it is a revenue/economic stream that is in place and has projections and funding/lending practices in place that are predicated on those projections. In other simpler words the clock is running out and they are grabbing all dollars while they are still alive.

    Devices like tablet computing and cloud servers are and will continue to eliminate traditional media streams. Game console and disc sales and down by 26%. Last year NBCUni reported a 49% drop in revenue. Please look it up – WSJ or wherever you wish.

    Houghton Mifflin just released a new textbook product line for the tablets. All of teh big six publishers are doing the same.

    Media in all traditional forms is slowly slipping away. It may be slow but it si happening.

    [Reply]

    Greg Reply:

    Patrick,

    Thank you for sharing your perspective. Although, working for a global ad agency network, mine is quite different. Advertisers invest most of their money in traditional media simply because that’s where they get the best results.

    That may change at some point in the future, but for now that’s the way it is.

    – Greg

    [Reply]

  13. Patrick permalink
    September 11, 2010

    Not to argue but that is because the indivduals running those ad budgets have no idea how to use digital. I have worked with them over my career. I have heard them say out loud – “I kind of skipped over that whole computer thing.. ”

    If they are investing in traditional media why are magazines, newspapers, and television all reporting tremendous gaps in revenue – not spending – different thing – but actual revenue after costs? This is what I read in the trades. AdAge – AdWeek – NAPA – all reporting closings of traditional media outlets. Bride, Gourmet, Cookie…didn’t this just happen? USA Today reports that it is focusing on its online edition.

    The only job listings I see are digital based.

    Online education saw a 800% increase from 08-10 – doesn’t this affect ad spending? If students are spending more time online – 18-35 year old marketplace – with over $150 Billion in discretionary spending – doesn’t this affect where ad dollars should be spent?

    Maybe this is why the Ad industry hasn’t been hiring for the last 18 months? They may be spending but are they actually making money for their clients? Spending is easy it is the ROI that actually counts – generating profits therefore causing the need for more hires – thus invigorating the economy.

    My regional paper has gotten so thin I can barely wrap the garbage in it. It leaks right through. Been at this for three decades, been through the first waves of digital they may have been arcs but now the sea has risen to a new level.

    My colleagues all told me that the Kindle and the iPad were frivolous toys. Now they are reaching the top position on Amazon and eBooks are accounting for 50% more in sales than traditional books. The iPad is selling at 200,000 units a day, just in the USA.

    You are too young to act this old. I’m old and maybe I shouldn’t be acting this young, but facts are facts.

    [Reply]

    Greg Reply:

    Interesting points. Thanks for sharing.

    – Greg

    [Reply]

  14. January 2, 2011

    I agree with the point that social media is actually helping traditional media. I constantly get Twitter commentaries about what’s on TV or radio right now, what new book someone’s reading, etc. Social media is still referencing traditional media much of the time.

    [Reply]

    Greg Reply:

    Shakirah,

    It’s also a major part of content strategy online, which is one reason why I’m skeptical about Apps.

    – Greg

    [Reply]

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