Melting Ice Cubes: New vs. Old Media

The media industry has a lot of melting ice cubes

I try to get involved in lots of conversations about the future of the media industry.  Having worked initially in the music industry (content creation)  and later in the emerging media business (content strategy),  I spend a lot of time thinking about were people spend their time accessing information and consuming content, and I’m lucky to live in New York, where there are a lot of really smart folks who think and talk about this a lot.

The media business is an interesting place right now,  there are a lot of new executions happening on content development, distribution and monetization and the big changes aren’t over by a long shot.  This innovation has created a lot of transitional friction.  This is not new news but worth continuing the discussion.

Changes in consumer behavior create a great deal of what’s referred to in the investing world as secular risk.  I take a class right now where someone mentioned newspapers and terrestrial radio, describing  the two industries as melting ice cubes because the value is melting away as customers move to other parts of the media universe.  I think that’s an apt description for what’s happening to a lot of businesses that used to make lots of money.  Because customers are migrating to new media sources and away from old media sources,  the value of these older models is….evaporating.   It happens fast:

Want to change the music industry?  Download your music for free.

Want to never walk into a bookstore again?   Stop buying books.

Want to kill terrestrial radio?  Don’t turn it on.

Media and entertainment are risky because, often,  all it takes for you to become worth nothing is for your customer base to refrain from consuming your content.  When Napster dropped an A-Bomb on the business in 1999, the argument from a lot of music fans who gorged themselves on free music was that “the music industry had been ripping them off for years,  this was just a rebalancing”.  The party is now over and SoundScan just had its worst week in history; which is an unfortunate blemish on a great achievement for Amos Lee.

Some great things have been growing, new businesses like Sirius XM, Pandora and Last.FM for music….and digital books and tablets are incredible; but these innovations have largely come at the cost of traditional media businesses and  they haven’t found the type of profitability that is necessary for long-term sustainability.  This is potentially value destroying.

Some of these changing businesses were desperately in need of disruption; I think others are just going to get run over and it’s the downside to innovation.  I believe innovation is, net-net, an exciting proposition that allows for new players, new solutions and and overall better experience for consumers.  With that said, the transition can be tumultuous and sometimes things like albums and books get lost in the shuffle…and they were really great products and I’m going to miss them.  I do know one thing for sure, if content farms are the future,  then we’re all going to start missing the past.

InstaPath: Mobile Social Networks

It’s already been an interesting month and we’re just getting started with February.  Over the past three days, we saw two “smart-phone enabled media-sharing communities” receive new rounds of funding.  Both Instagr.am and Path received millions in venture capital financing to grow their respective businesses.

I’m excited to see these companies get some backing.  I’ve been thinking about social networks and their usefulness in certain contexts because, in my experience, there are certain contexts for which Facebook just doesn’t fit my life, which means that there is an opportunity to fill a need.

I was speaking to a colleague yesterday about path and Instagr.am.  He was asking “where is this all going to shake out?  Where is the revenue on the other side and what happens when Facebook decides to get into this space?”.

I believe that if Flickr and LinkedIn can coexist with Facebook, then it follows that smaller networks built around specific experiences can thrive in the next wave of  social networks.  Facebook is not the place for my professional profile, it’s the place where I’m going to get information on a lot of friends, many of whom I am only marginally connected to.  My Facebook feed is primarily filled with people that I went to school with.  LinkedIn is the place for my professional network (the people that I’ve worked with), and Twitter is the place where I get the news and content that I want from news sources, celebrities, venture capitalists and investors.  I don’t want to involve my Facebook network in everything I do.

I think the disconnect that a lot of people have around this trend is that they fail to realize that streams and networks are going to replace a lot of the content curating that we used to pay for (like magazines and traditional television programming),  so people’s initial reaction to a new network is is “Another social network? We don’t need another social network!”.

I kind of disagree.

That’s why services like Path and Instagr.am exist; they are looking to create smaller networks of people who share certain interests.  These companies are developing their networks on mobile devices and they are starting to succeed.  I’m not making bets on any particular player, but I think this is going to be a growing sector and I’m looking forward to seeing new networks emerge on my iPhone and Android  devices in the near future.

If you want to learn more about the stories behind Path and Instagr.am,  here’s some more recent info:

  • Kevin Systrom talks about launching the product with Chris Dixon in this post on Techcrunch (worth checking out).
  • For Path, here’s a story from Michael Arrington discussing Google’s $100 million offer of Path, and Path’s subsequent rejection of the offer.