The Fragmented Media Future

David Schatsky | January 04, 2006, 06:45 PM

Is the media industry cracking up? The US media industry is the world’s most important. Though it accounts for just about 5 percent of GDP in this country, it touches hundreds of millions of U.S. consumers daily and its influence on consumers across the globe is a major component of our nation’s “soft power” abroad. But this is a time of dramatic disruption and transformation that will remake the industry landscape and see formerly dominant companies whither into irrelevance and test the resilience of an industry that has led the world through all of the last century. Will it lead the world in the current century?

The driver of this disruption is the dynamic of fragmentation, which is playing out along three dimensions simultaneously.

Audience fragmentation. As an expanding array of media and entertainment choices make claims on consumers’ time, the amount of time they spend with traditional media, from television to magazines, is declining. Mass audiences are shrinking.

Personal fragmentation. Consumers are spreading their media time and dollars around, spending less time with TV, magazines and other traditional media in favor of newer media like the Internet and video games.

Media fragmentation. Media itself is beginning to fragment in dramatic ways. Individual songs and episodes of TV series are available for sale via download. Digital “feeds” of newspaper and magazine content allow consumers to read parts of a publication out of context without ever seeing the rest. Cable companies may soon offer individual channels a la carte.

Consumers increasingly expect to be able to consume media when and where they want, on any platform or device, in any context. The technology and media industries are beginning to oblige them. Fragmentation is both a cause and effect, creating a cycle in which fragmented audiences lead to fragmented content, which allows audiences to fragment further, and so on.

These changes will threaten established practices and entrenched interests in the media and advertising sectors, but consumers will benefit and ultimately, companies that can ride this wave will benefit as well. They have no choice. Take movies: Nearly 100% of the growth in movie industry revenues over the last 50 years has come from new markets, such as home video, and new platforms, such as DVD.

As fragmentation transforms the media landscape, media companies will need to adapt to remain relevant. They will have to:

- Support multiple platforms for their content, from public venues such as theaters to digital media hubs in the home, to portable devices on the go. Content not available across the spectrum of platforms used by consumers will become irrelevant to them.
- Enable disaggregated, a la carte models that offer singles, episodes, feeds, fragments, samples, and so on to consumers who increasingly expect to select and consume their media granularly.
- Integrate more closely with advertisers, looking beyond the thirty-second TV spots, for example, to a multitude of new formats, from much shorter 5- to 10-second units to branding experiences that are integral to the media they sponsor, such as product placement.
- Collaborate more with consumers who, in online discussions, blogs, and podcasts are increasingly creating their own media.

The changes afoot in the media industry effectively create more competition in the market for content and entertainment and are affecting every link in the value chain.

Cable companies, representing an “old-guard” pipe for content, are threatened, but those, like Comcast that are aggressively experimenting in with on-demand distribution models and the creation of their own content have a better chance of remaining relevant.

Tech companies see large new opportunities in the fragmented media world. Apple, for instance, is becoming an increasingly important intermediary (with iTunes) and a platform (with the iPod).

Content owners, such as TV networks that acquire or create content, stand to do well even as media consumption patterns change, providing they are promiscuous with platforms and provide compelling content. Hence the $500 million bet by Sirius Satellite Radio on the charms of Howard stern. But creating compelling content is more of an aspiration than a dependable business model.

While no one really knows what the media landscape will look like ten years out, those companies that embrace the change that is shaking the industry, and commit to aggressive experimentation and flexibility, will have a greater chance of surviving, thriving and leading in a world of far greater possibilities and rewards than ever before.