Do we rebuild the media industry from the outside in or the inside out? It may depend on what is understood by “convergence.”
Convergence has been a misunderstood concept in the information industries almost from the first time it was uttered. (I don’t know exactly who or when was first, but I was working with Anthony Oettinger in the late 1970s when I first heard about convergence from him at the Program on Information Resources Policy at Harvard. If Tony wasn’t the first, he was near the starting line).
From the beginning, media, telecommunications and computer companies, among others, misinterpreted the significance of what was converging. It was not fundamentally about industries converging—though that is one outcome. It is not about technologies converging, for that would be redundant. Convergence is about the blurring of the boundaries of content as all goes digital. That is, in the historical analog world, a printed page is created through a very different process than a video image: the mechanics of capturing, processing, storing and transmitting are easily defined and differentiated. The economics are different. The regulatory regime can be clearly defined.
But in the digital world, a bit is a bit. A string of zeros and one. Whether it may eventually be displayed as a text or audio or an image bit, it is captured, stored, processed and transmitted much the same way. At that point, it is simply (or maybe not so simply) a function of economics for how it gets to the end user and who provides it. Some examples?
An easy one is the newspaper: take all those bits created in the newsroom and from various outsourced vendors like the Associated Press and create a plate and put ink on it, print a paper and truck it to the buyers. Or take all those bits and impose some flavor of mark-up language on them and store them for access remotely. Oh yeah, this second option can make audio reports and video streams available within the text “pages."
A newer more complex example stems from something like Google’s announced acquisition of DMARC Broadcasting, an apparently Old World business that, ho-hum, places ads on radio stations. But if advertisers can create their own listings and bid for placement in text using Google’s service, why not do the same with digital files that happen to become audio instead of text and show up inserted into digitally controlled station stations instead of Web wages? Whoda thunk?
And now we have “television” programs stored on servers to be sold to folks who will carry them around on their portable iPods and the like. There were 8 million video downloads from Apple’s iTunes service in the first months, and that was tallied from a skimpy inventory of titles and before an estimated 14 million video iPods were opened from under the Christmas tree. You’ve got to extrapolate: what does this do to the broadcast network and affiliate model if consumers decide they like and are willing to pay for their digital video on demand? If consumers can download their re-reruns, where does this leave local broadcast stations that make big bucks from repurposed hit shows like “Friends” and “Law & Order?” What could be the impact on the DVD distribution Channel, which after all still requires a manufacturing process and energy-intensive shipping?
Soon you may read about Yahoo or Goggle acquiring a firm called SpotRunner, which does for TV ads what DMarc does for radio. From the convenience of a Web browser, it allows a local pizza restaurant owner to order a generic pizza shop TV ad to be inserted on television sets only in its neighborhood during prime time. And at a cost that may not be much different from buying space in the local weekly newspaper.
And it’s doable because it’s all digital. That’s convergence.
It can’t be much fun these days for the top managers of the traditional media companies. On the one hand they must deal with the normal responsibilities of running a large organization. For the public companies there is the overhang of Sarbanes-Oxley as well. In the “old days”—let’s say before 2002 or so—there were the usual strategic decisions: where to reinvest profits, whether to buy, acquire, merge, or seek organic growth. It was always a challenge to get it right more than wrong. But top management got big bucks for trying and often received personal gratification from playing the game.
Today, on the other hand, if their heads are not swimming in the unknown-unknowns facing them they are either naïve or disconnected. 'Cause convergence is when you don’t know where the next bit is coming from.
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