Leading executives examine long-term future of media
Posted September 25, 2009
Two leading media architects visited USC Annenberg on Sept. 24 for a conversation with communication professor Jonathan Taplin (pictured, top left) about the long-term future of media in the digital age.
The event, The Art of the Long View: The Media Company of 2020 with Peter Chernin (pictured, top right) and Gordon Crawford (bottom right), was the first in a new series of discussions on the future of media. It was Webcast live and is available in its entirety here. Taplin’s discussion with Chernin, former News Corp. president, and Crawford, managing director of Capital Group, attracted students, faculty and a live Internet audience for a discussion about the uncertainties of the ever-evolving American media industry and the business models that have and will define it.
“When we first started talking about this series, the point that I had was that it seemed to me most of the media investment conferences that the three of us go to focus very much on the next two quarters or the next two weeks, as Gordon says,” Taplin said. “And so we thought it would be helpful at an institution like Annenberg to have a long view of this. And so today, I’m really pleased to have our first two guests to really think about what the media company of the next 10, 15 years is going to look like.”
Chernin, Crawford and Taplin agreed the constant improvements to the quality, speed and cost of digital media signal an obvious overhaul to the current status quo.
“There’s enormous value creation going on,” Crawford said. “Google did not exist in January, 1999, and it’s got a $160 billion market cap and next year it’s going to have $26 billion of advertising revenues go through their system. That’s more than ABC, NBC and CBS combined.”
He said that, for example, the recording music business has been cut in half, while Apple has thrived, in large part because of its popular iPod music devices.
“The money hasn’t gone away, it’s just been reallocated,” he said.
There will be vast amounts of news-related information, Chernin said, but The New York Times, CBS or ABC won’t be paying for 37 news bureaus around the world.
Crawford said the concept of a physical newspaper being delivered daily is outdated, but the need for journalism is not.
“We’re going to live in a world where the news is instantaneously updated, and it’s going to come to you on your Kindle or your Apple Tablet or your computer screen,” Crawford said. “Is it going to be the local news reporter, the sports reporter of the LA Times, or is it going to be ‘ESPNLosAngeles.com’ that people get up in the morning and read?”
Taplin said he doesn’t want to defend the piece of paper news is printed on, but he does defend that a trusted group of editors and writers can be paid to deliver news.
“(Economic) models will evolve because people today are consuming more news than they ever consumed, they’re listening to more music than they ever listened to, and they’re watching more video than they did,” Crawford said. “But the business models are going to change.”
Chernin said it won’t happen overnight.
“I actually think it is the most exciting time to enter the media business,” Chernin said. “And I think there will be more jobs than there have ever been, I think there will be more opportunities, I think there will be more challenges. I think it will be much harder than when I did it. I think it’s the most exciting time in the world to be 23 years old. I think it’s a world of limitless opportunities, of incredible intellectual challenges, and a great many more jobs than ever existed. There’s so much more content being created and produced.”
“… There’s an entire world of new opportunities that are going to be created outside of these traditional media businesses. And they’re going to be extraordinary, and if I were you I would suggest that this should be a time of incredible optimism.”
Crawford said journalism students should not get dour outlooks on the current media business model confused with their future jobs as journalists.
“What you do as a journalist is one of the most important professions that we have,” Crawford said. “You cannot have a functioning democracy, you cannot have a functioning democracy at all in a city like Los Angeles, which is one of the most multicultural places in the world, without the spotlight of great journalism. It’s critical – if The Los Angeles Times goes down, or if the business model doesn’t work, we need somebody at the L.A. school board, and at the (Department of Water and Power). You need that in a democracy. And we need great journalism.”
“Real journalists are critical to our society and models will evolve for your work to get out there and it’s an extremely important function in our society,” Chernin continued.
Regarding a potential economic model to sustain the delivery of media content in a digital world, Taplin proposed a concept that intrigued both Chernin and Crawford. He pointed to the music publishing business, which pays a license fee to BMI and ASCAP for the rights to play songs.
“What would be wrong with assessing a global copyright license fee at the ISP level of three or four bucks a month and pulling it all in and just like ASCAP and BMI buy sampling first and then eventually buy the routers reading the actual watermarks of everything and doling it out amongst the people who own copyrights?” asked Taplin, adding that the current 1 billion and projected 2 billion broadband users would create a huge pool of money.
“It would be fantastic for the media industry,” Chernin said. “Whether or not it’s politically viable is a different question, but it would be a great thing for the media business.”
“I’ve never really thought about it or heard it proposed and don’t know quite how it would work,” Crawford said.
Crawford explained the differences between the time he entered the field and today, the periodic revolutions in technology have determined the present and future of that world.
“When I came into the business in ‘72, the existing media business was an incredibly attractive business to invest in,” Crawford said. “From 1972 to 1995, it was pretty much like shooting fish in a barrel investing in the media business … There were really no threats to them.”
But he said times are different now.
“It’s critical when you look at the way people consume entertainment and information, it’s critical to understand technology,” Crawford said. “Technology has always been what’s driven these long cycles in the media-entertainment business, and it’s very disruptive. It creates enormous wealth for the new ways in which things are delivered and it also creates huge value destruction. And this has been true. … “Every time one industry is hurt, another industry creates vast value.”
Chernin said in the last 10 or 15 years – because of new technology – media companies can no longer make huge profits by tactics such as charging people for an entire music album when they only want one song.
“The power has now moved to the consumer and you cannot protect those non-consumer-friendly business models any longer,” Chernin said.
Taplin said the changes in the tech world that have led to upheavals in corporate-driven media are not always well-received by these companies; Chernin concurred, saying big media companies protect their “non consumer-friendly business models” because of issues of self-preservation, but he added the world of such models may be forever changed.
“I don’t know whether it’s over – I think that may be slightly hyperbolic,” said Chernin, referring to the DVD industry. “…Frankly, in some ways I think the bigger change than Netflix and certainly a bigger change than Red Box is going to be the transition from hard goods – from owning a physical copy of something - to electronic delivery of these things. I think the easiest way to look at that is, ‘When’s the last time anybody in this room bought a CD?’ I think it’s remarkable how quickly those things go.”
Crawford also said consumers would have more access to media content and that this evolution would be ongoing.
“It’s the inevitable, immutable march of technology,” Crawford said. “… You’re going to have bandwidth that’s multiples faster than it is today, storage is going to cost nothing, and these issues are going to get resolved and people are going to have access to every movie ever made, whenever they want it, either on a pay-per-view or subscription basis and you’ll be able to get it on your television, on your Apple tablet, on your iPhone and it’s going to be a great world. And the industry will adjust to it, but that’s where we’re going.”
Taplin used the term “interregnum” – “the old is dying and the new can’t quite be born” -- to refer to the period of discontinuity ahead, and Crawford pointed to two crucial elements that, if implemented, might cause further instability and speculation.
“A couple of the wild cards are if Congress or the FCC impose a la carte pricing on cable networks then 250 of your 400 channels will disappear overnight because they just don’t have the support to survive,” Crawford said. “And the other thing, which would be terrible, is if piracy goes unchecked.”
Crawford said he is hopeful the prevalence of privacy will change.
“As countries move up the developmental cycle, things like rule of law begin to come in,” Crawford said. “They’re beginning to develop their own film industry, and the Chinese actors and actresses and screenwriters don’t want to get it stolen. I think over the next 20 years China will crack down on the guy on the corner and a legitimate market will develop.”
Taplin asked if the television world would look very different over the next decade, with niche networks, cable restrictions and pay walls facing off over revenue and audience priorities. Chernin agreed that it was “not going to happen overnight,” but that the matter should be studied closely.
“I think it is the single-biggest question facing the industry,” said Chernin, adding that huge companies such as News Corp., Time Warner, Disney and Viacom are essentially cable companies because that is where most of their profit comes.
“Are consumers going to go, ‘Wait a second. This $120 a month that I’m paying for 400 channels when I want to watch 10 or 15 of them?’” Chernin said. “Will that sustain?”
Times of India
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