The Convergence Conflict: Exploring Why Businesses Fail and What it Takes to Succeed

0
17

Based on our convergence model here, what banks failed to realize is that they inadvertently standardized their product while simultaneously making it available at a discount or practically free. The standardization occurred because not only could the same bank employee offer a checking account, a life-insurance policy, and put your money into a mutual fund, but the process by which it was all done was so seamless to the end-user, that the lack of distinct processes or even physical locations signaled to them that wherever they went, they could expect the same products with the same seamlessness.

The cost became the difference between fractions of interest percentage points on value (appealing to a group that this firm has already proved caps out at 15 to 17% of the “promotion consuming” population and delivers no long-term value to the company (2)). In other cases, the free-bes were even more blatant as competitors offered free checking, free ATM use, and 24/7 convenience.

In both travel and banking, the distribution converged, and the content soon became standardized so that the end-user could use them in any combination, at any time, and across competitors at near-zero or zero cost, but most importantly, without loss of (intrinsic) value to them.

A Business of Brand

The implications for media businesses facing convergence is simple: because you are currently meeting all of the irreversible conditions, your current business model has failed. And in fact, you’re only wasting money by developing competing technology standards and suing anything that clicks.

Comfort yourself with the premise that the business of content creation will always remain expansive and extremely fragmented because, like stated above, no matter how big Viacom gets rehashing their content to appeal to increasingly more specific ages (“The Twelve Channel, the channel for 12 year olds”?), there will always be a consumer looking for alternative choices in (confusing?) Time Warner, (pixar’d?) Disney, and even (trusted?) News Corp.

It is possible right now to access the web, music, movies, and your video games, call, text, and email all your contacts, photograph and video record anything anywhere, plan your week, by the minute, squeeze in some work and live virtually your entire existence from the palm of your hand or living room set. And you won’t look like a huge geek doing it because your super devices will actually look trendy. Oh, and cheap.

In other words, your brand isn’t limited to or defined by the medium in which it appears and will always have huge opportunities in a fragmented audience world. (What’s that saying about the message and the medium?) And digitization (and ability to playback anywhere) isn’t destroying the economics of selling content to consumers; it’s transforming the content-creation model so that today, software isn’t really necessary (and harder to “steal”); consumers enjoy, prefer, and even create their own shorter videos (so why aren’t you?); and consumers prefer their content in smaller portions, a la cart, value-menu style (why do music labels still create “albums”, instead of just singles?)

And finally, even bookworms have a voice as they can now have a direct relationship with their favorite authors, enjoying every idea that pops out of their skulls (as blogs, podcasts, or even chapters of books, all without agents).

The consequence of convergence is not the limiting of content, then, based on the belief that since many content creators will naturally be disinclined from producing for an audience which doesn’t appreciate their content, uses it without their consent or consultation, and severely curtails the value the creators can extract from their content. The true consequence will be less reliance on the protection of finite intellectual property and the near-prolific creation of ever more content, via every old and new media channel.

As this model gains traction, the process will improve, the quality will improve, and content creators will come to see that it’s way too much for their audiences, unless they bundle it in convenient topical nuggets and charge consumers for their editing (i.e. Harvard Business Review); they’ll realize that subscriptions to the entire content vault is no longer the primary value-driver, and subscriptions to specific topics or content brands do work (i.e. New York Times TimesSelect); and they’ll conclude that despite not serving every consumer segment with content and being able to charge advertisers accordingly, their content depth does indeed reach a much more targeted user, a user who actually enjoys the advertisement, and that a content creator can rightfully charge more to reach (i.e. ESPN).

(Editors Note: I mention this last conclusion due to the ever increasing rates broadcast networks still get away with charging to reach smaller and less targeted audiences. Every advertiser knows this makes no sense, and they prefer to continue to invest in bad content when they should ideally invest in proprietary ways to improve the metrics of this particular media business.)

Poor media buyers; how can you not feel sorry for them? Whether you get rid of them or not, their work just became a lot tougher.

________
Footnotes

(1) Berrios, Al, “Content vs. Media: Debating Which Advertising Asset Constitutes the True Commodity”, http://www.adotas.com/2006/11/content-vs-media-debating-which-advertising-asset-constitutes-the-true-commodity/

(2) Berrios, Al, “Everyone’s a Punk Rocker – Examining the Effects of a Sustained Promotions vs. Short, Focused Promotions”, http://www.alberrios.com/c/101904marketing.html

LEAVE A REPLY

Please enter your comment!
Please enter your name here