Why Steve Jobs Could Be A Savior For Media Companies

topics

News From Us:

Our latest report; our new video section; and jobs with paidContent.org and paidContent:UK

Leading Voices
Why Steve Jobs Could Be A Savior For Media Companies

Arnon Mishkin is a partner with Mitchell Madison Group, where he consults for media companies on improving legacy businesses as well as making the internet profitable. Prior to MMG, he was a partner at the Boston Consulting Group, where he did some of the firm’s earliest work on the web.

One of the most effective television ads for a media company was one that WINS, an all-news radio station in New York, ran several decades ago. It asked viewers if they knew how to set the [preset] “buttons” on their car radio, and then explained, “You pull out the middle button…tune to 1010 WINS…and then push the button all the way in.” In those days, all car radios had the same mechanical preset system. And since hardly anyone had ever read that part of the auto manual, a large number followed the advice in the ad. They wound up driving with the middle button set to WINS – and WINS won the ratings war.

I remembered that piece of ancient media history when I read the latest rumors about the mythic Apple (NSDQ: AAPL) tablet. The tablet has been rumored for long enough to make it the technological equivalent of The Flying Dutchman, but it seems like the device may finally be arriving in port in early 2010. According to Gizmodo, the way Apple is thinking of partnering with content companies suggests it may, in fact, turn out to be worth the wait.

On the web, all content gets posted and made available ubiquitously – through search engines, aggregators and the like. While some call this a wonderful ecosystem, the record shows that almost all the value that has been created on the web has gone to organizations that curate and navigate the masses of available content. They are the companies that have created the essential starting points (first Yahoo (NSDQ: YHOO), now Google,and in the future, maybe, Microsoft (NSDQ: MSFT) via Bing) or folks who create real or de facto “walled gardens” (at first AOL (NYSE: AOL), now apparently Facebook, and arguably Hulu).

Why is it so hard for content makers to create value on the web? Because the web has evolved to minimize content makers’ ability to retain users. Thanks to the power of search, users can bounce from one site to another so effortlessly that it’s tremendously difficult for any one site to monetize their visits.

The iPhone and, apparently, the Apple tablet rely on a very different approach to providing content to users: individual apps, of course. When someone downloads an app, that person immediately becomes a true user of it; the physical size of the device, coupled with a user’s desire to minimize the number of pages of apps, create limits to where that user gets information. While users may choose to drop an app or add others, there is a very clear cost (to the user) of switching from one content provider to another.

In other words, apps allow media companies to compete for that “middle button” that 1010 WINS won. And it’s not just the apps and the iPhone that can help media companies achieve that feat. Any successful e-reader and its downloads could have the same impact. Echoing this point, the author of a previous Leading Voices piece on paidContent argued that the unsung virtue of the Kindle was the way it allows readers to “unitask.”

Unlike the web, the system of apps and downloads (e.g. an e-magazine subscription) provide tools that enable a content developer to build and keep a loyal audience, and you can imagine a variety of workable business models. A business could sell advertising against the customer base or potentially sell things directly to the customer, particularly with the new feature of “in-app purchasing.”

With Apple, the key is that it allows each app developer to “bundle” content – in a sense, just the opposite of what it did with iTunes, where it broke apart the music combo of records and CDs. As companies develop their approaches to apps, they need to figure out:

1. What types of bundles make the most sense – the generic bundles that were the norm in the broadcast television and newspaper industries, or more vertical, branded-identity bundles that were the norm for cable networks
2. How to ensure that they secure as much as possible of the best real estate on users’ iPhones, tablets or other devices
3. How to promote an app, taking advantage of the tools of the web
4. How to move users from their inherently low-margin web sites to different types of e-readers, apps and the like
5. How to make sure they don’t lose the inherent stickiness of apps
As they tackle these questions, content companies can take what they learn in the app and download world and try to make the web more profitable for themselves.

Arnon Mishkin Oct 22, 2009 11:59 AM ET

Posted In: Features, Leading Voices, Media & Publishing, Books, eReaders, Companies, Apple, iPhone

latest headlines

Media Boy

"I feel the cold breath of walking death."

Steven Burgess

As an extension to Mr. Mishkin's comments about 1010WINS' middle button promotion, I remember creating special stickers that would be applied to the preset with our station's call letters. Very much like the icon on the iPhone desktop promoting the media outlet's app. Simple and effective.

Balmer's comment shows a certain amount of disingenuousness. He is really referring to the browser-accessed world wide web. The iPhone (and other mobile devices like Android and Blackberry) are supporting apps that use the internet without the restrictions of a browser. They are redefining people's interface to the internet.

The future of the internet lies in applications that reside on devices like mobile devices, PCs and so on and use the internet as a delivery mechanism for content that doesn't need to be stored on the device. The browser isn't dead, but it is too generalized to provide the kind of user experience that a custom app can. Examples of this on PCs are the scores of Twitter apps that enhance the experience of accessing the real-time feed using the Twitter API.

Miles Galliford

Aaron,

You make a good point. Many content owners are using mobile apps as a way of charging something for the content they provide for free on the web. But don't you think this will be a short lived opportunity?

As mobile broadband improves, won't mobile devices simply become new ways of accessing the same web and content that we access on computers today? Won't we use the content search and aggregation tools that we use now? Do you think that people will be happy paying for content via an app, which they can access for free via their mobile browser?

I think any media company that is relying on mobile devices as being their road to riches is putting all of their eggs in one very fragile basket.

But good food for thought.

Greg Golebiewski

All good—I love the "middle button" example—but why does one has to create limits and narrow users' choices in the process? There are other ways to retain users or at least to monetize content—because content monetization is what we should be talking about, not visit or traffic monetization.

Search engines helped create (and Soc Nets populate) an enormous worldwide maze, through which one can navigate only with their "ad-supported" guidance. The bigger and murkier the maze, the better. In this model, the quality, reliability or currency of the content almost does not matter. One might say "CPM non olet;" if a silly cat video generates more CPM than a smart piece by A. Mishkin does or ever will, so be it; if one half of the CPM comes from impossible-to-catch-and-close floating ads, misleading tags or phony, phishing or copy-cat sites, so be it. SE and Soc Nets will make their money anyway—huge money; however, not as huge as possible. (The handful of really successful Internet companies seem to have forgotten that the role of a business is not only to make money, but also to maximize profits.)

If Apple chooses the same way of manipulating the organic web traffic, bending it to its own "middle button," rather than promoting users’ free choice and quality content that is delivered directly to the users in a quick, simple, safe, and fair (which is not the same as "free") way, without any "application and download optimization" gimmicks, then its tablet will be just another expensive gadget, preying for its piece of the traffic in the maze and loosing the opportunity to make a lot more money in the long run.

There are other ways to make ideas like the tablet work well and save the content creators and publishers too.

Ric

One thing is for sure this Mishkin guy is as out of touch as Ballmer is and as are most consultants. Apple just furthers the broken DRM process on brilliantly designed hardware and an interface that makes it idiot proof to use and to addictive to get away from if you you fall prey.

But Jobs as a Savior? Puhlease! He is the King money grubbing demon amongst a pantheon of epic devils trying to ream consumers! You may get the oblivious young and general morons out in the world to buy into a walled garden, but go ahead and try to make anyone with intelligence adopt your ludicrous system and see where that gets you.

Content providers have only themselves to blame. You didnt do right by us when you had us by the short hairs and now that we can flip you the middle finger, you find that you dont like what comes back around.

Arnon Mishkin

PS Just noticed that Steve Ballmer is quoted as saying: "The Internet was designed for PCs, not for iPhones." That's right Steve; that's why it could be more profitable for the content players. http://www.businessinsider.com/henry-blodget-ballmer-the-internet-was-designed-for-the-pc-the-internet-is-not-designed-for-the-iphone-2009-10