A few years ago I had observer status at a TV industry event in Florida. At the time, the hot topic in media circles was the impact of the Internet. Back then, media execs could still utter the word “convergence” without embarrassment or irony. Cable companies and publishing giants were getting set to hop in bed with web firms; teeny-tiny producers of online programming were getting millions in VC funding. (For my part, I'd just written a story for this magazine that ran under the headline “How the Internet killed television.”) Ah, those were heady days.
But while there were big moves afoot (BCE, for instance, was just about to buy the CTV network), there was a good deal of skepticism at the Florida resort where the convention in question took place. After one long day of seminars, networking and basking in the Orlando sun, a bunch of Canadian broadcast and telecom execs gathered in the tequila bar. Inevitably, the Internet came up in conversation. The consensus opinion seemed to be that it was “just another distribution channel.”
Looking back on that now, it seems to me to illustrate how it's possible to be right and wrong at the same time–right, because IP really is just another distribution channel, and wrong, because saying that is to underestimate the impact the introduction of a new distribution channel can have.
In fact, the revolution in media has turned out to be more dramatic than any reasonable observer would have thought six years ago. The surge in broadband and wireless have made the Internet not only more popular but more useful. Meanwhile, a profusion of content devices has created unprecedented diversity, customization and volume of media offerings–with important consequences for media companies, as the special editorial package that begins on page 51 reports.
Convergence didn't used to be just a model for media companies. Techies used to talk about it for home electronics–the single device delivering TV and movies and telephone and radio and you name it. But it turns out they were counting on consumers valuing the elegance of simplicity as much as techies do. Fact is, consumers (especially young ones) are quite happy multi-tasking media–on the phone, the TV set, the web and the iPod, and not necessarily one at a time.
This has big ramifications for mass-market businesses. One is that any single distribution of product is likely to make less money than it used to; instead, earnings are scattered across different platforms. The trick for the distributor of either programming or marketing messages is to deliver effectively for the specific media–to know your customer intimately, and, if you want to keep a mass market, to cobble together a lot of different platforms.
This is not an argument against big media–it might even be one against the crowd (led by Carl Icahn, of recent Fairmont fame) that wants to see AOL and Time Warner break up. Convergence might not work, but smart agglomeration–the return of silos, if you will–could. Breaking up AOL Time Warner isn't wrong so much as unnecessary. You don't have to get all the parts working together. You just have to get them working right.