'MEDIANOMICS' - will 2013 be a year of disruption?

This blog post has its focus on my research topic: Media firms’ approach to find new sources of revenue in the digital ecosystem, and the process of open innovation. The blog post was updated 2013-02-24.

The year 2012 has most definitely been a year of transformation in the Media Industry across the globe. However, very few truly disruptive innovations have been identified as of yet. By disruptive I mean 'profitable new business models'. Some of the new concepts mentioned below are in their early days, launched during the fall of 2012.

Right! - there have been a few remarkable new media platforms introduced this year, like the personalised Rockmelt browser for all media content on the iPad created by +RockMelt, Inc. co-founded by its CEO +Eric Vishria and financed by Netscape alumni including Marc Andreessen. An image of my personalized view of recently read and shared media content is found below.

Here in Finland we have seen a number of new things, this has been the busiest and perhaps most innovative year ever in the media business in Finland. New ways of curating content and HTML5-based web apps have been launched, namely a new weekly magazine concept named HBL+ by newspaper publisher KSF Media and several magazine apps, e.g. Suomen Kuvalehti and Tekniikan Maailma by Otavamedia. In January 2013 we have witnessed the rebirth of Helsingin Sanomat in tabloid format, and the website and apps for mobile platforms were completely revamped by Sanoma News during 2012. The relaunch of Helsingin Sanomat also features magazine-like content in the newspaper on Thursdays an Saturdays, in order to complement the weekly and monthly supplements. 

Another novelty in 2013 will be a new magazine for 50+ people based on 'service journalism' by Aller Media. The brand name is 'OMA AIKA' (Your Own Time) and the launch will be in March. The targeted audience for a 50+ media concept is comprised of people still active in working life, with grown-up children and time for consumption and pondering of the meaning of life. Aller has typically been very skilled in bringing social media platforms to the heart of their publishing concepts and it owns the popular Suomi24.fi platform, a website for all the Finnish people. The complete concept for OMA AIKA includes the printed magazine, a tablet edition and a website, as well as a competition for the best work place for 50+ people.

A new and interesting concept for paid content is Long Play, producing one single long form story each month. Long Play is formed by a group of Finnish journalists and the Editor-in-Chief is Johanna Vehkoo. Long Play digs into interesting topics and represents a 'deep view' into current affairs in our society. The latest issue was published on February 20 and delivers a critical view of 'the Future of Finland' research project led by philosopher Pekka Himanen on behalf of the Finnish government. The article has led to a fierce debate in media and a flow of comments from the audience on several media websites and in social media.

It remains to be seen how successful these new applications and formats will be. Visually they are a big step in the right direction. Personally I like my content well designed on the new tablet and smartphone platforms, preferably with rich media content. The latest issue of HBL+ featured for example a review of the best music of the year with a link to the playlist on Spotify. The opening page to the review is shown below. This example represents what I'd like to call 'media as a service'. 

Looking at global media brands the trend towards transformation onto digital platforms is even clearer. Newspapers in the U.S. have been in crisis for a long time, as advertising (still bringing about two thirds of all income) coming back to the level of the 1950's. And this includes revenue from online advertising. The figure below goes without saying any further comment.

Global advertising spending is forecast to grow by 4.5% in 2013 according to ZenithOptimedia. Internet advertising will grow by 15%, more than three times faster than any other category. In absolute terms this means that the amount spent for online ads will surpass that for newspapers (print ads) for the first time. Print ads will fall for a third consecutive year. This development implies that the Media Industry restructuring will continue in 2013.

That's why more publishers are applying focus on increasing digital circulation revenue e.g. The New York Times. Although advertising revenue has declined rapidly The New York Times has managed to build a large audience (NYT has more than 592,000 paid-for digital subscriptions as of October, 2012).  At this growth rate digital subscriptions may surpass daily print subscriptions by early 2014. The long debated NYT ‘paywall’ looks like a bona fide success (only 10 articles per month are free). NYT argue that many of the digital subscribers are new customers (the researcher is one of them). This implies incremental revenue and a larger subscriber base across the globe. As an avid reader of quality content I wish NYT every success with their new approach. They are working very hard to market the new subscription models. The pricing options are shown below and more info is available on the NYT website.

A true success story on all digital platforms including online is The Economist. They focus on an audience who can 'trust' the quality content provided by the Publisher covering economics, finance, politics and new trends in technology, to name a few topics. The Economist is available on every digital platform including audio readings featured in its tablet and smartphone apps. On December 3, 2012 The Economist announced its latest alteration of the subscription model, granting access to digital-only subscriptions and charging a premium to new print subscribers who want digital access to the magazine. “We’ve got three choices now. There’s a print-only, a digital-only and then a bundle,” Michael Brunt, VP of circulation, said explaining that “people think it’s reasonable to pay a little more for both.” The mark-up means that new print subscribers will pay the existing $127, but will have to pay $160 if they want digital access too. One quarter of new subscribers are choosing print or digital only, while half are choosing to buy the bundle. With this three-tier pricing, The Economist appears to have hit on a shrewd strategy to reinforce the value of its digital content. 

And a fact is that the new ecosystem for media services - formed by devices and related operating systems, applications (native ‘apps’ for a particular device) and related services such as HTML5-web applications keeps growing rapidly. Mobile platforms are expect to surpass traditional desktop PC's and notebooks already in 2013.

The image below was featured in "The World in 2013", a special issue by The Economist. The orange diagram consists of Desktop and Notebook PC's and the green one of Smartphones and Tablets. Global installed base, bn units. For more information please refer to The World in 2013 by The Economist.

For a researcher 2013 will be a thrilling year. The question is will we see some new, truly disruptive innovations and new business models in the media business. Will Media firms thrive in the new ecosystem of smart devices and technologies? What will be the implications of changing consumer behavior? Will content created by professional journalists and photographers still be ‘King’ as it has been for the past two centuries?

I will do my best to find out. For those interested just a few words about the Methodical issues for my research, as I am now entering into the second year of writing my PhD thesis.

Research and Methodical issues

We have identified three research questions:

1. What are the strategic implications of technological change with respect to the Media Industry, individual firm and consumer behavior?

2. What implications do those changes have on firms’ abilities to generate new revenue streams in order to sustain their profitability?

3. What are the specific requirements within a firm to create the innovative new Business Models, and how is this leadership organized to ensure profitability?

A major business paradigm shift is underway. The key drivers of change include behavioral as well as cost and technology related issues. The CEO’s dilemma – and this goes for the whole Management Team including the Editors-in-Chief – is to manage the present, selectively forget the past and to create the future – all to make sure the business will last. (Adapted from “The CEO’s Role in Business Model Reinvention”, by Vijay Govindarajan and Chris Timble, Harvard Business Review).

Key Drivers of Change

·   Consumer Behavior (time spent on media and how media is consumed)

·   Cost of Print & Distribution (particularly the cost of physical distribution)

·   Disruptive Technology (the new ‘ecosystem’ with tablets and smartphones)

·   The Change in Advertising (mass marketing vs. targeted marketing)

These Key Drivers will be discussed in more detail in one of the chapters of the thesis. They are all interrelated and this interrelation will be argued in the thesis. However, the change in consumer behavior (audience evolution) is the one Key Driver that affects all of the three others, even the way consumers are able to consume printed products in the future. The ‘Information Explosion’, i.e. how many messages per day can we actually handle, has a lot to do with consumer engagement in media and advertising content. As for print it may well be a ‘luxury product’ in the long-term, for those who can afford to pay for it.

Will Media firms thrive in the new ecosystem of smart devices and technologies? What will be the implications of changing consumer behavior? Will content created by professional journalists and photographers still be ‘King’ as it has been for the past two centuries?

In the empirical study conducted in four countries I will have a look at different approaches and strategies.  Many of the forerunners are attempting to create the future by way of an active presence in social media, engaging readers and advertisers; investing in a digital future on multiple platforms; and by way of initiating open innovation together with readers and partner networks. Time will tell if this approach will work – are the forerunners the most successful ones or will the copy-cats make more money, or alternatively vanish from the media landscape. 

The aim is to carry out a qualitative study based on interviews with Media experts in four countries. A greater number of the interviews are taking place in Finland, with similar interviews to be conducted in Sweden, the U.K. and the USA. The reason for this is that the reading habits and consumer behavior is thought to be different in each country, and the change in the industry is more rapid in the U.S. and the U.K. when compared with Scandinavia. Altogether 55 interviews are already conducted with Finnish Publishers and representatives of related industries, as the thesis puts emphasis on how the Business Models in the Media Industry in Finland will change over time. The international interviews are conducted in order to understand the change of the business environment and the Business Models in the English-speaking countries as well as Sweden, representing Scandinavia. The change from print to digital platforms is thought to be quicker in the U.S. and the U.K.

The international interviews will be reported in the next few blog posts in 2013, starting in Sweden with the CEO at the regional media group Västerbottens-Kuriren, followed by an interview with Jonas Bonnier, CEO of Bonnier AB, a privately owned media group with diverse media activities in 17 countries.

The interviews in London in February focused on the leading publishers and strategists at The Economist, The Financial Times and The Guardian, with an insight of their 'Digital First Strategy'. I also took part in a panel discussion arranged by The Guardian Media Network. A very useful experience and my first live panel on Google hangout.

In the U.S. I will interview leading publishers like Hearst and The New York Times. I will also deepen my understanding of 'Media Audience Evolution' and the concept of 'audience autonomy' with a little help from Professor Philip M. Napoli, a media researcher at Fordham University.

In short, by way of conducting interviews I am trying to get a glimpse into the future of Publishing. To supplement this concept we are also planning an expert panel with non-industry experts to collect their views of the daily use of media and media purchasing habits. This expert panel will include people from “start-ups” such as Kiosked in Finland, featuring people with competencies in business development, branding and marketing. Some of the experts have a background in buying media, others have built their businesses utilizing the new ecosystem with only a limited approach towards traditional media. The design of the expert panel is carried out by the researcher together with our research partner Idean Enterprises and the results will be presented in March. We will use infographics in reporting to underline the non-industry experts personal media consumption habits and how they use various channels to build engagement, and also their view of traditional media.

I wish to take this opportunity to say a BIG THANK YOU for your support in 2012 and please share your comments and feedback on anything you may agree or disagree upon. WISHING ALL OF YOU A HAPPY NEW YEAR!