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Summary:

Mika Salmi is the former president of Global Digital Media at Viacom/MTV Networks (NYSE: VIA). He has been involved in a number of startups…

Mika Salmi

Mika Salmi is the former president of Global Digital Media at Viacom/MTV Networks (NYSE: VIA). He has been involved in a number of startups and currently serves as Chairman of Sulake (Habbo Hotel), and on the board of Blinkbox, among others.

The global media business is in the midst of a major transformation. Everyone wants to know when this change will end and how media will look tomorrow.

Sorry, but the future is destined to remain unclear. Media, and most importantly the distribution of media, has gone digital. That means change will be ongoing, and media will be subject to the same non-stop innovation present in the broader technology sector. The core content – videos, music, games, print, etc. – will in many ways look/sound/play/read like today but everything about the way it is consumed and delivered will continue to change.

The digital revolution hit the music business first. Print media came right on its heels. The TV industry has been watching these businesses’ woes and has wondered what it can do to prevent the same fate. Interestingly, the games space is not immune to these issues either – even though many media companies have looked to games as a diversification play.

What do all these industries have in common? First, the distribution of their product is changing from physical/analog to digital. Also the creation of content across them has exploded, with thousands of new content creators taking advantage of the lower cost and ease of digital content creation. Critically, the consumption of media also continues to grow, as more video, music, games and texts are being consumed than ever before.

Positioning for the Future
If we don’t know where this all ends up and the business landscape is in constant flux, how can a media business be positioned and structured for the future?

One answer lies in the software industry. Software as a Service (SaaS) has taken that industry by storm. Shipping or downloading a static physical or digital product is a dying business. Pioneers like Salesforce.com, and now *Google* with their office apps, are showing how a “product” is not a discrete thing. Rather, it’s an ongoing relationship – with continuous updates and two-way communication – with customers and even between customers.

This revolution in software has been enabled not only by constant Internet connectivity and faster bandwidths but also by changing business models like subscriptions and micro-transactions and even by the rise in social networking. No software category has been unaffected by SaaS. In the software industry, if you don’t have plans to put your product in the “cloud,” your future prospects are dim.

So how do media’s products become Media as a Service (MaaS)? This is not just about putting up a pay wall and charging a subscription fee. Rhapsody tried that in music and the Financial Times has done it in print, both with limited success. The “S” in MaaS is not an afterthought or tacked on, it is the entire ecosystem attached to the content.

Games as a Service
Some notable examples to help guide other media businesses can be found in the games business. While the hardcore online game World of Warcraft led the way out of the boxed product and single transaction business, the casual social games of Playfish, Zynga, and others are taking it to a whole new level.

These “social gaming” companies have emerged in the past 18 months as powerful firms with all of their products existing solely on people’s Facebook pages. And their consumer is not the classic teen boy gamer of old but the coveted “non-gamer” with games like “Pet Society” and “Farmville” appealing to all ages and demographics.

These games are a “service,” with no discrete product for a consumer to own. Costing nothing and with no download or registration hurdles, they’re also easy to try. Yet they constantly evolve, with revenue being generated in multiple ways, from sales of virtual goods, offers for products/services, subscriptions and advertising. Critically, consumers’ social interactions and online profiles serve as a key part of the games’ play, driving engagement, popularity and revenue.

These social games companies have come from nowhere and many are generating hundreds of millions of dollars a year. The rest of the games industry is stunned. Games companies are quickly trying to figure out what they can do to get in on the action. Other media businesses should do the same.

But aren’t games different from other media? Not necessarily. Interactivity and social connectivity are what enables the Games as a Service approach, not the fact that they are games. In fact, many of these so-called games simply offer a minor activity – like feeding a virtual pet – as an excuse for online interaction.

The fact is all media has already become interactive and social via sharing of links, feeds, commenting, playlists, editing, uploading, embedding, etc. Media is a major focal point on Facebook and Twitter. People’s social graphs and personal details are integral to this experience.

Embracing TV as a Service
What if a TV company took the next step and thought of their content as a service? How would they approach their business differently?

Perhaps a TV “show” could become a continuum of short episodes distributed via Facebook, Twitter, or other social and real time means. The “show” could be free on a Facebook page, with standard ad units providing the first level of revenue. The show might contain social elements (pulled from the Facebook page) built into the content, which would connect the content, the user, and their friends more deeply. Additional “fees,” in the form of demographically tailored offers, micropayments, or subscriptions could come from users who want to see a show first, buy products from the show, create avatars, host a viewing party, and on and on.

Once a company, producer or content creator embraces its content/media as a service, the possibilities and ideas on how to approach it multiply. And since the business will be constantly changing, new revenue models and content ideas will emerge. This is not just about computers or mobile phones. The living room television may become the most exciting area for these media services.

It’s no longer just about playing media. It’s about playing with media. Hulu, Blinkbox, BBC, Warner Bros? Who will embrace TV as a Service?

The article was first published in C21, behind a paywall. Published with permission.

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  1. Andrew Waterman Monday, October 5, 2009

    Excellent article! It's an important new perspective for examining the question everyone's trying to answer: What new business model will save media?

    As you suggest, perhaps it is a combination of monetization strategies that recognize the user is paying for a "relationship" with the service provider (the content providers), rather than paying for use of a single discrete product.

    As a follow-up question (for anyone reading) — what should the role of freely syndicated content be in this new MaaS model? Because written content can be syndicated anywhere and be read wherever the reader wants it, the media company loses the "relationship" with their readers needed to upsell other aspects of the "service."

    If Google News, Google Reader, and Twitter determine how we engage with WSJ or paidContent.org's content, then WSJ and paidContent lose some ability to cater a "service" they monetize — which seems to be the direction things are going.

  2. Thanks for the comment. Good thoughts.

    I wrote this a few weeks ago for a UK magazine (C21/FutureMedia) and coincidentally, a decent example of MaaS came out right after that.

    Ashton Kutcher's KatalystHQ second season launched on Facebook via a Slide app and i read that the first week it had 9m views with an average number of friend connections of 68. Impressive numbers. Still, that is a v0.5 MaaS effort as it has fairly standard ads (good product placement though) with no transactional revenue. It wasn't really built from the ground up to take advantage of people's social graph with new monetization methods built in.

    Social games have done this and surprised everyone. They first looked at how people are using FB and built the game and biz model on top of that.

    To be clear, FB is just one example and one distribution channel in a world of multiple consumer touchpoints. As the commentor points out, the service and consumer relationship are what is important.

  3. Jeremy Allaire Monday, October 5, 2009

    Mika-

    Enjoyed this piece, good stuff. We are starting to think about how these various forms of consumer engagement can play into video experiences, and I agree that this is probably the most powerful new form of audience interaction and potential distribution that is out there right now, and no one is doing it incredibly well. I also think that the nascent social network micro-payment platforms hold a lot of promise for media companies seeking to develop "duel revenue streams" from online video.

    Jeremy

  4. a couple of throw-ins: while i have some reservations about the micropayments model, and see long-term issues with it outside of markets with sophisticated enough payments process systems, i would certainly be prepared to use it in certain cases.
    hopefully producers realise there are customers, like me, who dislike advertising so much (60 mins of an episode of 24 is what, 40 mins long?) that they'll pay something for a clean, unencumbered episode/prog/event across whichever medium it happens to be.

  5. In this on-demand world the customer is in charge, and will only pay for (or engage) in what has value. The day of bundling unneeded products and services is and will be dwindling to a close.

    We're providing a similar "political campaign as a service" format and value driven delivery in our Gubernatorial contest in Maine.

  6. Honestly, it really is not this complicated and not much has changed. I'm disappointed to see this kind of speculation — it just adds to an already really confused industry and isn't necessary.

    What's going on has to do with one and only one thing: We are changing platforms. Never in the history of platforms has there been so much wrongful and off analysis, speculation and misleading — maybe if everybody would stop talking and start learning, you'd find how easily we'd all adapt.

  7. philip@blurgroup.com Monday, October 5, 2009

    This article is probably the most practical attempt at outlining the likely future macro digital content business model and one we agree with.

    And as with SaaS the incumbents have the most to lose initially by its success. Startups will need to kick MaaS off. If they succeed the incumbents will follow.

    An early example of MaaS worth researching is http://Innovatrs.com.

  8. Timo Argillander Tuesday, October 6, 2009

    Thanks for the good point of view, liked that!It seems to me that in today’s TV business there are so many incumbent players, which base their business on the status quo that TV as a Service faces quite a few hurdles. Now that CE manufacturers are bringing Internet connectivity to TV sets these firms most often co-operate with TV companies to provide VOD content. It would be refreshing to see some really open web-to-TV solutions come to market that would foster the emergence of new kind of content, or, rather, “Service”.

  9. Mukund Srinivasan Tuesday, October 6, 2009

    Thanks, Mike – an excellent article. As Chris Anderson pointed out in "The Long Tail", gone are the days of early bird advantages with strategic and innovative business models. The future is simply this: "why becoming the new what". This in effect translates to a business model that doesn't explain how to transform the ecosystem, but rather understanding why there is a need to do so. Once this is clear, the rest will fall in place.

  10. Interesting article. It's exciting to think of the new media experiences that will be available in the future. I invite you to take a look at some of the television experiences made possible by using the power and flexibility of the cloud at http://www.ActiveVideo.com.

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