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Summary:

When it comes to media, one important idea is starting to become clear: Content isn’t a product anymore, it’s a service. Because for consumers, content is less and less a thing they buy and more a thing they experience.

Rupert Murdoch knows who’s winning the war between big media and the Internet. Unsurprisingly, it’s Rupert Murdoch. “Without content, the ever-larger and flatter screens, the tablets, the e-readers and the increasingly sophisticated mobile phones would be lifeless,” he proclaimed when News Corp. posted unexpectedly strong fiscal 2010 second-quarter earnings. “Devices and platforms are proliferating but this clever technology is merely an empty vessel without any great content.”

Murdoch danced a lively jig for investors as he bragged about his company’s ability to thrive in the media tumult caused by the Internet. I’m not buying it. News Corp. may be getting a big lift from “Avatar” right now, but like any big media company, it still has a lot of learning, experimenting and failure to do before it can really start to monetize the web. The arrival of the iPad and other tablet devices may, in time, make that easier. But first they will make it much harder by speeding up the process of adaptation.

The most difficult thing about the disruption facing the media industry hasn’t been the certain sense that business models are changing — it’s that nobody is sure how they’re changing. But one important idea is starting to become clear: Content isn’t a product anymore, it’s a service. Because for consumers, content is less and less a thing they buy and more a thing they experience.

The notion emerged a couple of years ago, with the likes of Kevin Kelly alleging that the Internet is essentially a copy machine and asking what can be sold that isn’t easily copied. Others took it even further, to the notion of content as a service. Over at his O’Reilly blog, Andrew Savikas wrote:

Whether they realize it or not, media companies are in the service business, not the content business. Look at iTunes: if people paid for content, then it would follow that better content would cost more money. But every song costs the same. Why would people pay the same price for goods of (often vastly) different quality? Because they’re not paying for the goods they’re paying Apple for the service of providing a selection of convenient options easy to pay for and easy to download.

It’s no accident that Apple has been thriving in this chaos. And it’s no surprise that the iPad was designed to enhance the experience of web media in ways that are more immersive and intuitive than either laptops or smartphones. In fact, the iPad seems to be built on the blunt assertion that content is now something to be experienced rather than possessed. Selling content — whether it’s news, music, books or something else — as a product on a tablet is setting yourself up for disappointment.

This evolution in content is clearer in music, which was the first to feel significant disruption from the Internet. Twenty years ago, buying music meant purchasing a CD after you heard a song on commercial radio (or, for the adventurous, college radio) or read a review in a magazine. Today, music is becoming an experience that begins with discovery sites like Pandora or social network sites like Twitter and end up in a cloud-based service like Spotify or Grooveshark. Significantly, these companies are startups and not traditional media giants.

In short, the old media giants need to think like startups: That is, look at the iPad with the eyes of any other app developer and imagine what it can do that hasn’t been done before. How will a tablet change the experience of books, news, music, and so on? And why will we consumers be willing to pay for that new experience? These are the questions to start with, rather than asking how to shovel the same old content products onto devices that radically transform what content is.

Murdoch is right that those devices are lifeless without content, but he neglects to mention that it’s a symbiotic relationship. “Content is not just king, it is the emperor of all things electronic!” he crowed. Maybe, but this emperor is wearing the service uniform of a burger flipper. When do we get fries with that content?

Image courtesy of World Economic Forum on Flickr.

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This article also appeared on BusinessWeek.com.

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  1. Content may indeed be king — Thankfully there are many wearers of the crowns

  2. I was flipping through a past issue of Hapers and there was an advertisement: “A content free zone.” The implication was that Harpers does not sell content, they sell ideas. There will always be a market for that!

    But, publishers have increasingly dismissed content, and frankly so have consumers. In education, publishers have been farming out their essential content development to reduce costs. So, if these publishers hope to sell the service of providing content, they require more than iBooks! Alas they run to the cliff in a frothing pack barking “content.”

    The problem is that we have no shortage of entertainment, and we can at least rely on our friends at Facebook to provide some. I do not envy the position!

  3. Well stated, Kevin. Most people believe that technology is transforming culture, and that’s true. However, the energy for that change is coming from people themselves, because we’re in the midst of the Second Gutenberg Moment in the culture of the West. “I experience, therefore I understand” is augmenting “I think, therefore I understand,” just as the latter augmented the faith (“I believe, therefore I understand”) of the Roman church in the 15th Century. Keep up the great work.

  4. You’re correct. Those who are alive in five years are those who asked and answered those questions – what can I produce for this market that does not exist now?

  5. Rupert Murdoch and News Corp don’t have to innovate or think like a startup. They can let the startups duke it out and when one starts to emerge or has a revenue stream, Murdoch can buy it. See: Myspace.

  6. Kevin Kelleher seems to be onto something when he says that the wrong way to go is “asking how to shovel the same old content products onto devices that radically transform what content is.”

  7. Contrary to Andrew Savikas comment, media companies are not in the service business. They can be, but if they are not, they partner with service companies – in other words distribution platforms.

    What he says about music and iTunes being a service, the same was true for DVD’s, CD’s and LP’s in the brick and mortar retail environment. The same is true for books as well (although pricing varies more from item to item).

    What is different today is the removal of scarcity from the equation. On the internet, you do not have to wait for a store to be open to buy. In the digital world nothing is out of stock and you can order/use your purchase immediately, whenever.

    Media companies and service businesses merge (thing AOL/TIme Warner or Comcast/NBC Universal) to control the process from creation to consumption.

    While media companies have stumbled in the early years of the online world, they will rise to prominence again.

    Media companies provide the one thing that advertisers, consumer goods companies and service providers don’t offer – entertainment. And isn’t that all that people ever really want?

  8. Umberto Milletti Saturday, February 6, 2010

    The same dynamic is apparent in the business information market. What once was a market for buying content bits (leads, contacts, company records) has turned into a market of aggregated databases, with the goal to deliver insights/intelligence/information and hence productivity.

  9. Don’t forget that the internet allows anyone to contribute content. This is how all the social media sites survive today. Why have content forced on you by a big media company when I have a endless supply on the internet.

  10. Kevin is half right. The need for a symbiotic relationship is paramount. But the technologists have been as clueless as the content providers because they believe the delivery mechanism is more important than the content.

    But there is nothing new in this. Journalists have traditionally been paid less than members of the printers union.

    1. Your point is important because the average publisher is 90% or more about content delivery, generally physical goods, as opposed to content. I am not sure if the publishers have any idea on what to substitute that value with. The largest tech companies — Facebook — are dwarfed by the amount of value that has to be shed in the coming years.

      When eBook readers are so cheap as to be disposable (you think that won’t happen?) all hell is going to break lose. The value proposition is going to shift so thoroughly as to dismantle most of these companies. We are coming to a point where value is going to be measured more accurately. I’d love to know what people think the value of News Corp is…

  11. In regards to the iPad, it looks like an iPod Touch did it with a Macbook. I think Apple need to stop pimping out their iPods and iPhones and start to create other devices to enhance the use of other iLife programs. This is just from the perspective of an Art & Design student though. :/

    To me using any kind of Apple software or products was not just about putting some media company’s content on it, but also my own. I mean GarageBand syncing with iTunes is great in the fact someone can put their own music on their iPod as well as downloaded songs.

    It would be nice to see other Apple devices where users can store and present their own media creations. Perhaps some device that can take great pictures/movies, sync with iLife programs and can edit on the go. Like a stylus to edit on the actual screen? If they put Photoshop on it that’d be awesome. Or even better yet, allow the device to wirelessly send images to a printer.

  12. Another clueless the internet is so cool and content owners don’t know a thing blog post by someone who obviously doesn’t understand the essence of content.

    It is the core source material – the ideas, performances, creative production that has value – i.e., content.

    The delivery medium changes nothing except convenience.

    Content is king. Technology just carries the content like servants carrying the king’s litter.

  13. Likewise, content would be useless without devices to experience them on.

    It’s not an argument about which one is more important: we need both.

  14. While I’m not a fan of Mr Murdoch, I don’t think his sentiment is as easy to ignore as some might suggest.

    The pay wall worked just fine for him with the Wall Street Journal. The evidence he has, says this might just work. In an increasingly level playing field with respect to online media, for many perhaps being able to share through an established online store such as itunes is an advantage. However, with the equality of access to “publishing” tools, I think also comes some market fragmentation and the ability to buck the trend, where some people might seek to commoditise information, those who can offer a different, more considered perspective or who can indeed offer unique content seek to interest a different audience. Is it a more lucrative audience? I suppose that remains to be seen, but like anything else, I don’t think we should be quite so dismissive of this mentality (as much as I personally would like it to just go away).

    Also, were I a fan of the tinfoil hat, I might suggest that certain things like ACTA were a precursor to the end of network neutrality and the ubiquity of services Mr Murdoch provides might mean he’s in a place to position his provision of content quite differently to how we might ordinarily see this move coming.

    With respect specifically to the ipad – I think Apple made a huge gamble here, no doubt some developers will look at this and go bananas, but part of what attracts developers to a platform is the installed user base. Apple at some point has to fragment their store (in fact, they really should have done it already) and having applications that really suit a 3.5″ screen blown up to something bigger might not exactly be the best user experience.

    In many ways, Apple’s approach with the ipad is totally the opposite of the ipod. With the ipod, they had an advantage because of piracy. Labels were happy to jump on board anything that remotely looked like a saviour, I think book publishers can see the change coming for them too, but I don’t think they’re quite so desperate, nor are they in a market which commoditises an art form on quite so flat a scale. A lot of what will make the ipad work or not is the content and Apple is betting big on the interest of developers on this one. Interest I don’t think will carry through sufficiently because I just think the “gap” this device appeals to is, for many, filled already by a smartphone and a desktop/laptop/netbook. Gen 2 or 3? Maybe. Now? No.

  15. I think this post is too conclusive without enough data. Two quick points:
    1. iTunes does charge differently for songs: $0.99 for most and $1.29 for more popular classics and this price difference is working apparently (can’t find link to story that showed higher prices has not led to lower revenues on those songs). iTunes cound differentiate even more but to keep things simple for the consumer it doesn’t (same reason CD stores in the 80s and 90s largely went with 3 or 4 price points). This doesn’t mean consumers don’t value the content differently.
    2. There is definitely a segment of people that don’t care to own music and streaming from the “jukebox in the sky” is fine for them. But there is and will continue to be a segment (including young people) that will want to own what they believe is of value. not just the music but posters, t-shirts and anything else to capture the essense of the artist/song they like. Witness that Rhapsody co-exists with download-only sites quite well.

    Quality content is always going to be valued especially in a world where social networks so easily proliferate time sucking junk. That’s why GigaOm and other niche-focused well researched blogs do well. And why “old-world” periodicals like New Yorker, WSJ and NYT are still valued, albeit not in the paid subscriber sizes they had become used to. The trick is to extract the right value (money) from these avid readers and I for one am happy to pay to keep well researched content alive.

  16. I think this post is too conclusive without enough data. Two quick points:

    1. iTunes does charge differently for songs: $0.99 for most and $1.29 for more popular classics and this price difference is working apparently (can’t find link to story that showed higher prices has not led to lower revenues on those songs). iTunes cound differentiate even more but to keep things simple for the consumer it doesn’t (same reason CD stores in the 80s and 90s largely went with 3 or 4 price points). This doesn’t mean consumers don’t value the content differently.

    2. There is definitely a segment of people that don’t care to own music and streaming from the “jukebox in the sky” is fine for them. But there is and will continue to be a segment (including young people) that will want to own what they believe is of value. not just the music but posters, t-shirts and anything else to capture the essense of the artist/song they like. Witness that Rhapsody co-exists with download-only sites quite well.

    Quality content is always going to be valued especially in a world where social networks so easily proliferate time sucking junk. That’s why GigaOm and other niche-focused well researched blogs do well. And why “old-world” periodicals like New Yorker, WSJ and NYT are still valued, albeit not in the paid subscriber sizes they had become used to. The trick is to extract the right value (money) from these avid readers and I for one am happy to pay to keep well researched content alive.

  17. Ownership is not dead yet – there are a number of benefits to owning a track that the new ownership-free streaming services gloss over – just ask all the beatles fans!

    However, there’s more to the ‘music experience’ than just owning a CD or mp3 and its this value that new music startups have to tap into. Gigs, previews of new materials and a genuine connection with the artist are all premium features of this ‘experience’ that will continue to make money for the artists. The One thousand true fans meme has a lot of merit in it and we’ll see more people trying to help artists find this value in their own relationships with their fanbase over the next few years

  18. MySpace, R.I.P – GigaOM Wednesday, February 10, 2010

    [...] he recently said. But as our Kevin Kelleher essentially summed up Murdoch and News Corp’s business strategy in this post over the weekend, “Murdoch is right that those devices are lifeless without content, but he neglects to mention [...]

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