Physical media is dead — long live the app

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Over the weekend, Hunter Walk (a friend of mine who works for YouTube)  tweeted about brands offering apps built on the Spotify platform. Spotify is likely to introduce these branded apps from the likes of Intel, AT&T, Reebok and McDonalds at an Ad Age event this week.

This tiny tweet is yet another reminder that physical media is dead. It is being replaced with “apps” thanks to  broadband connectivity and anywhere computing that has come to us via smartphones, tablets and other connected devices. From music playlists to catalogs to retail stores to television — it wouldn’t surprise me if everything is an app in short order. And that future is scary and yet full of opportunities.

Hunter’s tweet reminded me of Rock River, a San Francisco-based company that used to make music CD compilations for companies such as Brooks Brothers and Banana Republic. I remember Rock River because my old magazine Business 2.0 wrote about them. They were quite the rage in the early 2000s.

Today, these CDs are not quite as hip. Why? We listen to music via services like Spotify and Rdio and Pandora instead, and we download tracks we love from Apple’s iTunes and Amazon’s store. We watch movies and television shows streamed to us from Netflix (or one of its international variants.) Books are now digital and are growing so fast they are even worthy of a department of justice investigation.

The Container Planet

The unifying fabric behind all these new behaviors is broadband. For the longest time, physical media was the container that moved content. Records became compact discs. Movie film became VHS tapes and then DVD. Books didn’t really change. And neither did newspapers and magazines. They are all mere containers.

It didn’t matter if you read Tom Wolfe in Rolling Stone, Esquire or in form of a book. He created content (art, if you ask me) and the companies packaged and sold it in containers.  They used their distribution networks — trucks, newsstand networks and book stores – to get us to pay for Wolfe’s works.

In the post-broadband world, Internet is the truck, and app stores are the newsstand and book store. Result: the slow and steady decay of physical media as a container for content. Sure, today people still have CD players and DVD players, but tomorrow when all our music will be either downloadable or streamed to us on many devices, who needs those CD players? The shift to digital music will increase with network density — that is the number of connected people and connected devices.

Hey DJ — hit the bass

We can already see it happening. Pandora saw total listener hours for the month of March 2012 hit a cool billion – up from 975 million a month earlier and 88 percent from 567 million listener hours it logged in March 2011. In a report released earlier this year, the chief executive of the International Federation of the Phonographic Industry wrote:

The number of paying subscribers to services such as Spotify and Deezer has leapt in the last twelve months, from an estimated eight to more than 13 million. At the same time, cloud- based services, such as iTunes Match, have become a reality in the marketplace, helping drive the popularity of music downloading. With a healthy 8 per cent increase in our digital revenues in 2011 – the first time the annual growth rate has risen since records began in 2004 – some might feel tempted to say that a troubled era for the music industry is coming to an end.

These growth curves are not just limited to music. Netflix and Hulu, for example, are experiencing nice ramp in their streaming customer base. Netflix is estimated to have snagged over 23 million streaming subscribers by the end of March 2012.

The impact of this shift is going to be immense. Unfortunately, we are still thinking about the world in terms of these “old” containers. Books are being thought of as we have always known them – discrete, unconnected and for solitary learning and/or  enjoyment. Magazines as we see them today were created in an era when society was less networked and less rushed. We need to rethink these containers for a brand new always-on world, and apps are the right metaphor.

It makes perfect sense that a branded music compilation is not going to be a CD and instead an app encompasses a playlist. “What I get most excited about in branded music is the opportunity for brands/influencers/celebs to become curators,” Hunter wrote to me in an email later. Absolutely! Because now we are free from the constraints of physical, static and unconnected media. I know I have spent way too much time on the music and other media, but apps as a container metaphor can be extended to other arenas as well.

Brands as apps

Today, some of my favorite brands such as Montblanc and Cartier offer iPad apps in which they keep me informed of the new products from those companies, sometimes news events and of course they are chock full of colorful graphics and photos. In the past they would have snail-mailed me a catalog every few months, probably at great expense.

With a mobile app, theoretically speaking, I could just get an update, informing me new content is available for me to read, instead of mailing me an analog catalog. Sure their apps are limited and imagined by someone with little understanding of the technical capabilities of the iPad, but what they have is a one-on-one relationship with the brand.

Any smart brand should have capabilities to see how often I lust after a specific model of a watch and then try to convert me into a buyer. By being on my most personal of devices, they already know that sooner or later, whenever I feel flush, I will convert into a buyer. Why bother with an email, when they can send me a notification of an offer or a special discount.

Result – they don’t need to advertise as much in some magazine, or in the newspaper. As I said, the worst is yet to come! Extend apps to catalogs – a company like J-Crew could simply skip the whole idea of mailing a catalog and instead start sending me updates and offers-as-notifications.

What dogs couldn’t do, the Internet has…

The fact is that this digitization of everything is going to cause an upheaval in all sorts of industries. We are already seeing the US Postal Service starting to lose a ton of money. USPS lost $5.1 billion in 2011. A report from the GAO said that USPS has way too much infrastructure for a world which is seeing the mail volumes drop. “By fiscal year 2020, USPS expects to lose over 60 percent of the First-Class Mail volume that it had in fiscal year 2006,” the report notes. USPS has had a total loss of $25.3 billion since 2006, the last year it was in the black. Ouch!

Just like the mailman, the commercial printers are facing rough times as well. A report in PIWorld points out that after a lukewarm year, the commercial printers could expect 2012 to have similar mediocre performance, despite being an election year, when the demand for printed materials is typically high, thanks to free spending candidates.

“The most notable is investment in tablets as a printing replacement by government agencies, schools at all grade levels and certain consumer sectors,” the printing industry’s trade publication writes. From the article:

The National Association for Printing Leadership (NAPL) chief economist Andrew Paparozzi, expects “industry sales to be essentially flat this year, somewhere between up 0.5 percent and down 0.5 percent” though it is pretty good compared to “sales down 1.7 percent in 2010, -15 percent in 2009 and -5.3 percent in 2008.”

Admittedly it will be some time before tablets and mobile devices become ubiquitous, but there is no doubt about its inevitability. The ad-agencies themselves might find themselves being disrupted — for the very idea of brand advertising will change. It means opportunities for new kind of digital creative shops that go beyond mere advertising and instead build result-oriented strategies that use math, data and human emotion.

We’ll be talking with leaders in tech, media and investing about how to make the most of today’s opportunities, blurred lines and all, at paidContent 2012: At The Crossroads, May 23, at The TimesCenter in New York. Join us.

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