Saving Local Content in the UK

Thankfully British media authority Ofcom has summarized on one single webpage how they will save local news and bloody underwear content in the regions of the nations that constitute the United Kingdom.

The Problem

Without this balance, there is no incentive for commercial public service broadcasters to retain their public service licences. This is particularly the case for ITV plc. The licences it holds retain significant public service obligations, including the regional obligations rooted in Channel 3s original federal structure. If the obligations of ITV plcs licences significantly outweighed their benefits, ITV plc could feasibly surrender its public service licences and pursue an entirely commercial strategy using broadcasting spectrum through an alternative multiplex (such as SDN, which it owns). In such a scenario, much of ITV plcs public service content would be likely to be lost completely, including regional programmes.

The Solution

In formulating proposals based on this underlying analysis, we listened to what ITV network audiences told us they valued most namely regional news gathering and programmes transmitted at times when most people were watching. Accordingly, we concentrated the declining available benefits of public service status on maintaining journalistic resources in the field, maximising the level of localness in programmes and maintaining the volume of public service programmes broadcast in peak-time, when most people watch.

The consequences

While RTL Germany, depending on the interpretation of different sources has harvested a loss of 60 to 90 million Euros in the first two quarters of this year and Swiss Public Television has lost money in the league of ORF rather uninformed members of the elite sit in the Austrian parliament and discuss the differences and commonalities of airlines, broadcasting and the web. At the same time the real discussion takes place at the responsible ministry department where officials fix details with the emissary from brussels to find compromises of the sort only lawyers and justices have the sick knowledge to really appreciate. Small wonder, the population never checks, the union has more benefits than disadvantages.

Careers in TV are at stake. That used to be hot but only for birdies any longer. Where have you gone Mr. Idle, we need you, now. Please repeat: These enquiries led to certain changes at the BBC.

Mass Media, a Problematic Business Architecture, Part 2

In our last installment, with the help of Dealing With Darwin by Geoffery Moore, we have analyzed the somewhat schizophrenic double business architecture of mass media. Today we will look at the last 150 years to see the beginning and end of that uncommon model, a thing that, judged from pure abstraction, should not have happened.

Beginning: The Penny Press

Historically seen, mass media are a relatively young phenomenon. They sort of started their life with mass bible reading enabled through the printing press, but began in earnest with penny newspapers in the United States and later Great Britain. The sixfold price decrease was enabled by two factors: progress in printing technology and a corresponding rise in the possible advertisement revenue. That rise in turn was enabled by the creation and quantitative growth of mass marketable product. This really diffused the press and reading into the so called masses (as opposed to literate elite).

Before the penny papers came the sixpence papers, illustrated

It also established the double business model of mass media in place to this very day. The principal customers underpay the product and the gap is filled by selling the eyeballs (and eventually the ears) of these same customers to totally different customers who want to talk to those eyeballs, ears and the brains and souls behind them. (Before that there had been announcements which should not be confused with advertisement as we now understand them.)

1^st Modification: Sound Broadcasting

Radio comes to the mind when thinking about the next step. The phenomenal success of the private radio market in the US is often quoted for the next step in mass media development. For many people radio is the proof for the possibility of products that are freely given to customers. But that is not quite true. The commercial success of radio in the US was based on the progress of the consumer product industry on one hand and on the full integration of nearly all elements of the architecture by companies like Radio Corporation of America on the other. The business model started with the consumer buying reception and playback devices every couple of years from RCA. For a nice sum, that is. RCA also provided everything else: production equipment, programming, content, management, integration technology, organization of sound artists, ad sales etc.

2^nd Modification: Television Broadcasting

As all who know, know, that integration model did not work out anymore with TV after WWII. But even without all of that TV became a large business because of the unforseen enormous rise of the advertisement needs of both the industry and the services sector and because TV is and remains the most powerful ad platform ever invented. But its rule is far and out not as complete as it used to be anymore.

Excursion: Publicly subsidized commercial online success: the minitel

3^rd Modification: Interactive media through all-purpose small computers, many trials, groping in the dark, finding success

From 1996 to 2000, after realizing that the founders of Netscape Corporation had made gross and obvious errors in their initial business plan spreadsheets, Netscape, Oracle, Sun and their allies all tried to repeat successful American radio network model with intentionally crippled and controlled devices called NCs or Network Computers. Oracle even trademarked the term. Only in the state of states, France, with heaviest support from the government and direct political coercion of the users, did such a strategy (Minitel) succeed with computing devices in the first round.

Until today, Sony, Nintendo, MSFT and Apple are the companies that have created mass media in the good old Radio way. In the electronic games and entertainment market you sell the device upfront and the content after that. Piracy exists and poses a threat (compare this to people who watch TV without paying for cable or public broadcasting, Schwarzseher in German).

Then Apple led the crowd with its line of iPods and a lot more important by the iPhone and the iPad and have really succeeded in reproducing at least a large part of the integrated RCA business model. Even Google nowadays design smartphones to go with their software. One cannot exactly say that smartphones are crippled devices if one thinks of all the sensors, processors and memory built into them. But these companies as a whole have succeed in making these powerful devices pretty much dependant on the net and the cloud. They even gave up on a once big ideal of PC software, namely that as opposed to the mainframe world you could by software and use it as long and as often as you wanted whereas today you can practically only rent the most widely spread professional software tools.

In the games sector Blizzard were among the early successes trying out the subscription model as opposed to bying games for your kids at Christmas time and be done with the costs. Many relevant actors in the quintessential "free" medium markets, TV channels and most new audio services are returning (HBO - 38M subscribers, Netflix - 40M+ subscribers, Spotify, Pay Radio ...). Still, the successes are few and far between. Many of these companies offer a hybrid model from the start and other will start to succumb to the lure of advertisement money. Expect in-game-advertizing to modify the games market in the years to come. Expect others to try to modify and optimize the exisiting hybrid models.

For professional politicians Video-Images in any form became and remain the figure before the hypnotizing 50 or 60Hz ground

Exception: The thing that was able to confuse many brains

Until here we have intentionally written very little about television, the medium that has the reputation of having changed everything in the (mass) media business. Looked at seriously it is still by far the biggest thing in media but has lost its commanding role nearly completely in the past ten years.

The mass media double business model came to its climax and full fruition in the 60 years of the rise of commercial television (1941-2001). We won't write anything more here than that TV has earned the merit of expanding the commercial volume of mass media by a third which is no mean feat. Tons and tons of research on TV have been published, so everybody can look and read for themselves. And do not forget how companies like RCA and Columbia lost a large part of their businesses when, after the transistor, it turned out American citizens prefered Sonys and Panasonics and so on over homeland-produced all-American Mr. TVs.

Today we can sit in the front row and watch as the schizophrenic mass media business model is dying its very very slow death. After 140 years of huge but often dubious successes it is falling apart before our eyes. It does so from inner development and because, in the end, structural problems prevail against opportunity. Radio was able to feed on the mass uniformity the press had created. TV fed on the hot and hypnotized mass uniformity Radio had put on top of and into it. It did so by giving a relief right after the big war and by cooling everthing down. What does the interactive nature of the internet do? What does the change from cooling down tube devices to hot high resolution LCD and LED screens do? It seems not many people want to find out. Everybody is in the hamster wheel but some grumpy old professors and some esoteric ladies and guys who have their followers but no real power.

The Happy Ending

But now the wave hast started to roll back. All of the twentieth century the telephone has counteracted mass media in the invisible and unhearable background. Since it has been released from its bond to the wall, all figures we see rather show that the amount money people spend for electronically supported communication has neither risen nor fallen dramatically, it seems.

Just who is allowed to talk to who, who listens to who, watches whom and where and when this happens seems to be changing quite a bit. What it is that people talk about on the phone and post on networks from their ever more powerful phones has raised peer pressure and group conformity considerably while on the other hand segmenting and fragmenting the once huge and pretty uniform groups ever further.

Globally connected telephones constitute the largest network on this globe and that networks' potentials gets more and better all the time. All forms of peer control and politics in most social groups are rapidly changing and all the patterns ripple and waver. Waver through phones and pods and PCs and warez and what have you. New things emerge.

Interesting times. And dangerous. Like all such. Let us be glad that thanks to atomic proliferation for the time being large scale land wars between the great powers are somehow out of the question. But one has to say, it is high time politics and the media get their act together and instead of running after the masses take their responsibility and start to change their ways in earnest. Ahead of all they must become more modest (real and really, not as a form of play-acting in front of cameras and mics) and think about how these new segmented groups can find common ground.

For this they need to become less competitive, more cooperative and not just in uneasy coalitions but in a sustainable manner. It will need a new generation of players on one hand, friendly continuity and competent handovers, it seems. Not a all around fetishization of "creative destruction". And hopefully these new peopl will not just play the same game as all the elites of the last 2000 years when they got ready to replace the former one. Some things have gotten better from the penultimate generation to the last one. But in some respects it would be good to consider if the pendulum did not swing back a bit.

Jump back to part 1 of this series

Fact and Fiction in the Media

In the first edition of the Liverpool Mercury on 5 July 1811, the editors declared that: 'Information, discussion, utility, and amusement are to be blended in a public journal; and yet so blended, as not to be confused.' Other early nineteenth-century newspapers similarly claimed to provide a compendium of diverse articles, emphasising their intellectual rigour, the reliability of their sources and their long-standing reputation for quality news. In order to further enhance this image of independence and accuracy, journalism was founded on anonymity. Articles on current political affairs did not acknowledge any named journalist, while the few columnists who were acknowledged always used a pseudonym.

For instance, Charles Dickens published his articles in The Morning Chronicle under the pseudonym 'Boz', William Makepeace Thackeray adopted more than twenty different known pseudonyms for his articles, and the real identities of many columnists remain unknown. In a further attempt to claim impartiality, the editor of The Examiner, Leigh Hunt, even declared stated in the first edition of his newspaper that he intended his intention not to publish any advertisements, promising 'they shall neither come staring in the first page at the breakfast table to deprive the reader of a whole page of entertainment, nor shall they win their silent way into the recesses of the paper under the mask of general Paragraph to filch even a few lines.' in his newspaper.

Read more about it at the British Library ...

Mass Media, a Problematic Business Architecture, Part 1

On last Friday an associated person drew the editors' attention to two things. Quoting Peter Drucker with "The purpose of a business is to create a customer and keep him." is a reminder anyone in business should pronounce once in while.

The pointer to Dealing With Darwin was new to us. Dealing with Darwin is a relatively new and rather interesting business economics pattern book published in 2005 by Geoffery Moore .

Let us just mention that we completely agree with Mr. Drucker in the assertion quoted with respect to business as an organizational form.*

In his book Mr. Moore suggests there are two different basic business model architectures for successfully handling innovation and the task of creating and keeping customers, calling them the Complex Systems Model and the Volume Operations Model. Mr. Moore also recommends not to mix these architectures:

The two cannot and should not mix, or share best practices. Businesses with one architecture should not covet the benefits of the other.

A first line explanation

Volume operations customers, like individuals buying coffee, sports ware, mobile music players or enterprise units buying furniture, multipurpose office software or cars, require an easy-touch, a few-sizes-fit-all approach, where customization, if available at all, is in DIY or small business personal services form.

Volume operations start with a base technology. This creates a portfolio of offerings which spread through a continuum of channel operations to a potentially huge base of customers. If the potential is reached then the buyers generate the cashflow as trickles of small transactions that unite to a mighty river at the supply side.

Sony, Volkswagen, Apple Records, Apple Computer, the application arm (but not the server software arm) of Microsoft and many regional food, say for example local cheese, companies are good examples for this business model. These companies deal in standards. Edison, Bell and Ford are famous implementors.

Complex systems customers on the other hand, like, for example, an enterprise buying a new overall IT architecture and implementation of their business processes (say Allianz) or a multinational buying cross-country, cross-media, cross-targetgroup promotion (say Coca Cola) or individuals buying a new home for their family, require an intense-touch, high-customization approach.

As we can see in Mr. Moore's diagram, the complex systems model necessitates a solutions model which involves an integration platform over legacy infrastructure elements, all bunched and connected by a technical architecture layer, a mixture of own and third party modules, a second architecture layer that maps the bottom of the system to the customer’s needs and tastes. The complexity of this alone is often too much for the customer and this in turn opens the opportunity to offer consulting and integration services as an icing on the cake.

NASA, CapGemini, Siemens, WPP, Oracle, SAP, Bouygues and many local business technology integrators are good examples for this business model and its architecture. The model does not scale infinitely but does so pretty well.

What the business architectures have in common

Everybody knows, companies have to be profitable to stay in business. We now need to return to Drucker as an unsuspicious source for the assertion that profit is not the goal of business, which is to “create and keep a customer”. Profitability is a constraint. It is needed to manage risk, crisis and survival.

How the business architecture requirements differ

• Concerning the cost and pay constraints: In complex systems revenue and margin are dominated by a complex and rather nontransparent cost structure, large gross margins and slow turnover. In volume operations on the other hand profit is achieved by lean and transparent cost structures, narrow margins and fast turnover, costs are standardized and modular.
• Concerning innovation handling: In volume operations technological innovation generates revolutionary changes in the business model. In complex systems disruptive technology is most often a direct driver, but legacy must be handled. Philips mixed that one up badly when they thought a digital consumer music device (Digital Compact Cassette) needed to handle legacy. Volume products do not need legacy handling, it only holds them back. Look at mobile music players in the 90ies and 00ies.
• Concerning marketing: Volume customers and complex system customers have very different sympathies and prejudices and therefor generate very different necessities in marketing. Sales cycles and revenue balance between first buy and post-sale are near completely different in the two models. Volume operations need the best ad campaigns and customer relationship programs they can afford. Complex Systems Services need lots of relationship work and networking from bribes to honest friendship to cross company team building.

  Complex systems architecture must orchestrate coalitions of associates to make solutions work. Subtle reputation and collective positioning is a key to this. In volume operations branding and stand-alone segment positioning is a key to working the image and brand value and as such clearly opposed to collective positioning.

Preliminary Conclusions

We now start to see why Mr. Moore so adamantly discourages the mixing of both business architectures. We could give lots of examples, positive and negative. Lets be content with 3 or 4. After 25 years in the business and great successes IBM got rid of its PC product line. Siemens never really succeeded in electronic volume operations products. Oracle although trying hard and repeatedly was never once able to successfully develop, ship or sell mass consumer products.

All of these examples are very well managed companies and have been generally successful over many years. The other way round mixing business was more rarely undertaken. Apple would be a modest example. While maybe they have - after many crises - mastered the volume model better than anybody else, whatever they did in the server, network, management and IT services area was ridiculous and doomed to fail. Amazon on the other hand, who seem to be very near to the mass consumer market is in truth coming strictly from complex system for logistics, distribution and commerce of everything and with only a very small unit to design and market Amazons own products, seems to handle the complex systems architecture requirements quite well.

Mass media, a practical and fundamental violation of the underlying principles

Now traditionally, mass media, as the name suggests and considering their main product, found themselves quite naturally in the volume operations architecture. All customers of a newspaper read the same newspaper that morning, evening and the next day. All viewers of a movie or television entertainment program used to watch the same story unfold on the silver, phosporized or LCD-lit screen. In traditional newspapers, pay TV, pay radio (including public service broadcasters), paywall websites and apps subscription fees and the sale of single media pieces still provides for a large parte of the revenue the but in free to air privately owned radiostations, TV-Stations, free newspapers and websites ad slots are nearly the only things that move money in the direction of the owner.

And so for many of these media companies money from commercials was a lot more important than sales of their media pieces, editions and subscription, which gave them a feeling they had a fundamentally superior model because price set no limit to the size of their audience which in turn became the product for their real customers, the media agencies which in turn handled the volume operations business that so desperately needed segments as large as possible of the selected target groups for their very shiny and expensive commercials to operate upon.

Until digital came along no one even dreamt of customer based ad slot customization. As a customer you'd book that slot or space, send in your hopefully sexy spot, poster or 4/4 display ad and that was that. National and regional selling was a lot cheaper and easier than what Coke and Apple had to do when conceiving and booking global campaigns.

There is a large difference between media pieces on one hand and Coca Cola, Red Bull and iPhones on the other hand though. The daily products and even building blocks (clips and articles) may have uniform rules but are still handcrafted by teams consisting of artists of different talent and performance, thus leading to the above mentioned nontransparent cost structures typical for complex systems businesses. Modern radio with its playlist dominance and product elements that can be used for many weeks and even years and online-media with its larger shares of newswire content have mastered that problem just ab bit better than TV and newspapers.

On the marketing side, once physical production machinery and transport were efficient enough, low implementation and distribution cost expanded the reach to practically the limits of language comprehension. In entertainment, without the need of speed in news content, it was even easier to consider transnational markets. Translation and overdubbing enlarged markets to culture comprehension sizes.

The complication with the three classes of mass media's customers

On one hand there has been the necessity of daily handcrafted production from the start of the mass media business model in about the 1830ies. To make things worse, the better the writers, photographers, camera operators and directors you employ the less you will be able to make them uniform and daily riable. You need those qualities though to make a difference in many market segments of the media industry. Automization, at least for commodity media pieces like sports and weather reports seem to have come a long way, but too much of it brings the danger of boredom and loosing any differentiation. For high class pieces and series computers support a lot more processes but you still need talent for which the competition is fiercer than ever.

But the real complications mass media are confronted with are set by the two classes of customers, the masses in mass media who really need the volume operations approach in lots of ever more segements and those who pay much larger sums in fewer bills, are the buyers of the eye pairs product and, accordingly, do not request the easy-touch, a few-sizes-fit-all approach of volume operations but require the intense-touch, high-customization approach of the complex system architecture.

The second class of customer is a complex mix of product promoting companies and their advisers and consultants, a sector which the media companies call the advertisement industry. The product these customers want to buy is increasingly complex. Though it is constructed out of rather uniform and simple mass available byproduct elements of mass media (time and space slots for ads), the form and set into which these elements are combined tends to be ever more complex. Those customers and the associated offers and sales stuff, if only for the complex psychology involved, belong to the complex systems architecture.

A third class of customers one are political elite groups which are bound together with media people, especially news people through a complex reciprocal interest. They also do not interact with media through market and business principles but through reciprocal interest exchanges. Quite a lot of investigation has been directed at the contradictions created by the often differing interests and tastes of the second and the third group of complex customers. The moment the second and third group require to much attention from media managers you can be sure the first and most important audience group gets bored and goes somewhere else. Brings you into a defensive vicious circle.

The troubles generated by the two different business architectures can be thoroughly felt every day but have been largely overlooked by media science and model abstraction as far as we can see. The troubles also have been smeared over a bit by the fact that large intermediate groups act in the field with a strong pretension to be able to reconcile those needs and tastes. This pretension is the ground and water they swim in. No figure, nothing to be seen. Just feelings of the participants. From the 80ies to the change of the millenium the advertising industry led the way to ever greater glory. Now they are on the defensive and do not stop to commit blunders over and over. 30 second spots before the audience can see a 30 second video. Booking youtube ads that practically every user clicks away. Booking ads that are surrounded by 4 other moving ads. Only crying, no sexiness, no attraction. But large report with figures in the millions that no one understands. Digital mad cow disease everywhere.

The Provisional Diagnosis

Let us pause here and assert that mass media companies, by their double basic business model architecture fundamentally violate one important rule (Do Not Mix!) explained in Moore's "Dealing with Darwin".

Go on to part 2 of this series

Some necessary philosophical clarifications

Illustrative Addendum

Here's an illustrative addendum to yesterdays story. For all who are still able enough to read b&w pictures this should be evidence enough.

This word is on the most conspicuous wall of every room in every IBM building. Each employee carries a THINK notebook in which to record inspirations. The company stationery, matches, scratch pads all bear the inscription, THINK. A monthly magazine called 'Think' is distributed to the employees.

In his first move as president of IBM, Watson Jr. decided to take what Fortune Magazine would later call the company’s “$5 Billion Gamble”. He hired a team of electrical engineers and set them to work designing mainframe computers. Since they would be incompatible with all of IBM’s previous products, the risk was obvious.

Steve generally treated Bill as someone who was slightly inferior, especially in matters of taste and style. Bill looked down on Steve because he couldn't actually program.