Why Is The Media Industry so Confused?

Our main hypotheses are

• that the overall business model of mass media is problematic
• that this has not been recognized before because extraordinary revenues and profits hid the fault line
• that the extra money came from an absence of real (that is global) competition provided by a combination of intrinsic limits in the production and distribution of media and cultural borders provided by language, scripture and tradition
• that electronic digitization has started to enable a global level of competition 20 years ago
• that media people of all levels who are not trained in this sort of competition tend to panic and fall into hoping for magic instead of rationally investigating solutions

Why and how did the Media Industry live so well if their business model is problematic?

From the invention of the mass newspaper in the 19th century to the rise of film, comic strip and radio in the 1920s and 1930s and to the long rise and global dominance of television the media industries have been a glamorous, attractive and rich branch of business. Most everybody wanted to be friends with them, many dreamed of being a part. Writers, photographers and camera operators seemed to be able to make and unmake presidents. Without an image in the media no significance seemed possible anymore in our world. Philosophers already speculated if the real world were not already more of a reflection of the media than the other way round.

And though the media industries’ turf - in terms of manpower and gross revenue - might always have been an order or two of magnitude smaller than say that of telecommunications or energy this restriction only seemed to further contribute to its glory. How could all of this be?

All of this growth, money and glory became possible because certain aspects of human culture and a set of intrinsic attributes in analog electronics reliably prevented a normal international if not to say global level of competition for media. The media industry could exist and thrive with an uncommonly low level of that competition and critical comparison for one and a half centuries now.

Do not get us wrong. There was a lot of fierce competition inside the media industry. People competed with other people. News shows, soaps, dramas and news papers in one market might compete really hard every morning or night for their audiences. This might even give executives, producers and their teams the feeling that they had to compete harder than most everybody else. But still, it was not a league of 20 competing top teams with leagues of hundreds below them. On a systemic level competition was very much limited to a few players and even the loser got a huge prize. Everybody in the industry was in finals all the time.

Cost Structures

The dual leverage of overall cost (in news gathering mainly) combined with the curiosity set of average audiences (always slightly more local than global) helped the print-media to rule and maintain geographically segmented markets to this very day. From the beginning print media were closely associated with the nation states and their political elites. Every modern state has forced postal and telecommunications monopolies (regardless of their being state or market monopolies) to subsidize the transport of physical and electronic media by not charging full market prices for their transport.

Biology and education lead to the fact that even during the climax of nationalism nationwide print media commanded only a minority part of the possible audience and their time schedule even at their apex from 1920 to 1960. But contrary to nearly all other commodities regional and local market niches remained intact and profitable for a long time for regional newspapers and radio programs.

Film and television production costs forced somewhat larger market segmentations. But for a long time language and culture provided new “natural” boundaries. And while government institutions and agencies all over the western world strived hard to keep junks of this business at the regional and local levels, until the commercialization of the Internet the most important market demarcations of electronic media coincided with the boundaries of nation states.

In the USA which span half a continent and where both radio and television by legal design and market structure started as a local business, national networks formed faster than you could look. All over the developed world the scarcity of usable analog spectrum bands contributed very much to this stable trend of segmented markets and oligopolies. As far as we can see, until a short while ago the media industry has remained successful in instituting stable geographical and material market segmentations and the corresponding political protectionism like only few other professions and businesses have.

Branding and Advertisement

The second factor that made media shine for so long is based on yet another innovation brought about by the development of capitalism. Since the American economy brought forth the idea of the branded mass consumer good, demand for advertisement did nothing but steadily rise. The long lead the United States of America had in this strain of human development allowed their federation to abstain from collecting a fee for the passive and some active usages of the invisible electronic spectrum. It also allowed smart business people to create the illusion that a “free as in free beer” product was a feasible economic reality. While the UK introduced a dual television market in the late fifties audiences on the the continent west of the Iron Curtain had to wait longer. When the television advertisement and consumer brand markets of old Europe had matured enough, which seems to have been the case in about 1970ies, “free to air” without further license fees was was broadly introduced in the larger nations here. It took the small and the Soviet dominated countries at least ten years and sometimes more to become able to support their own privately held TV companies.

Computerization perforates old boundaries

In the 70ies digital semiconductor technology on one side and software engineering on the other had advanced enough to begin with the computerization not only of weaponry, spacetravel, banking, accounting and airline booking but also of nearly all aspects of media production and distribution.

The existing telephone and telegraph networks provided the datapaths for networking. TV began to broadcast data as teletext. So from the 80ies electronic digitization als began to to tear down all “natural” boundaries that had kept the old segmentations intact and had helped to hold the systemic levels of competition low. When digital modulation of electromagnetic and light spectrum in copper, fibre and through the air replaced analog modulation bandwidth was not scarce anymore and cheap satellite and cable channels abound. Suddenly businesses that once where firmly separated by distribution form (print/text and electronic/audiovisual) find themselves competing with similar products for the same audiences. Suddenly all sorts of players from all over the world, without national licenses and approbation from national political and economical elites, can enter the field through the internet. And the first glimpses of shere bandwidth abundance shine their ugly spotlight on a future where universal competition will rule the media world and niches will become what they are in other fields of activity, small and tight.

For many years media companies and their employees are not anymore used to competition from selfmade professionals and amateurs they have no sort of control over. They never knew that the sum of other peoples' faces and speeches always commanded more attention than theirs. But now that fact becomes visible.

A few segments aside competition for them takes place when they try to enter the business and then against a few well known colleagues. Once you had landed a job in the racket you were an artist or a humanist. Competition was down to haggling with colleagues for the next higher position and yesterdays or last month's ratings. You never once thought you had to work that hard again in your life. Even less did you do so when you had inherited that entrance in one or the other way, all further life was to be mostly fun and importance and a few hard and quick runs.

Dazed and Confused

But now all of this is in a process of change that has lasted for one a decade and will for decades to come. The threshold costs to entering media markets are almost down to zero and myriad players at all levels arrive and will continue to do so. Media markets will continue to fragment like many other markets. All bets are off and old rules do not apply universally any more. Most people have high definition video cameras in their cellphones. Everybody can publish their observations and opinions on many platforms to many "friends" as text, image and sound. All these packages will draw attention. 18 hours a day of being awake will stay the same.

Nearly everybody in the media industry complains about these Facebooks and Googles and at the same time nearly everybody cooperates and submits to them. At conferences and in speeches old media gurus talk about quality and orientation, double check of sources and the like while they lay people off and promote "Yes Sir"-employees to positions and tasks which they are in no way equal to.

At the same time, when it would matter, as events happen, traditional media compete hard and often at one level with these new individuals and sacrifice all alleged virtues for speed and emotion. Cool thinking and coherent strategy based on scientific analysis have given way to confused tactical distributed bubble innovation action, resulting in disorientation and a lack of motivation amongst the professionals who still really believe in the old values and advancement throught hard work and achievements.

Some of the old players are still very well equipped to succeed in partial games and competition for position. When everybody talks about selling the product and designing and manufacturing the product is seen as commodity like in incumbent media and established political parties the talent of winning these partial games benefits these people but definitely does not benefit the companies or organization they work for. At least not in the longer run. Everything gets muddled up. Well paid jobs do not seem to be secure or enjoyable anymore. People talk about disruptive innovation but the only thing they know is that somewhere you can get new "digital" recipes for success in terms of money, value and recognition. Hard times for defenders of legacy and serious humanism.

The Flawed Business Model Architecture

Here is a description, why by normal criteria of how technology, production, marketing and distribution and exchange work together in markets and businesses under the precondition of having well connected markets, a standardized medium of exchange (money economy) and private property all guaranted by a state with a monopoly of violence the media business cannot work under normal conditions of competition. Read that tex after this article and then, if you are serious move on to the literature cited there.

Important Addendum on Competition

It should be stressed once more that some of the employees in the media industry are exposed to utmost competition. For producers of daily programs in direct time slot competion to similar offers of other players in the same market segment hard competition can be a daily experience. They get their ratings every day and every minute. "Playing a final" every day and not every month or year can be very taxing.

Competition is hard on every level, even in the lowest league of any sport. To compete in any league you have to make a decision to dedicate a substantial amount of time and discipline to the selected activity and its practice. In a stratified system such as the soccer league system you rise if the combined talents, training and competion methods of your team, trainer team and club management take you to the next level. That rule applies only to single managers and very talented artists in the media industry, very rarely the teams that play. The media industry is no sport but a business.

We uphold though, that media companies viewed as systems are not used to regular competition from many competitors and also that the mentioned murderous competitive impulses are mostly perceived in a completely wrong way. When the global competition is unavoidably perceived, as for example when comparing this year's Austrian or German production of TV Series to their British and American counterparts the fact of not being able to compete in craftmanship and dramatic art is lightly attributed to the "lots of money" the US-American or British producers have at their disposal. Then the comparative view is switched back to opponents who for sure themselves have less money than ...

In this way a false sense of excellence and security will be maintained month after month until it will be too late. The same happens in news coverage. The view stays with todays nearby competitors and their failings. Never once do chief editors and Universty professors dare to do a systematic comparison with the quality the large editorial staff of yesteryear were capable of. Their managerial s3lf would instantly break down. Instead "quality" is a quality that is ever more affirmed the more it goes down the drain. And going down the drain it does, that is for sure. Too few people for too great a task can only succeed for a short time but has never been and will never be sustainable. Sorry folks.