free html hit counter Packaged Goods Media vs. Conversational Media, Part One (Updated) | John Battelle's Search Blog

Packaged Goods Media vs. Conversational Media, Part One (Updated)

By - December 05, 2006

Time Warner

In the past month or so, three senior executives charged with running the interactive units of major media companies have either been shown the door, or have left on their own accord because they found their jobs no longer fit their character.

Jon Miller, who took AOL from death’s doorstep to a new model which stole a page from Google and Yahoo, was summarily offed in mid November. Ross Levinsohn, hailed as a genius within Newscorp for engineering that company’s purchase of MySpace, has decided that it’s more fun to build a new company than run one inside Mr. Murdoch’s empire. And Larry Kramer, until recently the head of CBS’s interactive unit, saw the writing on the wall when Les Moonves installed a new boss above him (Kramer remains an adviser to CBS).

Newscorp

What does it all mean? I know each of the three men reasonably well, and I’ve spoken to many folks around them, and it all points toward a trend that I’ve been itching to think out loud about: Major media companies are realizing that their digital assets are far more valuable than they initially thought, and they are reacting by putting folks in charge of those assets who they believe will protect the company. Not the *interactive* company, mind you, but the company that owns the interactive products. Why?

Let’s take each in turn. The general vibe on AOL is that Time Warner believes it’s time to treat AOL like any other major Viacomadvertising-driven media business – put in someone who lives and dies by advertising. So they install Randy Falco, a respected television executive with deep relationships with major brand advertisers.

Over at Newscorp, the folks I’ve talked to say that Murdoch viewed Ross as an M&A guy, and not an operator. It’s time to *operate* these assets, now that Ross has assembled them, and the new guy – Peter Levinsohn, another seasoned TV executive – is more of an operator than Ross (they are cousins).

And at Viacom/CBS, head honcho Sumner Redstone was apparently livid over his lieutenants’ failure to buy MySpace. So they have installed Quincy Smith, a seasoned technology/media M&A banker in the media space, to run Viacom’s digital assets (and Nbcuto buy their way to the table, as one can see from the recent hiring of a senior Yahoo corp dev executive). Kramer, who ironically is more of an operator (he ran Marketwatch for 12 years), apparently left because he didn’t want his job to be about buying companies, and he was not that pleased with having Smith inserted between him and Moonves, who had been his boss before Smith showed up.

One might argue that a supreme shuffle could have solved all of this – put Miller in Ross’s job (Miller turned AOL into an ad property, maybe he can do the same for MySpace), put Ross in Kramer’s job (he can buy stuff well), and put Kramer into Miller’s job (he can operate a big site like AOL).

But there’s more to it than that. All three of the departed execs are, in their own rights, extremely seasoned interactive executives. And while their replacements have some digital experience, it’s mostly in negotiating deals between traditional media companies and new the new digital world. And while I may get beat up for saying it, I must insist: Things are different running interactive properties. Deeply, importantly, significantly different.

In each case – Viacom, Time Warner, and Newscorp – the media moguls have installed folks who have no significant operating experience in the interactive world. (One can also argue that installing Beth Comstock as head of NBC Universal late last year – a very impressive executive who nevertheless came from a marketing background at GE – was a similar move).

What does this tell us about how these major media companies are thinking about interactive? Well, I’ll go out on a limb here. I think the moguls are thinking along these lines:

1. Interactive is now a very important, profitable, and growing business.

2. We can’t afford to not view this as strategic to our future.

3. We need someone running theses sites who is not an interactive “cowboy,” it’s time to grow up and treat it like any other major piece of our conglomerated business.

4. Therefore, I need “one of my own” running these businesses, and I expect them to deliver just like the folks who run my radio, TV, print, and/or other major asset groups.

5. “One of my own” is someone who lives and breathes my world – the world of Very Large Media Companies that Own A Boatload Of Intellectual Property Assets and have Massive Investments In Huge, Controlled Distribution Networks.

A perfectly logical and reasonable train of thought. And I’m not about to predict that AOL, Fox Interactive Media, or CBS Digital are going to fail because they’ve hired new blood. I am sure the folks who are now running these properties understand the depth and breadth of the shifts occurring in the Major Media Company businesses – but are they going to be empowered to do what they need to do to truly win in their respective markets?

What do I mean by that? Well, that’s the focus of my next TOL (thinking out loud) post. But the synopsis goes something like this:

There are two major forms of media these days. There is Packaged Goods Media, in which “content” is produced and packaged, then sent through traditional distribution channels like cable, newsstand, mail, and even the Internet. Remember when nearly every major media mogul claimed that the Internet was simply one more media distribution channel? They were right, but only in so far as it pertains to Packaged Goods Media. Over the past few decades, massive media conglomerates have built on the deep DNA of Packaged Goods Media.

The second major form of media, is far newer, and far less established. I’ve come to call it Conversational Media, though I also like to call it Performance Media. This is the kind of media that has been labeled, somewhat hastily and often derisively, as “User Generated Content,” “Social Media,” or “Consumer Content.” And while the major media companies are unparalleled when it comes to running companies that live in the Packaged Goods Media world, running major companies in the Conversational Media field require quite a different set of skills, and consideration of radically different economic and business models – models which, to be perfectly frank, conflict directly with the models which support and protect Packaged Goods Media-based companies.

It seems clear to me that the folks now charged with running the interactive assets of NBC, Viacom, Time Warner, and Newscorp – four of the largest Packaged Goods Media companies in the world – are charged not only with growing their own Conversational Media assets, but also with protecting the Packaged Goods Media assets of their bosses. And those assets are based on several heretofore unassailable pillars:

1. Ownership or control of Intellectual Property (ie content) by the corporation.

2. Ownership or control of expensive distribution networks (so that the content can reach the audience).

3. Established business models based on highly evolved approaches to advertising and subscription models – models which themselves are built upon the presumptions of #1 and #2.

Each of these three pillars – and I may stumble upon others as I keep thinking out loud – seem to be either irrelevant or significantly shifted in the world of Conversational Media. Note that I am not dismissing these pillars are they relate to Packaged Goods Media – far from it. But basing your Conversational Media business on these pillars is, frankly, entirely missing the boat.

In the next post, which I hope to complete sometime this week, I’ll focus on why. I’ll review the models of Packaged Goods Media and Conversational Media, highlighting the differences between them. As always, your input and criticism encouraged….

(note: I updated this on Dec. 16th, writing through it for clarification but changing no meaning/intent)

Related Posts Plugin for WordPress, Blogger...

15 thoughts on “Packaged Goods Media vs. Conversational Media, Part One (Updated)

  1. Mike says:

    I love this post because of this one line…

    are they going to be empowered to do what they need to do to truly win in their respective markets?

    From a San Diegan perspective, I’d say no. Our local CBS affiliate seems to lift its content from Newsweek (like today’s leading autism story, which happened to be last week’s cover story) or other printed news outlet; local NBC gets its content from their consultants; and the local ABC affiliate is, well, in complete hiatus, as their reporters are too busy trying think of anything else since they’re recording, writing, editing and producing news segments now (makes for really awkward yet entertaining newscasts… and who doesn’t love entertainment, anyway? Ha.). Naturally, you’d think, "Hey, they’re already on the path to performance media. No original content here. They’re probably going to invest more into streaming online media and analytic tools, etc." Nope. At least not for a while. Things seem to work under the mantra of let’s try this because everyone else seems to be doing it… but let’s do it as inaccurately as possible to demolish of what’s left in the j-world.And that’s broadcast! Print is much worse, image that. Track down any managing editor and throw the terms CPC/CPM/CRT into their face and all you’ll get are glazed eyes that spell out "huh?" Ironic, given the job title. The reality is that any higher-up is much more willing to stick to the traditional (advertising) model for as long as possible. Ride the wave till it crashes. My advice: start by listening to your Web dev and give him/her reasonable ownership of your site to pioneer the transition from print to online journalism. My god, it’s not that complicated. Baby steps, right?

  2. Mike says:

    I love this post because of this one line…

    are they going to be empowered to do what they need to do to truly win in their respective markets?

    From a San Diegan perspective, I’d say no. Our local CBS affiliate seems to lift its content from Newsweek (like today’s leading autism story, which happened to be last week’s cover story) or other printed news outlet; local NBC gets its content from their consultants; and the local ABC affiliate is, well, in complete hiatus, as their reporters are too busy trying think of anything else since they’re recording, writing, editing and producing news segments now (makes for really awkward yet entertaining newscasts… and who doesn’t love entertainment, anyway? Ha.). Naturally, you’d think, "Hey, they’re already on the path to performance media. No original content here. They’re probably going to invest more into streaming online media and analytic tools, etc." Nope. At least not for a while. Things seem to work under the mantra of let’s try this because everyone else seems to be doing it… but let’s do it as inaccurately as possible to demolish of what’s left in the j-world.And that’s broadcast! Print is much worse, image that. Track down any managing editor and throw the terms CPC/CPM/CRT into their face and all you’ll get are glazed eyes that spell out "huh?" Ironic, given the job title. The reality is that any higher-up is much more willing to stick to the traditional (advertising) model for as long as possible. Ride the wave till it crashes. My advice: start by listening to your Web dev and give him/her reasonable ownership of your site to pioneer the transition from print to online journalism. My god, it’s not that complicated. Baby steps, right?

  3. Mike says:

    I love this post because of this one line…
    are they going to be empowered to do what they need to do to truly win in their respective markets?
    From a San Diegan perspective, I’d say no. Our local CBS affiliate seems to lift its content from Newsweek (like today’s leading autism story, which happened to be last week’s cover story) or other printed news outlet; local NBC gets its content from their consultants; and the local ABC affiliate is, well, in complete hiatus, as their reporters are too busy trying think of anything else since they’re recording, writing, editing and producing news segments now (makes for really awkward yet entertaining newscasts… and who doesn’t love entertainment, anyway? Ha.). Naturally, you’d think, “Hey, they’re already on the path to performance media. No original content here. They’re probably going to invest more into streaming online media and analytic tools, etc.” Nope. At least not for a while. Things seem to work under the mantra of let’s try this because everyone else seems to be doing it… but let’s do it as inaccurately as possible to demolish of what’s left in the j-world.And that’s broadcast! Print is much worse, image that. Track down any managing editor and throw the terms CPC/CPM/CRT into their face and all you’ll get are glazed eyes that spell out “huh?” Ironic, given the job title. The reality is that any higher-up is much more willing to stick to the traditional (advertising) model for as long as possible. Ride the wave till it crashes. My advice: start by listening to your Web dev and give him/her reasonable ownership of your site to pioneer the transition from print to online journalism. My god, it’s not that complicated. Baby steps, right?

  4. Mike says:

    sorry for the double-post, but here’s my "interactive post" (it’s got links to go with my rants)… tried posting it on here, but the spam filter must’ve thought I was trying bypass it.

  5. Ron Denholm says:

    Hi John,
    Thanks for your blog. To get to the guts of your thoughts, I just read the higher end paragraphs using Coning Technology.

    Document thinking range 72

    66%] In the past month or so, three senior executives charged with running the interactive units of major media companies have either been shown the door, or have left on their own accord because they found their jobs no longer fit their character.
    27%] Jon Miller, who took AOL from death’s doorstep to a new model which stole a page from Google and Yahoo, was summarily offed in mid November. Ross Levinsohn, hailed as a genius within Newscorp for engineering that company’s purchase of MySpace, has decided that it’s more fun to build a new company than run one inside Mr. Murdoch’s empire. And Larry Kramer, until recently the head of CBS’s interactive unit, saw the writing on the wall when Les Moonves installed a new boss above him (Kramer remains an adviser to CBS).
    84%] What does it all mean? I know each of the three men reasonably well, and I’ve spoken to many folks around them, and it all points toward a trend that I’ve been itching to think out loud about: Major media companies are realizing that their digital assets are far more valuable than they initially thought, and they are reacting by putting folks in charge of those assets who they believe will protect the company. Not the *interactive* company, mind you, but the company that owns the interactive products. Why?
    80%] Let’s take each in turn. The general vibe on AOL is that Time Warner believes it’s time to treat AOL like any other major advertising-driven media business – put in someone who lives and dies by advertising. So they install Randy Falco, a respected television executive with deep relationships with major brand advertisers.
    55%] Over at Newscorp, the folks I’ve talked to say that Murdoch viewed Ross as an M&A guy, and not an operator. It’s time to *operate* these assets, now that Ross has assembled them, and the new guy – Peter Levinsohn, another seasoned TV executive – is more of an operator than Ross (they are cousins).
    57%] And at Viacom/CBS, head honcho Sumner Redstone was apparently livid over his lieutenants’ failure to buy MySpace. So they have installed Quincy Smith, a seasoned technology/media M&A banker in the media space, to run Viacom’s digital assets (and to buy their way to the table, as one can see from the recent hiring of a senior Yahoo corp dev executive). Kramer, who ironically is more of an operator (he ran Marketwatch for 12 years), apparently left because he didn’t want his job to be about buying companies, and he was not that pleased with having Smith inserted between him and Moonves, who had been his boss before Smith showed up.
    50%] One might argue that a supreme shuffle could have solved all of this – put Miller in Ross’s job (Miller turned AOL into an ad property, maybe he can do the same for MySpace), put Ross in Kramer’s job (he can buy stuff well), and put Kramer into Miller’s job (he can operate a big site like AOL).
    78%] But there’s more to it than that. All three of the departed execs are, in their own rights, deeply seasoned interactive executives. And while their replacements have some digital experience, it’s mostly in negotiating deals between traditional media companies and new the new digital world. And while I may get beat up for saying it, I must insist: Things are different running interactive properties. Deeply, importantly, significantly different. In each case – Viacom, Time Warner, and Newscorp – the media moguls have installed folks who have no significant operating experience in the interactive world. (One can also argue that installing Beth Comstock as head of NBC Universal late last year – a very impressive executive who nevertheless came from a marketing background at GE – was a similar move).
    100%] What does this tell us about how these major media companies are thinking about interactive? Well, I’ll go out on a limb here. I think the moguls are thinking along these lines:
    100%] 1. Interactive is now a very important, profitable, and growing business.
    100%] 2. We can’t afford to not view this as strategic to our future.
    80%] 3. We need someone running theses sites who is not an interactive “cowboy,” it’s time to grow up and treat it like any other major piece of our conglomerated business.
    100%] 4. Therefore, I need “one of my own” running these businesses, and I expect them to deliver just like the folks who run my radio, TV, print, and/or other major asset groups.
    100%] 5. “One of my own” is someone who lives and breathes my world – the world of Very Large Media Companies that Own A Boatload Of Intellectual Property Assets and have Massive Investments In Huge, Controlled Distribution Networks.
    86%] A perfectly logical and reasonable train of thought. And I’m not about to predict that AOL, Fox Interactive Media, or CBS Digital are going to fail because they’ve hired new blood. I am sure the folks who are now running these properties understand the depth and breadth of the shifts occurring in the Major Media Company businesses – but are they going to be empowered to do what they need to do to truly win in their respective markets?
    100%] What do I mean by that? Well, that’s the focus of my next TOL (thinking out loud) post. But the synopsis goes something like this:
    57%] There are two major forms of media these days. There is Packaged Goods Media, in which “content” is produced and packaged, then sent through traditional distribution channels like cable, newsstand, mail, and even the Internet. Remember when nearly every major media mogul claimed that the Internet was simply one more media distribution channel? They were right, but only in so far as it pertains to Packaged Goods Media. Over the past few decades, massive media conglomerates have built on the deep DNA of Packaged Goods Media.
    85%] The second major form of media, is far newer, and far less established. I’ve come to call it Conversational Media, though I also like to call it Performance Media. This is the kind of media that has been labeled, somewhat hastily and often derisively, as “User Generated Content,” “Social Media,” or “Consumer Content.” And while the major media companies are unparalleled when it comes to running companies that live in the Packaged Goods Media world, running major companies in the Conversational Media field require quite a different set of skills, and consideration of radically different economic and business models – models which, to be perfectly frank, conflict directly with the models which support and protect Packaged Goods Media-based companies.
    72%] It seems clear to me that the folks now charged with running the interactive assets of NBC, Viacom, Time Warner, and Newscorp – four of the largest Packaged Goods media companies in the world – are charged not only with growing their own Conversational Media assets, but also with protecting the Packaged Goods Media assets of their bosses. And those assets are based on several heretofore unassailable pillars:
    1. Ownership or control of Intellectual Property by the corporation.
    2. Ownership or control of expensive distribution networks.
    40%] 3. Established business models based on highly evolved approaches to advertising and subscription models.
    80%] Each of these three pillars – and I may stumble upon others as I keep thinking out loud – seem to be either irrelevant or significantly shifted in the world of Conversational Media.
    100%] In the next post, which I hope to complete sometime this week, I’ll focus on the models of Packaged Goods Media and Conversational Media, highlighting the differences between them. As always, your input and criticism encouraged….

  6. Great post John.

    I think successful enterprises will increasingly delegate power to the edge and senior management’s job will change from control to co-ordination.

    You describe how that is playing out in three media companies that are (or should be) leading the way in this regard. If social media is about conversation it will only work if there is true delegation.

  7. eirikso says:

    Thank you for a very interesting post. A while ago I introduced something that I called “The Conversation Society”. For the last couple of years we have been talking about “The Information Society” when describing what the internet does. Point is that the information society was something that Mr. Gutenberg introduced with the printing press 500 years ago.

    The real revolution with the internet is that it is much more than a distribution channel, it’s a communication channel.

    I have tried to sum this up here:
    http://www.eirikso.com/2006/10/30/the-conversation-society/

  8. John says:

    How does BoingBoing fit into these categories? It permits no direct interaction between the editors and their audience or among audience members. The only “interactivity” that readers get is when editors occasionally select screened reader comments to publish (“Update: Jeb sez…”)- which is actually rather like the model used by newspapers and magazines. The website seems more “Packaged” than “Conversational” to me. Is this where you are going with this article?

  9. Owen Thomas says:

    Hey, John, it’s just plain “CBS,” not “Viacom/CBS.” They’re separate companies now. You might want to add the departure of Viacom CEO Tom Freston into the list, though.

  10. For important clues regarding the answers to the questions you raise, I’d encourage you to (re?)read Clayton Christensen’s best-sellers The Innovator’s Dilemma (perhaps better yet, his follow-on, The Innovator’s Solution).

    These books make a compelling case that industry incumbents generally cannot effectively adopt disruptive innovations (defined as innovations that either cater to new markets or the low end of existing markets). This stems from the institutional incentives that incumbent companies face, suggesting that swapping executives is not an effective solution.

    The only effective solution? Create separate entities that are entitled to compete with the parent – something none of these media companies has been prepared to do yet.

    The rise of Conversational Media fits almost all the characteristics of a disruptive innovation as defined in Christensen’s research. I think that means Google is going to eat their lunch.

  11. It’s about economics (ad revenue) vs. relevance (interactivity/user content). How much interactivity are these media conglomerates willing to let through the filters, and would they do it all if it’s “at the expense” of advertisers and advertising revenue. We now know that relevance has value with users/ consumers (Web 2.0), the question is, is there enough net margin at the rendez-vous for traditional media companies that potentially have a lot to lose vs. start-ups that have way less to lose…

  12. For important clues regarding the answers to the questions you raise, I’d encourage you to (re?)read Clayton Christensen’s best-sellers The Innovator’s Dilemma (perhaps better yet, his follow-on, The Innovator’s Solution).

    These books make a compelling case that industry incumbents generally cannot effectively adopt disruptive innovations (defined as innovations that either cater to new markets or the low end of existing markets). This stems from the institutional incentives that incumbent companies face, suggesting that swapping executives is not an effective solution.

    The only effective solution? Create separate entities that are entitled to compete with the parent – something none of these media companies has been prepared to do yet.

    The rise of Conversational Media fits almost all the characteristics of a disruptive innovation as defined in Christensen’s research. I think that means Google is going to eat their lunch.

  13. This is John Testing.

  14. Gary Price says:

    For important clues regarding the answers to the questions you raise, I’d encourage you to (re?)read Clayton Christensen’s best-sellers The Innovator’s Dilemma (perhaps better yet, his follow-on, The Innovator’s Solution).

    These books make a compelling case that industry incumbents generally cannot effectively adopt disruptive innovations (defined as innovations that either cater to new markets or the low end of existing markets). This stems from the institutional incentives that incumbent companies face, suggesting that swapping executives is not an effective solution.

    The only effective solution? Create separate entities that are entitled to compete with the parent – something none of these media companies has been prepared to do yet.

    The rise of Conversational Media fits almost all the characteristics of a disruptive innovation as defined in Christensen’s research. I think that means Google is going to eat their lunch.

  15. Ron Denholm says:

    Hi John,

    Thanks for revising this post. For readability it’s all about rating the thinking in your opinion (Coning Index) and where the thinking lays in the article (Parascape Index). See http://www.oracep.com

    Your original post rates at 72
    Your revised post rates at 73 with a Parascape Index of 2. This index measures the accessibility of your major thinking (1-3: one being best).