“If you do not change direction, you
may end up where you are heading.”
– Lao Tzu
Everyone knows what happened to Kodak – or do they?
The company was in fine shape selling print film. Then one day everyone started buying digital cameras and stopped using print film. Kodak’s executives hadn’t been doing their homework and so were completely shocked by the speed of the digital revolution, having no time to avert disaster.
But then again, is there another account
that is closer to the truth? In 1975, Kodak created the first digital camera prototype. Their vantage point as market leader provided early knowledge of advances in digital tech and they took some half measures to cover off that part of the market, in 2001 buying an online photo sharing company called Ofoto. Where the company failed was not by ignoring new developments, but in choosing not to tear apart the business model that had generated success for 110 years and reinventing themselves around a completely new, unproven technology. They attempted to use Ofoto to generate more print film sales rather than to create Flickr. Keep in mind, that to have managed the transition properly would have felt like Noah building a giant boat on a hilltop and locking up hundreds of animals there waiting for rain. Then again, this unwillingness to look beyond the present when the future is uncomfortable can be found embedded deeply in our nature – particularly when we face complex situations. Look at the behavior of many great leaders in the days before World War II, the 2008 financial crisis and climate change, for example.
If you work in TV, radio or outdoor media, does any of this strike a cord? Is 2017 perhaps the year you need to drastically reinvent your business? There may still be time to dabble in digital, but consider the risks of taking only half measures:
- Self-driving cars will become mainstream over the next 5-8 years, with 10 million of them on the road by 2020. Drive time radio will become far less interesting when people no longer need their eyes or hands for driving. Is it far-fetched to picture a dashboard radio sitting comfortably in a museum beside a 1970’s film camera?
- Google and Facebook are now taking 76% of each new dollar added to digital ad spending. Considering that digital is driving the majority of growth in advertising, we are truly seeing the rise of a new paradigm built around precision targeting. Historically, media companies have come and gone but the new paradigm is relevant to every customer of every media company and so is here to stay.
- At many television companies, things probably feel OK but not great, as they did for Kodak at the start of the decline. Because less people are watching traditional TV, inventory is actually tight. Advertisers ironically need to buy more shows to achieve the reach they’ve come to expect from TV, so some airtime is selling out. But keep in mind, according to L2’s Death of the Advertising Industrial Complex, this year cable companies’ revenue declined 1% whereas over-the-top services such as Netflix, Amazon and Hulu achieved 30% revenue growth.
So, if this really is the time for a fundamental shift – a change that completely ignores the conventional wisdom of the industry, what should a traditional media company to do? We have four suggestions:
- Court next generation marketers. Today more and more senior leadership positions are being given to digital natives, and old industries like banking and retail are being renovated by digital innovations. Print was the first media segment to experience digital’s creative destruction, and Canada’s leading print publisher, Postmedia, has demonstrated that necessity is the mother of invention by creating a division to structure innovative deals with startups. They invested $50m worth of media in Vancouver fintech company Mogo in exchange for equity and revenue share in the company. A Mogo investor recently explained to me how this tailor made deal enables the startup to match their necessarily back-weighted revenue from consumers with deferred customer acquisition costs – bringing highly desired balance to their business model.
- Conform to programmatic ad buying protocols. In the digital realm, ad buyers pay primarily for targeted audiences, and less so for mass reach. In campaigns where mass reach is the primary goal, traditional media companies can continue to play to their strengths, but in addition they now need to support media buyers who are orienting around consumer attributes beyond merely age and gender. Television is the area with the most buzz around programmatic tech, but other segments will soon be subject to the same demands. Canadian leaders in the space are already launching new automated platforms such as Pattison’s AdShop.ca or Newad’s Campsite.
- Leverage high quality content in new ways. Radio’s most compelling aspect is the collective voice of its speakers. The insights provided by these artists, thinkers and commentators can easily be repackaged into new forms such as podcasts or Snapchat stories. And producers of television content are fortunate that video will continue to be the most dominant type of content. The couch will always be a good place to watch video, it just won’t be in the linear broadcast format we’re most familiar with but in new formats that will blend subscription revenue with and precisely targeted ad dollars.
- Work with a forward-thinking company that is solving these challenges for media companies. Discover Media House’s platform makes for a smooth transition into programmatic selling and we have recently launched our innovative Inflection Program to connect media companies to next generation marketers. Startups rarely consider traditional media despite its incredibly cost-effective reach and so we’ve partnered with DDB in a national brand building initiative to educate startups on traditional media and to find opportunities for the right companies to form long-term partnerships with media suppliers.
It’s steps like these, taken now, that can pave the way for a profitable and prosperous 2020 and beyond!