Arnon Mishkin is a partner with Mitchell Madison Group, where he consults for media companies on improving legacy businesses as well as making the internet profitable. Prior to MMG, he was a partner at the Boston Consulting Group, where he did some of the firm’s earliest work on the web.
One of the most effective television ads for a media company was one that WINS, an all-news radio station in New York, ran several decades ago. It asked viewers if they knew how to set the [preset] “buttons” on their car radio, and then explained, “You pull out the middle button…tune to 1010 WINS…and then push the button all the way in.” In those days, all car radios had the same mechanical preset system. And since hardly anyone had ever read that part of the auto manual, a large number followed the advice in the ad. They wound up driving with the middle button set to WINS – and WINS won the ratings war.
I remembered that piece of ancient media history when I read the latest rumors about the mythic Apple (NSDQ: AAPL) tablet. The tablet has been rumored for long enough to make it the technological equivalent of The Flying Dutchman, but it seems like the device may finally be arriving in port in early 2010. According to Gizmodo, the way Apple is thinking of partnering with content companies suggests it may, in fact, turn out to be worth the wait.
On the web, all content gets posted and made available ubiquitously – through search engines, aggregators and the like. While some call this a wonderful ecosystem, the record shows that almost all the value that has been created on the web has gone to organizations that curate and navigate the masses of available content. They are the companies that have created the essential starting points (first Yahoo (NSDQ: YHOO), now Google,and in the future, maybe, Microsoft (NSDQ: MSFT) via Bing) or folks who create real or de facto “walled gardens” (at first AOL (NYSE: TWX), now apparently Facebook, and arguably Hulu).
Why is it so hard for content makers to create value on the web? Because the web has evolved to minimize content makers’ ability to retain users. Thanks to the power of search, users can bounce from one site to another so effortlessly that it’s tremendously difficult for any one site to monetize their visits.
The iPhone and, apparently, the Apple tablet rely on a very different approach to providing content to users: individual apps, of course. When someone downloads an app, that person immediately becomes a true user of it; the physical size of the device, coupled with a user’s desire to minimize the number of pages of apps, create limits to where that user gets information. While users may choose to drop an app or add others, there is a very clear cost (to the user) of switching from one content provider to another.
In other words, apps allow media companies to compete for that “middle button” that 1010 WINS won. And it’s not just the apps and the iPhone that can help media companies achieve that feat. Any successful e-reader and its downloads could have the same impact. Echoing this point, the author of a previous Leading Voices piece on paidContent argued that the unsung virtue of the Kindle was the way it allows readers to “unitask.”
Unlike the web, the system of apps and downloads (e.g. an e-magazine subscription) provide tools that enable a content developer to build and keep a loyal audience, and you can imagine a variety of workable business models. A business could sell advertising against the customer base or potentially sell things directly to the customer, particularly with the new feature of “in-app purchasing.”
With Apple, the key is that it allows each app developer to “bundle” content – in a sense, just the opposite of what it did with iTunes, where it broke apart the music combo of records and CDs. As companies develop their approaches to apps, they need to figure out:
1. What types of bundles make the most sense – the generic bundles
that were the norm in the broadcast television and newspaper
industries, or more vertical, branded-identity bundles that were the
norm for cable networks
2. How to ensure that they secure as much as possible of the best real estate on users’ iPhones, tablets or other devices
3. How to promote an app, taking advantage of the tools of the web
4. How to move users from their inherently low-margin web sites to different types of e-readers, apps and the like
5. How to make sure they don’t lose the inherent stickiness of apps
As they tackle these questions, content companies can take what they
learn in the app and download world and try to make the web more
profitable for themselves.
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