What Traditional Media Companies Can Learn From Startups
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What Traditional Media Companies Can Learn From Startups

Creativity Technology
What Traditional Media Companies Can Learn From Startups

I have been spending a lot of time lately talking to people in various media companies: editors and agents, executives, journalists, producers and directors. It’s a fascinating time to see content industries in action, because they are facing a constantly changing landscape and are really trying to keep up. In other words, they are facing conditions of extreme uncertainty, just like startups. So I generally feel right at home in these conversations.

Most pundits and the people I ask for advice fall into one of two camps. One is explaining the world as it used to work: the importance of gatekeepers, the scarcity implied by limited distribution, and the resulting quality bar that the industry is so proud of. The other revels in the world as we all know it will be someday: limitless distribution enabled by new technologies, the importance of collaborative filters, and on-demand availability of all content for end-users. The problem with engaging with either camp as an author (or “content creator”) is that neither camp is really addressing the world as it exists today. The old models are broken, and we do not yet have new models to replace them. For established media empires, this is a scary fact. But, as any startup can tell you, this opens up a tremendous set of opportunities for the rest of us.

As I talk to established media companies, their responses are surprisingly uniform. I have in mind an image of each industry marching along in lockstep, one after the other. I place them roughly in this order:

Movies > Television > Books > Music > Magazines > Radio > Newspapers

Each industry is watching the one in front of it sink into the quicksand. Their reaction seems to be relief that at least they are not as bad off as the industry in front of them. Thus does everyone enjoy a nervous chuckle at the plight of newspapers. But this relativism obscures one essential fact: everyone is sinking! It’s just taking some longer than others. What accounts for the difference? Mostly it is the time and expense required to create the means of distribution for that industry. Because it is much more expensive to launch a Hollywood movie than a printed book, for example, it’s taking digital technology longer to work its way through the complete supply chain for that industry. But make no mistake, disruptive innovation has happened, and the established supply chains are going to change accordingly.
So let’s turn our attention from what may happen in the future to what is definitely happening in the present. Here are a few of my observations from the trenches:

Personal brands are displacing organizations brands.

I used to be skeptical of all this talk of “personal brand.” But I now believe it is at the center of the disruption changing the face of media. Because of the incredible array of information available, we have a desperate need for filtering mechanisms. But the traditional media brands simply aren’t good enough. Does anyone really watch the full NBC lineup anymore? Or follow all of the New York Times columnists equally? It’s an artifact of the old large-batch distribution mechanisms that we bundle all this somewhat-related content together.

This is good news for everyone except those who have huge legacy investments in large-batch distribution. Customers will get to consume the content they want, and support the producers of that content directly, rather than having to rely exclusively on intermediaries. And once you have a relationship with an author, musician, or journalist, it will be quite easy for them to offer new products and services – and for you to give them feedback that helps them shape ever more interesting (and ever more profitable) offerings. But there is a serious drawback: finding new creators is getting difficult. There are just too many of them out there.
Now, helping potential customers discover new things they might like is the job of the discipline of marketing. But that job is changing dramatically, and this brings us to the next major problem facing traditional media organizations:

Media companies are failing at marketing.

Most of the people I meet in marketing at traditional media companies are struggling with the realization that their new job is to cultivate new personal brands and to constantly explore new ways to help people discover and deepen their engagement with those brands. The key tools of this new marketing are: targeting, filtering, and customer insight. Mass blasts of information are ineffective, because the broadcast channels are suffering from information overload (even in social media). There are too many products clamoring for attention.

But the same technologies that make life difficult for traditional marketers also offer them unprecedented new opportunities. Test-marketing is now easier than ever before, thanks to leveraged distribution channels like AdWords and Facebook. Scaling up successful tests is easy for the same reason. Most importantly, it’s now possible to have detailed analytics on exactly what’s happening to messages and ideas as they flow through word-of-mouth channels. In the old days, the brand manager of a consumer packaged goods product had to spend energy inferring the effectiveness of their television ads through a combination of trailing indicators (like market share) or time-consuming market research. No longer. Anyone who puts out a marketing message today and doesn’t know exactly what happens to it is suffering from willful ignorance (what I term Datablindness).

Gatekeepers are overloaded.

Gatekeepers, who decided what material was published, where dollars were invested, and had a tremendous responsibility for predicting future consumer demand, dominated the world of traditional media. All successful media companies had at their heart a series of editors, producers, and agents tasked with discovering and developing new talent. Look at the stories of the current generation of aging superstars in any industry. They all have a story of how they were discovered, how their first breakthrough work was cultivated by a skillful (or lucky) individual gatekeeper. You can’t turn on a television these days without hearing about how this happened to Michael Jackson. But the idea of artists being discovered is heading towards obsolescence in a world when anyone can start a personal brand anytime, anywhere. The new “discovery” will be a continuous series of events, starting with a niche following and, for the successful artists, gradually transitioning into mainstream success. It will look much more like the technology life-cycle adoption curve than like a tournament system – and that is a good thing for creators of all sizes.

I’ve met a lot of gatekeepers in the past few months. They all have one thing in common: the world’s most painful case of information overload. Ever-more artists and authors are petitioning them. As the costs of production fall, it’s getting easier and easier to send in a proposal or even a complete work. And thanks to the radical transparency enabled by the internet, the quality of these proposals is actually constantly rising, to the point that it’s almost impossible to judge the quality of the final product – because all the proposals look polished and professional, even the terrible ones.

Thus, the selection criteria for gatekeepers has moved almost entirely away from the content itself and to an elusive quality called the “author’s platform” (in publishing; each industry seems to have its own version of this same concept). This is the total number of activities that the author has engaged in – other than writing – that causes people to give them attention. Think of it this way: every person on earth is ranked on a scale from zero to Oprah. When she says to buy something, millions of people do it. How many people follow your recommendations? This is an important question, but it’s not directly related to the kind of content an author actually produces. Unfortunately, this content-less decision-making process is inhibiting the ability of media companies to develop interesting new content at the very time when this supposed expertise should serve as their one true competitive advantage.

Despite all the energy invested in talking to authors about the size of their platform, very few gatekeepers have a rigorous set of metrics for measuring it. My blog has over 14000 subscribers, for example. Is that a lot? I have given more than two-dozen paid speeches this year – is that a lot? When I reviewed a recent product development book, it immediately shot up to Amazon sales rank 300. Is that good? These are pretty interesting anecdotes, but they are hardly the kind of serious approach that these questions deserve. In the absence of real data, gatekeepers are having to rely on much more tenuous indicators. And as everyone’s attention starts to focus on those same indicators, their value is being diluted. Which leads to the next problem:

We need new status indicators.

One of the legacy functions of the established order that has not been adequately addressed is the creation of status indicators. For example, the best book reviewers only review books published by the best publishers, which only accept manuscripts from the best agents. These reviews can launch good books onto the big mainstream bestseller lists, which then provide self-sustaining growth (similar to the dynamics of App Stores). Even if a self-published book was every bit as good as one published by a top-tier press, how would the reviewers know? They can’t even consider 99% of published books already. And how could they possibly review a blog? The problem is that there are no other metrics they can look at to judge the content of a book to know if it’s worth reviewing.

We faced this same problem in entrepreneurship and venture capital, but we are getting past it. Seed-stage investors are learning the metrics of traction, and are getting better at identifying those companies that are really achieving validated learning about customers. They can make smart investments even if the entrepreneurs are not well credentialed or have a product/idea that is outside the mainstream of what investors are expecting As this change has rippled up the venture industry, it has meant a lot more worthy companies are getting funded than just a few years ago.

The biggest lost opportunity of all, though, is this one: we no longer need to rely on scarcity or status-oriented measures to filter which projects should get the green light. Just like in the world of startups, we can start to use micro-scale pilot programs, executed in lean fashion, to gather real facts for making ROI decisions about new project investment. Most publishers are still caught up in an outdated “vision vs. metrics” argument, which is already obsolete here in Silicon Valley. We’ve learned that data can be used as a reality-check against vision without diluting the mission or reverting to “sum of all features” focus groups.

Consider this question: what percentage of all books that are purchased does the buyer actually finish reading cover-to-cover? I’m not sure we really know the answer – yet. But thanks to new distribution technologies like the Kindle, we will soon. And that will open up an interesting new way to value books. If a previously unknown title has a higher-than-average customer engagement across a wide demographic, it might merit additional investment – even if the total number of units sold is quite small.

And as we consider specialized niche topics, like business, technical or educational content we can get even more precise. If our goal is to teach, persuade or inform with our content, we can measure our success at those goals. There is no reason why all written content that is produced today for those purposes couldn’t be split-tested – at least to a segment of its audience. Digital versions of these books could have built-in comprehension tests and mini-feedback forms, all of which could evaluate the level of understanding of the reader. Even if only a small percentage of readers or viewers participate, we will be able to get an accurate read on the effectiveness of each piece of digital content.

For those of us who create content because we care passionately about having an impact on the world, we need to rethink the process by which we do it. We can’t just delegate the business questions to some media executive.

For people raised in a traditional media environment, this probably sounds scary. In fact, traditional media specialized in keeping authors and creators in a kind of bubble world, so they could “focus on their creativity” but that in reality served to keep them in a constant state of dependency. That made sense in an era where ownership of the means of distribution was more important than ownership of the means of production. But we don’t live in that world anymore. Fellow creators, trust me – this new world is incredibly liberating. Sure, you have to pay attention to your own business, you need to own your own brand, and you need to engage in dialog with your customers. But guess what? Every minute you spend on those activities is spent actually honing your ability to shape the world through your art.

So, to all those struggling with how to build an information-distribution channel in this brave new world, let me make a few concrete suggestions. First off, every customer who interacts with any of your creators should have the option to subscribe to all of their future work, every time they interact. For bonus points, make this a paid subscription. Your creators should always have a simple way to talk to current and potential customers in any segment. Make it easy to “pilot” new work with a test community of actively engaged readers, and provide a mechanism for measuring the impact of these pilots. And anytime you strike a deal for digital distribution of any content, insist that your creators be given real-time access to the big-picture metrics: not just downloads, but engagement, retention and replay.

The media companies that will make the transition in the coming years will be the ones that embrace this principle and devote themselves to helping creators, authors and artists develop as entrepreneurs as well as craftspeople. If they don’t, there are a new breed of lean startups who understand this deep in the bones ready to take their place.



version of this post originally appeared on Eric Ries’s website where he writes about Lean Startups and entrepreneurship. 

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