Is Big Media Doomed?

The media industry as a whole is shrinking. Consumer spending in this market is inevitably going to decrease dramatically and not just in music, but also film, broadcast and cable. Everyone wonders, well wont advertising make up for it? Inevitably, the marketing budgets of corporations are not going to change and overall media ad spending will not increase because its tied to corporate budgets (the aggregate of online and offline wont change).

Google's recent announcement on ultrafast internet services is the scariest thing yet for the media industry. What has happened to music will also begin to happen to video and inevitably all large files (games, software, etc). This trend threatens the sustainability of any paid model. Media has been built through three monetization sources: advertising, subscription services (cable, print circulation, etc.) and individual purchases (download, physical, etc.). As broadband gets faster and more content becomes ad supported, consumers are going to spend less on both subscriptions and purchases, which had been the cash cows of the media industry. Fewer consumers will buy cable services, online debundling of channels will occur and fewer people will see movies as they can pirate them as quickly as they can a song today. Sure, all the media companies can provide free ad supported content, but there is only so much corporations can spend on ads and ad spending will never make up for the lost revenue because marketing budgets are not big enough.

So what is the solution? Freemium models and upselling the user experience. People will always pay for the best experience (bigger TVs, quicker access, improved features). Media companies need to make sure that consumers do not cut their budget for media spending. That spending will shift from buying and owning the content to experiencing the content.  Spotify has been very successful at this in Europe, providing a free ad supported service for music that does not include mobile adaption and has fewer features (no caching for example). They then hook the users on the experience and make them want and need the better product and pay a premium subscription fee to access the service with no ads and on their mobile devices. Once users like a service, they dont want to shift away if it gives them everything they want. Its time for media companies to innovate and focus on providing the best media experience and realize that content may not be king any more and something that broadband has commoditized. Marketing, delivery and user experience should now be the focus.