Hack:
Hacking Traditional Media

In Corporate Strategy at NBCUniversal, I believe what we do matters.  The two things I think most contribute to obesity in this country are the ethanol subsidy, which puts cornstarch in everything we eat, and the cable model, which artificially subsidizes volume and keeps users mired in a state of passive couch-potatodom.  As Shirky discusses, people sometimes ask how Wikipedia is possible... 98 million man-hours all freely contributed.  Where do people find the time?  The answer: from television.  People spend two hundred billion hours (2,000 Wikipedias) watching television every year.  If we can redirect even a tiny fraction of this, profound things become possible.  

My mission is to shift the industry from its current model to one where people pay more per unit for a smaller amount of produced content, content they genuinely care about, and don’t just passively consume but actively participate in and create around.  This righteous intention I believe coincides with economic incentive.  I don’t assume people should pay less for media, just that they should get something they value more.  And suppliers, yes, will be held more to account for what they produce than in the current bundle model, but will have the opportunity for growing revenues off less production, created alongside an army of collaborators (think Facebook... overhead and infrastructure, development and a bit of sales, but the rest is all margin... content and marketing come for free from users).  

The point I believe to be core is that the Internet isn’t just another pipe.  The Internet is an open distribution platform available to anyone, a fundamental change to the business ecosystem in which we operate.  And the Internet is bidirectional, which should fundamentally change the product we offer.

Historically, a small number of companies held exclusive control over distribution infrastructure.  Today this isn’t true.  Today, the Internet has opened up distribution to anyone (with production and marketing tools following suit), empowering an entirely new class of creators.  The Internet also making it easier to find and collaborate with these publishers, our traditional model becomes increasingly antiquated.  It is no longer possible, competitively or practically, to try to keep out grip over everything, controlling the entire production and distribution process internally, to push a monolithic product on a passive consumer we have no relationship with.

The problem of the web’s openness is fragmentation.  On the web, instead of a couple companies trying to assemble full packages of finished content, everybody throws everything out there.  Most of it’s of course crap.  But the best can be quite great, even better than ours.  And more importantly, individual pieces tend often to be better than ours, at least for some particular person, at some particular time.  The aggregate of the network becomes difficult to compete with.  There will always be a market for high-end, quality-assured content.  But as low end tools move ever up market, our input resources become ever less exclusive, and discovery mechanisms become ever better, that premium pie that we and the other big guys fight for becomes ever smaller.  It’s basic innovators dilemma.

You see it in the obvious trends plaguing our business model.  Monetization has always been about control... about setting up checkpoints, sites where people have to come to us if they want the services we provide.  In the broadcast era, we had no way to ask this of consumers, so we turned to advertisers, to whom we could gate and sell access to our audiences.  In the cable era, we found a way to establish a retail model, controlling the flow of content through pipes and selling access to consumers directly.

With the Internet though, these models break.  As we lose control over distribution, consumers gain the option of alternate content paths, legal and illegal, rather than waiting at our checkpoints.  And as the world fragments, we lose our ability to aggregate audiences. Of course, this latter point matters less and less, as businesses gain the ability to speak to consumers directly (first through web sites and now more effectively through social networks), and then even they get disintermediated, consumers shifting their reliance from ‘push’ brand messaging toward ‘pull’ p2p recommendation and reputation (think Amazon star ratings).

I believe there’s a solution, once which was doesn’t run from but instead embraces the openness and the Interactivity of the web.  I believe we must shift to and collaborative model, where we use our premium resources as a vacuum to suck in value from partners and users.   We should utilize external capabilities where they’re preferable to our own (eg distribution), and release our own differentiated resources to open innovation (eg content and sales capabilities).

In all our interactions – with our suppliers, but most critically with our users – we must shift from one-off transactions to ongoing relationships.  No longer should we simply push our products to users and call it a day -- sell them a DVD and that’s that.  Me must shift to a services model, where we build communities.  The opportunity here is extensive: continual subscription revenue streams, a secure distribution model (services are harder to steal than goods – one needs to stow away), a sustainable advertising model (based on deep knowledge of our users and a recurrent opportunity for persuasion), a continually evolving product, products customized based on user habits, and the chance to capture knowledge, innovation, and creativity from our customers.  It’s what Blizzard and Zynga did with games, Netflix with video, Zipcar with vehicles, and down the line as all business gradually join ‘the mesh,’ as Gansky calls it.

In corporate strategy, we spend much of our time trying to figure out the impact of the Internet as simply a new pipe.  How does it impact broadcast, for first-run and repeats?  How is it related to DVR and VOD?  I believe we need a broader view on the future. Companies like Cisco, IBM, and P&G have taken multi-billion dollar restructuring paths to come out fundamentally different creatures, but sustainable, vastly more successful companies.  Just looking at what consumers are doing today and how it impacts our current bottom line is only one piece of understanding whether something is net good or bad for us.  If we want to avoid being the next Yahoo! (or Tribune, or Warner music), I believe we, and the industry as a whole must begin crafting a fundamental opinion on what we the future looks like, and begin preparing for it today.