2 opportunities for new media: further concentration and a more fluent licensing marketplace

Having a sustainable business is not always about growth, but it is always about change; adapting to a changing demand. A business has always two sides: supply and demand, and, in the long term, they will tend to be equal. What we have now is simply a lowering demand, and thus, supply must adapt because the market is asking us to allocate fewer resources into content production. The fact that newsrooms have to reduce costs and adjust to the new situation is something already assumed by media companies (we are just listening how hundreds of journalist and other media workers end up to be unemployed every month passing). It is a hard reality.

(This failure would be perfectly avoidable or reduced with an appropriate professional re-conversion)

With decreasing newsrooms, we have to increase economies of scale and specialization. In order to be sustainable, media business need to decrease the cost/content, cost/audience, because with growing competition, news are becoming increasingly a commodity and commodity prices tend to minimize marginal profit and it is difficult to add value (margin) in a commodity. Ok, yes, we know that some companies sell water at the price of expensive wine, but we all cannot do the same and customers able to pay for water the price of wine are a minority.

We have 2 complementary ways to reach economies of scale in content production:

- Increased Media concentration among channels and countries, in other words, some media companies merging with others so they can all share contents further exploiting them. If we got a huge group, journalists can specialize in some fields while exchanging contents in other fields. In fact, nowadays, media producing is more efficient in a big well managed communication group.

Since it has much political relevance, multinational integration has proved to have some limitations so far, but it is necessary to continue concentrating in order to adapt to the new situation.

- Empowered and more fluent licensing marketplace. We are talking of a b2b content licensing market. Of course, platforms like youtube, or integrated advertising platforms such as doubleclick or tradedoubler in a different way are already b2c solutions for content rewarding, but there is room for b2b content exchange tools. One difficulty of this approach is the lack of consensus on online media audience metrics as well as the complete lack of information systems integration in the different media companies. As Internet progress and audiences and content sources get fragmented, a healthy marketplace is definitely a growing need.

Business developers have a responsibility in getting a fluent licensing exchange to allow reducing content costs while increasing licensing revenues, but there are some established taboos coming from the content side that also need to be removed.

Developing a media marketplace is a kind of dream that some companies share and a growing need to adapt to the new situation of even smaller self-production of contents. New media can only be competitive if change its focus to: a bit of production and a lot of licensing. That is, we have to empower economies of scale; otherwise, content producers will be just buried by content aggregators. We do not need to become aggregators, because this is not our core and it would just be insane, but we have to change our focus becoming content producers, and content qualifiers, so we minimize the cost per unit of audience without reducing, but increasing, our quality standards.

Licensing exchange is nothing new; it has existed for decades and we carry a heavy legacy in that area. Therefore, this is not a matter of new development but of change management. It is in the hands of media to suffer a disruptive change and be out of the game (what seems to be happening so far) or to lead this change in its on favour.

To summarize,

1. We need to reduce cost/unit of audience

2. Solution A is to merge media globally so we arise economies of scale. This solution crashes with political interest but it will continue to be important.

3. Solution B is to empower licensing exchange so we can re-focus from purely content producers to producers+qualifiers.

A fluent licensing marketplace is a business development or a content issue? Nowadays, it is strategic for media companies as whole, and so, let’s make it happen working together.