FutureTech Business

5 Ways for Publishers to Gain Revenue and Customer Loyalty

By Eleanor Haas

"Navigating Search” was the title the SIIA gave yesterday’s Brown Bag Lunch, moderated by Diane Burley, a digital media consultant and advisor to Nstein Technologies.  We learned about new directions being pioneered by global publishers with millions of assets.  “New Ways to Deliver Meaning – not Just Online Content” might more accurately have described the program.  The payoff for publishers is significant.  It’s all about revenue and customer loyalty.

1.     Focus on the visitor first and only then on the information and how it is presented.  Understand visitor needs, interests and learning styles. Respect three key stages through which the visitor passes - first, processing the information, then making decisions about it and then executing decisions based on it.  Understand how sensory clues can be used to guide the visitor and how the visitor’s memory and inferences can support the information-gathering process

2.     Use wayfinding principles to organize digital space.  Wayfinding, a process used for centuries by navigators, and more recently by architects and other designers, describes how people intuitively orient themselves to a space and navigate from place to place. In general, people focus on a destination and follow what appears to them to be the best path.  Architects and other designers assess wayfinding options as a basis for improving the functionality of a particular environment and making the space more comfortable for visitors.

Paths, edges, nodes, landmarks and districts – the terms used by designers to describe spatial features for this purpose – were first coined by Kevin Lynch in his book "Image of the City" (1960) to help designers describe and think about how people experience space.   The same concepts are relevant to locating online content so that users can avoid the avalanche of irrelevant information delivered by keyword search, discover what they want and move on.

3.     Think beyond the home page to treat each website page as the potential landing page it is.  Google drives more and more traffic to pages beyond the home page, and these pages have too often been neglected in the past and therefore failed to deliver a superior visitor experience by reason of their design. 

4.     Connect multiple databases in ways that speed comprehensive search.  Enable visitors to come up with closer to 100 percent of the information needed for a decision, not just the usual 40 percent to 60 percent.  This can require smart connectors that enable a federated search across 6,000 databases, for example – using technology such as that offered by MuseGlobal.  Smart connectors add value for the publisher as well as the visitor.  For the publisher, they can increase revenue by an order of magnitude by speeding time to market for new products and significantly reducing the cost of support.

5.     Use text mining to organize and categorize vast amounts of both structured and unstructured information.  This permits publishers to cross-promote use of their content by enabling people interested in Topic A to quickly find related Topic B – with the help of technology such as that offered by Nstein technologies.  Content maps, which are beginning to replace traditional site maps, facilitate this by displaying the taxonomy of concepts within each subject or theme area.  The goal is to make it easy for visitors to infer additional knowledge about a piece of initial information – an inference that, in turn, becomes a new piece of information. 

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Shifting Realms for King Content: Three Views

By Eleanor Haas

Is content still king?  Yes and no.  Depends who’s talking and how they’re defining content.  Michael Wolff, magazine columnist and best-selling-author, stated unequivocally at the recent SIIA Summit that traditional news organizations – newspapers and broadcast news alike - are finished.  He gave them 18 months at the outside.  His solution was to abandon print and to found Newser, an online news destination.  At Newser, machines aggregate news, humans edit it down to what’s important and then they present it in lively online formats with links to original sources.

Not so, countered Vivek Shah, head of the News Business Unit at Time, Inc. Print journalism lives.  Newsgathering as a way of creating value is disappearing, he said, but voice and personality matter.  It’s all about points of view.

Content lives and so do newspapers, said Arturo Duran, CEO, Impremedia Digital, a portfolio of Hispanic periodicals, at an SIIA Summit preview session on digital publishing. Newspapers have an important role to play.  But they need to redefine themselves as local; they have to own their cities’ local listings and news.  Readers trust the name. Newspapers also need to reinvent their antiquated infrastructure in terms of cost and processes and be ready to deliver content to any platform.

Tectonic Shifts in Digital Media

By Eleanor Haas

“Tectonic” – pertaining to changes in the earth’s crust.  “Tectonic shift” was something George Kliavkoff said at least three times in the course of his NYMIEG interview on December 17^th.  Probably not surprising from the Chief Digital Officer at NBC Universal at this moment in media history.  And those three were only a few of many implied. 

The first shift he mentioned was the shift of media and advertising to digital platforms as ROI becomes increasingly important to marketers.  At the moment, he commented, some pockets of advertising will slow but overall, we can expect to see a flight to quality – to premium content, such as NBC’s www.hulu.com. 

But Hulu itself seems to me to be a tectonic shift in business models.  A joint venture between NBC and FOX, the site delivers free streaming video content of hit television shows to online viewers.  Doesn’t this run the risk of cannibalizing the television shows and their revenue streams, he was asked?  No way.  To the contrary, NBC has found this drives incremental TV viewership later.  “Prime time television viewers use mobile devices and online to catch up,” he said. 

The magic sauce in the new world of content is making things convenient and easy for customers.  It’s all about making a great customer experience accessible to customers when and where they want it and giving them choice.  This is a tectonic shift Kliavkoff and others now take for granted, the shift in power from seller to buyer.

Hulu’s ad model gives viewers an amazing choice.  Viewers choose between three to five 15-second interstitials and a pre-roll of a full movie trailer.  About half choose each.  Interesting.

To distribute its great shows widely enough to make them readily accessible, Hulu made yet another radical decision:  be sure its content is where the viewers are.  Give it to Yahoo, MSN and other distribution partners but require that it be on the Hulu player with Hulu advertising, straight off the Hulu server to maintain the integrity of the business model and to protect the site from piracy.

Consistent with these shifts is the coming personalization of local online programming.  A study I conducted 12 years ago found that “everything points to personalization as probably the single most important interactive marketing trend today.”  Forrester Research at the time was alerting us to the expectation that personalization would redefine the web and was something every site must prepare for. 

Kliavkoff predicts a wave of technology soon to come that will enable web sites to personalize content quickly, making every visit more relevant because viewers no longer have to contend with 90 percent to 95 percent of irrelevant pixels.  For this, sites will have to share data and information while being polite about privacy, he explained.  Behavioral targeting and social networking are both part of this.

The iPhone, App store and Adroid represent another tectonic shift with far-reaching implications.  These break through carrier control over mobile content for the first time ever.  As phones become an open platform and marketplace for premium content, they become candidates for significant new mobile e-business models as well.  Lots more coming down the pike on this one; it’s still early days

Then and Now

By Eleanor Haas

A friend’s astrologer reported that the heavens are aligned the way they were at the time of the American and French Revolutions.

An interesting parallel:  toppling of the existing power structure and a redistribution of wealth so it reaches more people.

Then it was triggered by violent upheaval.  Now the developed world has systems in place so that we have a collapse of some financial practices and institutions with government intervention, in effect, taking power from the handful of super-beneficiaries of the old system and redistributing it more widely.  We also have an election coming up for which unprecedented numbers of underdogs - young people and ethnic minorities - have registered.  If Obama wins, we’ll have a descendant of a race that was enslaved less than 150 years ago in the highest office of the land and one of the most powerful in the world.

At the same time, we have the continuation of the Internet revolution and changes in business operations, market structure and the pace of change.  The Internet also topples the existing power structure because it redistributes information so it reaches more people.

Also the same time, we have violent upheavals in the

Middle East

, which have toppled the existing power structure.

Interesting!

But the World Goes 'Round

Music by John Kander.  Lyrics by Fred Ebb.

Sometimes you're happy, sometimes you're sad
But the world goes 'round
Sometimes you lose every nickel you had
But the world goes 'round

Sometimes your dreams get broken in pieces
But that doesn't alter a thing
Take it from me, there's still gonna be
A summer, a winter, a fall and a spring

And sometimes a friend starts treating you bad
But the world goes 'round
And sometimes your heart breaks with a deafening sound

Somebody loses and somebody wins
And one day it's kicks, then it's kicks in the shins
But the planet spins, and the world goes 'round-
But the world goes 'round
But the world goes 'round

Sometimes your dreams get broken in pieces
But that doesn't matter at all
Take it from me, there's still gonna be
A summer, a winter, a spring and a fall

And sometimes a friend starts treating you bad
But the world goes 'round
And sometimes your heart breaks with a deafening sound

Somebody loses and somebody wins
Then one day it's kicks, then it's kicks in the shins
But the planet spins, and the world goes 'round
And 'round and 'round and 'round and 'round
The world goes 'round and 'round and 'round
And 'round!
(From "New York, New York")

Political Haste Makes Fiscal Waste

By Eleanor Haas

“Without government help” is how Wells Fargo snatched Wachovia from under Citigroup’s nose just four days after an oral agreement of government subsidy  to enable Citigroup’s acquisition.  How many options were examined before Treasury’s decision to underwrite the Citigroup deal?  If Wells Fargo was in a financial position to do a deal, how many other healthy banks are out there, ready to ride to the rescue of troubled institutions without government help?

The core issue everyone agrees is liquidity.  Banks won’t lend..  And that’s the primary reason given for the heavily hyped bailout bill.  Banks are required to maintain a 12:1 cash reserve in order to lend, and mark-to-market accounting rules mean that toxic assets have driven the value of these reserves below the legal requirement for lending,.  What has been considered to address this issue directly?  Is there no rifle-shot approach short of what is now an $810 billion bailout bill with all its add-ons?

Freddie Mac and Fannie Mae have been in trouble for a long, long time, but suddenly they’re nationalized.  But what about the underlying causes for the collapse?  What difference will government ownership make if the old business policies and practices continue?

What if the bailout bill does pass today but consumer confidence continues to plummet?  Then what?

Armageddon or Opportunity?

By Eleanor Haas

Yes, this is a major inflection point, a revolutionary change from one economy to another.  Ever the optimist, I see radical change, not disaster!  And radical change always means opportunity to the entrepreneur and innovator.  This all seems to me to have been inevitable.  We could not possibly continue down the mad, mad, mad path of ever more complex and deceptive derivatives and spiraling debt.  Nor could we continue down the road of government to the rescue.  That’s just not the American way.

No, we are not entering another Great Depression – thousands upon thousands of unemployed men – and today, women as well – standing in line for food handouts.

But we are certainly in a crisis of uncertainty.  Banks aren’t lending at the moment, and properly managed debt is fundamental to all businesses.  So now what?  Bankruptcy for those with overleveraged financials.  Is that such a bad thing?  It’s the normal way of the world.  It doesn’t mean the company dies.  It just means the owners lose their investment, and creditors take over.  It doesn’t mean everyone loses their jobs.  It just means employees may have some new bosses.

How many companies will fail?  Given the failed bailout amount of $700 billion, a lot.  But is it better for that amount to come out of the pockets of those responsible for overleveraging or out of the pockets of taxpayers who had nothing to do with it?

The bailout bill was a bad, bad idea if you believe in the free enterprise system.  It was a terrible idea if you believe in personal responsibility and accountability.

CNN just published a point of view that happens to agree with mine by someone eminently qualified on the subject:  Jeffrey Miron, a senior lecturer in economics in Harvard.  Here's what he has to say:    

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

What do you think?

Yes, Mr. Carr, IT Does Matter – It Matters A Lot

By Eleanor Haas

Does IT matter? In his provocative book of that title, Nicholas Carr argues that the strategic importance of information technology is diminishing, not growing, because it has become what he describes as “a commodity input that is necessary for competitiveness but insufficient for advantage.” He goes on to define what he means by IT: an infrastructure, a common resource – and then proceeds to demonstrate how competitors readily and rapidly copy infrastructure innovations as the infrastructure matures.

In all fairness, Mr. Carr’s challenge was timely. Vast sums were being invested in the early years of this century in IT infrastructure by enterprises on the basis of potentially false assumptions. At the same, time, the challenge seems in retrospect to have been remarkably shortsighted. IT infrastructure per se is not the issue today. Nor was it as late as 2004 when the book was published.

As I reflect on the value and role of IT, commoditized IT infrastructure seems to me to have been an essential first step to what matters today:  (1) The Internet, a network of networks that has become fundamental to all aspects of business and communications. (2) Software applications that have changed and continue to change the way people in industrialized nations work and opened new learning channels for people in both industrialized and developing nations. (3) Out of these has come social computing, which is changing the way increasing numbers of people communicate with each other and relate to one another with profound implications for our society. Software applications and social computing, in turn, are being effectively used to create new kinds of competitive advantage by small businesses and enterprises alike, to say nothing of political candidates and nonprofit organizations.

Forget sustainable competitive advantage – Michael Porter’s dream of continuing cost or differentiation advantages. That died years ago. Today continuous improvement, continuous innovation and relationships are the only viable basis for advantage. Ubiquitous IT accelerated the pace of change. But it also facilitates continuous improvement and innovation, which can provide such competitive advantages as are possible in this environment.

So, yes, Mr. Carr, IT matters a lot. It could not matter more. Commoditized infrastructure was merely the tip of the iceberg.

High-End Computing for General Purposes Becomes an Eco-Friendly Possibility

By Eleanor Haas

How quickly both information technology and social values are advancing! Bringing supercomputing capabilities down to a general-purpose level where they can serve consumers, not just advanced scientists – as a new IBM product does - is a giant leap forward in our ability to access, analyze and manage massive amounts of information efficiently and cost-effectively. But that alone is no longer sufficient. Today our society requires that this be done in ways that minimize climate change effects. Greentech is not just a fad. It’s here to stay.

The new IBM iDataPlex line of server products does both. It seems to me to represent an historic break-through: It enables cloud computing that supports Web 2.0 applications as well as the high performance computing (HPC) requirements of life science researchers, engineers, petroleum exploration, financial services, and government and academic research. But perhaps the most important attribute of the new hardware design is that it requires 40 percent less electrical power to run than alternatives with comparable computing power and can eliminate air conditioning when outfitted with a water-cooled wall.

As Web sites evolve, they add features that impose new demands on the infrastructure and challenge performance standards critical to the user experience. Web 2.0 applications empower users to do a great deal more than just retrieve information. Now users can activate interactive features inherent in Web 1.0 at a higher level and exercise new degrees of control over data, even add value to applications as they use them. These new capabilities drive enterprises to scale capacity in a secure, reliable and cost-effective way in order to deliver a satisfactory user experience. Cloud computing is one of the most important new concepts that is emerging to make this possible.

Cloud computing is computing done at a remote location, which is to say, out in the clouds. It is computing on a massive scale in terms of both computing power and the range of computing tasks.

Supercomputers were mainframes invented to enable advanced scientists to handle enormously complex calculations. Then Google and others started locating the data storage and processing power of supercomputers on vast banks of computer servers in remote data centers – Google called these distant servers “the cloud” - instead of on mainframe computers or a network of multiple processors on the Google campus. And Amazon and others started providing cloud computing services - remote computing services, also called web services - delivered over the Internet. And so cloud computing was born.

Cloud computing is hugely important but still nascent. A recent report by Forrester Research said in its executive summary that: "Cloud computing is a new IT outsourcing model that doesn't yet meet the criteria of enterprise IT and isn't supported by most of the key corporate vendors.  It's wildly popular with startups, exactly fits the way small businesses like to buy things, and has the potential to completely upend IT as we know it.”

Cloud computing represents a fundamental shift in how we handle information, according to BusinessWeek, because it enables companies to write their own programs to run on a cloud provider’s servers. Irving Wladawsky-Berger, Chairman Emeritus, IBM Academy of Technology and Visiting Professor of Engineering Systems, MIT, sees two major factors that make cloud computing qualitatively different from all IT concepts to date: One is massive scalability. The other is the much higher quality of experience it can provide for users. “As with the Web in the mid-‘90s, every enterprise will have to develop its own cloud-like capabilities, or work closely with partners that do.” he writes on his blog.

But cloud computing can be no more than a vision until something is done about the data centers on which it relies. In general, today’s data centers can be described as massive, sprawling and pushing the limits of power and space available to them. Many have grown through mergers and acquisitions, with different departments having their own servers and a proliferation of small and mid-size servers. As a result, they are inefficient, expensive to operate and have high energy requirements. Worse, they cannot be scaled effectively.

The new IBM iDataPlex system represents a solution, a basis for the data center of the future. It reduces the cost per server by approximately 20 percent to 25 per cent by using off-the-shelf components and open source software, fits 138 percent more servers in the same floor space and, best of all, as we said, requires 40 percent less power to run. It is intended both for enterprise cloud computing initiatives and clouds designed to host Web 2.0 applications.

Not a lot of iDataPlex systems will be sold. The target universe contains only 1,000 prospects, each valued at upwards of $20 million, and each system will be custom-built. But it’s already clear that cloud computing builds on itself, as large companies become suppliers for smaller ones. And IBM has the pieces in place to help customers acquire new data centers conveniently. IBM Global Financing will offer them lending and leasing opportunities, IBM Global Asset Recovery Services can manage the disposal of equipment in accordance with environmental regulations, and IBM will team with third party technology companies to drive a product ecosystem around iDataPlex..

That’s smart of IBM because iDataPlex has the markings of a hot product. According to Forrester, “Cloud computing . . . has all the earmarks of a disruptive innovation: It is enterprise technology packaged to best fit the needs of small businesses and start-ups – not the enterprise.” An eco-friendly cloud computing system.  What a thought!

What do you think about all this?  Where do you see it going?

Some Resources:

http://www-03.ibm.com/press/us/en/pressrelease/23991.wss

http://www-03.ibm.com/systems/x/hardware/idataplex/index.html

                                                                                                                                                  

PDF documents
	Pund-IT Research Report: IBM System x iDataPlex – Enabling Web 2.0 with Internet-Scale Solutions (133 KB)
	Cabot Partners White Paper: IBM System x iDataPlex: The Newest Economical Workhorse in the Computing Cloud for Next Generation HPC Data Centers (1 MB)

The Consumer is King - Not Content After All!

By Eleanor Haas

A decade ago, the cry was “Content is King” as we tried to make sense of digital  technologies that were changing everything about how we received and used information, did business and related to one another.

Now technology has not only enabled new kinds of media unimaginable even ten years ago but has empowered consumers in ways that enable them to control the information they receive, once the exclusive province of publishers. Most serious of all, technology has transformed so much so fast that today’s adults are no longer competent to forecast what happens next. As Strauss Zelnick, founder, ZelnickMedia, pointed out at yesterday’s digital breakfast, our media habits today are those we formed by the time we were 16.  Look to the 16-year-olds for what’s cool and try to understand how they use and experience media.

Listening to media business leaders discuss the future of digital entertainment – and digital “entertainment” now encompasses all digital “content,” another startling convergence – right after reading Chris Anderson’s piece on “Free!” as the future of business models throws light across the full spectrum of the media universe and related business models. The business leaders spoke at a GothamMediaVentures event sponsored by Frankfurt Kurnit Klein & Selz. They were Ellie Hirschhorn, Chief Digital Officer, Simon & Schuster; Andrew Lack, Chairman, Sony BMG Music Entertainment, and Strauss Zelnick. Richard Hofstetter, a Frankfurt Kurnit partner, drive the discussion with probing questions.

Digital Business Models

Hofstetter described the digital platform as a source of new opportunities for monetizing consumer relationships and for bringing customers to media brands – i.e., supporting the traditional entertainment business model of advertising, subscription and pay-per-view or pay-to-use. This is certainly true. In many ways we are, in Zelnick’s words, moving increasingly away from a paying economy to an advertising economy. But that is only part of the story.

Anderson takes the story to another level, talking about radical new business models enabled by low-cost digital distribution, such as free video content online while theaters make money from concessions and sales of a premium movie-going experience. Google is free to consumers, he says – and generates revenue from advertisers who want to reach those consumers.

“Technology is giving companies greater flexibility in how broadly they can define their markets, allowing them more freedom to give away products or services to one set of customers while selling to another set,” he writes, adding that “anything that touches digital networks quickly feels the effect of falling costs.” Web technology is all about scale, he explains, and transistors, which he calls “the atomic units of computation,” are now close enough to costless that storage, bandwidth and processing power are being offered free by companies like YouTube and Google, and IT developers can afford to focus on delighting computer users, not just on running algorithms efficiently. As a result, we have increasingly sophisticated user interfaces, new forms of digital entertainment and a flood of new ways to make “free” part of business models.

The New Economics of “Free”

Attention and reputation are the new scarcities, not money, writes Anderson, and it’s to acquire these that “free” exists for the sake of a business model. It’s a seismic shift in our values as society.

Anderson clusters variations on the theme in six categories:

• “Freemium” – the subscription model – a free basic version,      supported by premium versions with more features.
• Ad-supported – free content, services, software, etc., paid for online by ad banners, text ads, affiliate ads, site sponsorships, search results inclusions, paid listings, lead generation, product placements and paid personal connections on social networks.
• Cross-subsidies – giving away one product (razor) in order to sell another (blades).
• Zero marginal cost – a de facto business model: the product becomes free because distribution costs nothing. Example: online music.
• Labor exchange – the user creates value for the publisher by supplying information and gets free access to Web sites and services.
• Gift economy – beyond money to altruism and sharing now that zero-cost distribution makes this economically viable – Wikipedia, open source software and UGC, for example.

New Business Models for Digital Music

Looking back, Zelnick says “we (the record industry) drove people to piracy.” How? By not having the technology to support peer-to-peer sharing except for free and by so fearing what had happened to the film industry with VCR rentals – retailers made money but not film studios – that the music industry would not allow retailers to make money with digital music.

Anderson’s point about cost-free distribution supports this. Consumers saw what was possible and acted on it. The record industry lacked the access software and the strategy to take action.

Now new business models have emerged that make online music economically viable with multiple revenue streams, including two of

Anderson

’s categories: ad-supported and paid premium subscriptions.

· Entertainment content download sales are booming at both iTunes and Napster.

· MySpace Music, announced less than a week ago, is a joint venture of MySpace with the big labels: Sony BMG Music Entertainment, Universal Music Group and Warner Music Group. For the first time, the most popular digital music community, My Space, is in partnership with leading music companies for purposes of marketing music content in a way that legitimizes downloads and generates multiple revenue streams. This represents a sea change from iTunes because it helps music titles bubble up in peer-to-peer interactions as opposed to being pushed down by large companies’ choice of materials. (The success of the joint venture will depend to some degree on the autonomy granted to partners who are otherwise competitors.)

· Device manufacturers are taking an “all you can eat” approach, loading devices with music so that consumers buy the music with the device.

 

Radiohead and other alternative bands left their record labels, released new albums on their own Web sites and invited downloads for free or whatever consumers wanted to pay. But by then they were already established and could use tours and other vehicles to generate revenue. (Anderson’s cross-subsidy model.)

The value record companies and movie studios deliver is discovering and establishing new artists, who need nurturing and a company behind them even if they no longer need the old distribution of traditional media.

Film Business Continues as Before

New films continue to be distributed and marketed in the traditional manner, and the studios continue to provide the financing. The business has not yet been disrupted because the Internet pipe isn’t fat enough for downloading movies.

Book Publishing has Yet to Adapt

Music, video and social media have been the first three waves of the digital content revolution, which the book publishing industry has sat out, according to Hirschhorn. Storytelling is still in demand, and people still read books. Opportunities are evolving for e-delivery and integrated e-commerce that can provide a rich media reading experience, but it’s early days.

Authors are assets as well as books. Like musicians, they have fan bases. Opportunities exist for them to connect with consumers, build personal brands and franchise and have a voice beyond their books.

What’s different from some digital entertainment businesses is that the book business is not in the ad sales business, looking to build audiences. Publishers want their authors out there broadly, leveraging syndication.

How Do Story-Tellers Get Paid?

One way storytellers get paid is apparently by developing online games.  Zelnick mentioned a new interactive game that contains eight hours of narrative!

Beyond this, however, how they get paid seems to be the $64,000 question. Technology business plans are clear. But content companies are under pressure. The middleman/distributor is in competition with the creative force. TV viewers zap commercials, and networks now give away content for free at sites like Hulu – online streaming video on demand, free snippets of programs. Creators are getting into their own businesses but have to rely on agents and lawyers to fight for the right to do their own exploitation. Will advertisers buy this? Yes, says Lack, advertisers will follow if consumers buy in.

It’s all about what consumers want. And that, in turn, is determined by our habits at 16!

New Directions for News.

TV news has begun cutting news-gathering costs, looking to outside sources. Yesterday, CBS was reported to be in talks with CNN about outsourcing some of its reporting operations. (Whoever thought the heart of the news business would ever be outsourced?)

In addition, citizen journalism has become a reality. CNN introduced ‘iReport” a year ago, soliciting UGC for consideration by CNN editors. Now ireport.com offers unvetted online content from users and bloggers. What happens to credibility with citizen journalism?

Lack characterized blogging aptly: “Blogging is part of grassroots bubble up content – some news, a lot of opinion and junk – a platform trying to find its place.” But, he added, it should not dominate serious news gathering. a lot of established companies have too much baggage for the digital age, he continued. The high cost of their infrastructure is challenged by digital media and will be replaced by some of these, including blogs.

But there’s no need to get news from an existing company. Social networks are rapidly becoming an alternative. Are they being overvalued? Zelnick’s answer to this is a good one: “News Corp. paid $580 million for MySpace and got a good buy – even though the valuation is too high.” Why? Because of the enormous growth potential of interactive entertainment, based in part on the same model as the traditional movie business: give consumers what they want and grow with the demographics.

And the reason for this is what might be termed the new economics of consumer control.  Social networks add a measure of consumer control that has never before existed.  Content bubbles up in peer-to0peer interactions instead of being pushed down by large companies.  Being incontrol transforms the value proposition for consumers.

What’s Next?

 

The next business to be disrupted will be television, and it will be an ugly transition, predicts Lack, but this will take longer than we think – as did the battle between videotape and 35-mm. film, which took decades.