Jobs or Murdoch?

With Macworld’s announcements of the strengthening iPod and iTunes juggernauts and Steve Jobs becoming Disney’s largest individual shareholder, the digital-entertainment-is-here bandwagon has officially entered the fast lane. Analysts are tripping over themselves to declare more enthusiastically than the last that old media must embrace new models or perish. On the surface such statements seem wise, if not a bit obvious. But does a $1.99 pod-friendly episode of Dragnet really represent the future? Probably not. In fact, it’s merely the last gasp of the past that gives the white shirt and wired rimmed crowd with their freshly pressed khakis and MBAs cover. When the board asks about their digital strategy, alas they can say they have one.

Savvy boards won’t simply kick the tires and pat the whiz kids on the head. They will want to look under the hood. What’s the engine driving this strategy? Rather than a finely tuned hybrid that embraces both old and new media models during this transitionary period, they’ll find the same tired hamster running in place. Truth be told, the $1.99 episodes of Lost and Desperate Housewives are nothing more than the VHS and DVD distribution model with an enviously low cost of goods sold. Nice margins mean everyone eats, everyone gets fat, and everyone falls asleep.

A couple of weeks ago, Business Week’s Jon Fine made some interesting observations about the future value of content. He described two schools of thought. The first is the old school that values only the original content itself. The latter is the new school that believes value is derived from the conversations that are generated by that content. Fine didn’t take sides, but did a great job at describing the ends of the spectrum. (The column was really about a way for traditional media to put the hurt on Google and Yahoo!)

Last week’s Economist dons a cover featuring King Kong as King Content. (I swear it’s starting to feel like 1997. Simply replace the word “internet” with “media” in the press coverage.) The Economist, in its typically low key and intelligent analysis connects takes the discussion a step further. Old media is alive and well it tells us in a leader. Surely the threat of piracy remains, but things are moving in the right direction. Even the music industry is beginning to turn around with a thriving online business.

In the same issue, a profile of News Corp. that noted its purchases of MySpace and IGN has made Murdoch’s empire a new media powerhouse ended like this:

Owning internet properties is also a way for News Corporation to establish its content online. Before the company started talking to MySpace.com, the biggest four discussion groups on the site were about three programmes made by Fox, its subsidiary—“Family Guy”, “The OC” and “The Simpsons”—and a film from Fox Searchlight Pictures, “Napoleon Dynamite”. IGN has developed technology to allow the downloading of large video files from the internet. In 2006, as a start, News Corporation will use this to distribute “Family Guy” episodes made exclusively for the internet across Fox’s websites. The company is already feeling a marketing benefit from its web communities. One of Twentieth Century Fox’s films, “Transporter 2” did far better than expected after being promoted on MySpace.com and IGN.Nevertheless, it is News Corporation’s big legacy businesses that will mostly determine whether the company can adapt to a new era for the media industry. That is why Mr Murdoch will need to keep focusing on making money from television, films and newspapers as well as his trendy new web communities.

Meet the new boss. Just the same as the old boss. The next time some kid dressed in black with narrow glasses and meticulously unkempt hair tells you, “Old media just doesn’t get it,” try not to laugh too hard.

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