I spent the first week of November as Innovator in Residence at USC’s Annenberg School of Communication and Journalism. As part of my activities during the week, Dean Ernest Wilson hosted a conference on Social Media: Platform of Provocation for Innovation?. The half-day conference consisted of two panels: one on the social and technological innovation being brought about by social media, and the other on the implications of social media to business. Each panel included experts from USC Annenberg and IBM.
The first panel covered topics on social networks, 3D virtual worlds, immersive journalism, social computing research and a number of others. It was moderated by Henry Jenkins, who moved from MIT this Fall to join the USC faculty as Provost’s Professor of Communication, Journalism and Cinematic Arts. Henry, - whom I met at MIT a couple of years ago because of our mutual interest in virtual worlds, - was previously Director of MIT's Comparative Media Studies program and Professor of Humanities.
The full video of the first panel can be seen here.
I wouId like to focus this blog on the second panel, which I moderated. The panel focused on the implications of social media to the communications and media industries as well as to organizations in general. Panelists included Marc Cooper, Jonathan Taplin and David Westphal from the Annenberg School, and Melissa Cefkin and Steve Canepa from IBM.
The full video of the second panel can be seen here.
I first asked David Westphal, former Washington editor for McClatchy, the third largest newspaper company in the US, whether he sees news and media institutions embracing social media as part of their journalism and business strategies.
He felt that they are starting to, but it has taken a long while. “A lot of our parents and grandparents got on Facebook and Twitter before big media got involved in social media . . . and it has something to do with the near-death experience that big media is going through right now,” he added.
David feels that at the start, social media seemed to be absolutely contrary to everything that big media was about. Social media is forcing journalists to become public people when previously they were not supposed to have a persona.
“It tempted journalists to be real people and to say what they thought, contrary to what reporters are supposed to do, which is to be objective and not really say what you think but just report the facts and be completely neutral. It forced journalists to engage with real people and to listen to them and to respond to them. Initially, the reaction of reporters was, ‘I do not have time for that, I already work 12 hours a day, 14 hours a day, there is no way I have time for this.’”
He added that another reason big media has been slow to embrace social media is that it puts their organizations on the same level as little media and even individuals. The advantages that big media companies became used to are disappearing. But now they realize they have no choice and are moving rapidly to embrace social media, both as institutions and as individuals within those institutions.
Social Media and the threat of cannibalization
I then asked Jon Taplin why media companies feel so threatened by new social media technologies. Disney, for example, recently laid down new ground rules, inserting a clause in their contracts forbidding people from commenting on the projects they are involved in on Twitter, Facebook and other social media without Disney’s express written consent.
Jon is an expert in digital media entertainment and in international communications management. On a personal note, I am most impressed by his having been a producer of The Last Waltz, one of the best rock concert films of all time.
He replied that big media companies have always been resistant to new technologies. Hollywood in general resists anything new because of the potential for cannibalization, that is, the fear that new products will cut into the revenues of existing products.
Monetizating new digital media opportunities is really a huge problem for existing media companies. Jon gave two examples. First, he talked about newspapers:
“The New York Times . . . has 20 million viewers online, a million people get the newspaper. They still make more in advertising money from the newspaper than they do from their 20 million people online. And that is because from my opinion Google is trying to repeal the laws of supply and demand.”
“Every single blog, every social network, every site in the world can have as much advertising as they want. So we all learned that value comes from scarcity, and in a world where there's no scarcity, when everyone can be an advertiser, then essentially the value of any individual ad unit is going to decline.”
“If you look at The New York Times' business plan, they never imagined that they would have 20 million unique users a month, but they never imagined that the individual worth of an ad unit would be so low. And so it's totally screwing with any business plan that they have or any transition into a digital world.”
The second example is about the music industry:
“They all look at the record companies and say, well, . . . there was a gigantic reallocation of value from four big media companies to Apple, right? Apple stock is 200 bucks and Warner Records stock is $1.20 or something . . . so all the value was taken away from the media record companies and reallocated to Apple. The [big media companies] are all afraid that's what's going to happen to them.”
Jon then mentioned an anecdote he had heard several years ago involving a previous head of big Hollywood studio:
“When the people from TiVo had come in to show them the great new device, . . . he ripped it out of the wall after the demonstration and threw it out the second floor window of the conference room and said, “that's what I think of your damned device” . . . Because he saw what was going to happen. You were going to fast forward through commercials, and all that . . . advertising revenue . . . was going to go out the window.”
Coping with increasing fragmentation and cannibalization
Steve Canepa, General Manager for IBM's Global Media and Entertainment Industry talked about the changes in the media industry, as it transitions from a B2B business model in which analog content is distributed over physical networks, to a B2C model in which digital content is distributed through digital networks to a variety of intelligent devices.
All of a sudden you have all this content, some still professionally produced, but a lot of it generated by users, available to consumers over a variety of devices. In the end, the average consumer has about the same amount of time they ever had to consume this new avalanche of content and experiences. The result is massive audience fragmentation.
“What scares the media companies a lot is that it becomes incredibly hard to attract, retain and sustain a core audience around a brand, a network architecture, or a platform, because you have this fragmentation happening. It's really challenging the core foundations of the business models in the media industry in all the different segments. . . . music is just one example.”
Steve then mentioned some of the surveys that IBM is conducting to understand the changing media usage patterns of consumers around the world: 68 percent of survey respondents use some social media on a regular basis; 49 percent use it quite often. 83 percent of 18 to 24 year olds say they use social media regularly, as do 70 percent of 13 to 17 year olds. Usage drops off with older demographics.
In addition, 76 percent of the consumers surveyed said they now watch video on their PCs, up 27 percent from last year’s survey; 32 percent now have watched video on a mobile device or a mobile phone, up 45 percent from last year.
“I think of those as pretty dramatic swings in consumption patterns. . . . that drives me to think, well, what does that mean to traditional media? I mean, back to this bad word, the cannibalization. So we asked the question, and 50 percent of the 18 to 21 year olds said they're watching less television now because they can watch it online in some fashion . . . What does that mean to broadcast? . . . The reality is most social sites that have video on them operate in the range of about 10 percent to 40 percent of the value that the same content would earn in a traditional television broadcast model.”
The challenge that media companies are facing is figuring out how they are going to sustain value, revenue and profits while getting significantly less money from each consumer. Moving from dollar content to dime content.
So, Steve concluded, what is happening in the media industry is basically what has happened in the IT industry, the automotive industry, finance, and just about all other industries. As competition increases and prices drop, you have to restructure your operations, run a much more efficient back office, embrace new innovations that enable you to increase your productivity, and generally drive down your overall costs of production. Like all industries that have been severely impacted by disruptive technologies, the media industry has to learn to operate under a fundamentally different business model that requires them to be much more efficient.
I pointed out that we all seem to be saying that the media industry is undergoing what economist Joseph Schumpeter called creative destruction almost seventy years ago, the process of transformation by which the value of established companies is eaten away over time by the disruptive innovations introduced by entrepreneurs. The only way for companies to avoid being done-in by these disruptive innovations is to embrace the innovations themselves and use them to transform their own fundamentals, including their business models and their culture.
The barbarians are already inside the castle
Award-winning journalist and author Marc Cooper pointed out that a century before Schumpeter, Karl Marx said that “the old society was pregnant with the new” which succinctly captures the tension between old and new media. (More precisely, Marx's exact quote is:“Force is the midwife of every old society pregnant with the new one.”)
“Even at this late date . . . the journalism business . . . I will overstate it, I don’t think they have a clue as to what to do with social media. They know it's at the gates, they know they are pregnant with it. Their real instinct is to abort . . . but unfortunately they're in the 10th month of pregnancy.”
“The most resistant and most denial ridden sectors of the old media today, continue . . . to insist rather hotly that there can be no new media without the old media. But then we'll go back to the metaphor of pregnancy and say, that's like parents who believe that their child with whom they're pregnant and who eventually will be born will absolutely be dependent upon them for the rest of their life. And they are, economically, for too long a time, but they actually have individual personalities and get along just fine after the parents pass away.”
Marc believes that the old system has already been overthrown, and as in any revolution, a new system could take a long time to build. It is also possible that there could be many new systems, not just one. Like with parents and children, there will be tensions between the old and the new, there are strains of the old in the new, and the new carries with it influences from the old.
Social media and organizational transformation
Melissa Cefkin, an ethnographer and research scientist at the IBM Almaden Research Center talked about the value of social media within organizations. She mentioned that at IBM quite a number of people use Twitter, Facebook, wikis, blogs and virtual worlds. They have access from work to the external versions everyone else uses, but in addition there are internal versions of these social media that run on the company's own IT systems that offer much more security for business discussions.
These technologies are invaluable to help people find each other, share information, communicate and learn. “ . . . if you think about it, that is the quintessential corporate challenge, . . . businesses or organizations of any kind could be more effective if you can get effective knowledge sharing going on. So why wouldn't you want to encourage that kind of knowledge sharing?”
She talked about some of the real risks organizations face with internal use of social media. You do not want your employees out there “ . . . grumbling about the new project they are on. You don’t want them sharing IP. You don't want them . . . in advance of the market, creating a potentially bad reputation for something that's about to launch.”
“You want employees to be productive. And IBM and other corporations are having to constantly weigh and ask, is all this time spent . . . with these [social media] tools and in these different environments a productive use of employees' times and ways of interacting, or is it not?”
In the spring of 2005, IBM used a wiki to create a set guidelines to provide practical advice for employees who wanted to blog. Since then, these guidelines have been extended to include other forms of social media. The resulting IBM Social Computing Guidelines offer helpful, common sense advice to those contemplating the use of social media. It both encourages employees to explore the potential of social media, and reminds them of their responsibilities and obligations.
Everyone agreed that social media is a major, disruptive innovation that is transforming the media and communications industries, as well as organizations in general. Communications and media schools need to play a major role in shaping this uncertain future. They have a unique opportunity to become the places where emerging media companies come looking for new ideas and talent, and old media companies come to learn what they must do to survive into the future. This is clearly Dean Wilson's vision for USC Annenberg. I wish him and the school all the best as they take on this really tough, important and exciting challenge.
Linux was just so. It really cannibalised the OS/2 revenue, until (like a hundred-year-old patient with a heart attack on the resuscitation table in hospital) there was no point continuing. You could invest all you like but you wouldn't get a return.
The King is dead, long live the King (as they say from time to time in European countries).
OS/2 is dead, long live Linux.
Businesses do have to reinvent themselves from time to time. Invest some of the dollars they get from sales into researching and developing things which are new and different, and which will sell as the old products commoditise.
Who would like to buy a copy of IBM Lotus SmartSuite ? Who would like to buy the whole global distribution rights for IBM Lotus SmartSuite ? Could Disney market it as "Disney SmartSuite, the future of the Disney 1-2-3 spreadsheet that started it all"
Do ask them. There is no IBM salesman and no IBM developer that would contest the sell-off.
Posted by: Chris Ward | November 27, 2009 at 11:49 AM
Great reporting, Irving. I'm always on the lookout for stories of disruption.
It seems that once anything can be digitized, labor or services, the Internet enables the competitive forces of disruption.... Except Telcos, but that's because they are regulated, the government becomes a partner and a barrier to new competition. This could be our future.
Posted by: Tom Foremski | November 28, 2009 at 01:04 AM
“Social Media Implications for Business” organizations.
The pervasiveness of social media within the global community outside the business organization demands that management within the organization develop and implement a strategy that utilizes this potential productivity tool. At the same time, management must apply enough controls to ensure that the primary mission, value and values of the company are guaranteed and hopefully, enhanced. It will be no easy task.
For example: How do you manage, police, restrain, restrict the internal blog that becomes very popular within the company around the world but that delves into subject areas that reflect poorly on company practices; that call out the company, its executives, management, and/or employees when such practices may lean or seem to lean towards the unsavory, the unethical, the illegal, the dumb? Will you allow to be discussed challenges of the performance and/or disputes on the authority of management? Do you apply constraints? What will be constrained? What will not?
Do you allow free-wheeling discussions on policy, management decisions, salary, the benefits package, business practices, your products and services, your customers, the competition, or other sensitive matters? Do you allow blogs to be open to all or do you restrict access to classes of users?
These and many other questions come to mind when contemplating the use of in-house social networking within any organization. Whether organization social networking will be governed by dictatorial practices, exercise a benevolent environment on the part of management and employee alike or fall into anarchy remains in the balance. The main question of course is: Has management and distributed organization and management structure within any given company matured enough to allow the formal socialization of what today is primarily a function of discussions among colleagues, the rumor mill, water cooler talk, or over-drinks conversation at the watering-hole across the street?
Hopefully, management can run fast enough to make productive use of this phenomenal new communication reality. It can be a great productive tool. But, the jury remains out on management's ability to use for the good of the company.
Posted by: Bud Byrd | December 02, 2009 at 09:56 AM
Thanks for the reporting and video.
I am interested in the MIT comparative media program and just get to know that Jenkins is now at USC. I think it is time for business embracing and taking use of new media and are not just being afraid by the cannibalization. By using the social media for marketing and innovation, I guess they can get back what they lose.
Posted by: Yunzhi Yang | January 19, 2010 at 06:15 PM
I completely agree with many of the points that has been raised in this article. Social media is transforming businesses and it matters. From Twitter to Facebook and every web2.0 tool in between, consumers are more and more concerned with the integrity and intent of the brands they interact with, while employees are less afraid to expose how companies work internally. The challenge for marketers is not to merely appear engaged, but to actually be engaged – to live up to the promise and deliver.
Jaiden
Posted by: Lead Generation Philippines | July 01, 2010 at 09:20 PM
This blog says a large aspect of social media and its implications to the business world. I agree with all the points provided in this blog.
Social media will transform how businesses approach the marketing and advertising aspect and it will continue to evolve into a more 'easy-to-understand' platform. Social media play a big role in small and large businesses. I also agree the it will open doors for companies to find capable talents around the world, thus engaging the entire web community and be productive, this is the new innovation in communication.
Posted by: James the Marketing Consultant | July 27, 2010 at 04:11 AM