Commentary
The Battle Of The Big Three
- by Cory Treffiletti , Featured Contributor, May 5, 2010
Remember the good old days of TV, when the world was dominated by three big networks: CBS, NBC and ABC? Remember what it was like when you could spend the majority of your ad budget with just three power players, who could provide you with as much as 75% of your target audience? Well, get ready to revisit those days, because we might just be getting ready to see them again.
This time the world of media is quickly becoming dominated by three "primarily" digital players: Google, Apple and Facebook. These three companies are making moves that separate them dramatically from the rest of the pack. Plus, their respective spheres of influence are no longer constrained by the parameters of the computer.
Google's quest to organize the world's information makes it a formidable player to deal with, but especially with its rapid growth via development of mobile platforms and desktop operating systems (see Android). The Android platform has the potential to extend even further, powering your TV, the dashboard of your car, even the organization of your kitchen and the appliances that fit inside.
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Apple is known for the development of elegant, easy-to-use devices. Its focus has shifted far beyond the desktop, becoming the dominant player in mobile (iPhone), in the music industry (iTunes) and the application space (App Store); it's now moving into publishing (the iBooks and the iPad). Of special importance is the company's success in the app space, literally redefining the way the average user interfaces with programs by creating a simple interface powered by stand-alone programs rather than a sophisticated, learning-curve-driven operating system.
Facebook is the latest move and shaker, creating literal waves with its development and procreation of the social Internet -- or as the company now refers to it, "the open graph." By aggregating the wealth of data that is fast becoming available to it, Facebook is proving a new vision for the Web that may require its competition to revisit how they integrate with the world at large.
Oh -- and did I mention that these three players are big?
What I find most intriguing is that each of these companies understands one simple idea: that the future is based not on a single platform, but on cross-platform capability. ABC, NBC and CBS had their chance but lost their footing with the growth of cable; their lack of speed online has put them at a further disadvantage. They put all their eggs in one basket and they didn't think about the future. They used to own the eyeballs, but they hesitated -- and he who hesitates loses ground.
Google, Apple and Facebook are not so much technology or Internet companies as they are service- and experience-based companies. They focus on providing users with a consistently reliable, easy-to-use set of services across a variety of platforms. These companies understand that if they make these services reliable, then the user won't mind some marketing mixed in. Consumers don't hate advertising the way they pretend to hate it; they just tend to notice the ads that are untargeted and ineffective the most. They never complain about the messages that resonated and worked because, let's face it; they may not have even realized they were being advertised to. In those cases, the advertising was so good that the consumer may have forgotten they were supposed to be acting cynical!
But I digress.
These three companies are expanding their influence in ways that you wouldn't have imagined, and though there may indeed be other strong players in the marketplace (hello, Microsoft), they're all playing catch-up at this point. Microsoft does not innovate, that is simply not its strength. The company identifies markets that others have done well in and then tries to take them over. Of course, the Microsoft alignment with Facebook makes it formidable on its very own, but still second fiddle to the innovators.
These kinds of situations excite me because they demonstrate maturity for the business that we haven't seen before. You should be excited, too! What do you think? Let me know on the Spin Board!
Great post and excellent insights. Yes, it's very exciting! As the Chinese proverb goes, we are living in very interesting times.
Cory,
Your assumptions on broadcasters and cable and speed online owning eyeballs needs further discussion as I do not beleive as you that things are that dire. Braodcasters are and will continue to be consistent and reliable stewards of delivering major brand advertising. The concept of mass broadcasting and hence mass adverstising will not disappear. Your view on cross-platform capability are in synch with the convergence of media underway which will inevitably result in converged business models which are yet to be born. Netflix is a great start. Within this context I do not find the broadcasters in such dire straits.
L
If I were one of those 3 companies, I would hope this didn't occur...but it probably would occur regardless of what any individual company hoped for.
Fact is, regardless of industry, this is a common historical trend. Think cars - 3 major auto manufacturers. In radio, prior to TV, at the peak there were 3 major networks. I could go on and on. But it's not unusual for any industry (aside from the ones clearly designed as monopolies - such as Bell during the glory years of telephony) to have 2 to 4 power players which dominate the landscape. Over time, however, this kind of dominance eats away at the underpinnings of the success that placed these firms at the top.
Why? Several reasons:
1. Lack of innovation. Seems odd to use a term like that with THESE firms. But as they get larger, they will seek to protect more turf than they choose to carve out anew. It's Standard Operating Policy.
2. Competition from the bottom. Survival of the fittest means that smaller competitors will eat away at the margins by offering little bits of the pie for lower cost. At first, it's insignificant. Over time, it's deadly (think Cable and Broadcast).
3. Poor definition of industry. My favorite - Railroads went out of business for believing they were in the railroad business, not transportation. This was less true as some of the large TV companies moved rapidly into online - but look how they did so. Tentatively, with poor understanding of the space, and applying TV concepts to a space that wasn't ready to adopt them.
4. Sheer size. At some point, one firm will simply get "too big" and be incapable of continuing to grow at rates deemed acceptable. Money spent to keep profit rates high will get wasted as Pareto Optimality is exceeded.
I think this article is dead on - this is the likely future. But the future beyond the likely future is more interesting. How is THAT going to shake out?
Who knows? I doubt Jay Gould expected to ever see an automobile in everyone's garage - let alone 2 autos!
The only constant is change... and if you don't like change, you are going to like irrelevance even less. (just ask the big three TV networks)
Great analogy and hypothesis, though I think its worth further discussing the audience fragmentation and how that has on the overall model, and specifically how that makes this Big 3 much different than the old Big 3.
Great article. As technology grows, so does social media. Regular cable channels are trying to compete with newer platforms such as facebook and google because these platforms are free for members to join. Although television channels such as NBS are not forgotten, they have no way of competing with online social networks because they are on different platforms. Broadcasting will continue to be a main source of advertisement as long as peoplpe still watch tv. The internet just offers a different/new alternative to advertising that tends to attrach a younger audience.