Commentary

Buggy Whips & Electric Cars: What's Video Got To Do With It?

I heard it again at the National Association of Broadcasters' convention: Traditional pay TV and broadcast models are going to go the way of the buggy whip.  This was not the first time, nor will it be the last time that this phrase has been uttered by folks on the online video side of the business. 

Interestingly, another set of observations I made on more than one occasion at NAB was the difference in perspective of folks from traditional media discussing online video and those from new media companies discussing the same.  The new-media folks were for most part aggressively touting the buggy-whip scenario of all the disruptions and upheavals that technology is wreaking on the fundamentals of video distribution and consumption - concluding that the traditional businesses will go by the way of the buggy whip.

The folks from the traditional business side of the industry were defending their businesses with arguments of, well, business.  Their position (if I may take the liberty to summarize and therefore generalize some), was that the online video business models and revenue flow don't make for good business at scale -- today.  Online video is a good extension of traditional mass media and not a replacement for it.  The inter-dependent ecosystem of publishers, distributors and advertisers has strong underpinnings that will not change overnight, even if the technologies are there to disrupt the value chain.

For many of us in the industry, these two sets of arguments are not new.  However, every time I read commentary on one or the other side of the argument, I realize that people are either oblivious of the counter argument, or conveniently choose to ignore it for whatever reason.  I do however know from firsthand experience that for a lot of people the traditional media food chain is a blind spot. 

The "buggy whip" metaphor is one that we are all familiar with for sure.  The automobile made the buggy and therefore the buggy whip obsolete.  This metaphor comes up innumerable times in the context of traditional media versus digital media over the past few years. 

That got me thinking that actually very few things go the way of the buggy whip these days.  Even the music industry is still hanging on, raking it in with live concerts and still cranking out platinum stars.  Regardless, the woes of the music biz were inherent long before digital media came along, as I wrote a few years ago in Streaming Media.  In other words, music industry members were their own undoing well before digital media appeared on the scene.

Rather than apply the dated buggy-whip metaphor to what is happening in video, I think what is going on the in the automobile industry today offers a better playbook for our industry.  I am talking about the emerging hybrid and electric car technologies as an evolutionary step and a slowly changing paradigm.  The auto industry is slowly but surely developing and adopting these new technologies, and a market is developing around them, even when the economics are not entirely favorable.  I could go on, but you get the idea.  Eventually, it is bound to happen that the traditional technologies will become obsolete.  Meanwhile, the traditional technologies are actually getting better.

But that is only half the story, as is the case within our industry.  For many, if not most online video startups, traditional media is providing the viability for their businesses -- think of most of the OVPs, metadata and discovery companies, online publishers, connected devices, and others.  At the same time online video companies are providing traditional media an extension of their business into emerging distribution and consumption trends.  This is augmenting the existing ecosystem that will expand before it is replaced by the new technologies in its entirety. 

Let's look at an example of a new hybrid ecosystem:  Consumers are purchasing Roku boxes primarily because of Netflix; Netflix is gaining subscribers by the millions because it carries traditional broadcast and pay TV programming; Revision3 (and others) are featured on Roku and will be discovered by consumers on account of that, while they (consumers) bought Roku to watch Netflix and probably would not have bought it to just watch Revision3.  Meanwhile traditional broadcast and pay tv programming (and some very old archives) are finding new distribution channels.

The two sides of the industry have more in common and more interdependencies than is commonly acknowledged.  The fact that they show up at the same shows and even on the same panels is evidence of that.  While competitive tension is a good thing, being able to leverage each other's strengths is a bigger force.   The ones that will have the hardest time riding this rising tide are those whose businesses rely on a fork lift replacement of an existing paradigm.  For the rest, both in traditional and online video this is a great time to be in media and an unprecedented time of opportunity to build customer satisfaction and brand loyalty.

5 comments about "Buggy Whips & Electric Cars: What's Video Got To Do With It?".
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  1. Diane Politi from Reel Centric, May 5, 2011 at 11:48 a.m.

    Sam,

    I agree with most of what you are saying. The challenge is that traditional media still makes a lot of money with their "buggy whips". It becomes a question of the "jumping off" point. If they have any vision at all, they know they need to move toward more digital product development....a two-tiered strategy of maximizing buggy whip sales while transitioning the model. Some media companies are doing this well, but of course the pure-plays do it faster and better because they don't have legacy issues and internal madness to deal with!

    Another big challenge at traditional media outlets is they have to get to critical mass with regard to online video ad inventory before they can really make money at it. There are numerous other video options, such as rich media ad units, players, etc. but today, these represent a very small percentage of their revenue and they take resoiurces.

    Indeed, it's a very interesting time tobe in media!

  2. Rick Monihan from None, May 5, 2011 at 11:52 a.m.

    Sometimes going the way of the buggy whip is a "good" thing. I'm wondering if companies that make buggy whips have pretty good margins. I imagine they do - it's a niche market.
    The car also made blacksmiths more or less obsolete. They, too, went the way of the buggy whip. I know at least 2 of them. Both make a darn good living. The demise of their craft has been a boon to those who stayed with it as a niche business.

    Very few things go away forever. Perhaps we should be more accurate in our metaphors. "Go the way of the chariot, " for example, would be more accurate (I really haven't seen many chariots lately, but there are alot of buggies up by Central Park). But along these lines, I know that its likely that the "demise" of linear TV (broadcast or cable) will only go as far as online video viewing allows it. And while I think online video will continue to impact both, at a certain level they become symbiotic.

    Newspapers, while struggling mightily today, survived the death blows of Radio and TV. Radio survived the emergence of TV. In the long run, newspapers will survive too. What will change most is how they are used by the population....and while I'd love to say how that will be, I just don't know. But whoever figures it out will most likely do quite well for themselves.

  3. Douglas Ferguson from College of Charleston, May 5, 2011 at 11:53 a.m.

    I mostly agree with Mr. Vasisht's nuanced explanation. What *has* changed forever, the genie that has left the bottle, is the economic model supported by limited choice and barriers to entry. Traditional media can only adapt so much before the old system starts to fail.

    Speaking of metaphors, I prefer the "long fuse" analog. Discontinuous change is underway but the process is so slow that some deny the impending collapse. Broadcasting made a lot of sense before we became a wired nation. Today I'm not so sure it has much of a future, regardless how slow burning the fuse is.

  4. Jeff Bach from Quietwater Media, May 5, 2011 at 12:10 p.m.

    For me the part that resonated the most was the PACE of the change. Yes the genie is out of the bottle, yes deltas are happening across the board.

    But to me, what Robert Iger is quoted as saying still is HUGELY true "...why should we trade dollars for pennies". I'm in the industry and more than anything else I remain impressed by how far we still have to go.

    Old media in ALL its forms including newspaper and magazines still DWARFS virtually everything in new media. One still has to look fairly hard in new media to find a profitable maybe even cash-flow positive business. Yes old media companies are exiting and dying, but MANY others are still throwing off profits bigger than the sum of new media revenue.

    This is still very early days for new media. My kids are all still plunking down in the living room watching Disney. I'm still watching the NBA playoffs on TNT and ESPN in the living room on my plain old TV. The large majority of consumers is still consuming and relying on old media.

    Once the breathless hype of new media goes away, THEN that will mean something is here and significant. Right now all the hype simply means that most of the everyday marketplace does not know new media exists, so we all have to make noise just to become visible.

  5. Rick Monihan from None, May 9, 2011 at 4:59 p.m.

    Douglas,
    One thing worth noting is that it is very rare for things to disappear completely (as I noted). The horse drawn dray is gone because the auto can perform all the same things more effectively. But railroads still exist because the auto was incapable of doing many things the railroad could do. As a result, you can say that oftentimes changes and improvements in an industry can be complementary, even when it seems one is hobbling the other.

    New media is not killing old. It has always been complementary. And while broadcasting may change in many years from now, it will still exist in some format. I will draw your attention to 2 firms: AmEx and Wells Fargo. WF grew out of AmEx - but both were in the express mail industry. As that industry disappeared (did it ever? We now have many firms in that business), they moved into related, but somewhat different fields.

    It's entirely possible that over the air broadcasting fades into some other form - but it won't go away. It will likely morph. Those frequencies are valuable for many other things besides transmitting image and sound.

    Cable will be with us for some time to come, as will radio.

    The human mind is good at linear thinking - but it doesn't easily recognize that life itself is non-linear. Once a process starts, we naturally assume there is only one - the linear end - way it can finish. But there are always many ways it can continue.

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