• by George Simpson , Featured Contributor, November 7, 2005

If you wonder why your recent college grad can't seem to find gainful employment in spite of the scorching hot hiring market of the new media world, consider this gem in The New York Times from a professor of finance who teaches a course on media at Columbia Business School: "It is not clear that anyone understands the Internet, so why should media companies expand in yet another direction?"

This is His Wisdomness's explanation for why old media company stocks have been in the toilet--a statement that perhaps explains why he is a professor and not a senior vice president on the front lines of The Real World, Inc. It seems to me that everybody "gets" the Internet--except traditional media companies. Google and Yahoo!'s stocks are by no means struggling, and the venture capitalists are pumping money into new media ventures as if Mary Meeker and Henry Blogett are just ghosts of bubbles past. Look at what is happening to the valuation of AOL now that Time Warner has gotten out most of the kinks. How much did News Corp. pay for MySpace? I think the only ones not "understanding the Internet" are the clearly underserved b-schoolers who have to sit through Professor Numbnuts' classes.

Let's see if we can make this elementary enough so that even the faculty of the Columbia Business School can get it: The Internet is not a toy. It is not a passing phenomenon. It is the single most important development in the history of media (with the possible exception of the Grill Room at the Four Seasons). Nothing in media will ever be the same again (with the possible exception of creative expense accounting).

What was once a pretty straightforward producer-advertiser-consumer continuum now has more twists and turns than a Claria strategic plan. Where media used to be in tight control of what was content and where, when, and how it could be consumed, the power has shifted to the consumer who increasingly is seeking information and entertainment produced by a variety of content providers, most of whom don't live in Sherman Oaks, Georgetown, or on the Upper West Side. The monolithic control of information the government and private sector enjoyed for the first couple of hundred years of this nation is going bye-bye. Either you are part of the process, or it will simply pass you by--or, as in the case of traditional media companies standing in the road like deer caught in the headlights--it will run your ass over.

The denial has been deafening. But as their financial models slowly crumble with each wave of innovation that the Internet washes up under its pilings, old media is looking out over the deck, saying: "What happened to the beach?"

While we don't want to pick on the record companies (what the HELL, why not!, they sued us, and still charge too much for CDs with only two songs out of ten worth owning, not to mention concerts that cost as much as an iPod mini) but how much did those brilliant futurists lose before realizing that the Internet had changed the equation and they needed to make it easy for people to buy JUST the music they wanted with a quick download? The additional price of that denial: new bands are bypassing the major labels to market directly to their fans online.

The film and TV industries are ever so slowly realizing that if they don't become more responsive to giving consumers JUST what they want, when they want it, online will become awash with "illegal" copies of their content too.

The key word here is content. Bloggers aside, old media companies have the human resources to produce content that consumers trust and might even be willing to pay for, either directly or in conjunction with online ad messages. Forget the old model of offset presses rolling through the night, culminating with a paper thrown onto a predawn wet lawn. Make it all digital, and give the consumer the choice of what content they really want. It might be a cyber-paper full of only sports and movie listings, but what do you care? In return, consumers will tell you what they plan to buy next week, so you can serve them ads they really want to see. A win-win for everybody (except perhaps the pressmen).

But you can't stop with your own staff. You have to incorporate your audience into the process. Letters to the editor are the buggy whips of the new millennium. Interact, respond, help guide the discussion; make your audiences feel like they are part of the process instead of victims of it. I agree, it's a little nervous-making--but already, there are lots of tools to help you manage user-generated content.

Right now, that new media world might seem hostile because it undermines a model old media has enjoyed for three-quarters of a century. But when you embrace the new world and use fantastic tools like behavioral targeting and 360 degree online video and customized content creation, you will find your new media units making up the money you are losing on the old media side of the ledger.

Then see what happens to your stock price.