Bad News for Old News

And Seven More Things to Look Forward to in 2007

With so much doom and gloom in the media business - at least in the print media business - you'd think it would be tough to find anyone who thinks optimistically about the future. After all, most industry headlines in 2006 have told a story of declining audiences, softening ad revenue, job cuts, and disappointing earnings.

Then again, the people covering this chaos are the ones who stand to lose their privileged perches if bloggers, 15-year-old filmmakers, and Google continue to reinvent the media business as we know it. The fact is, consumers' passion for media is alive and well: They're reading it, viewing it, creating it, and sharing it, perhaps more than ever before. But they're doing it on their own terms. Whatever else is uncertain, this much is clear about the future of media: Consumers are in control. Here are eight predictions of what's in store for the media landscape in 2007 and beyond.

Traditional media companies will struggle to maintain their audiences.

It's no secret that once-dominant media brands are under assault. Readers and viewers are turning to less-established outlets to access news and entertainment, and anyone with a keyboard and an Internet connection can post his own take on world events. Despite high-profile efforts - moving Katie Couric to the evening news, for instance, or creating free newspapers targeting 18- to 34-year-olds - traditional media companies are still struggling to figure out how to maintain their audience in a fragmented, interactive era.

"We really need to think about what it means to be in an interactive environment and have an audience that wants to communicate with us," says Michael Rogers, a media consultant and "futurist-in-residence" at The New York Times. "When these new ideas come along, things become polarized very quickly - it's newspapers versus bloggers, user-generated content versus network television." The challenge for media companies, Rogers says, is to figure out how to "keep the necessary authority that's taken many decades to establish, but still have our audience participate."

For Dan Gillmor, author of We the Media and director of the Center for Citizen Media, the solution is to become much more community-focused. "I'm hoping we will see at least one example in the next year of a major media organization doing some significant project where they bring the community into the journalism process at the beginning of the project," he says. "And I don't mean by just inviting people to take pictures of hurricanes and their aftermath, but something much deeper than that."

More business models will emerge to reward independent content creators.

That said, it's not clear that empowered content creators will want to operate under the umbrella of an established media brand, especially when they can amass large audiences on their own - and in some cases, even profit from their efforts.

John Battelle, a cofounding editor of Wired magazine and founder of The Industry Standard, runs Federated Media, a company that helps bloggers maximize their ad revenues by handling back-office functions like sales, billing, and reporting. FM's network of bloggers includes sites like Boing Boing, a blog about technology and culture that reaches 2 million readers a month and is on track to earn $1 million in ad revenue this year.

"If you're looking at starting a magazine and you want to have half a million readers, the capital risk is $10 million," Battelle says. "What's shifting is that people who have talent have found that, using tools that are widely available, they can actually aggregate audiences without spending any money at all."

Another difference is the relationship between FM's bloggers and marketers. Battelle invites authors to comment on the ads that appear on their sites. A Microsoft ad that incorporated a blogger's text suggestions performed 60 percent better than the company's copy. Another ad, for a job site, offered a dialog box where readers could type in frustrations with their current jobs.

"There is an opportunity to think about new ways to market, where you invite the audience in on their terms," Battelle notes. "You ask permission and enter into a dialogue in your marketing. You can't do that except in a medium that is, by its nature, a conversation."

TVs, computers, and other digital devices will truly begin to morph.

People have talked about "convergence" for years, but 2006 was the year that consumers really started to use their computers in ways that resembled television and DVRs offered TV audiences a level of control that felt more like a mouse.

"The difference be-tween the TV and the PC is getting less almost by the month," says Mike Bloxham, director of testing and assessment at the Center for Media Design at Ball State University. "They're kind of morphing, and the only real difference is the size of the screen, where I'm using it, my need state or mind state, and, at the moment, the amount of interactivity."

Add to the mix video iPods and devices like Slingbox, which allows consumers to watch TV shows recorded from a cable set-top box on a laptop 3,000 miles away, and the implications for marketers and media companies are profound. "The fact that you can watch Lost on any screen you want makes you really difficult to measure," Bloxham notes, though on the plus side, he adds, "[These devices] can give advertisers that sponsor those downloads of Lost a whole lot of data."

Bloxham predicts that media research will become more sociological and behavioral, particularly as cable companies amass a wealth of data about what consumers are watching on TV as well as what they're doing online.

Technology will make it easier to find, access, and manage content.

Though Google has made it possible to track down your high school sweetheart or the lyrics to a song, it still takes a lot of effort to find things using existing navigation and search tools, whether you're looking for a recipe on the Web, a movie on cable, or a file on the hard drive.

"Search is always the elephant stand-ing in the corner that people acknowledge but ignore," says Lydia Loizides, vice president and director of technology and media experience for the Consumer Experience Practice at Interpublic Media. "I think over the next two or three years, you're going to see a much higher demand for effective and integrated search."

At the same time, giving consumers better ways to manage and access content willbecome a priority. "Right now, we're driven by silos of technology," Loizides says, referring to the content consumers capture on their cable boxes, digital cameras, computers, iPods, and cell phones. "There will be a need to figure out a way to manage content in the most efficient and user-friendly manner."

Digital video will drive the growth of online advertising.

Google's $1.65 billion acquisition of YouTube demonstrated that there might be gold in those grainy videos people are watching on their PCs - that is, if Google can sort through all the lawsuits YouTube faces over claims of copyright infringement. But even beyond YouTube, media companies and marketers are betting that digital video will be the catnip that finally draws more advertising dollars online.

"I think video is going to become a much more significant part of online advertising," says The Times' Rogers. "That's good news, because the CPMs there are much, much higher than they are for display or search-based ads."

Those on the marketing side of the business are equally bullish about the opportunities for video, though they caution that not all online video is worth sponsoring.

"You'll start to see the business segmenting itself into areas that can be monetized," says Shelly Palmer, head of Palmer Advanced Media and author of Television Disrupted. Palmer predicts that Google will take advantage of its AdSense technology to wrap relevant video ads around some YouTube videos - but not every clip uploaded from a teenager's bedroom.

And YouTube certainly won't be the only place marketers will be looking to place video ads. "In the year 2007, to reach a million people, I might need to put an ad on 350,000 online videos on different sites," Palmer says. "We need to find a way to optimize 350,000 venues to do the job [that] one venue [did] in 2006."

Advertising in digital venues will become more contextual.

To some degree, online advertising already takes into account who's viewing the ad and in what context, but industry observers say the ability to target ads will improve, especially as video is added to the mix.

"We believe that if somebody clicks on a news story online, they should get a pre-roll that's somehow connected to the fact that they're waiting for news," says Alan Schulman, chief creative officer for Brand New World, a creative agency specializing in emerging media. Marketers can use video "to tell richer, deeper stories," Schulman adds.

Ball State's Bloxham ob-serves that what the industry has dubbed "addressable advertising" can work on a cable box as well, where ads are targeted based on a combination of data the company has collected and what the viewer has disclosed. "We would see different versions of the same ad because one of us has kids and one of us doesn't," he says. "Who sees which ads is influenced by consumer insight and permission."

Small-screen devices will have limited appeal as a media platform.

One thing most people seem to agree on is that cell phones and other handheld digital devices aren't quite ready to break out as media platforms due to a lack of standards in the wireless industry and a lack of interest among consumers.

"It all boils down to where you would prefer to watch something," Palmer says. "We know that there is a personal audio audience, but music is not a high-focus activity. That's not true of video - watching a video is a high-focus activity."

On the marketing side of the spectrum, Brand New World's Schulman agrees that cell phones aren't ready for prime time, though he cites the wake-up calls Target sponsored last year to get shoppers out of bed the day after Thanksgiving as an innovative use of wireless technology as a media platform. "But [wireless isn't] really ready for streaming video. I just don't think we're there yet," he says.

That said, Rogers sees potential for improved mobile devices with larger screens: "Over the next five years, we're going to see the rise of better reading devices - computers that are portable and have much better displays."

That development would no doubt increase interest in products like Times Reader, a software download that offers more features than reading the paper using a Web browser. "I think the drive is going to be toward much better mobile reading experiences, and that includes video and audio and everything else," Rogers says. "We don't have anything nearly like that right now."

Marketers will make some mistakes as they move into new digital spaces.

Douglas Rushkoff, author of several books on new media, including Get Back in the Box: Innovation from the Inside Out (excerpted in this issue), is one of the more pessimistic observers of the ways that acquisition of sites like MySpace and YouTube is changing the new media landscape.

"The more natural process by which a community can develop and figure out what it's about ends up being replaced or overtaken by the corporate mandate to turn it into a profit center or a marketing opportunity," Rushkoff says. "What we end up with is this landscape of immature media in which corporations over-invest but never get a chance to grow into anything we've never seen before."

Rushkoff isn't the only one critical of the way corporate interests are colonizing digital spaces they don't really understand. "Look at what News Corp. has done with MySpace - they've just junked it up with banners," Schulman says, suggesting that marketers should look for opportunities beyond sponsorship, like leveraging tagging technology. "There's potential for brands to put tags out there that will have them showing up in lists, riding along other types of content - affinities that will never show up in a media plan."

Likewise, Interpublic's Loizides points to as an example of how technology enables consumers to act as evangelists for their favorite brands. The site is a collection of products its users recommend, organized by tags and lists. "We're still looking at social networks as a place to push branding into, whereas the real opportunity lies in being able to establish a dialogue with consumers," she says. To do that, she adds, brands should establish relationships with fans.

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