• by Dave Morgan , Featured Contributor, December 21, 2006

Everybody knows that the media world is undergoing extraordinary changes from the digitization of content and the growth of digital platforms like the Internet. Predicting who will win and who will lose in this transformation has been both a parlor game and a game of high-stakes finance for everyone involved. While there has been lots of speculation as to what might happen to different companies, what hasn't been talked about as much is, what will happen to media industry people?

When offline media fully transforms into digital media, what will happen to its talent? What will happen to the content makers? What will happen to the creators of the advertising? What will happen to the ad buyers? The ad sellers? Ultimately, I think that the digital shift in media will mean very good things for many of these people. As media digitizes, fragments and moves closer to the consumer--as the media world becomes more "open source" akin to what we've seen happen in the software industry--so will the talent. In the digital world, where the incremental cost of distribution is close to zero, the value and economics that flow to content reflect its appropriate value. This, too, will happen to the talent.

Today, many of the costs in the media industry go to funding analog production and distribution. In the print world, it is about paper and ink, printing presses and strappers, mailrooms and delivery trucks. In the television world, it is all about million-dollar cameras and billion-dollar studio complexes, broadcast towers and satellite uplinks, and FCC licenses. These assets have been where the first dollars have typically been spent in the industry, because these assets have been the price of admission to the media world. It's not unusual for offline media companies to allocate one-half or more of their total economics to supporting these costs. In this world, while talent may help differentiate companies, the economics that flow to talent tend to come in a distant second, and tend to be concentrated in only a few hands, since the offline media world of heavily fixed cost structures is necessarily a "hits-driven" world.

Not so in the digital space. We've already seen the importance that technology companies place on talent. Google is legend in its quest to find and keep the most talented people. So, too, will media companies, as they become more digital and learn that talent is the new price of admission in the media world. More money will go to people who create content that can attract and retain valuable audiences. More money will go to people who can sell ads on that content. More money will go to people who can plan and buy ads in that content.

It is ironic that as offline media companies slow down, they are laying off more and more talent. Earlier this week, for example, VNU announced thousands of layoffs, as did AOL. Since people are one of their only variable cost structures, cutting employees seems to be the best way to deal with revenue slow-downs. Of course, these companies are removing from their organizations the very assets that are essential for their long-term growth. This is not unlike the steps taken by the large telecommunications firms and mainframe computer companies in the '80s and early '90s as new competition started to fragment the business. These firms laid off tens of thousands of employees, and the declines in their businesses only accelerated.

Undoubtedly, the grass was greener for most of those who lost their jobs. They took their buyout packages and high-tech skills and built the Internet industry, finding places in the thousands and thousands of Internet technology companies that sprang up in those years.

I think this will happen in the media world, too. As offline media companies see their revenues continue to slow down, they will lay off more and more people. At the same time, the burgeoning digital media industries will value these people for what they can do and will give them new opportunities. They will do well. They will be the new content builders. They will the new sellers of Web video advertising. They will be the new planners of truly integrated digital marketing programs. Their only wonder will be why they didn't leave sooner.