Traditional Media Companies Must Embrace Digital Realities Or Die

Barry Diller and Vint Cerf are straight-talkers about the Internet. They are contemporaries who are powerful media forces in their own right. Cerf, a computer scientist, is one of the founding fathers of the Net and Google's chief Internet evangelist. Diller is a traditional media convert whose InterActiveCorp is a portfolio of Web-based interactive businesses. During separate conferences last week (Oct. 22-26), they made telling remarks that underscore just how far traditional content players are from blazing new cyber trails.

Diller riled his so-called old media colleagues by proclaiming that all old-line media conglomerates, save News Corp., "still don't get it"--charging they are unwilling to invest big money in creating original Internet content and innovative businesses. "The difference between Hollywood and tech companies is that tech companies know they have to put money into innovation. If you're not doing it, you actually can't play," Diller said at Forbes' MEET conference in Los Angeles on Oct. 24.



Diller, a former chairman and CEO at Fox Inc. and Paramount Pictures, has vowed to invest $200 million in original Web content to best his traditional media rivals' fixation with recycling their existing TV, film and print on the Net and keeping ads intact where possible.

Cerf took the stage at Google's California headquarters the same day for the company's annual analyst day. Cerf reminded the crowd that in 1969, he was a UCLA graduate student playing around with the Internet's early computational infrastructure. Diller was vice president in charge of ABC's feature films and program development.

Having created the Internet's organizing protocols, Cerf says the Net's future now is in the hands of the 1.244 billion users, who are as much creators as consumers of content and information. Since mobile phones already outnumber personal computers by 3 to 1, it's all about portable interactivity. With mobile devices already outnumbering people on the planet, distribution is fast becoming a commodity. As distribution becomes more ubiquitous, the future is about continuously providing compelling new content that interactively engages users--a critical point that falls on deaf ears in Hollywood.

Because Asia has the largest Internet population, but the lowest penetration--12.4%--compared to North America's 70%, Internet content, communications and marketing will be heavily influenced by emerging markets there. Space, time and social networking are three organizing principles of the Net; they represent the biggest opportunities in all areas of business, but especially in advertising, Cerf said.

The transition to "cloud computing," a buzz phrase increasingly bandied about by new media players, will facilitate new pursuits appealing to more traditional media players. It involves rich Internet applications (utilizing massive data centers and powerful servers) that run on the Net, or "cloud," that are accessible to anyone with the right kind of personal computer software, Internet connection and browser. This represents a universally interchangeable paradigm that Google executives say will drive Internet advertising before anything else.

Such predictions are most profound when considered in light of where the biggest, most influential established media companies are in proactively addressing or monetizing any of those Internet growth areas.

Most are still gingerly pondering the Net as a mere extension of their current businesses. Granted, new businesses and new models are not easily created from their legacy operations, sensibilities and expectations. However, most appear to be unwilling to break out of their old molds by investing a sizable chunk of their hefty cash flows to create and maintain autonomous innovative stand-alone interactive enterprises. That's what Diller means when he says companies like Time Warner, Walt Disney, CBS and mainstream media players "just don't get it."

Cerf made the point that unless such formidable companies are willing to submerge themselves into the digital economics and global dynamics that define the new media space, they will never fully leap into it. "The old media platforms like print and film have to change. Like Darwin said, they must adapt or die," he said.

"Most of the world's population will be first introduced to the Internet on mobile devices. The [Net's] interests, languages and applications will be influenced especially by Asia," giving a whole new meaning to the concept of globalization--especially for communications and media concerns, he added.

These are no small points for the handful of U.S.-based media conglomerates that control so much existing media that has found its way to the Web. Perhaps hedged by the bad memory of the blind zeal of aborted early Web opportunities a decade ago, the biggest, wealthiest media companies are moving cautiously into the new digital space. Their lack of intelligent risk-taking becomes more obvious listening to insights from Cerf, who is working on the Interplanetary Internet with NASA's Jet Propulsion Laboratory to establish the standards for multi-language, interplanetary communications. (Clearly, Google's recently announced outer-space endeavors are aimed at that ultimate search rush!)

Between the lofty talk of the Interplanetary Internet and the statistically crimped creations of traditional static media (prime-time television ratings and the weekend film box office) is a world of opportunity that Silicon Valley, Hollywood and Madison Avenue must be bold and brilliant enough to forge from scratch. In the new world according to Cerf, they have everything to gain--and everything to lose if they don't.

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