The Content Wars

AS MENTIONED IN PREVIOUS EDITORIALS IN S&VC, I HESITATE TO make predictions. However, with the indicators as strong as they seem to be in the business
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The Content Wars

Nov 1, 2002 12:00 PM, NATHANIEL HECHT

AS MENTIONED IN PREVIOUS EDITORIALS INS&VC,I HESITATE TO make predictions. However, with the indicators as strong as they seem to be in the business of providing content to the masses, the allure is too compelling to resist.

Media conglomerates such as Bertelsmann (BMG), Sony, Vivendi Universal, AOL Time Warner, Walt Disney Company, Viacom, and Rupert Murdoch's News Corp. are all vying for position as the key provider for the next big wave of broadband media delivery. As mentioned in my September editorial, many believe that these large controllers of media entertainment will also determine how it is to be delivered and what kind of equipment will be used in the future, so as sound and video contractors, we need to be aware of who these players are, not just by name and property ownership but by reputation in business, as well. In other words, it would be wise to keep informed about these giants as their businesses takes shape in action. Here is a bit of information to start you off.

The first thing to understand about where these companies are now is to rewind to a time when everyone was sure that the Internet would be the answer. There is, of course, no shortage of companies that bet it all on the Internet and died in the process — or lived to regret it — and the media giants are no exception. I hesitate to use the word convergence, as it is so often misused, but in this case, it really fits — the idea of combining older, established media assets with the Internet was so alluring that it became irresistible to the chief executives at Vivendi Universal, AOL Time Warner, and Bertelsmann (BMG). Those executives were dismissed from their positions within weeks of each other because of the dismal results of their expensive efforts.

That is not to say that they had the wrong idea; in fact, most still concede that they were correct in assuming that the Internet will be the defining factor in all media markets one day, but what they didn't count on was the rate of acceptance by the consumer. Sumner Redstone of Viacom was one of the first to point out that despite how attractive a technology seems, it is unlikely that behavioral patterns will change as quickly as the technology develops. The key to maintaining profitability in these markets is not to use the Internet as a means to an end but rather to use it as a way of extending an already strong brand identity. In the case of Viacom, Walt Disney Company, and Murdoch's News Corp., it was the emphasis on conventional media and stoicism in the face of Internet-mania that left them all in excellent positions for dominance while the others have been left floundering in debt. The numbers are truly staggering. Viacom has emerged as the likely leader as the most profitable, most valuable, and largest media provider of them all — for now.

Viacom's conservative approach worked well for a company that deals mostly with film and TV properties, where it makes most of its earnings through advertiser support, but what about companies such as BMG, which cites music as its main property? Remember when BMG decided to buy Napster in order to convert it into a revenue generator by charging fees? It was a great idea, but without garnering support from the other music media providers, there was no hope for success. Without consensus the BMG purchase proved to be fruitless. It might have been the best revenue-generating idea for the music business since the invention of the phonograph record.

In any case, the media wars will continue as these companies move cautiously ahead in their plans for dominating their market. Charting their course and finding ways to fit them into your business plan when the time is right could be the key to future installation business in both the business-to-business market and the residence.

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