Welcome to Las Vegas and NAB'97! Every year it seems like the technology
of our business changes so much, so fast, we wonder how much farther it
can go. Well, this past week, the FCC made it official. We are in the era
of digital broadcasting. That certainly portends more change, and given
the schedule outlined by the FCC, this change will happen faster than anything
we've seen before in consumer media. Depending on which demographic group
you call your own, the cartoon thought bubble over your head might read
either, "Wow! Too much, too fast!" Or, "Like way cool dude!"
Walking the exhibit floors this week is going to be mind boggling. There
is so much to understand, so much to choose from. Well, it's not all that
much easier as a consumer. The well-equipped household will boast of TVs,
radios, VCRs, PCs, multi-line telephones, fax machines, CD-ROMs, DVDs,
cable, DSS, cellular telephones, Internet, America On Line, WebTV - and
maybe a Batman utility belt to carry around all the remote controls, mouses,
and keyboards. The consumer media marketplace, according to the Consumer
Electronic Manufacturers Association will reach $86.4 billion in sales
by the year 2000.
When it comes to understanding what's going on in consumer media, I
like to think of three different ages in consumer media. These ages are
similar in some ways and different in others. These ages are the Newspaper
Age, Broadcast Age and the age we have just entered, the Internet Age.
In the rest of my time with you this morning, I'd like to share some ideas
about the characteristics of these three ages of consumer media and what
it means for broadcasters.
Modern mass media began about 150 years ago with the launch of the so-called
"Penny Press." This was the beginning of the Newspaper Age. Using
Industrial Revolution technologies and the mass production economies of
the factory, huge numbers of newspapers could be printed and distributed
inexpensively. Costs were kept low enough so that the final price to the
reader was one penny, hence the name, "Penny Press." For the
first time in history, the average person on the street had access to a
regular source of professionally collected, written, edited and distributed
news, information and entertainment of the day. This was tremendously empowering
for consumers and it led to the development of new markets.
The Newspaper Age is over 150 years old, and has certainly gone through
much change. However, newspapers are still very much with us here today.
The Broadcast Age began about 75 years ago when the first commercial radio
station signed on in Pittsburgh, Pennsylvania. The key enabling technology
of the Broadcast Age was the ability to move the mass production printing
presses out of the newspaper factories and into consumer homes. In a sense,
what radio and television broadcasting does is to print electronic copies
of programs in consumer homes in real time. Instead of printing and distributing
only one newspaper a day, in the Broadcast Age, you can turn on your radio
or television and experience real-time, constantly updated content. It's
like a living newspaper.
This created a whole new experience for the audience. The audience began
relating to people on the radio and television as trusted friends. For
years, research has shown that television news is the most credible source
of news. People rely on radio as a personal companion. With the ability
to essentially have a round-the-clock, constantly updated newspaper, Broadcast
Age companies scrambled to come up with ides to take advantage of this
new program platform. Ideas were borrowed from the newspaper industry,
from vaudeville, from concert halls, and indeed, new forms of content and
audience experiences were developed.
Just as the newspaper industry developed new conventions and new forms
of content, so did the broadcast industry. As I mentioned earlier, the
newspaper industry gave us conventions like organizing the news into sections,
front page, sports, style, etc. We still use that convention in the Broadcast
Age. Consumers have entirely different relationships with their local TV
news anchors and radio drive time personalities than they do with newspaper
reporters. It's a more personalized relationship.
In fact, the Broadcast Age plays a major role in the average person's
life. Altogether, advertisers, consumers and institutions will spend $353
billion on newspapers, broadcasting, cable, home video, magazines, books,
video games and online services. The average U.S. household can receive
about 45 television channels and nearly as many radio stations. The average
person will spend 40% of their time listening to radio and watching television
in a typical week. That's 3,500 hours per years! The U.S. has the richest,
most diverse and prolific consumer media environment of any country on
However, that doesn't appear to be enough.
Enter the Internet Age. In the Broadcast Age, we moved the printing
press from the newspaper factory into the home. In the Internet Age, we
also move the editorial office into the home. We move the graphics, layout
and composition rooms into the home. We move the reporters' bullpen into
the home. We move the mailroom into the home. The Internet Age consumer
becomes a fully empowered participant in the information age. We are leaving
behind Industrial Age economics.
The Internet Age is not based on the Industrial Revolution economics
of mass production. It is not based on the ability to move the printing
press to the point of distribution as in broadcasting. The Internet age
is based on digital commerce, which has entirely different characteristics.
The economic premise of the Newspaper and Broadcast Ages is that you create
one high cost copy of content and then amortize that investment by distributing
a large number of increasingly less expensive copies. To the consumer,
each copy of the original is the same.
The economic premise of the Internet Age is that each customer creates
his or her own low cost original copy of content. No two consumers are
going to have the same experience. We've gone from relying on mass production
technology in the Newspaper Age, to combining electronic mass production
and distribution in the Broadcast Age, to creating essentially individual
digital copies on the fly in the Internet Age. The consumer content experience
in the Internet age creates value for consumers and advertisers.
That is what is unique about the Internet age relative to the Newspaper
and Broadcast Ages. We can't afford to print and distributed individually
tailored newspapers or broadcast programs. However, in the Internet Age,
it is perfectly economical to create a large repository of digital content,
a multimedia database and let consumer access this database by creating
personalized views of its contents. Consumers can even become content producers
themselves. That's what America On Line is all about. That's what the World
Wide Web is all about. That's what webcasting or real-time multimedia streaming
is all about.
Consumers can either request something specific from a database using
a client-server model, or they can select certain categories of things
to be sent to them on a specified basis, using the "push-model."
The basic business model is changing from the creation of a high cost first
copy, which then needs to be mass produced and distributed to achieve economies
of scale - to creating a high cost media repository or database for which
economical personalized views can be created. In the future, businesses
will not just be producing and broadcasting programs, but creating media
assets that can be accessed and served in customized packages specified
by the consumer.
The Broadcast Age is all about distributing single programs in real-time.
The Internet Age is all about connecting consumers to program elements
in their own time. The basic technology of the Internet Age is the unification
of the production, distribution and consumption platforms. The connectivity
and interoperability is achieved through digital processing and standard
setting. The entry point in TCP/IP, the language of the Internet. We are
now into HTML and ATV television formats. Soon we will have digital radio
as well. These possibilities will only grow in scope, magnitude, and consequence.
As broadcasters become digital, our companies automatically will become
Internet Age companies. We will have two basic business lines - the traditional
Broadcast Age business of providing programs in real time. However, using
the same kinds of content, we can mange our media assets and distribution
platforms to also diversify very successfully into Internet Age economics.
We can data broadcasting, multiple program feeds, broadcast multiple data
types, offer software services or provide multiple camera angles, program
statistics and other customized views of our media assets. We will also
take advantage of the technologies to create new services and revenue opportunities.
What will happen to newspapers and traditional broadcasting in the Internet
Age? My view is that both will survive. Newspapers serve as a key niche
and so does broadcasting. There will always be an audience demand for broadcast
programs. Audiences organize much of their lives right now around real-time
broadcasting. They love it and spend thousands of hours of their lives
each year proving it. With digital broadcasting we can enrich and expand
on this experience, and develop new businesses.
With each new consumer media age, there are both new artifacts and new
terms. I'll refer to this consumer media technology as the "artifacts"
of each age. Like archeologists studying artifacts of ancient civilizations
to understand their cultures, consumer media artifacts help us learn more
about the three ages of consumer media.
The consumer media artifacts of the early Newspaper Age were basically
reading glasses and candles. The consumer media technology of the Broadcast
Age expanded upon what existed in the Newspaper Age. Once we moved into
the Broadcast Age, we added radio sets, television receivers, and then
cable, remote controls, component stereo systems, portable radios and TV's,
home theater systems and eventually, digital satellite systems. All these
artifacts of consumer media take advantage of the Broadcast Age's basic
characteristic of using the radio receiver and the television set as in-home
printing press for distributing real-time content. In the Internet Age,
the artifacts include things like personal computers, sound boards, video
boards, WebTV, keyboards, mouses, disk drives, CD-ROMs, DVDs, America OnLine,
gigabyte hard drives, RAM, and even smart homes that run on computers.
Broadcasters can rest assured that the business of creating and distributing
programs is grounded in a continuing economic reality. This particular
consumer media artifacts won't change this. Will it matter if "Drew
Carey" gets viewed on a Compaq personal computer with a Microsoft
operating system instead of a Toshiba widescreen television? Probably not.
Will it matter if "60 Minutes" is viewed on digital broadcast
channel 35c, when channel 35 is operating a multiple program feed mode
instead of analog channel 7? Probably not. Will it matter if consumers
don't watch the "World News Tonight" as originally broadcast
at 7 p.m. but instead put together their own newscast from ABC News daily
archives and watch it whenever they want? Probably not. Audiences will
still gather around content and advertisers will still pay for access to
What can we expect from consumer media? Where will the successes and
failures be? Of course, the answers aren't clear. However, based on 150
years of consumer media, there are some clear guidelines of what it takes
to be successful.
As we look forward to predict what's next in consumer media, we might
do well to keep these guidelines in mind. Consumer media must be:
Let me elaborate briefly on these points.
People don't mind spending money if they think they're getting their
money's worth. Consumer media must deliver a perceived value that equals
or exceeds the price, or the outcome is failure.
Consumer media must be economical. This means that a sensible business
model must be developed. As we weigh the benefits of new technologies,
we must remember that the flip-side is their costs. Exciting new technologies
have to perform in the marketplace. Consumer media operate on basically
three revenue models: Advertisers Pay, Consumers Pay, and Advertisers and
In 1997, the business model winning the greatest consumer use is the
"Advertisers Pay" model. The advertising dollars from consumer
media in 1997 summed to $170 billion. The emerging consumer medium which
filled the headlines all last year, the Internet, rang in dollars of just
$267 million or 0.16% of ad spend. People spend thousands of hours each
year with their favorite radio and television stations, amounting to 60%
of their total time with all consumer media. Coming in second is the "Advertisers
and Consumers Pay" model, exemplified by cable, newspapers, magazines,
and to some extent online services. This comes to about 25% of their time
spent with consumer media. The "Consumers Pay" media includes
things like books, video games, movies, home video and recorded music.
That occupies about 15% of time spent with all consumer media for the average
person in a year.
The trend over time is away from the Advertiser Pays to other revenue
models. In 1990, 44% of the spending on consumer media was from Advertisers.
By the year 2000, according to Veronis, Suhler & Associates, this will
drop to 41%. In this same time frame, overall spending on consumer media
(advertisers, end users and institutional) is expected to jump from $193
billion in 1990 to $353 billion in 2000, or up 83%. This great growth in
consumer media spending will therefore come largely from the Consumer Pays
model and the consumer share of the Advertisers and Consumers Pay model.
To the broadcasters in this audience, I offer this thought. Consumers
are now spending 60% of their time with something they get for free - radio
and television broadcasting. That's a pretty hard competitive position
to attack. Growth in consumer media revenues will be driven by consumers,
to the tune of $150 billion over the next several years. Consumers will
spend for more personalized content experiences. Internet Age broadcasters
have all the necessary qualifications to be an important part of this emerging
People organize their living spaces so they can walk in the dark, if
they have to, without crashing into things. As the adage goes - "a
place for everything and everything in its place." That's the way
people like their media too. People like the familiarity of conventions.
The evening news is organized into basically the same kinds of sections
pioneered by the Penny Press. It works.
Consumer media must provide a kind of psychological refuge for people,
if they are to be successful. It is important to understand and meet consumer
expectations. Market research teaches us that consumer use media for different
but predictable reasons. They want to be informed. They want to be entertained.
They don't want to be bored or lonely. They also don't want to have to
dress in sweat suits and track shoes to get their daily media exercise
by running an obstacle course of browsers, menus, and search engines.
Consumers expect their media to be easy to use, easy to understand and
easy to enjoy. Many people have trouble with Boolean operators, indexes,
and other navigational interfaces. The average U.S. home now has 45 channels
of television and probably as many radio stations piped into it. That's
quite formidable. People are finding it ever more difficult to orient themselves
in this media space. The average person uses between 8-9 television channels
and 2-3 radio stations per week. Consider that everybody with access to
the Internet has over 16 million host sites to visit, with potentially
hundreds of millions of multimedia objects! This is really testing the
limits of consumers' abilities to comprehend and act on all the possibilities.
Whatever we can do to help connect people to the media content and experiences
they value, the more likely we will achieve success. That is a great challenge
to be solved in the next generation of consumer media. People need to know
what to expect and where to find things that are interesting to them. It
is no accident that online services like the Microsoft Network and America
Online have reverted back to organizing their content using the metaphor
of television channels. This is a familiar and powerful way for consumers
to understand and act on media content and experiences. The use of a channel
metaphor, i.e., the News Channels, the Sports Channel, the Movie Channel,
is by now a convention they accept. Consumers recognize and appreciate
a structured environment. Packaging adds value to content.
The definition of "easy" in consumer media is something people
already know how to do, and preferably already are doing! Consumer media
that require new skills or behavior change are fighting an uphill battle.
While the Penny Press of the 1800s was a marvel of technology and entrepreneurial
effort, things never would have gone anywhere if people did not know how
to read. One of my favorite barometers of technology literacy is the percentage
of VCRs flashing 12:00. This is the percentage of people who don't know
how or don't want to be bothered with the basic step of programming their
VCRs. Of course, if their VCR doesn't know what time it is, they probably
aren't using them for time-shift recording. When it comes to consumer media,
people don't like to plan ahead, they don't like multi-step procedures
and they don't like learning new skills.
The basic skill in reading a newspaper, other than literacy, is the
ability to turn a page. For broadcasting, consumer must know how to operate
the on/off switch and station selector. For home video, we add another
layer of complexity with features like fast-forward, pause, and record.
Now, we're into the online world and expect consumers to deal with software
installs and configuration, login procedures and menu structures and search
engines before they can even get started.
Consumer media must offer something compelling to people. There are
too many ways for people to spend their time and money these days. The
basic premise of consumer media must offer a bargain people just can't
pass up. Again, the broadcast model is, "we'll give you well produced
shows which are entertaining and informative for free if you'll sit through
the commercials." That is a proven killer application.
Betting the farm on a "build it, and they will come" business
model may have worked for Kevin Costner, in "Field of Dreams,"
but this may not transfer well from baseball in Iowa to consumer media
on Main Street. Telephone companies and cable operators bet that video
on demand would be the next great consumer medium. They started to build
it, but noticed a distinct lack of crowds gathering at the gates in their
proof of technology and early marketing trials. Why? What they were offering
ended up being not all that worthwhile to customers. The technology to
serve video on demand is here. However, the packaging of price and content
to be delivered are major limiting factors in determining how worthwhile
that service is to consumers. Pay-per-view movies may offer some convenience
relative to going to the video store, and given the high percentage of
late returns may even be somewhat comparable in cost. However, people like
to shop. They enjoy browsing over hundreds of titles at the video store.
Consumers like to get something for nothing. They like to add value
to things they already own. Things that work together well add value synergistically.
Consumer technologies tend to be introduced piecemeal and later be incorporated
into systems or multifunctional units. Consumers like that. They like TV/VCR
combinations. They like telephone/answering machines. They like multimedia
PCs. The more complementary the consumer media experience, the greater
the value to be leveraged. Television viewing and telephone use are different
consumer experiences, for example. People have stayed away from video phones
in droves. We might as well to make refrigerator/toaster combinations.
VCRs took off so well, going from nowhere in 1980 to 86% of U.S. television
homes in 1996, because they added value to the television set and the viewing
experience. Video homes use their VCRs about 5 hours per week, mostly for
playing prerecorded tapes. The online world grew from an embedded base
of PCs and later helped drive PC sales. The telephone modem is to the PC
what the VCR is to the television receiver. It adds value to an existing
The basic building blocks of successful consumer media have remained
largely unchanged since the beginning days. It's a simple formula in concept,
yet as imperative as it is difficult to achieve in the marketplace. Any
new ventures into the consumer media space during the Internet Age should
be weighed in view of these necessary qualities to assess success prospects:
That's one view of what features consumer media must have, based on
150-plus years of experience. What will change the Internet Age? The Newspaper
Model of consumer media is based on low volume of use, large amount of
content, ability to store and browse, and mixed revenues (consumers and
advertisers) pay. The broadcast model is based on high volumes of use,
select content, limited ability to store, no real browsing ability, and
advertiser pays. The Internet Model joins these models and then adds it
own compelling features. What kinds of features am I talking about?
1. Push vs. Pull
The Newspaper and Broadcast ages of consumer media are premised on the
idea of creating and bundling content packages, daily issues or programs,
and sending these packages to consumers as intact services. In a sense,
newspaper and broadcast companies are filling up boxes and pushing them
out the shipping door for delivery to consumers. Consumers have the choice
of accepting or nor accepting delivery. If they do accept delivery they
then have the choice of opening or nor opening the box. If they open it,
newspapers permit browsing, broadcasting requires linear participation
in real-time. Neither the Newspaper nor Broadcast models let the consumer
individualize or segment their consumer media environments. That's because
newspaper and broadcasters rely on mass production economies in the creation
and distribution of content.
In the Internet Age, the connection between content and consumer can
be highly personalized and operate in real-time or non real-time. Consumers
can have a standing order with content providers to send or push only that
content that matches their predefined profile. Or consumers can benefit
from the interactivity of the Internet and send out their own content orders
to be gathered and pulled from various databases and sent back to them
on whatever schedule they choose.
This permits the creation of personal broadcast networks. By using intelligent
agents, consumers can customize and personalize their own media space.
Utilizing intelligence in the multimedia data centers, on-the-fly content
packages can be developed based on structured consumer queries. Relational
multimedia databases, distributed intelligence, platform connectivity and
interoperability will be the technology engines of the Internet Age.
Consumers will value this service and pay for it. This is especially
true of our children, as they make their presence felt in the marketplace.
And it's also likely to be true for those of you who go around the exhibits
saying, "way cool, dude." Advertisers also will value the ability
to reach highly select target segments of consumers. That's a good thing,
because all this stuff is expensive and we need all the money in the system
we can get!
Consumer media will support more than the ability to inform and entertain
audiences. The same technology platform can be applied to other human activities,
like shopping. This will add a new source of revenues to companies involved
in the Internet Age. The new economic model of consumer media will include
revenues from advertising, user payments and transactions. The same infrastructure
used for consumer media can support electronic commerce. This provides
access to whole new markets with new revenue streams that let us further
amortize infrastructure investments.
The Internet is no longer the providence of geeks. Of the 220 Million
people over the age of 16 in the US and Canada, 23% are using the Internet
and 17% are on the WWW. About three-quarters (73%) of WWW users search
for information about products and services. An estimated 5.6 million people
or 15% have purchased online! Admittedly, there is a distance to grow.
Internet transactions in 1996 totaled only $550 million, compared to catalog
sales of $60 billion. But, this growth will come.
3. Direct consumer interface vs. embedded interface
Another source of economic opportunity in the Internet Age is that not
all of the functionality needs to be obvious to consumers. Some of the
functionality can be totally invisible to consumers. Intelligence can be
embedded into consumer devices rather than confronting the user directly
with an interface. This includes ideas like smart homes, netphones connected
to the Internet telephony services and radios and TVs that serve Internet
content. Consumers needn't be aware that they are connecting to the Internet
to get services, they can focus on the service itself.
We will enter an age of consumer devices that have IP addresses and
connectable to the net either on a full-time or batch basis. How many times
have you left on a vacation only to wonder if you left the coffee machine
on? If your coffeepot has an IP address, you can use your car phone to
issue the command, "turn yourself off." That seems like a neat
feature on the coffee machine and people needn't know or care about the
technology infrastructure supporting this simple service.
4. Consumer as producer
Another source of the technology inherent to the Internet Age is that
the boundary between producer and consumer will blur. Consumers can become
producers. News footage of disasters is increasingly coming from amateur
home video cameras. There's no reason why this same content can't be posted
on the Internet server and either served on demand (i.e., "pulled")
or broadcast (i.e., "pushed") to interested consumers. This kind
of content doesn't have to become part of the mass production machines
of the Newspaper or Broadcast ages - it will become part of an individual
production machine. The cost of creating content will be borne by the consumer,
not by the producer. The consumer media infrastructure will provide value-added
access and processing to that content.
In summary, what's next in consumer media is the Internet Age. This
age will create new economic and creative opportunities for companies already
active in the Newspaper and Broadcast ages. It will engender new types
of consumers and consumption patterns. It will enable the development of
new kinds of content and services. It will benefit not only from the economies
of Advertiser and Consumer pays, but also from transactional economies.
The Internet Age will present itself both face-to-face to consumers in
the form of various browsers and interfaces, but also embed itself invisibly
into a wide range of consumer devices. The Internet Age will encourage
change in the way audiences behave, stimulate new economics and allow us
to restructure our media environments for greater personal empowerment.
Consumers are going to like the Internet Age, and I think there's plenty
of opportunity for all of us in this room to benefit from this and run
some pretty successful businesses.