We’ve all heard this infamous quote attributed to Albert Einstein: “The definition of insanity is doing the same thing over and over again, expecting different results.”
While the assertion may not have originated with the genius, it doesn’t take a rocket scientist to recognise the truth when people read it.
But it’s amazing how many intelligent executives in billion-dollar businesses continue to repeat the same mistakes hoping for a more favourable outcome – media moguls included.
Victims of “digital Darwinism,” they continue to fall short of meeting the needs of consumers, who are not only riding the wave of digital technology advancements and society’s rapid shifts, they’re driving them both.
But in their efforts to try and squeeze traditional print publishing paradigms into bits and bytes, publishers have missed a fundamental element for financial viability in this new people-powered planet. They’ve missed the “consumer-isation” of the communications gravy train, and like many industries before them, they need to do a serious about-face and face their audience up close and personal, or, frankly, perish.
This is a harsh reality so many executives just don’t get, not because they aren’t intellectually intelligent, but because they lack the social IQ needed to build a business that can thrive in a socially-centric digital world.
Digital disruption or digital destruction?
Publishing isn’t the first to be impacted by digital disruption. The music and video industries faced similar challenges that ultimately forced them to radically transform their business models in order to survive.
When record sales reached their peak in 2000, Americans bought 943 million CDs, and digital revenues were negligible. But the traditional pricing model of US$15/CD did not sit well with many music fans. Their response was to find other, sometimes nefarious, ways to access music they felt was overpriced.
In its stubbornness not to give listeners what they wanted, the music industry gave birth to Napster, then iTunes and Spotify – consumer-savvy services that gave consumers what they wanted: convenience (i.e. choice and aggregation) at the right price.
Netflix had a similar impact on the video industry replacing DVD purchases with its on-demand video streaming. Blockbuster, once the king of video rentals with 9,000 locations in the United States and US$1.6 billion in revenues, declared bankruptcy in 2010 and closed its last 300 stores early in 2014.
Pressured by movie studios to maintain high-margin DVD revenues, Blockbuster’s high-priced DVD rental model fueled the torrent revolution and led to a pricing stand-off with consumers from which they could never recover.
Meanwhile, Netflix, which was also into DVD rentals, didn’t go down with its mail-order business. By listening to the market and innovating to serve its needs, Netflix offered a US$7.99/month, all-inclusive subscription model that was able to reach consensus with viewers because it gave them convenience (i.e. aggregated video) at the right price. Blockbuster’s attempt at a pay-as-you-go streaming video solution couldn’t compete.
Today Netflix is the largest premium TV/movie subscription service in the United States with US$5.5 billion dollars in revenue in 2014 and more than 57.4 million subscribers.
In the music and video industries, digital and social disruption of the markets resulted in massive makeovers of business models that no longer worked.
The same is happening to the publishing industry, but at an even more precipitous free-fall. Print advertising revenues have decreased more than 57% in just the last six years and more than 75% from the US$65.8 billion peak in 2000.
And because publishing executives didn’t learn from music and video’s hard lessons and continued to silo their content behind paywalls, treat engaged digital readers like passive print subscribers, and deny readers choice at the right price, they opened the door to competitors they never imagined.
In part 2 of this post, I’ll take a closer look at who the real competitors are and what publishers need to do to stop the insanity of racing to the bottom.