Where The Internet Has Failed To Make Money

You need only to look to the panicked state of radio, records, television and newspapers to understand the monumental effect the Internet has had on the music media business.

Here's a short course:

Radio, the medium for every next generation since it arrived on the scene, is forced to share time with the Internet. How about 5o% of a young persons spare time directed to their life is online according to some researchers. Streaming of radio stations although on the increase has so so far not been the answer.

In fact, it's Internet streaming that will be the next hot thing. Probably not the kind of streaming done by radio groups.

TV is so concerned about YouTube that all the networks want to be YouTube.

So they've invented their own Internet delivery systems. And most networks have scaled back on their budgets for television show production. They are hell bent to go down with reality TV. In short, what they supposedly do best -- make programs -- is getting less of their investment money and what they do worst -- delivering audio and video over the Internet -- is getting more budget.

Record labels have done more stupid things since the first consumer became an online pirate.

They are still suing consumers who steal music even though that universe includes just about everyone in Generation Y. They've cut back on developing talent. Got the bug to cut costs and squeeze profit. And they still have no clue of what music trend comes next after hip-hop, the tired old genre that is embarrassing itself now.

Panic has set in and that's why traditional media companies are buying the Internet startups they couldn't start up in the first place. That they don't understand. They also don't know how to run these new Internet companies that they are buying.

Newspapers are cutting back resources daily because before there was ever an Internet they couldn't stem the flow of readers from getting their news on radio and TV. That's terrestrial radio and TV.

Newspapers never understood that they were in the unique news business not the print business. Anyone who has been around newspaper people know that print and news go hand in hand -- except with today's consumer.

What to do?

Print sales slide.

Advertisers look to online.

Internet readers don't want to pay for unique content so where does that leave you?

The Wall Street Journal has been somewhat successful in getting subscribers to pay for a subscription to the Online Journal but their readers have money to buy business publications. And they can rationalize that they are getting unique news.

Have I just been describing the Internet -- the place where everything is going and no one is really making money? And why does Internet earn a capital "I" in front of the word, like God?

The Internet has become a lot of things but what it hasn't become is a moneymaker for traditional businesses.

Porn on line, very profitable.

Google, they've found a way to sell search the way radio sold spots without anyone really knowing whether it was worth it. You know, the concept that says the only thing worse than buying advertising is not buying advertising.

The Internet has made money for a lot of people, but traditional content providers -- not really.

It's caused them problems.

Caused them to rethink their businesses (not very successfully, in my view).

Made them panic into over-spending traditional media money for a place at the Internet table. And they still have no certain plan on how to get a return on investment.

The Internet is the space of young people without whom it could not have been vaulted to capitalized status.

These same young people are not at all concerned with how traditional media companies make money for their shareholders. They don't even care if they go out of business (like in record labels).

A young generation independent for the first time of traditional media.

Misunderstood by everyone (except maybe Steve Jobs who actually owns them).

Even the personal computer business -- the original access point to the Internet -- is on the way down. More complete mobile devices and mini-computers will be all the thing in the future, not desktop computers.

What should we make of all this?

I always tell my students to go study Steve Jobs (that is, don't just read an article on him -- study him).

What is it about Jobs that is so revealing and useful to the rest of us.

Is it that he's so intelligent?

But there are lots of bright people in the music media business.

Is it that he's an outstanding marketer?

He is that, but there is sure no shortage of great marketers.

What is it that Jobs has going for him that traditional media is going to need if it is actually going to get rich on the Internet, the medium they're betting the ranch on?

Jobs has a masterful understanding of the generations -- not just Gen Y, but Gen X and baby boomers. I teach my students to look at all things media in the perspective of the generations starting with the Greatest Generation, Baby Boomers, X, Y and yes Z.

What we've discovered -- and Jobs knows instinctively -- is that the generations are both very different and very much the same. Different and the same.

And perhaps Steve Jobs' greatest other asset is that he is so contrary and quirky. What great qualities to have when you are courting the next generation -- contrary and quirky.

In addition to being a professor at USC, I am Director of Executive Programs at Thornton School. We've done forward thinking projects for record labels, traditional and non-traditional media companies. Believe me, the interest is out there. Finding the way takes a first step.

The first traditional media company to figure this out becomes the next Apple.