6 Roadblocks to the Digital Future

It is sure not the consumer getting in the way of the coming digital content revolution.

Consumers are gobbling up Apple products, Android phones and all types of digital content as fast as they come to market.

It is more than significant that outstanding content producers are struggling to make new media pay off for them. Apple has found a way – make the cool products that consumers will scarf up even in a prolonged recession.

But Verizon hasn’t come up with a good idea nor have the other cell phone operators beyond what they fell into which was text messaging at $20 per month. And who can live without text messaging?

The digital future is more than texting, apps and iTunes.

Apple isn’t even going to go there. Steve Jobs is smarter than that. Apple will continue coming up with the products and infrastructure and will charge content providers a distribution fee. And while some publishers have complained about Apple getting 30% of their subscription take, there has always been a distribution fee.

Radio stations have to maintain towers and transmitters and engineers (except at consolidated stations where they’ve fired most of them). Newspapers have printing presses. TV isn’t cheap to produce – production takes people and costs money.

For content providers, then, new media companies and traditional ones like publishers, radio, television, music and even film – there are some significant roadblocks in the way.

1. Royalties

Unless and until the record labels work out a fair compensation structure for the use of their music, there isn’t going to be a digital revolution in content. The labels remain under the mistaken belief that they can get away with forcing content providers such as Pandora to pay draconian royalties, but as long as they persist they are actually hurting themselves.

Once resolved, I can see radio and TV personalities using the iPad as their “transmitter” as they fully integrate music into what previously might have wound up on the airwaves. The sooner a deal that is better than streaming media has happens, the sooner we can get on with the digital revolution and in fact the labels can prosper. (I'm going to spend some time on this at my upcoming Media Solutions Lab).

2. Pay vs Free

Get used to paying for Internet content because as paywalls get erected, content that is unique, compelling and addictive will be an option for consumers. There will always be free. And I expect a lot of traditional-minded media companies to offer clunky paywalls that will fail. Inside Music Media switches over to a paid subscription model probably this week if final testing goes well.

Did you hear what Apple may be doing?

Offering a new subscription plan to newspapers that also see the iPad as the future printed newspaper replacement.

The speculation is that Apple will take its customary 30% fee for delivery and a whopping 40% share of all advertising from the publisher’s apps. And yes, Apple will relent and share its readership data with partnering newspapers. For that price, why not? If you’d like to read more about the Apple speculation, click here.

3. Failure to see that all digital must be built around social networking

This is a huge mistake. Simply aggregating good content, slick pictures, video and marketing savvy sites is no longer enough. We used to call that building a website.

Today, content providers must start with a social network and super serve that network of supporters who will want to talk to them and each other. It’s a different mindset. If it isn’t optimized for an iPad – of which 21 million more are expected to be sold to consumers in the year ahead – then it’s just a website and websites are out. That’s my prediction.

4. Monetization

I am often reminded of the late management guru Peter Drucker telling one of my media conferences before his death that the Internet will be successful – in 30 years! Why so long? Now we’re beginning to see why Drucker was the modern management genius he was. There must be an adequate way to monetize the Internet.

Porn sites found a way before Google sold search ads. There are web ads everywhere these days with success defined as one or two percent of viewers actually clicking on them to connect to the advertiser’s message – a low standard, indeed.

There are three ways to monetize the Internet right now. Ads. Paid subscriptions. And event marketing -- one of my favorite because few know how to do it and yet it is perfect for social networking.

I can see bloggers holding live events that have sponsors once or twice a year so that they will be able to charge less or nothing for their content. Of course – and let’s say it together -- compelling, unique and addictive content is a must.

5. Lack of adequate WiFi and finite cellular bandwidth

Bandwidth is being gobbled up by consumers using apps on devices that are becoming hogs. A few providers are charging more for bandwidth and if that continues you’ll see a slowdown of the digital content revolution we are all expecting.

WiFi must be universally available in a car, almost everywhere. The spectrum to make that happen may be coming available, but without "everywhere WiFi" and tons of available bandwidth from cell carriers, the revolution remains stymied.

6. Misunderstanding the next generation

No matter how many times I say it, only Steve Jobs does it – take the lead from consumers developing products and/or services. In the past, media companies had a monopoly on delivery. In essence, they guessed or in some cases researched their way into business. It is scary how little billion dollar media companies actually know about consumers. They know what they think they know and that isn’t usually accurate. To the student of students, success will flow.

Often we assume the digital future as a given.

This morning, you see the challenges as well as opportunities that lie ahead to content companies looking to go there.

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