The Canary In The Coalmine: The Media Industry Decline and Your Business

Information has become the backbone of business. Its increasing collection, categorization, analysis and application drives strategy, tactics and everything in between. So what happens when access to information you used to sell becomes free - and everyone can get it cheaply? Welcome to the ninth ring of Dante's hell, home of the media industry for the past few years. It would be easy to dismiss this set of circumstances as their problem. But as Saul Berman explains in Harvard Business Review, the uses of information and access to it is so ubiquitous that it may be only a matter of time before your business model is disintermediated as well. What the media industry has learned may be of value to you.

"No matter how bad the last few years have been for your business, you can at least take solace from the fact that you're not in the media industry. (Unless, of course, you are in the media industry.) Shrinking revenues, customers who pirate (and actively distribute) products, dizzying technology change, new competitors, defecting advertisers, plummeting discretionary consumer spending — almost everything that could go wrong for music, magazine publishing, radio, newspapers, and broadcast television has gone wrong in the last fifteen years.

It's easy from the outside to engage in a bit of Schadenfreude and dismiss media's experience as the result of unique (digital) circumstances and poor management. But the reality is that the underlying forces that have been batting media about like a ping pong ball are not unique to the sector. In fact, I believe media is the proverbial canary in the coal mine for all sorts of industries due to a set of common trends that will, or are already, driving change across sectors. Those trends are:

• Ubiquitous low-cost communications
• Virtually unlimited low-cost bandwidth
• Virtually unlimited, low-cost, real-time data processing power
• Consumer expectations for personalization, control, relevance, and timeliness
• Rapid technological and competitive innovation

I don't think anyone would debate the reality of these trends. They hit information sectors like media and software first because media products consist of information, and therefore can be wholly digitized, converted from their physical form to a virtual one. But for all industries, these trends enable "smart" products and vastly more information to flow more quickly between producer and consumer (and consumer's social networks), so that even physical products can now have a useful information component. Take, for instance, the automotive industry's pursuit of information services like GM's OnStar and Ford's Sync, even BMW's iDrive. Those are digitized information products attached to a physical product. Or consider the wide range of industrial tool companies that now offer remote monitoring and preventive maintenance services to extend the life of their physical products.

Look as well to health care. A great deal of the argument made in 2010 by those in favor of U.S. health-care reform focused on the cost savings and care improvements that would come by collecting and applying better information: electronic health records can prevent duplicate tests and fraudulent claims; comparative effectiveness data will allow doctors to prescribe less expensive treatments that work just as well; and genetic information will allow earlier detection and highly targeted treatments.

This increased information flow is set to grow even more rapidly in the decade ahead as the "Internet of things" that futurists have discussed for at least a decade begins to find practical, real-world applications. More devices will be able to exchange and react to data from information networks. In practice, your refrigerator will know when you are out of milk, your washing machine when you've accidentally mixed a red sock with the whites, and your calendar when its time to visit the dentist (and when you're both available).

With more, better, faster information comes increasing consumer demand for personalization, control, relevance, and timeliness. These demands have always been latent in consumers, but companies had no way to meet them. How could they in a world where bandwidth was expensive and information flowed primarily in one direction, from producer to consumer?

The ubiquity of low-cost communications, bandwidth, and processing power will increasingly allow smart companies to cheaply gather information not only about how many units of a product are sold but how, when, and by whom those products are bought and how, when, and by whom those products are used. With that information, producers can profitably customize products to ever-smaller groups of consumers. The resulting improvements in product design, pricing, packaging and service will drive even higher customer expectations around personalization, control, relevance, and timeliness — and so on, and so on... These trends demand change greater than typical product innovation. Whole new value chains are being created--and that demands new business models and new revenue models in particular.

The media industry has had to react to these trends first — and therefore is a source of valuable lessons for any who care to look. Media companies have attempted a huge range of business models and revenue innovations: free, not free, freemium, customized, one size fits all, low cost, high cost, componentized, bundled, sponsored, ad supported, and on and on. To paraphrase Walt Disney, "If you can dream it, they did it."

If you're in an industry that isn't in the throes of major change because of the trends I've discussed, start thinking about media's experiences as part of your peripheral vision. It can give you a leg up on competitors who aren't picking up the (for now) weak signals of major change and allow you to innovate your revenue model on your own terms rather than playing catch-up like the media industry has.