The following article summarizes a keynote presentation I made for a conference on the future of media and audience measurement. The conference was attended by major players from radio and television broadcaster and print media companies, as well as satellite and cable distributors.
If you could visit the future, what would you bring back? If you had a clear idea of what the future held, would you be able to change your organization’s direction, and your way of doing business? Organizations tend to resist change, even when it’s necessary, and the old saw about knowledge being power is only half-true; it’s what you do about what you know that produces power.
I don’t predict the future because the future is inherently unpredictable. Instead, I try to help people plan and prepare intelligently for an unknowable future. And you are the experts on media and audience measurement, not me. What I’m going to do here today is talk about the forces driving change in and around your industry, and then help you think about what actions you might take to prepare.
The only thing I can tell you for certain about the future is that it’s going to catch us by surprise. The terrorist attacks of 2001, the tsunami in south Asia, the SARS epidemic, and hurricane Katrina all demonstrated that. More, they also demonstrated that the biggest shortcoming for most organizations is a lack of imagination! All of these events were forecast by respected organizations and individuals – and all of the forecasts were ignored by the relevant authorities. That’s why my first question is not: What do you know about the future? but rather: What do you plan to do about the future? That said, let’s look at the forces that are driving change in media and audience measurement.
Technology
I can tell you a great deal about what the technology will be able to do over the next 5- to ten years, but, with one exception, that’s not especially important. The exception is that technology is going to continue to fragment media, much as cable did to broadcast television. You should expect that any media you are currently using won’t just fragment, it will shatter completely, until every medium is available as a unique service tailored to each individual according to their needs and location at each instant. That will have dramatic consequences, which I’ll come back to later on.
For the moment, let’s focus on where the technology is going, then circle back to the implications. And let’s start with the obvious: computers will get cheaper, more powerful, easier to use, and come in smaller packages. As the Soviet army used to say, ‘Quantity has a quality all its own.’ Smaller, cheaper, faster creates that quantity, and will lead to things happening that haven’t happened before.
For instance, people have been taking digital photos with their cellphone cameras for some time now. What’s happening now is that some people are wearing cameras, and programming them to take photos throughout their day, say at 10 second intervals, to produce a visual diary of their lives. But as data storage continues to shrink in both physical size and cost, we will very quickly enter a world where there will be people who will produce, store, post, and share continuous video of their lives 24/7. This also means that if you happen to be in their field of view when you do something particularly stupid, or evil, or funny, you may wind up posted online and becoming famous for all the wrong reasons. It’s not just Big Brother who is whittling down our privacy, but it’s Little Brother and Little Sister as well.
The biggest technical bottleneck in this whole process is uplink capacity. Downloading video is manageable today. Uploading it is still an issue for most people. Accordingly, one of the next big areas of demand in IT is going to be uplink capacity – it will have to keep pace with the continuing explosion of data, especially video, that is emerging from users. In effect, the flow of data is starting to move uphill, from the consumer, rather than all downhill, as in the days of traditional broadcasting and cable distribution.
Next, the sharing of images is going to lead to a change in neural perception among young people, who are the willing, even eager electronic guinea pigs in the digital world. As soon as the capacity becomes available and affordable, kids are going to share live video feeds just as they are sharing text messages and photos from portable devices today. What happens when kids at a high school, for example, can share video images of different parts of the school simultaneously, and their software can stitch the images together into a 3-dimensional whole? What it means is that students will be able to experience the entire school, and everything that’s going on within it, simultaneously or selectively, using some kind of trackball or joystick to shift views. I don’t know if our brains are capable of integrating that much information, but I suspect they can. The result may be that kids (but not adults) will be able to see around corners, through walls, and all around themselves in what might be called a ‘god’s-eye view’ of their surroundings – or indeed, of many distant locations.
High definition TV is finally working its way into our homes. It has been the ‘technology of tomorrow’ for the last 20 years, but it has never been the ‘killer app’ that hardware manufacturers were hoping for. Indeed, it’s still barely crawling into the marketplace. The reason that high def has taken so long to land is because it fails Drucker’s 10 times rule. This is one of the most perceptive things that Peter Drucker, the grand-high Pooh-Bah of management science fiction, said in a long career of brilliant insights, but it’s almost completely unknown, even among students of Drucker, because he made the observation as a throw-away on the way to another point. Drucker’s 10 times rule is: For a new technology to replace an existing technology, the new technology has to be 10 times better in order to get people to abandon the money invested in the existing technology. Then there’s (ahem) Worzel’s Corollary: For you to overcome the inertia of consumer behavior, what you offer the consumer has to be perceived by her as being 10 times better than what she’s currently using. So while HDTV is clearly better than traditional TV, it ultimately fails the 10 times rule, whereas color television passed it. As soon as color broadcasts were available, people couldn’t whip out their checkbooks fast enough to buy color sets. That’s not the case with high def.
So, high def TV is only now creeping into consumers’ homes in significant numbers because large format screens are finally getting cheap enough to be interesting to people, and high def is often included with that kind of screen. But the combination of large screen TVs, digital signals from cable, satellite, broadcast, or DVD, and the high definition format is leading us towards images of stunningly improved quality, and an application that might yet pass the 10 times rule to become a killer app: the perception of 3-dimensions. Three-D images have been invented and reinvented repeatedly since 1838, when Sir Charles Wheatstone's stereoscope was first introduced, and have always been a novelty with no staying power. Yet, work that one major film-innovator did almost 20 years ago indicates that if you get the frame rate high enough on a big enough screen, then the image flicker and other cues that tip off the brain that what it’s seeing isn’t real fall below the threshold of perception. When that happens, the brain assumes that what it’s seeing is, in fact, real, with the result that the appears to pop into 3-D without any 3-D technology. With the combination of the superior image quality of HD combined with big format screens and digital signals, we are approaching that perceptual edge. What I can’t tell you is whether people really care if they can get the nightly news, or Deal or No Deal in what might be perceived as three dimensions.
The moveable video feast
Portability of computers, communications, and therefore, media is also highly predictable. The advent of developments like video downloads, Bit Torrent, Slingbox, and the new Apple TV mean that we are quickly moving to a world where the relationship between the video viewer and the video distributor is melting like rotting ice. The implications of a viewer being able to download half an hour of what used to be broadcast video are that the need for local TV stations, or even TV networks to act as intermediaries between producer and viewer may be eliminated. Now the viewer can buy the product without bothering with a network, much as young people often prefer to buy DVDs of an entire season of 24 rather than watch it on-air. Moreover, as video downloads through the Internet become more common, and as the ability to relocate the image becomes more user friendly, the grip of signal conduits like broadcasters or satellite or cable will decline – unless they can come up with enough additional value-added to make it worthwhile keeping them around. Moreover, if the experiment that Google is running in San Francisco to provide free WiFi anywhere in the city takes hold, then users may not need an Internet Service Provider either. And with VOIP eating into the airtime minutes of cellphone providers, what happens to the communications companies’ service bundles then?
Now, from the point of view of audience measurement, this is a two-edged sword. On one hand, traditional broadcast audience measurement is going to get both more difficult, and less relevant if users move to downloadable video rather than viewing or recording from a traditional means of transmission. Yet on the other hand, it will be possible not only to measure viewers, but to identify specific individuals, and match them up with advertisers interested in buying the availability of that particular consumer. If you add to this the ability to customize marketing appeals, as Amazon does to visitors to its website, then you have a much more cost-effective means of marketing, where the metric is not in cost-per-thousand, or even cost-per-sale, but cost-per-dollar-of-profit.
Moreover, competition for consumer attention is just beginning, and it won’t be restricted to professional sources. As with everything else, the power-to-the-people effects of the Internet are coming to video images. YouTube and related video-sharing sites are making it possible for individuals to develop markets for independent video without traditional infrastructure. Most of the videos available from YouTube are either swiped from somewhere or someone else, or are truly dreadful in quality. However, this is an emergent media, and if you compare the quality to the early days of television, you would have to say that it must be taken seriously. It may be, in fact, that those organizations that are in the business of creating or conveying video images will need to start screening amateur (also called ‘independent’) video producers for potential content, especially for niche markets.
You also need to stop thinking in terms of linear broadcasting, where you have a continuous image stream that runs from midnight to midnight. Instead, you should be thinking about a multiverse of videos-on-demand that appeal to everything from broad-spectrum, mass markets, down to highly specialized niches comprising as few as one person – an Amazon.com of the air, as it were. Think about your outlet as a website rather than a broadcast, signal, or text provider. Furthermore, as the technology continues to gather in power, competition will proliferate from outside the industry. If I want to produce a full-video podcast, for instance, I can buy a green blanket and hang it from the ceiling of my office behind my desk, then go online and buy a professional-looking virtual studio, either conventional or science fictiony, starting from about $49, and bingo! I’m in business – assuming I have anything people want to see and hear. Moreover, as the ‘Red vs. Blue’ machinima videos have shown, you can create video programming using nothing more than gaming software (in this case, Halo) and a script – and get sponsorship and build an audience without any of the traditional production infrastructure.
But technology isn’t important...
So that’s a short overview of some of the future effects of technology – but as I said at the outset, that’s not what’s going to be important.
It’s not what the technology will be capable of that’s important, but what people ultimately choose that will move the marketplace. The problem is that people don’t know what they will want, because technology is creating choices that have never existed before. Surveying consumers about possible future products is almost worthless.
When Xerox approached the market with the first photocopiers, no one was interested. Kodak turned it down flat, and office workers thought that mimeographs were just fine. It was only when Xerox effectively sold photocopies one-at-a-time by supplying the machines and toner for free, and charging per-copy that people experienced what it meant to have a photocopier, and therefore why they might want one.
Fifteen years ago, if you had surveyed consumers, describing what email was like, and then asking them how much they would use it, most people would have answered either that they wouldn’t use it at all, or only rarely. Could you have explained to them why it’s better to write an electronic letter to someone rather than to just pick up the phone and call them? I doubt it.
Likewise, the demand for cellphones was vastly under-estimated. I worked on one of the (failed) applications for the very first cellphone licenses in the early 1980s. One of the senior bureaucrats at Industry and Commerce in our early explorations commented that ‘There’s no real value in cell phone licenses. A pager and a pay phone are just as good.’ Prior to the licensing of cellphone networks, surveys were done, asking consumers how likely they were to want a cellphone. The results indicated that fewer than 10% of people thought they would have any interest in owning or using a cellphone – and most of them thought it would be as a car phone. The surveys were wrong by almost a factor of 10.
So, you face an enormous quandary: technology is changing all the rules about what’s possible, who can do things, how media is produced, distributed, and consumed, and neither you, nor the consumers themselves know how it will turn out.
The future of media
The interesting thing if you look back at the history of media is that media are not replaced, they are augmented. Radio didn’t disappear when television arrived, and movies didn’t disappear when VCRs arrived. What does change when new media arrive is the way people use media, and therefore what kind of revenue model you can drive. For instance, I’m currently in discussion with one group about reinventing syndicated radio since podcasting has changed the revenue model for radio. Those of you who own or operate print publications are also in a difficult situation, because your market is fading even faster than most electronic media. In particular, websites like Craigslist are eating away at your classified advertising, Internet ads are eating into your space ads, and blogs are undermining your columnists as a market differentiator. All of which means it’s time to reinvent the newspaper or magazine – probably as one of several different gateways to validated content. Don’t buy the stories of electronic paper and e-books being the salvation of print by cutting production and paper costs. So far, no one has found a format or formula that interests consumers – these things fail Drucker’s 10 Times Rule.
And what about radio, where is it going? Just as technology is allowing video channels to multiply, so, too, are audio channels multiplying, and each will find a niche. A bigger question is: will the revenue model have to be different than it is today? And there, the answer is almost certainly yes. For example, let’s apply Drucker’s 10 Times Rule to satellite radio: Is satellite radio 10 times better than terrestrial radio? For most people, the answer is: probably not. For some people, such as those who like Howard Stern, or those who regularly drive long distances, or listen to CBC Radio, the answer may be yes. Accordingly, the revenue model for satellite radio had better focus on those people for whom it is dramatically better than the alternatives.
Moreover, technology is going to continue to advance, and that will start to impinge on satellite radio’s audience. If WiFi develops to the point where people can access the Internet wirelessly while in a moving vehicle, as you can do with cellphones today, then satellite radio and terrestrial radio will both face competition from Internet radio which is, effectively, radio-on-demand. This is already true to some extent with podcasting, except that you have to pre-plan listening to a podcast as opposed to doing it spontaneously. I believe there is a market for all of the existing forms of radio, but they had better have revenue models that fit their balance sheets. This returns to my opening observation that it’s not what you know about the future that’s important, it’s what you do about it that matters. So now let’s turn our attention to capturing uncertainty, and making it work for you, rather than being captured by it.
Using uncertainty as a strategic weapon
Some of the organizations represented in this room are among the most sophisticated in the country in many aspects of their operations, and yet, I’m willing to bet that few, if any, of you go beyond plain vanilla when it comes to strategic planning. The field of scenario planning is well-established, widely known, but lightly used. Originally developed by the U.S. military for gaming possible nuclear confrontations with Iron Curtain countries, it was brought to the corporate world by the RAND Corporation and the publication of Herman Khan’s On Thermonuclear War and Thinking the Unthinkable. It has gradually been taken up and used by major corporations, most notably Royal Dutch Shell, which used it to anticipate the Arab oil embargo of 1973, and became one of the very few organizations to successfully anticipate the collapse of the Soviet Union. In fact, they warned the CIA that the collapse of the Soviet empire was imminent in the late 1980s, but were disbelieved. In both cases, Shell made a fortune in the oil market because they correctly anticipated events the rest of the market hadn’t considered.
The subsidiary of a multinational pharmaceutical company asked me to lead them through a scenario planning process a couple of years ago. Their parent company had been using scenarios for years, and sending them to their subsidiaries, yet the sub had never used them, or created their own before. Half way through the first morning, the CEO suddenly sat bolt upright, and said, ‘I’ve got it. Now I understand!’ It turns out that three years earlier, they had embarked on a traditional strategic planning process. Mid-way through the process, he said he’d gotten very uncomfortable because they were making assumptions about what would happen over the next five years. He worried about how useful their plans would be if their assumptions about what was going to happen turned out to be wrong.
Scenario planning, by comparison, encourages you to explore a range of possible futures, and then to create contingency plans for those that are more likely. You don’t try to be right; you try to be prepared. And even though the future is unlikely to unfold in precisely the way your scenarios are mapped out, the mere process of thinking through the possibilities prepares you, mentally, to switch directions more quickly. Scenario planning may not allow you to predict the future with certainty, but you are likely to come closer, and will certainly be better prepared than your competitors who can’t be bothered.
How do we cope with the future?
I started by saying that no one can accurately and consistently predict the future – the future will catch us by surprise. The bigger questions are: Who will recover fastest from surprise, and who will respond most constructively? If you think ahead, and prepare for the future, your reaction time will be better, your execution will be superior, and you will pick up market share against your slower competitors.
You are in one of the fastest-changing industries in the world, which means only those of you who are smart, flexible, and aggressive will survive. I wish you good luck, and God speed. Thank you.
by futurist Richard Worzel, C.F.A.
© Copyright, IF Research, March 2007.
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