By now most of us are painfully aware of some unusual business phenomena that the digital age has wrought. They include the following:
- Demand for your content may grow yet your business may suffer (e.g., the newspaper and record industries).
- The complete “long tail” of content inventory (i.e., both the top current hits and the “catalog” or legacy content) can be completely in stock at all times at every (digital) store. This replaces the old paragon of “just in time” inventory with “all the time” inventory in the virtual marketplace (i.e., bad news for brick & mortar stores).
- Although they’ve always been important, good timing and accurate market forecasting are absolutely critical to success today, and with much higher granularity requirements.
I called these points unusual but they only seem that way to those with a traditional media background. In fact, they are the new “usual” as standard operating procedures in the digital environment.
Lessons of LEO
There’s been plenty of coverage here and elsewhere on items No. 1 and 2 above, so let’s focus here on No. 3, using a particular instance that’s been called “the Iridium syndrome.”
The name comes from the low-earth orbit (LEO) satellite system that Motorola developed for global voice communications in the 1990s, as you’ll recall. You’ll probably also remember the system’s notorious demise in 1999, after the investment of more than $5 billion.
How could such a well-established and savvy technology company make such a monumental blunder? It was mostly due to bad timing and poor predictive skills.
There have been numerous contributing causes cited in Iridium’s postmortem, but most analyses agree that the primary reason for the failure is as follows.
In the 1980s the concept of providing wireless voice communication to almost anywhere on the planet seemed like a great idea, and appeared likely to be a big commercial success. So Motorola set about designing, building and launching a network of 66 satellites — a process that took about a decade to complete. During that development time, however, terrestrial cell phone service had taken hold and was already providing essentially the same service for much of the developed world.
Iridium therefore was marginalized to a small subset of users in areas unserved by terrestrial cell-phone service, and was meanwhile saddled with an extremely expensive network and large, unwieldy handsets. It folded less than a year after its commercial launch and came close to taking all of Motorola down with it.
The moral of the story is that today’s pace of technological progress makes accurate predictions at once more difficult and more important. Profound change can happen so fast that it can devastate any business plan.
Most of us have already adapted to this, at least in part. For example, it is extremely unlikely that anyone today would propose a technology requiring 10 years to develop, because we know that we don’t know what the environment will be like that far into the future.
But just how far in front of us do our headlights actually shine today? What is the currently tolerable development period? And isn’t the increasing pace of technology constantly shrinking that window?
There’s an app for that
A more recent (though less dramatic) example, and one that hits closer to home, is the MSN Direct service, which Microsoft recently announced it would shutter at the start of 2012, as Radio World reported in its weekly Newsbytes e-mail.
MSN Direct delivered its signal to users’ portable and mobile devices via the 67 kHz subcarriers on a network of FM stations, so its shutdown will terminate a revenue stream that had been flowing to a number of radio broadcasters for the last several years.
Again the idea seemed like a good one when initially developed, but lost much of its value in the interim due to the broad penetration of mobile wireless data services. A dedicated, one-way data delivery network to general consumers became an anachronism in the era of the almost ubiquitous cell-phone service, SMS messaging and mobile apps.
Even the latest wrinkle that MSN Direct tried in delivering data to GPS systems (for real-time traffic data, local gas prices, movie times, etc.) wasn’t anything that couldn’t be matched or bettered by wireless broadband service to the car.
Perhaps most telling is that the oft-touted cost effectiveness of a broadcast solution apparently was washed out here by its dedicated nature, vs. the general-purpose economies of scale enjoyed by wireless platforms. This last point may soon apply to the entire market for broadcast datacasting.
Are there other processes currently in play that we will someday look back upon and categorize similarly? Perhaps.
Consider consolidation and its related actions: When the terrestrial radio industry pushed so hard for liberalization of ownership rules in the 1990s, it thought the battle for survival would be against satellite radio, and thus the fight would be waged against a small number of large, aggregated competitors. The same basis motivated the fight against the satellite radio merger more recently.
Yet it’s now becoming clear that the real threat to radio’s future may come from a multitude of small, independent webcasters instead. Thus terrestrial radio may have girded itself for the wrong war, unaware that a very different battlefield lay ahead.
Tactically speaking, we may realize too late that instead of lobbying so strongly for consolidation and fighting the satellite merger, the radio industry should have rallied harder against the music royalties that were initially put into place for Internet radio during the CARP proceedings — back in 2001–02, when broadcasters were fairly silent on the issue — and worked to develop a strong webcast presence of their own at the time.
Instead of configuring itself to ward off a monolithic opponent, terrestrial radio should have been preparing for a far more diversified adversary.
Today broadcasters are indeed rushing to build an online presence, but we may conclude in retrospect that they ceded too much early territory to the establishment of independent webcasting. Broadcasters may ultimately lose even more from the emboldening of the music industry they engendered by watching the initial royalty rate-setting proceedings mostly from the sidelines, and the momentum thus generated may even spill over to the assessment of new fees on traditionally exempt over-the-air music broadcasts.
The oft-cited (or perhaps by now, clichéd) Wayne Gretzky quote about his success arising from “not skating to where the puck is, but to where it will be” certainly applies here. The converse therefore suggests that wrongly charting a competitive trajectory can prove disastrous. One sure way to produce such erroneous results is by using old-media formulas in a new-media game.
Skip Pizzi is contributing editor of Radio World. Follow him on Twitter attwitter.com/skippizzi.