You’ve probably seen an increasing number of references to “Web 2.0” recently, and there’s been a good deal of confusion over what it really means.
Unlike “Internet 2” or “IPv6,” Web 2.0 is not a specific network or technology. It is simply a catchall term for the next wave of business on and usage of the Internet — some of which is already underway. Think of it as a maturing of the Web, as it moves from the heady, naïve and overly ambitious days of its childhood to a more realistic and sustainable early adulthood.
This movement is strongly focused on what’s become known as Web services, which move many formerly off-line processes that run on local PCs to online, real-time, interactive processes on the Web.
Another major part of Web 2.0 is the social networking movement, by which Web users can connect to others of similar interest via a specific site, for discussion, recommendation or other sharing. And of course, there’s the user-generated content component, the Web’s equivalent of open-mic night, where users can post their own media creations for others to explore.
Part of this maturing is also the expectation that the Web is no longer a novelty or luxury, but a reliable, consistent part of everyday life. This implies that near-ubiquitous Web access (including wireless access) will also become a normal and expected utility.
Media delivery
A major part of this movement involves the delivery of digital media content, a lucrative and growing industry. As Web 2.0 moves from a vision of the future to the everyday present over the next several years for most Americans, the traditional role of the media industry will be challenged from end to end. But the stress will be felt most by those in the last mile — the “retail” end of the business, if you will, as new content-delivery mechanisms compete with traditional ones.
An early casualty of this trend is Tower Records, a former giant of music distribution, now shutting its doors due to lagging sales. Brick-and-mortar storefront gives way to online delivery — or as Nicholas Negroponte would put it, yet another example of the battle of bits vs. atoms (Bits 1, Atoms 0 — and in the digital world, those are the only two numbers that count).
Similar movements are in play throughout the media delivery world, but some players do not feel that the physical and virtual forms are equivalent. On one hand, some consumers still prefer physical media for its tangibility, portability and even its physical realization of accompanying graphics and other metadata. On the other side, some content owners remain concerned that electronic delivery is too vulnerable to piracy.
In any case, it is not the content or its owners/producers that are truly at risk, but the legacy delivery formats. The same studios and labels that make and sell movies and music today will continue to do so, but the outlets through which consumers make those purchases may change dramatically — or perhaps completely — in the near future.
Other associated forms of media consumption — including broadcasting — may be similarly affected. The impact from this pattern upon terrestrial radio is uncertain, but it is possible that the local station’s value could be increasingly at risk — particularly if it is little more than a pass-through venue for content from an upstream source. Could that content source or its consumers find an alternative (read: more cost-effective or otherwise more advantageous) method of last-mile delivery for such service?
Terrestrial radio sets the bar pretty high for any would-be competitors, but it is not immune. Satellite radio is one example of last-mile replacement that has made some inroads, particularly in rural areas or among frequent long-distance drivers, where terrestrial radio offers low choice or little value-added service on essentially similar content. But for the majority of Americans, it has not penetrated the cost barrier, and terrestrial radio has retained the majority of its audience — for now.
Yet one element of satellite radio that also figures strongly in Web 2.0 is the subscription model, particularly for music. A subscription online music service may become as competitive to terrestrial radio (if not more so, among younger demographics) as is satellite radio. Again, all record labels are exploring and participating in new Web-based services that offer their content via all-you-can-eat, one-monthly-fee subscription download models.
Importantly, the labels are doing this voluntarily and proactively, unlike their involvement with satellite radio, which takes place via statutory license in U.S. copyright law, allowing satcasters to use any published music content they want without negotiating permission of the record label (in return for making a standardized royalty payment to the label). Thus the music industry may be more motivated to see the subscription model flourish in the Web 2.0 world, where they maintain a higher level of control over business results.
Re-intermediation
One of the buzz words of recent years in the media industry has been disintermediation, referring to the Internet’s ability to connect consumers directly to producers, eliminating “the middleman.” While this movement has been largely embraced in some spaces, it has been more successful in connecting individuals to one another and to small businesses (witness eBay and other similar sites).
This trend is expanded in Web 2.0 with a host of social networking and user-generated content sites, greatly empowering individual expression, and allowing birds-of-a-feather to meet and interact in a rich yet inexpensive virtual way.
For the heavily star-culture driven world of digital media, however, the movement to virtual spaces still seems to prefer aggregation — perhaps even more so than in the physical world, since there are generally no lines to wait in or crowds to fight. Whether delivery is ultimately made via atoms (e.g., Amazon.com or Netflix) or bits (e.g., iTunes or Napster et al.), there is great consumer preference and loyalty for a single portal.
Web 2.0 builds on this, with recommendation engines and other discovery/sharing processes building appeal. This is where a high-quality, “radio-like” service fits in. It’s therefore no surprise that several popular music download sites include “radio” services among their offerings. Retail 101 tells us that there’s no better way to stimulate sales than by free samples of good stuff. This has always been one of radio’s key values to both consumers and record companies, but the connection has always been indirect, and airtime has always been scarce. Web 2.0 will change this, with “radio” services proliferating almost infinitely, while providing a showcase for a wide range of samples from an online vendor’s inventory.
This also fits well with the oft-mentioned “long tail” model, which posits that in an unrestricted market, half of sales come from the most popular ~10% of titles (“hits”), while the other half comes from the remaining ~90% (“catalog”). Terrestrial radio’s and physical storefronts’ economics limit them to serving up mostly just the hits, while online radio services and stores find it viable to present and sell the entire head and tail of the inventory.
Finally, music services aside, the strong social networking culture of Web 2.0 may also warrant the development of streaming audio services that address specific subject matter or interest groups — much like trade magazines do in the print world. Again, aggregation of audience builds the commerce of the site, and popular radio-like services could be a key component of this.
So while the implementation and business models may change, it seems there will always be a place for well-presented audio services. We call them radio today, and probably always will, but the term may someday become simply a recognition of its roots. Web 2.0 will likely widen the opportunities for new, targeted, radio-like services, and who better to provide them than experienced broadcasters? Keep your eye on this ball as it bounces into a new court.
