Global Trend

The Media Transformation Continues

To understand where we’re going, it helps to understand where we’ve been. If you bought a new car 10 years ago, it came standard with a cassette deck, but a CD player was a somewhat expensive option. If you buy a new car today, it comes standard with a high-end CD player, but a cassette tape deck is an expensive and almost useless option. The cassette tape, which revolutionized the way we listen to and share music with others, is dead.

Most technologies go through this sort of life cycle, from birth to maturity to obsolescence, but entertainment technologies are a special case. They change much more dramatically and frequently than most other technologies. And they are subject to huge, disruptive changes.

The cassette tape, for example, was patented in 1964 by the Philips Company. It was a primitive, low-fidelity alternative to reel-to-reel tape or vinyl records. It offered several advantages: It was smaller, more portable, and more durable because the enclosed tape was less likely to get tangled than the tape on a reel, and it couldn’t get scratched like an LP. As the tape quality improved and such sophistications as Dolby noise reduction and high-end tape decks evolved, the race was on to dominate the market.

Interestingly, big companies, such as 3M, Sony, and Ampex had been making cassette tapes for years when two Japanese upstarts, Maxell and TDK, introduced the first truly high-quality tapes in late 1975. By the late 1970s, Maxell and TDK were household names, and expensive metal and chromium tapes were all the rage. Recordings were being released simultaneously on vinyl and cassette tape.

In 1979, Sony introduced the Walkman and completely revolutionized the world of music. By 1983, cassette sales reached 236 million units to outstrip the sales of vinyl records for the first time. Sony would ultimately sell 100 million Walkman units. By the mid-‘80s, long-playing vinyl records were fast becoming history, and cassettes were the mainstream of music listening.

But that same year, 1983, Sony and Philips both introduced the compact disk, or CD, to the United States. Some 30,000 players and 800,000 disks were sold that year. By 1990, a third of all households had CD players, and almost 10 million players and 288 million disks were sold each year. Worldwide sales reached a billion units.

To understand how the rate of progress has accelerated, consider that the long-playing vinyl phonograph record was introduced in 1928. Cassettes eclipsed them 55 years later. But it took just seven years after that for CDs to eclipse cassettes.

Not all of our entertainment technologies will follow such a rapid pattern, but sweeping changes are emerging in every area, and many of them are destined to be swift ? as well as profitable for those who can spot the trends.

Video recording and playback technology followed a pattern similar to the one that unfolded in the music industry.

Various companies began experimenting with the idea of recording video on tape in the 1950s, and by 1965, Sony had introduced the first half-inch home video recorder for around $3,000 ? almost $18,000 in today’s dollars. A wide variety of companies scrambled to introduce their own products, each with its own proprietary standard and all of them mutually incompatible.

In 1975, Sony introduced its Betamax player. Costing more than $2,000, it used one-hour half-inch tapes. But the following year, JVC introduced the VHS format with a VCR that sold for only $885, and it eventually won the battle for the format standard.

In the meantime, Pioneer launched LaserDisc in 1978. The playback quality was dazzling, but the disks were as large as vinyl records and too costly for the public to adopt on a large scale. Moreover, you couldn’t record on them. VHS became the standard for home movies and TV time-shifting.

Just a decade after the introduction of VHS, DVD discs and players went on sale in Japan. A year later, in 1997, they appeared in the U.S. Within five years, production of DVDs had surpassed VHS cassettes, increasing from 1 billion units in 2001 to 1.7 billion units in 2002, while VHS fell from 1.5 billion to 1.3 billion in the same period. In short, the video cassette tape, which was a revolutionary development in the entertainment world, had an even shorter lifespan than the audio cassette tape.

Today, various digital technologies are poised to deal the final blow to the CD, the DVD, and the players for both. With the advent of the iPod in 2001, and with upgrades coming at a breakneck clip, consumers can get all the music they want from the Internet. The CD’s days are numbered.

And an article in PC Magazine laments the impending demise of movie theaters in the face of technology that delivers a real theater experience in your living room. Most traditional movie theaters are already gone, replaced by multi-plexes with screens not much larger than the ones now available for home use. Acknowledging this, movie companies are set to begin releasing DVDs of new films at the same time that the movies appear in theaters.

But even DVDs appear to be doomed. In October 2005, Apple announced video entertainment that consumers can download from iTunes and play on the new video iPod. Partnering with ABC, for example, it’s selling episodes of such shows as “Desperate Housewives” and “Lost” for $1.99 each, according to a report from Associated Press.

Although some critics insisted that people wouldn’t pay for video on demand, Apple reported selling more than a million downloads in the first 20 days of business.

Hastening to catch up with what is sure to become the wave of the future for both TV programming and movies, separate deals were announced within weeks by CBS with Comcast and by NBC Universal with DirectTV, both of which will sell programs such as “CSI” and spinoffs from the “Law & Order” series for 99 cents each, according to Reuters.

Video on demand has been poised to take the entertainment world by storm for some time now, and these initial deals are simply a taste of what’s to come. For not only is the hardware, such as the DVD, under a death sentence, so is the business model for distribution, advertising, and every other aspect of the business.

Making this development even more interesting is the fact that Sprint PCS just introduced a phone that receives 17 channels of live television. Original programming is being created specifically for the small screens. Fox has already generated a minute-long mini-series based on its TV show “24.”

And according to a recent report by CBS correspondent Anthony Mason, Sony just introduced its “location-free TV” bay station, which can send television content from anywhere in the world back to a viewer’s TV, DVR, or DVD for later replay.

In light of these trends, we offer the five following forecasts for your consideration:

First, the most intense and immediate battle in this arena is going to be over content. Those companies that can capture ? or create ? the most popular programming and movies will win, because people will gravitate toward that content. There will be big legal battles in sorting out who has the right to distribute that content and who profits from it. The only clear winners at this point are the lawyers, but new entertainment companies may form around this struggle for dominance.

Second, all the technology for delivering this content will revolve around the Internet. And it will all migrate away from wires and toward a universal wireless system. Let’s face it: Wires are a crude and clumsy technology, from the tangle behind every home electronics device to the millions of miles of wires lining our streets. The public demand for entertainment will drive all communications systems into a wireless age, where content will be delivered to everything from hand-held devices like the iPod to home entertainment centers that provide a total theater experience. And the content will be everywhere, all the time, and always on. Companies that can deliver this experience seamlessly will position themselves to be huge winners in the coming decades. Apple could be a contender.

Third, these developments will have a near-term effect on newspapers that could destroy many of them if they don’t formulate another strategy. The pressures on newspapers are directly related to the Internet and changes in the entertainment industry. For example, the Web site Craigslist has made newspaper classified ads irrelevant, stripping them of a key source of revenue. In addition, many newspapers have been kept alive by movie advertising. With movie theaters rapidly becoming irrelevant, too, that takes away another big source of revenue. Add bloggers to the list of threats, and it appears that many newspapers may simply fold in the coming years. Those that survive will be the companies that are intently focused on proactively changing their revenue streams today.

Fourth, new portable technologies will emerge to take the place of devices such as Walkmans, iPods, and even laptop computers. At the Plastic Electronics Conference in Frankfurt, Germany last fall, a printable screen was introduced that can provide moving graphics on such things as concert tickets. Paint-on LCD technology is hot today, and within the next 10 to 15 years, we will see computer screens that can be folded up and put into your pocket. Connected wirelessly to a device like the Bluetooth earpiece now common for cell phones, this screen will provide you with any content you call up, no matter where you are.

Fifth, the very concept of advertising will evolve beyond what we can imagine today. Because of the highly targeted and on-demand nature of entertainment, enough will be known about each customer to deliver only those messages that customers want. Advertising, like entertainment, will be delivered by pull from the consumer, not push from a corporation. Moreover, it could well become the purview of the delivery company, not of any manufacturer of a product. For example, if Apple knows exactly what entertainment content you request, it may be in the best position to decide which ads you see. An entire new system of marketing will evolve from this phenomenon.

References List :
1. PC MAGAZINE, September 2005, “Newspapers and Movies ? Both Fading Fast,” by John C. Dvorak. ⓒ Copyright 2005 by Ziff Davis Media Inc. All rights reserved.2. THE ASSOCIATED PRESS, October 13, 2005, “Will IPods Change TV the Way It Changed Music?” by David Bauder. ⓒ Copyright 2005 by The Associated Press. All rights reserved.3. REUTERS, November 8, 2005, “NBC, CBS to Offer Shows on Demand for 99 Cents,” by Andrew Wallenstein. ⓒ Copyright 2005 by Reuters. All rights reserved.4. To access the report “Television Revolution,” visit the CBS News website at: www.cbsnews.com/stories/2005/11/28/eveningnews/printable1080594.shtml