Hold tight! Turbulent times still ahead of us

The decade may be drawing to a close, but the rollercoaster ride the media sector has been on shows no sign of slowing down

That’s the end of 2009, thank goodness/ a brutal year, closing a difficult decade. So, what has happened? In summary, 2009 highlighted the two huge trends that media businesses have been wrestling with through the decade.

First, of course, is the pace and change of digital platforms. At the turn of the century, we had the information superhighway, Netscape, Friends Reunited, BT Cellnet and email; by the end of the decade we have IPTV, Google, Facebook, O2 and Twitter. Quite a rollercoaster.

Second, just as obviously, is recession: revenues are down in the mid-teens for TV and radio, and are much worse again in national and regional press. There was even a decline in ad spend online, apart from search (where growth also slowed). It’s been like that all through the “noughties”, with the exceptional change and opportunity that digital has generated, being sandwiched by the dot-com bust and the global credit crunch.

Looking back, the decade started with clear pointers to these two future trends – but we were all too excited to notice.

First was Y2K – the huge non-event when all digital clocks in all PCs were supposed to count back down to zero, destroying records. Nothing happened. We should have learned then to be wary of the ludicrous overhyping of the impact of digital change on real-world behaviours. Perhaps if all marketers had understood better that Y2K was a non-event, we might all have realised the same about Second Life.

Next, AOL and Time Warner was the big media deal of the day – just now being unwound, ten years on. The leading new digital platform (AOL) and the old world’s best content (Time Warner) seemed like a match made in heaven (at a price to match). Yet this was no more successful than the acquisitions developed since between old media content and new media platforms – like ITV’s purchase of Friends Reunited or News Corp’s acquisition of MySpace. We’re all still struggling to identify the business models that make sense of social networks.

As if this platform change wasn’t difficult enough on its own to navigate, this quickly became a decade beset by financial pain. No sooner had media begun to recover from the dot-com bust, when the financial scandals of the mid-decade (with Enron being the midwife to Sarbannes-Oxley) changed corporate reporting forever. In turn, this financial pressure has transformed the way the marcoms sector is remunerated with the rise of procurement functions client-side, the decline of commission and the growth of auditing.

All businesses that have survived are leaner, fitter and more nimble than ever before. For all of us, having come through that degree of financial pressure, and that level of platform transformation, there should be remarkable confidence for the future. It can’t be that bad again, can it?

For traditional media, competing against freewheeling digital start-ups and a generously funded BBC, even greater levels of regulation were also to ensure little breathing space. As a result, all businesses that have survived are leaner, fitter and more nimble than ever before. For all of us, having come through that degree of financial pressure, and that level of platform transformation, there should be remarkable confidence for the future. It can’t be that bad again, can it?

Well, perhaps this is just the end of the beginning. The next few years will transform the sector again, so buckle up as it’s going to remain a bumpy ride.

First, we will continue to wrestle with platform change: TV will go fully digital by 2012 – by which time Sky will have more than 11 million subscribers, but IPTV and superfast broadband will also become mainstream applications. Radio will go digital by the middle of the decade, but along the way newspapers will fail to secure revenue for news online (especially when served free by the BBC) but will spend a lot of time trying.

Second, there will be a second dot-com bust. There are too many small digital start-ups without revenues that will fail to secure second-round funding in a banking world that is tight on credit and long on risk. Nobody has yet demonstrated how to convert social networking into a sustainable business – even the Royal Mail is losing millions of pounds every day trying to do that and it has been at it since 1840.

Closer to home, we should all expect government spending to decline by 25%. Given the COI is the country’s biggest advertiser, that puts everyone on notice. Couple that with the agency review taking place right now and that’s a recipe for lower yields and lower spending.
The BBC will be smaller. Part opportunity for competitor media, part threat for independent production companies and other suppliers. But the next review of the charter and licence fee – and the BBC’s own pre-emptive review of its portfolio and services – is unlikely to recommend (let alone fund) the inexorable growth in the BBC’s media footprint.

Finally, the media agency and media owner sales house will be submerged by online trading technology and auctions. It makes no sense when everyone can bank online or book their holiday over the web, that media inventory is still sold through agencies and commission.

So, enjoy the Christmas break because we’re going to need all our energy for 2010.

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