1All rights reserved. Copyright © 2006 Vringo Inc. This file may not be redistributed without prior written permission

Benjamin Levy

March 2007

Old Media vs. New Media

It’s a jungle out thereIt’s a jungle out there

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Topics

• Do old media have a problem?

• The dynamics of competition

• An innovator’s dilemma for old media

• The evidence for old media displacement

• What’s next

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A paradoxical snapshot of old media

• At first glance, the evidence for old-media decline appears contradictory

• Are old media in decline?

• Or doing better than ever?

• And how can we make sense of this mess?

Edison Research. (2006). Time Spent Listening by Teens (12-17) down 22% since 1993. from http://www.edisonresearch.com/home/archives/2006/09/followup_edison.php

Radio: Time Spent Listening by Teens since 1993

TV: Average viewing time p/ HH since 1995

Nielsen Media. (2006). Television's Popularity is Still Growing. 2006, from http://www.nielsenmedia.com/nc/portal/site/Public/menuitem. 55dc65b4a7d5adff3f65936147a062a0/?vgnextoid=4156527aacccd010VgnVCM100000ac0a260aRCRD

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A competitive ecosystem

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Ecosystems: Natural & Business

• Populations compete for resources– Water, food, space– Business resources

• Finding one’s niche– Orthogonal niches no competition– The more niches overlap the stronger the competition

• Coexistence

• Competition– Displacement– Extinction?

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6 Dimensions of media competition

Gratifications sought• Entertainment• Information• Sociability

Gratification Opportunities• Times• Places• Relevant opportunities

Time spent on media• Easy to measure• Last one to change• A function of opportunities

Advertising investment• Cost of sales• Reach

Paid content• Variety• Cost of goods sold• Distribution

Subscriptions

Dimmick, J. (2003). Media Competition and Coexistence: The Theory of the Niche. Mahwah, NJ: Lawrence Erlbaum Associates.

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Unequal competition

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The Innovator’s Dilemma

• Established companies excel at – Incremental improvements– Tailored to the largest, most demanding

customers– Driven by technology advancement that

outperforms market needs

• The challenges come from innovations that

– Do not perform as well– Are more convenient– Address untapped markets

• Disruptive innovation opportunities are asymmetrical

– They are unattractive to large enterprises; but

– Look like wonderful opportunities to small ones

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Performance Reliability Convenience Price

Performance Reliability Convenience

Performance Reliability

Time

Func

tiona

lity

Technology trajectory

Christensen, C. M. (2000). The Innovator's Dilemma. New York: Harper Business.

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The Innovator’s Dilemma: an illustration

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But, pâté is not easily found in the jungle

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Six dimensions of competition

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Gratifications sought

Information Entertainment Sociability

Information Entertainment Sociability

(micro) dimensions of competition

Stafford, T. S., Stafford, M.R. (2001). Identifying motivations for the use of commercial Web sites. Information Resources Management Journal, 14(1), 22.

Ruggiero, T.E. (2000). Uses and Gratifications Theory in the 21st Century. Mass Communications & Society. 3(1), 3-37.

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Gratification opportunities

previously empty spaces

underutilized spaces

core spacesOld Media

New Media

• Games on the handset• Reading one’s “local” newspaper

while abroad• Playing musical ringtones

• Watching TV while at work

• Streaming video on demand, instead of broadcast TV

• MP3 and podcasts instead of radio in the car

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Advertising investments

• Ad expenditures have been

remarkably stable

– Growing year on year

– But stable as a % of GDP

• Growth in Old/New Media ad

investment tells another story

– Old media increased slowly,

year on year (5.4%)

– New media increased rapidly,

year on year (45.3%)

• Old media’s pie is getting

smaller

0

2

4

6

8

10

12

14

1997 1998 1999 2000 2001 2002 2003 2004

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

US GDP ($, trillions) Advertising as a % of GDP

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Smallest ad investment that CBS can profitably accept

The Innovator’s Dilemma in Practice

Smallest ad investment Google can profitably accept 5¢

$20,000

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Content

• Arguably, old media’s strongest suit– Until Napster, KaaZa, etc. are taken into account– And the Apple Store

• Have you noticed that ABC, NBC, CBS now put most of their primetime programs on the net?

• Think of ringtones, wallpapers, and games downloaded to phones

• By the way• TV and Radio have never had paid content

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Subscriptions

• Virtual worlds

• Real gambling in virtual casinos

• Premium “adult” content

• Games for consoles make more money than movies

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Time spent on media

• Newspapers and magazines already heavily displaced– Any city where craigslist is

in, the classified are out– Why do newspapers still

print the stock prices?

• Radio is under sustained pressure– MP3 players, satellite radio– Time spent listening is

dropping– Ad revenue is dropping

• TV’s turn– Broadband penetration

only recently reached levels of dial-up penetration

– Quality of alternatives constantly improving

– Other dimensions favor new media

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Summary

Old Media New Media

Gratifications sought Gratification opportunities Advertising Content Subscriptions Time spent on media

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Conclusions

• There is no coexistence, just the appearance of it

• Will television companies go away?

Doubtful• Will TV go the way of

the dodo?

Most likely

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Thank you