by Adam Hartung | Oct 29, 2009 | Current Affairs, Innovation, Leadership, Television
I was intrigued to read about Apple proposing to rebuild a mass transit stop in Chicago in exchange for naming rights to the stop, as well as permission to advertise in the stop (Crain's Chicago Business – "Doors will open on the right at Apple stop.") Most people would ask "why?" And it's because Apple is moving toward a very different advertising future.
Most people think of advertising as the ads in newspapers and magazines, as well as on the radio, or television, or possibly billboards. Only we know that newspapers and magazines are failing because fewer people read them every month. Advertising in print media has limited value if there aren't any readers.
Likewise, people under 30 are watching a LOT less TV than the older generation. Whereas I grew up with my eyes on the "boob tube," increasingly I watch a lot less TV as I spend more time on the web. But my web use is nothing compared to people 17 to 34, who have almost abandoned television. They go to the web for entertainment. And they increasingly only watch TV shows and movies when they can download them – or possibly watch via DVD.
And Apple is at the forefront of killing the radio business. With iPods and digital music now cheap and plentiful, why listen to somebody else's programming? When you can program your own music, radio becomes less interesting. And if you want news there's the iPhone, Blackberry or similar mobile device to access the web – so why listen to talk radio?
Advertising as it was is gone. Coke, Pepsi, Procter & Gamble, Kraft, etc. built huge companies via media advertising. But media usage is declining sharply. So how do you get the message out to people who increasingly get their entertainment without using most of the traditional media?
And that's where Apple's move makes sense. By rebuilding a train station, they help promote their brand. It reminds me of when Hooters offered to fill the potholes in Chicago (a big problem) if they could put their company logo over them. This week I noticed that in the Newark, NJ airport the jetways had big billboards on the outside. And the TSA bins (for shoes, coats, laptops, etc.) had ads printed on the bottom. It's getting harder and harder to reach customers when they don't need traditional media.
So if you have historically been a big user of traditional media advertising, you'd better be rethinking that strategy. What worked in the past isn't going to work in 2015. Staying Locked-in to old ad budgets, and approaches, is going to keep producing declining returns. Traditional advertising won't even maintain current positions – much less work for new product launches. As ad costs go up, they are less effective. To reach customers requires shifting with the market.
If your new business plas is to use advertising as a way to grow your business, think again. While advertising isn't gone – it is a lot less effective than it was when traditional media was widely the source of information and entertainment. If you want to get people to recognize your brand, you have to start being a lot more clever. You have to find new ways to get in front of customers. You have to use your scenarios of the future to help you find the best way to promote your product. Because the old channels, and the ad firms that used to supply them, increasingly are an ineffective answer.
by Adam Hartung | Oct 23, 2009 | Current Affairs, Defend & Extend, eBooks, In the Swamp, Leadership, Lock-in, Music
If you try standing in the way of a market shift you are going to get treated like the poor cowboy who stands in front of a cattle stampede. The outcome isn't pretty. Yet, we still have lots of leaders trying to Defend & Extend their business with techniques that are detrimental to customers. And likely to have the same impact on customers as the cowpoke shooting a pistol over the head of the herd.
Book publishers have a lot to worry about. Honestly, when did you last read a book? Every year the demand for books declines as people switch reading habits to shorter formats. And book readership becomes more concentrated in the small percentage of folks that read a LOT of books. And those folks are moving faster and faster to Kindle type digital e-book devices. So the market shift is pretty clear.
Yet according to the Wall Street Journal Scribner (division of Simon & Schuster) is delaying the release of Stephen King's latest book in e-format ("Publisher Delays Stephen King eBook"). They want to sell more printed books, so they hope to force the market to buy more paper copies by delaying the ebook for 6 weeks. They think that people will want to give this book as a gift, so they'll buy the paper copy because the ebook won't be out until 12/24.
So what will happen? Kindle readers I know don't want a paper book. They wait. Giving them a paper copy would create a reaction like "Oh, you shouldn't have. I mean, really, you shouldn't have." So the idea that this gets more printed books to e-reader owners is faulty. That also means that the several thousand copies which would get sold for e-readers don't. So you end up with lots of paper inventory, and unsatisfactory sales of both formats. That's called "lose-lose." And that's the kind of outcome you can expect when trying to Defend & Extend an outdated Success Formula.
Simultaneously, as book sales become fewer and more concentrated a higher percent of volume falls onto fewer titles. And that is exactly where WalMart, Target and Amazon compete. High volume, and for 2 of the 3 companies, limited selection. This gives the reseller more negotiating clout against the publisher. So as the big retailers look for ways to get people in the store, they are willing to sell books at below cost – loss leaders.
So now publishers are joining with the American Booksellers Association to seek an anti-trust case against the big retailers according to the Wall Street Journal again in "Are Amazon, WalMart and Target acting like Predators?" . Publishers want to try Defending their old pricing models, and as that crumbles in the face of market shifts they try using lawyers to stop the shift. That will probably work just as well as the lawsuits music publishers tried using to stop the distribution of MP3 tunes. Those lawsuits ended up making no difference at all in the shift to digital music consumption and distribution.
"Movie Fans Might Have to Wait To Rent New DVD Releases" is the Los Angeles Times headline. The studios like 20th Century Fox, Universal and Warner Brothers want individuals to buy more DVDs. So their plan is to refuse to sell DVDs to rental outfits like Netflix, Redbox and Blockbuster. Just like Scribner with its Stephen King book, they are hoping that people won't wait for the rental opportunity and will feel forced to go buy a copy. Like that's the direction the market is heading – right?
If they wanted to make a lot of money, the studios would be working hard to find a way to deliver digital format movies as fast as possible to people's PCs – the equivalent of iTunes for movies – not trying to limit distribution! That the market is shifting away from DVD sales is just like the shift away from music CD sales, and will not be fixed by making it harder to rent movies. Although it might increase the amount of piracy – just like similar actions backfired on the music studios 8 years ago.
Defending & Extending a business only works when it is in the Rapids of market growth. When growth slows, the market is moving on. Trying to somehow stop that shift never works. Only an arrogant internally-focused manager would think that the company can keep markets from shifting in a globally connected digital world. Consumers will move fast to what they want, and if they see a block they just run right over it – or go where you least want them to go (like to pirates out of China or Korea.)
They only way to deal with market shifts is to get on board. "Skate to where the puck will be" is the over-used Wayne Gretzsky quote. Be first to get there, and you can create a new Success Formula that captures value of new growth markets. And that's a lot more fun than getting trampled under a herd of shifting customers that you simply cannot control.
by Adam Hartung | Aug 14, 2009 | Innovation, Investing, Music
This weekend marks the 40th anniversary of Woodstock, the rock concert that everyone remembers – even though almost none of us were there. Amidst all the tributes this weekend, I was taken by how much the music industry has changed during those 40 years – and how this industry can help us realize the need we all have to be adaptable.
When Woodstock occurred most music was listened to an a long-playing vinyl album, sold through a record store. Wow, have things changed. From albums to 8-tracks to cassettes to CDs and now MP-3 players. In just 40 years we went through 4 different technologies, and made at least 2 (8-tracks and cassettes) obsolete. Nobody at Woodstock was thinking about that, but it's made a huge difference in who makes money.
When you bought music in 1969 you went to an independent record store. Or Musicland, a retailer with over 1,000 stores in shopping centers that exclusively sold records – and 8-tracks. Now we buy almost all our music on-line. Either ordering a CD from someplace like Amazon, or downloading the music directly into a player with no physical item being shipped. Mass merchandisers like KMart and WalMart eventually made record shops obsolete, and increasingly the mass merchandisers are of less importance. Musicland went bankrupt.
In 1969 the artists made practically nothing from a concert. Concerts existed as promotional events for the records. An artist signed a multi-album deal with a record label – like EMI. The label offered a studio and put together the album. They then packaged it, and shipped it to record stores. For this, the band members got almost nothing. Only if the album sold well did they get any cash. So the record label told the musicians to go on the road and play. The objective was to do concerts so people got turned on to your tunes and went to buy them at the store. The musician didn't make anything until the album sold – in high volume.
In 1969 promoters paid the record label for the musician to pay, and the record label paid the musician. A promoter could not hire a musician, even if the musician wanted to play, unless the label agreed. Any performance fees were deducted from album royalties, so from the label's point of view the event fee was irrelevant. Headliners – a band that was already famous and trying to stay that way – usually took a big fee, but it was just an advance on royalties. There would be lesser known bands, and the label barely gave them enough money for gas because they didn't know if the album would ever sell enough to be profitable. "On the road" was a bad thing as far as musicians were concerned.
Tickets to Woodstock cost $18, and the promoters lost money (of course, about 90% of the attendees didn't pay). That's about $100 in today's money. Most promoters lived a grand life, but in reality made little money. Some events profited, but a lot didn't. The fee to the labels were high, and audiences were often not large enough. Not to mention bands that no-showed or arrived stoned because they didn't care — remember they got paid little to nothing. So eventually a couple of bad concerts in a row sent the promoter to bankruptcy court once too often and he ended up snorting cocaine in trailer-park-city.
Today, going to a 3 day event costs over $250 for tickets – and the promoters expect to profit in the millions. The labels get a lot less, as many musicians negotiate their own contracts. But the prices are high enough that the musician is guaranteed a rate of return, and the promoter is as well. And the promoter usually insures all events just in case the musician no-shows are turns up stoned. Unprofitable events are rare.
Labels no longer run the show. Musicians now can negotiate much better single-album deals because distribution is far easier. Musicians can self-publish if they like, selling their own tunes off their own websites. This has meant that top performers make unbelievable sums – far more than their counterparts in 1969. The Carpenters used to have to beg for money for a new car, while their albums sold millions. Now, because they can guarantee the big audiences, all that money the label used to take, the musicians get. So tens of millions flow their way. If you have any doubt, look at the private jets and helicopters owned and flown by the lead drummer for Pink Floyd. Or about any rapper on late night MTV. It would make a corporate CEO envious.
And the company that makes the most money of all in music is Apple. They have the biggest distribution system, and sell the most music. They don't have any artists on contract, don't produce any music, and don't carry any inventory. They just run a server farm that collects money and sends out digital files.
Of course, it's still tough to be a new musician. But you no longer have to sell your soul to a label. You can produce your own music, using affordable gear in your basement that's better than Joan Baez had in 1969 at the EMI studio. And you can sell the tunes yourself. If you work hard at promotion, including working those promoters to give you a warm-up slot, you can capture all the revenue from your songs from your own web site, and sign up your own distribution groups. It's much more in your own hands. Of course, that also means the labels don't have the money they once did to create an Elvis, or Beatles, or Rare Earth. So it's a lot more up to you to earn that money, rather than hope you get lucky and lots of label backing.
I doubt Jimi Hendrix would recognize anything about the music industry today. Of course, given how stoned he liked to get it's hard to imagine Jimi Hendrix being alive today.
Things change. We sometimes don't see them, because it's like watching the grass grow. You don't notice differences unless you compare two snapshots in time. Then we can see just how much things change. If you want to be a winner, you have to learn to shift with these changes. Only those who make the shifts survive. Just ask Barry Gordy, the one-time founder of Motown who saw his billion dollar business disappear. Now a footnote in history. For all of us to avoid becoming similar footnotes, the moral is to be ever vigilant about identifying and adapting to market shifts.
by Adam Hartung | May 26, 2009 | Current Affairs, Defend & Extend, General, Lifecycle, Lock-in, Openness
Today I was hit by a market shift that left me baffled as to what I should do next.
Everybody, every work team, every company has Lock-ins. Lock-ins help you operate quickly and efficiently. And they blind you to potential market shifts. I have as many Lock-ins as anyone. Some I recognize, and some I don't. It's always the ones we don't recognize that leave us in trouble.
For 18 years I've listened to only one radio station in Chicago. WNUA 95.5 smooth jazz. I like jazz, and I've just about quit listening to anything else musically. I grew accustomed to the people who played the "light jazz" music on WNUA, and so enjoyed it I even listened to the station on my computer when traveling out of town. I was a stalwart, loyal fan. My whole family knew that when I was driving the car, the channel would be 95.5.
Then, after a long weekend out of town, I got in the car this morning. I pushed the button for 95.5, and for some reason there was Hispanic music. I couldn't figure it out. This didn't make any sense. So I turned off the radio and went about my business. When I returned home I logged onto WNUA.com to find a letter from a Clear Channel Chicago executive telling me that WNUA was no longer broadcasting as of 10:00am on Friday, May 22. The web site was gone, only this one HTML page existed. I was stunned.
I quickly did a Google search and found an article published by the media critic at The Chicago Tribune dated May 22, "WNUA Swings to Spanish Format." I immediately thought "this can't be right. There has to be something I can do to get back my radio station. Maybe if I email Clear Channel?" See, I quickly wanted to defend my radio selection, and extend the life of the product I personally enjoyed.
But then I read the article. Turns out there are a lot of smooth jazz lovers who were loyal to WNUA. But, unfortunately, that number has not been growing for a while. The channel management had tried many things to boost listeners, but none had worked. The market just wouldn't grow, despite their efforts. The jazz radio listener market had stalled – and was showing signs of (oh my gosh) decline! I was getting older, and apparently us old Chicago smooth jazz hounds aren't creating new jazz followers.
But, the station had done a lot of analysis as to what was growing. Hispanics now outnumber African-Americans as the largest minority group in the country. Clear Channel Chicago did a full scenario about the future, thinking about what would be needed to fill the needs of Chicago's biggest listener groups in 5 years. Looking forward, there was no doubt that smooth jazz wasn't going to grow – but the opportunity for an Hispanic station was "crystal clear". Competitively, they would continue losing revenue playing smooth jazz, and although the cost of shifting would be great – the opportunity to be part of a growing market had much more to gain. Chicago is the 5th largest Hispanic population in the USA and growing, with 28% of the current population Hispanic. Clear Channel management did both scenario planning and competitor analysis before deciding to make this switch – just what a Phoenix Principle company is supposed to do!
KaBoom. The market was shifting, and I saw it, but I didn't think about the impact on my own life. I just assumed WNUA would always be there playing jazz for me. But the people at Clear Channel looked at the market shifts, and how they could best use their 5 stations to service the most people. That is good for Chicago, and good business for Clear Channel. If they wanted to keep growing, WNUA had to be replaced. I would bet the hate mail has been extreme. The longing for our old station must be felt by several thousand people around Chicago. It's hard to let go of a Lock-in.
Oh, I feel terrible about not having my radio station. But the right move was made. I should have thought about this more, and seen it coming. I could have scouted out other radio stations, and started looking for other music styles that I'd like to listen to. But I wore blinders – until the market shifted and left me in the cold.
I'm curious, have any of you readers found yourself the unfortunate loser due to a market shift? Did some favorite aspect of your life or work disappear because the market went a different direction – and you found yourself in a small segment unprofitable to serve? I'd love to hear more stories from folks whose Lock-in left them unprepared for a change in lifestyle or work.
As for me, I guess there's always CDs. Or NPR (I'm getting old enough to like the news). But those would be D&E behaviors intended to ignore the shifting market. So, maybe I should start letting others in my family select the radio stations so I could climb out of my cave and learn what more modern musicians are doing these days. It would do me good to update my music knowledge – get me closer to people who have music appreciation beyond jazz, and probably make me a lot more likable as a driver. It's never too late to open up some White Space and learn what's new in the world you couldn't see because of your old Lock-in.
