Mistaking Technology for a Business Model
In the technology business, there is a persistent tendency to mistake technology platforms for business models. Consider peer to peer technology, in the light ofBitTorrent’s ( News – Alert) massive headcount reduction and the likely end of the BitTorrent Entertainment Network, an online storefront for copyrighted media.
Undoubtedly, some observers will argue that the P2P business model, if not dead, will slow during the present economic sluggishness as media owners become more cautious about online content distribution.
The observations are about half right, at best. P2P never has been about business models, per se. It is a technologically efficient and different way to move large files around a network. It can be used to support popular, professional video, software distribution on a public or private basis or user-generated specialty video. But it fundamentally remains a transmission protocol, not a business model.
It makes about as much sense to argue P2P is a business model as to argue streaming or downloading are business models. They are technologies and distribution channels.
Some might point to Apple’s iTunes or Amazon’s Video on Demand service as competitors to P2P content. Again, the observation is half right. There is a clear business model difference between a packaged service such as iTunes, with clear revenue-sharing and massive distribution and promotion, and a P2P-based online service of any sort without those advantages.
The business model: a slam on short-term advertising prospects for electronic media, and what might be an escalating slide for print media. It isn’t simply the Christian Science Monitor announcing it will cease print publication next April. It is Time Inc. announcing a major restructuring, including 600 layoffs; Gannett is cutting10 percent of its newspaper workforce; Doubleday Publishing laying off 10 percent of its staff.
Martha Stewart Living Omnimedia is reporting a 25 percent decline in its publishing division’s revenue, McGraw-Hill cutting 270 jobs, while the Los Angeles Times cutting 10 percent of its editorial staff;
GE’s media operations might see a 10 percent to 15 percent revenue decline in 2009 on weaker ad sales. Local television earnings are expected to decline 13 percent as the election year spending goes away.
To be sure, media companies are diversifying into online channels. The problem is that such efforts only represent about 10 percent of revenue. The solution is to shift more content online. But some of us aren’t so sure the revenue percentages will track very well as that is done. In other words, the gross advertising dollars possible in mass media simply will not follow into the online distribution space.
Media now faces short term and longer term issues. But technology isn’t really the issue. It is partly a shift of business models, and a possible change in the profitability of some business models.