(Subscriber Report) New Media Companies Confront Failure, While Traditional TV Network Model Proves Sustainable

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Northeast Harbor, Maine: Although it is the dog days of August, the weather here in Maine's AcadiaNational Park is unseasonably warm. As I sit here overlooking spectacular NortheastHarbor, crowded with yachts, wooden-masted sailboats, lobster boats, sloops and dinghies, I am impressed by the generational consistency and continuity that has maintained the dignity of this summer home of some of America's legendary families since the early 20th century. But as an economist schooled in the dynamics of change, I cannot help but also recognize the transformation here -- symbolized by the apparently empty home of the late Brooke Astor, whose estate is now at the center of a drawn out legal battle. There is a clash of cultures, traditions and generations here that parallels, in many ways, the clashes that are quietly reorienting the media world. The key take-away message is not one of change overtaking tradition, however. In fact, it is just the opposite. Today's report focuses on the resilience of traditional media empires and the self-destructive patterns of new media that are holding back progress, development and economic growth.

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Here in Northeast Harbor, visitors, first-timers and new residents know little of the community's history and traditions. Celebrity newcomers like Law & Order producer Dick Wolf and Martha Stewart (in neighboring Seal Harbor) are relatively new here and while the old and new co-exist and share the beauty of Acadia, they rarely interact and share few common values. Similarly, as much as the media establishment tries to embrace a new culture -- defined by Google, Facebook, Twitter and YouTube -- the two have far too little in common to truly coalesce into a single integrated industry. Leaders of venture capitalized new media businesses fail to respect the traditions that generate $200 billion annually in advertising revenues. And the investors and leaders who have catapulted to the top of the new media world have little contact with or connection to the history upon which they are hoping to build their businesses.

This summer's recessionary realities have produced impressive cohesiveness among the broadcast and cable network community. TV network sales organizations have stood together as one (although marred by some unfortunate communications lapses). Old school sales executives -- scorned by the new media world -- maintained their pricing integrity and held firm in the face of a hurricane of pressures, standing tall against the winds of change and competition. ABC… CBS… NBC Universal… Turner Broadcasting… Fox… continue to lead the television industry while emerging media wannabes MySpace, YouTube, Canoe Ventures, and hundreds of others still struggle to find a viable place for themselves and confront a continued failure to identify profitable business models. MySpace last week hired the firm led by veterans Michael Kassan and Wenda Millard to lead their ad sales efforts – falling back on the old trusted institutions while they search for sustainable new business models. And while the traditional TV networks stand tall, Google, Yahoo, Amazon and Microsoft have climbed into the cage -- attorneys in their respective corners -- and squared off in a winner-take-all battle to the death. It's the new media companies – not the old and established – that are fighting for their lives, battling for survival, turning against their own, and lacking a vision for the future.

While the fundamental value models that underwrite established media are slowly disintegrating, nothing viable has yet emerged to replace them. For all the enthusiasm vested in interactivity, conversational media, social networks, and instantaneous feedback loops, the basic currencies upon which media and advertising are grounded remain unchanged. The recent announcement by a consortium of advertisers, agencies and TV networks of a research initiative designed to compete with Nielsen has been building behind-the-scenes for years and the industry deserves great credit for attempting to replace a dysfunctional system. The development of a true alternative currency for TV and online will require at least a decade and an investment well into the hundreds of millions. It may be a partial solution and offer a realistic threat to Nielsen's dominance, but it is far from the panacea of a currency that can integrate and measure the comparative impact and value of multiple marketing communications techniques and combinations. There has never been a successful sustainable consortium in the media and advertising business, and there is little appetite among potential financial backers to invest in a high risk research business that offers 1-3 time multiples and questionable scalability. Until media sellers are prepared to pull the plug on Nielsen funding without an alternative measurement system in place, the research business will continue to focus on piecemeal syndicated and custom models – but not on new currencies. And because many of Nielsen's contracts have years to go before they expire, there are few options open to the industry. If the established research techniques are outdated and in need of replacement, why…why…why… did the online media community fund from the outset an almost identical and equally irrelevant system? Why did the online advertising industry choose to clone the Nielsen ratings system rather than build from scratch a research model that achieves the goals the consortium has outlined?

Here in Northeast Harbor, tourists and the new elite are more visible and prominent than the long established hierarchies. But, as in the media industry, don't mistake where the true control lies. The basics remain unchanged. The families who built this community remain firmly in control of its heritage. There is an ethic here of hard work, respect for tradition, respect for the culture and respect for the environment. Bottom line, the institutions survive. Traditions remain intact even as they are surrounded by threats to their very foundation.

There are very few in the media industry who live by the original Radio Act of 1927, which required that the broadcast industry act in the "public interest, convenience and necessity." But those who do remain the true leaders with long-term values in place. The false prophets from Silicon Valley have failed in their mission to invent a new industry on the graves of the old. Just as traditions stand tall here in Maine, so do traditions remain strong in the media world.

Jack Myersadvises media companies, agencies and marketers on economic trends and business development strategies. He can be contacted at jm@jackmyers.com.