What's Wrong With the Current Media & Digital Business Model, and How to Fix It - Steve Blacker - MediaBizBlogger

The emergence of unlimited web site choices, coupled with text messaging, over 30,000 magazines and hundreds of cable channels can overwhelm both the consumer and advertiser. Advertising and promotion budgets have been reduced, while the placement options for these budgets have multiplied beyond the point where the business exists to support them.

Sites that have attracted major traffic, such as Facebook, Twitter, etc. are not yet profitable. Most major magazine publishers with the exception of Time Inc. and Meredith have yet to figure out how to make money from Digital.

So what's the answer?

There needs to be a major consolidation of bigger media and digital companies, either through acquisitions or by forming partnerships with other media and digital companies that are compatible or offer new growth opportunities. For example, WebMD might be a perfect fit for Hearst to combine with Good Housekeeping. Rather than having two separate editorial staffs providing content, one content director could supervise both operations. One brand director could be in charge of both companies' ad sales. Unless operating costs are reduced or consolidated, it will become almost impossible for many media and digital companies to achieve profitability. Imagine Yahoo acquiring Hachette Filipacchi Media U.S. This would give them access to significant content for women (Elle, Elle Decor, Woman's Day, Met Home) and automotive (Car and Driver, Road & Track, JumpStart). Again, content and marketing could be consolidated and operating costs lowered.

Hearst under Cathie Black's leadership has made a smart decision by not featuring content on their web sites from their magazines. Still the challenge remains how to get people to pay for digital content. One solution could be selling a combo subscription to a Hearst title, whereby the consumer gets both the magazine and digital access for a better price than if he or she were to purchase each separately. Of course, this means Hearst or any other publisher would have to start charging for online content now. Maybe Hearst can even include other benefits and make the subscription akin to a club membership. For instance, it could offer tickets to "Oprah," tours of the Good Housekeeping Lab, etc. Unfortunately, without being able to charge for content the business model is flawed. So now is the time to start testing outside-the-box ideas.

Ann Moore changed Sports Illustrated's corporate structure, to have one sales staff that sells both print and digital. This approach has become very successful and has increased profitability. Yet companies like Hearst and Conde Nast still have separate sales staffs for the most part. Hearst and Conde Nast do over 70% of their business through corporate packages sold by their corporate sales groups. These corporate groups have about 25% of the operating costs but generate 70% of the business. Why don't Hearst and Conde Nast trim the individual magazine sales and sales support staffs? The savings in head count could either drop to the bottom line or be invested in digital.

The world has both expanded and consolidated. Consumers have only

so much time and advertisers limited budgets. It no longer matters if you are a newspaper, magazine, cable channel or web site. Regardless, you are in the media, entertainment and technology business. This convergence provides great opportunity. The sooner everyone realizes this the better it will be.

Steve can be reached at blackersolutions@aol.com