Riding the Technology Wave

The old adage,” The more things change, the more they stay the same” is meant to describe the (non-) effect of technological, political, and social change on human nature. The original author intended this to mean that while the world today is very different from the world of the past, the people themselves are the same. If you were to use a time machine to pick up a baby from the 16th century and raise him today he would have all the same advantages and foibles of any modern man. Similarly, many of the obstacles we encounter as a society: bureaucracy, intolerance, and selfishness are present in every era of human civilization.

But it is a mistake to confuse the fact that human nature never changes with the reality that human behavior almost never stops changing. This is the cardinal mistake that industries and people have made for hundreds of years. The printing press changed the reading and learning habits of people around the world while early industrialization changed buying and manufacturing behaviors. At each turn, those advantaged by the old ways fought tooth and nail, ultimately unsuccessfully to prevent these changes. While human nature remained unchanged the actual behaviors: patterns of activity, methods of accomplishment, and ways of achieving success were fundamentally altered. The are some recent examples of this phenomenon that can help us understand where we might do better.

Played Off the Stage – The Music Industry

In some ways the music industry was the proverbial canary in the coal mine of the information age. They were the first of the big, well established multi-national industries to suffer through a major sea change in human behavior. Prior to 2000 virtually all money to be made in the music business was made by a few big publishing houses and their bottom lines were directly linked to one thing: album sales. To this end, the recording industry focused all of their efforts into lowing production costs and increasing sales. All other avenues of revenue, such as radio airplay, concerts, sales of singles, and music videos were secondary and were really only used to increase album sales. The publishing houses themselves weren’t the only ones living off album sales: recording artists, publicists, managers, agents, and other ancillary personnel all based their salaries primarily on sales of albums.

Eleven years later and album sales are dismal and few people in the industry rely on them for their primary revenue. The causes for this change in consumer behavior have to do with advances in technology: the rise of digital music players, the global reach of the Internet, and advances in digital music compression, but of more interesting concern was how the music industry choose to combat this change and the successes and failures they had along the way.

In many ways the first failure of the music industry was its inability to recognize the potential consequences of change before it was beyond their control. It was the music industry themselves who first opened the door to digital music by pushing the CD format. Fearing a loss of sales due to the cassette tape’s easy copy-ability, the industry pushed a new standard, the compact disc where music would for the first time be available directly to consumers in a digital format. The fact that the CD was also the next great medium for personal computing was considered a bonus rather than a downside. It simply never occurred to industry insiders to consider the malleability of digital content. Once digitized, music can be re-recorded, re-compressed, re-mixed, or re-formatted extremely easily and the perfect tool for this was the personal computer.

The music industry’s next big mistake was to underestimate the scope of the problem. Guess what else was about to hit the big time just as CD sales were peaking . . . the Internet. Internet + CD = Music sharing. I can equate this to shag carpeting, barefoot kids, and static electricity: if you have the first two, you get the third and no amount of cajoling, punishments, or threats will prevent it. But the music industry constantly tried with attempts at lawsuits and digital rights management (DRM). It was only when the industry realized that by making the process of finding and buying music online simpler and easier to do through legal means than through illegal means that revenue began to recover. To use another metaphor, they learned that the the best way to combat piracy on the high seas was not to send out the navy, but to send the goods by plane.

Eventually the music industry reacted to the change in consumer behavior in the best, and ultimately only, method possible: they quit fighting against it and adapted themselves to move with it. Today there are far more, usually much smaller and more nimble, publishing houses that focus more on digital mediums than physical product. Recording artists are usually compensated more from live appearances and merchandise than from music sales. Some have even gone so far as to skip the publishing houses all together and distribute their own online music.

Tinfoil Rabbit-Ears – The Television Industry

Television manufacturers are just now beginning to realize that they may be at the same place that the recording industry was a decade ago and, frankly, they are petrified. Since they don’t know what is going to happen they have decided to try throwing everything they can think of at the problem in the hopes that something will stick. Since it’s become clear that Blu-ray technology, once considered the wave of the future, is faltering in terms of adoption and household use and other recent attempts at guessing the next big thing in televisions, including attempts by Google and Apple, have been even worse failures television manufacturers have been practically throwing new features into their sets in the hope that one or more will turn out to be the next big thing:

  • Every major TV manufacturer has come out with a 3D or 3D capable TV. Sales of these sets have not been good for disputed reasons.
  • Internet-capable TV are now much more common on the high end spectrum and are working their way down to more moderately priced sets. Consumers have yet to be convinced that this is a deciding factor in which TV to purchase.
  • TV’s with built in apps are now common, including the ubiquitous Netflix and YouTube apps. Yet studies show most of these apps are rarely used and are certainly not a factor in most purchases.
All of this is just guess work by the industry. None of these efforts have shown any indication of being huge sales drivers. Meanwhile strong customer response and high early adoption rates for other TV-related technologies such as SlingBox and TiVo have been ignored and have yet to see significant implementation by television manufacturers.

Audio Illusions – The Mobile Carrier Industry

Unlike the television industry the mobile carrier industry, particularly in the US, knows exactly what is coming because they’ve seen it before. Back in the good old days before cell phones and VoIP, land-line phones, or just “phones”, required you to set up both a local and long distance carrier. While the local carrier was almost always determined by your address (local monopolies were the norm), the three main long distance carriers fought for each customer’s business. TV commercials for AT&T (no relation to today’s at&t), MCI, and Sprint were as common as Verizon, at&t, Sprint, and T-Mobile ads today. Eventually though, low-cost long distance cards, mobile calling plans with free long distance, Voice over IP phones, and other technological advancements basically did away long distance telecommunications as a viable growth industry. Hardly anyone even thinks about their long distance carrier anymore.

Eventually this same pattern will come to mobile phones. Cheaper data plans, pubic WiFi, wholesale LTE, and cheaper and better satellite communications will eventually make cellular voice and text plans obsolete. Already you can see the shift in marketing away from voice and text plans and on to data. Often unlimited voice and text is simply thrown in as an added benefit of the data plan rather than the other way around. Data plans themselves are coming down in price and will continue to do so for the foreseeable future.

So if the industry knows that a change is inevitable what strategy do the mobile carriers use to keep from loosing their advantage? Simple: three card monte. Have you ever noticed that none of the major mobile carriers have plans that can be compared apple-to-apples? Some give away free nights and weekends, others provide free mobile-to-mobile or free calling within a circle. Data plans are even worse, with arbitrary monthly caps or service throttling. Other contract details are equally confusing, try to compare early termination fees, overage fees, roaming fees, or 4G coverage maps between carriers and you are left with an incomparable mess. Even the definition of 4G varies by carrier to carrier. Worse, compare today’s rates in three months and you’ll get completely different results. Sure, much of this can be attributed to one-upmanship and changing marketing  strategies, but it is also a strategy that is designed to help hold off (at least temporarily) the eventual loss of revenue that technological change will bring. The rationale is that if consumers can’t be sure exactly what they are buying they will have a hard time determining who has the best deal.

Ultimately this strategy is doomed to failure. Right now mobile carrier growth is driven by innovations in phones and mobile data speeds. However no technology can maintain a steep upward curve of technological innovation forever. At some point minor advances in functionality, speed, or power become less of a purchasing concern than reliability and price. The desktop computer market taught us this. It is at this point in time that technological advancement begins to plateau and sales level off. Consumers will begin to buy phones that are “good enough, but cheap” rather than “the next big thing”. All the card tricks in the world won’t help the carriers when all the cards are the same.

Locked in a Box – The Broadcast TV Industry

Rather than trying to fight the future, network TV and cable broadcasters seem to have decided to bury their heads in the sand. The signs that this strategy is working are not good.

At one time moving a struggling television show from a bad time-slot to directly after a big hit was the easiest way to make another hit show. Network TV and Cable channels are increasingly finding that this strategy no longer works. Similarly, the once unstoppable domination of network TV prime-time is cracking at the seams. Networks are learning (slowly) that time-slots are far less critical in a world filled with DVRs (digital video recorders). This massive change in viewer behavior is affecting more than just ratings. DVR technology lets consumers easily skip commercials, the lifeblood of most networks, forcing an increase in product placement style advertising and requiring increasingly creative commercial spacing.

A few shows and networks are starting to branch out to other avenues of revenue and attracting viewership such as embracing online viewership, but this is the exception rather than the norm. Instead, most production companies and networks are clinging tightly to their traditional outlets and trying desperately to prevent any further loss. Partial attempts at new mediums, such as Hulu, HBO Go, and others have been deliberately hamstrung with limitations, restrictions, and obscure availability windows in a misguided attempt to “avoid cannibalizing” the existing revue stream. To use a different analogy, the industry is attempting to cling to a sinking ship and refusing to cut away their lifeboats because that would cause the ship to sink faster.

Is your industry facing a new reality? Take a few lessons from those who have gone before you and learn to ride the wave, rather than being buried under it.

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