mermigas on media

Media can learn from White House hopefuls

What do Hillary Rodham Clinton announcing her presidential candidacy on her Web site and the continuing travails of big media's digital transformation have in common? Plenty.

Clinton pulled a YouTube-inspired stunt Saturday by strategically fashioning the initial theme and tone of her campaign through Internet video. The effectiveness of the video online effort extended to Clinton's savvy manipulation of the media, which was compelled to pick up at least some of the less-than-two-minute personal message "as is" in order to include it in the news coverage of her announcement.

Clinton was not so much swiping a Web page from the playbook of other such presidential hopefuls as Sen. Barack Obama, D-Ill., and former Sen. John Edwards of North Carolina as she was brilliantly applying media's new rules of play for using the Internet as a customized global town crier. Expect to see lots more of Clinton and other candidates sidestepping the Fourth Estate and taking their case directly to the people on the Internet, knowing that big media will have to pick up their packaged pitches anyway.

Although masterful reliance on these new digital venues and tools might not immediately alter the $3 billion in ad spending expected across all media platforms for the 2008 presidential race, it likely will have a profound impact on the reallocation of political advertising dollars to the Internet in the next decade.

By then, a virtual lifeline to voters will be used for polling, personal dialogues with candidates, putting election promises into action and maybe even casting ballots. Using this paradigm shift as a filter provides a more compelling perspective on the continuing digital transformation of media and entertainment, where big players are hoping to avoid financial ruin and extinction by relinquishing some control and giving interactive consumers what they want ? a proposition that can be as complicated as it is challenging. Circumvention by tech-savvy politicians is one of many ongoing predicaments that will begin altering big media's value proposition and economics during the next several years.

Big media will find it more risky and expensive to simply buy its way into a Web 2.0 operation as a result of Google's YouTube acquisition and News Corp.'s purchase of MySpace, whose magic has been lately blunted by precedent-setting liability lawsuits.

"In-house efforts to develop new platforms are not likely to succeed, and as such, we expect the large players to continue scouting the market for the next big thing," JPMorgan analyst Imran Khan wrote in his overview report for 2007.

Khan also notes that big media has the added burden of preventing new distribution platforms from too quickly building disproportionate market power, so as to protect receding DVD sales revenue and other existing businesses from being cannibalized.

Continuing loss of content control and related revenue requires big

media to try new tactics to monetize across various digital platforms to offset declining practices. So far, digital initiatives "grab headlines but still amount to barely a rounding error in financials," which is why digital revenue still comprises less than 5% of big media's overall business, according to Banc of America Securities analyst Douglas Shapiro. Pioneering efforts not-withstanding, digital revenue including online advertising will hit $700 million at the Walt Disney Co. and $500 million at Viacom, Shapiro estimates.

Even as eyeballs keep moving to new platforms and devices, dollars lag ? which is why Shapiro has downgraded media conglomerates such as Disney, Viacom, Time Warner and News Corp. to "market weight" because there are no near-term catalysts to boost valuations and revenue. Even an unlikely trend in the wholesale privatization of media conglomerates and the more likely continuation of select asset divestitures would have limited and short-lived upside.

As aggregate traditional media advertising spend and pricing continue to decline and cede to new media, the onus is on television, radio and publishing to launch transaction and other interactive experiences that will reinvigorate advertising especially in an "event"-driven year.

While this year's upfront ad market might offer some hopeful glimpse in light of a mere 3% network ad revenue growth from pricing on flat to declining viewer ratings, the political elections that are media's only reliable growth boost must be leveraged to assure traditional players a bigger slice of the Internet's steady 30% growth in the domestic ad market. Nearly all of the $1.5 billion spent on local media advertising related to last year's congressional and local elections was on traditional airtime and print, even as it appears that local media ad spending dipped in 2006 for the second consecutive year. Slowing macroeconomic growth ? whether organic or driven by the Federal Reserve Bank through a change in interest rates ? would adversely affect the biggest of media players, whose core businesses are rooted in advertising and consumer-spending revenue streams. That would make reaping all of the traditional spending on the national election season all the more critical.

And that brings us back to Clinton, Obama and Edwards.

Big media, or even local media, are blocked from any direct economic participation in or exploitation of presidential candidates' regular enterprising interactive campaigning, which Clinton continues this week with live online chats. There is no telling how it might affect advertising-supported live broadcast debates or one-on-one interviews with the candidates.

But there are other big-media players perhaps better suited to taking a service approach to exploiting digital interactivity in this new style of national politics on the Web. Apple's iPod nation could launch novel election-year downloads and connections. AT&T could use its newly expanded dominant broadband wireless data and video telecom Unity network to connect candidates and voters, which might reinvigorate the process.

The kind of cantankerous, no-holds-barred fight for the White House that has become the norm is bound by the passionate issues, volatile events and news headlines that drive record-breaking traffic on news Web sites, blogs, chat rooms, Internet video and e-mails. It is just the kind of provocative event that will heighten the ways in which consumers access, search, transfer, socialize about and respond to online content from a variety of devices and platforms ranging from iPods, personal computers and Internet-supported mobile phones to IPTV. This is not about over-the-air television reaching a mere 5% of consumers by 2011, as Forrester Research predicts, as much as interactive platforms, content, consumers and advertisers evolving together to create new value, especially at opportunistic times like these.

The age of blockbuster entertainment may be over ? according to Wired editor Chris Anderson, author of the recent best-seller "The Long Tail: Why the Future of Business Is Selling Less of More" ? but blockbuster news events still boost TV news ratings, drive Web site traffic and sell newspapers.

It will be a costly mistake if major television networks, station groups, newspaper owners and even radio outlets approach the unfolding presidential campaign with a business-as-usual mind-set. Clearly the candidates are not.

Diane Mermigas can be reached at