The entertainment industry and online media: Pennies streaming from heaven; Is the internet really so different from the phonograph?

The entertainment industry and online media: Pennies streaming from heaven; Is the internet really so different from the phonograph?

Aug 17th 2013 |From the print edition


FASTER than a speeding bit, the internet upended media and entertainment companies. Piracy soared, and sales of albums and films slid. Newspapers lost advertising and readers to websites. Stores selling books, CDs and DVDs went bust. Doomsayers predicted that consumers and advertisers would abandon pay-television en masse in favour of online alternatives. Jeff Zucker, then boss of NBCUniversal, spoke for all media moguls in 2008 when he condemned the trend of “trading analogue dollars for digital pennies”.

It has been a long wait, but those digital pennies are starting to pile up. The internet once destroyed jobs and companies, but it has now become an engine of growth for old media, including music, television and books (see article). In 2008 around 12% of consumer spending on media and entertainment products was devoted to digital ones; it should reach around half by 2017. Admittedly, many parts of the media industry will not recover their highs for years, if ever. The music business is about 40% below its peak of 1999. But the internet has stopped bludgeoning old media and is now boosting it. In 2012 recorded music had its first year of (very modest) growth in more than a decade.I want it all, and I want it now

One of the main reasons for this turnaround is that consumers now spend so much of their time fiddling with their mobile devices. They want stuff to keep them amused, any time, anywhere, and they seem to be increasingly willing to pay for it—particularly when it comes in the form of “all-access” services. Firms like Spotify, for music, and Netflix, for films and television shows, let people stream as much as they want for a monthly fee. Music-streaming services may even reduce piracy, by providing a cheap, legal alternative.

For all the newness of the internet and the netizens’ claims to come from a different virtual world, the web is beginning to fit into the media world’s oldest script: a new technology rides into town, the moguls try to destroy it, but it survives and becomes part of the town’s future. Hollywood loathed the VCR (comparing it to the Boston Strangler); the networks hated cable TV; sheet-music publishers feared the phonograph; Socrates was sceptical about writing (not interactive enough, apparently). Yet nearly always two things happen: the old media survive (people are still buying vinyl records and even the odd printed magazine), and the new media expand the market.

The internet is the same, only more so. This year will be the first in which the average American will spend more time with digital media each day (around five hours) than watching television (4½ hours), according to eMarketer, a research firm, though many of these hours will overlap. Whatever happens, it will not stop people hungering for content—such as “House of Cards”, a big-budget series that originated on Netflix. The new technologies offer a cheaper way for content to be made and distributed. That often means lower prices as well, so trimming fat will remain important. As a Hollywood studio boss acknowledges, his industry has a “long way to go” to slim down. But the cheapness and speed with which things can be created also offers ever more room for experiment.

Digital technology lets the media industry try out new models and content in “beta” form, as with software, and then adjust them according to how consumers react. E.L. James’s “Fifty Shades of Grey”, an erotic novel, was first put out online and as an e-book before a traditional publisher bought the rights. The Washington Post’s new owner, Jeff Bezos, the founder of Amazon, promises to try lots of new ideas for making news pay. Film studios could experiment more with new “windows”, and push films to consumers at high prices through their set-top boxes at home while they are still on release in cinemas. Maybe big cable-TV firms will stop selling bundles of television channels and become mere broadband providers.

These ideas still seem like heresy. But now that the media industry can see the pennies beginning to accumulate, such experimentation will be at a premium. And why not? Socrates would probably have been pretty pleased that Plato decided to write down some of the things he was saying.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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