Yeah, try re-bottling that. (illustration by Stuart MacKay-Smith)

It’s tough watching an old friend slowly die. Even tougher knowing that you’re helping to knock him off.

Before you go calling 911, the old friend I’m referring to is my daily newspaper. For decades, I’ve started every day with my morning paper. I score my sports and business fix while downing pure Colombian full-caf. Over the years, the two addictions have chemically intertwined to enhance their combined effects. Consequently, whenever I miss my morning coffee-n-paper jumpstart, I find myself fluttering from activity to activity the rest of the day like a fat pigeon in a hurricane.

And now, to my horror and profound sadness, newspapers are dying, losing readers and advertisers to the Web. As a blogger, I contribute to this lethal migration, not so much by stealing readers from newspapers (if only I had such drawing power), but by validating the Web as the place to go for scoop. I myself drink deeply from this vast sea of instant info. After all, why read papers for business alerts or sports scores when they’re updated every second online?

As an environmentalist, I guess I should encourage the decimation of a business that consumes so many trees. I can always sip my coffee while perched before my MacBook — but it just wouldn’t be the same. With that vast expanse of information spread before me on paper, I’m much more likely to read something I might have ignored if it were just presented to me as a hyperlink. I can also take a paper with me into the bathroom — where MacBooks dare not tread — or roll it up and stuff it into my bag for later perusal in a place without WiFi.

A newspaper is more than just info in print.

As executed by the L.A. Times or the N.Y. Times, a newspaper is an orchestrated performance that you consume at your pace and leisure. These hardened yet savvy wizards known as “editors” critically pick what’s relevant, what’s trivial, what warrants front page emphasis, and what deserves to be relegated to the bottom corner of the inside back page. Do they make mistakes? Sure, they’re human, but they’re better than the alternatives. Yahoo! News is indiscriminate in feeding me headline after headline. Even a filter such as Digg seems less orchestrated than mob-ruled. Some institutions are right for democracy; others, like a sports team, a kindergarten, or a newspaper, call for a benevolent dictator.

What truly separates newspapers from all other journalistic media is in-depth investigative reporting of serious issues. The other media could provide it, but they don’t.

The major network evening newscasts consist of pharmaceutical ads interrupted by sound bites. Go ahead, millionaire anchors, investigate that vast sucking corporate greedhole known as the U.S. pharmaceutical industry. I dare you. We’ll see how long your corporate masters will keep you around at GE/NBC, Disney/ABC, and Viacom/CBS.

The cable news channels are worse. Fox News is a right-wing exercise in character-assassination and willful ignorance. CNN has become People Magazine in HD: “Tonight: what hot chick who used to date Brad Pitt then became a governor’s prostitute is now missing in Aruba? We’ll provide continuous coverage after this quick report on some wars going on.” MSNBC consists of pundit after pundit after pundit after pundit after pundit after pundit speculating and expounding and speculating some more on what someone else has investigated, followed by a prison-reality show. I did have hope when I heard Al Gore was launching a news network, only to find myself numbed by Current TV’s duller variation of MTV News.

And now we bloggers are supposed to be the new face of journalism — may the gods save us all if that’s the truth. While we may cover stories the “mainstream media” missed, people like me are more likely to review shenanigans at Facebook than expose corruption at the Pentagon. And the bigger bloggers, like the execrable Matt Drudge, want to shape the news rather than report it. Bloggers are to journalism what street preachers are to education. Certainly interesting to listen to or read, but not exactly the foundations of a civil society.

The big question we bloggers need to ask ourselves: are we amputating the hand that feeds us?

An editorial in today’s L.A. Times (“The Free Ride That’s Killing The News Business”) argues that bloggers, online news aggregators and other “free riders” are driving real journalists into extinction:

“Usually we all benefit when more efficient competitors enter the market and drive inefficient competitors out of business. But the Internet has not made ‘new media’ publishers more efficient at gathering news than their print counterparts. It has made them more efficient at taking news from their print counterparts and using it to compete while the news is fresh.”

The article notes that, while free rider websites can survive on very little profit, “Newspapers, which bear the hefty labor costs of gathering the news, can’t.” The editorial then proposes tweaking copyright law so that news can’t be borrowed freely by aggregators and bloggers.

Yeah, right.

As a newspaper lover, I appreciate the sentiment, but there’s no way in hell to re-bottle this genie. It’s simply too easy to rehash news online. Indeed, sharing information is the entire raison d’etre of the Internet. Clamping down on sharing news online would be like banning gossip in a junior high. If the music industry can’t protect its songs, how is the news industry going to protect information? Will the Powers That Be read every blog, peruse every Facebook profile, scan every tweet? After all, most news organizations are using social media to drive traffic to their sites, even putting “share” buttons next to their stories.

That said, there still needs to be a solution to save the news business. Just don’t look to the bloggers for it.

New TechCrunch blogger Paul Carr — one of the more brilliant writers in the business — used to write for the Guardian newspaper in the U.K. before getting laid off. From all appearances, he’s the only real journalist at TechCrunch. I read TechCrunch daily, and some of the stories are very good, filled with valuable information. But far too many TechCrunch posts consist of hearsay, speculation and over-the-top editiorializing. You know, just like the articles here on Cool Rules Pronto. The difference is that I would never compare Cool Rules Pronto to real news organizations, least of all claim to be superior to them, as does TechCrunch’s kingpin Michael Arrington.

Carr criticizes that absurd comparison himself. (I quote at length, because it’s totally fair to free ride a free rider.)

“There’s a horribly pompous misconception amongst bloggers that they are somehow ‘taking on the mainstream media’. “Those old losers just don’t get it!” they cry. “We bloggers are on the scene first, asking tough questions before the mainstream media have even put their shoes on”… When it comes to a certain type of highly visible breaking news, no-one can argue that social media kicks the mainstream media’s ass. At any given disaster, there’s possibly a 0.01% chance that a professional journalist or photographer will already be on the scene, compared to 100% odds that there’ll be some dude with a camera-phone there…. And yet… after camera phone dude helps us establish that the plane has crashed, who can we trust to tell us why it happened? While bloggers can own the first five minutes of any breaking story – a plane crash, a fire, a burglary – it’s always going to be the professional reporters who own the next five days, or five weeks. They walk the streets, work their contacts and – yes – trawl the blogosphere for eye-witness reports, and then take all of that information, analyse it, follow it up and ultimately provide an account of events that readers can trust… a superstar hack takes days – or weeks – of legwork to get to the bottom of a single story. Without content from workaday photographers or wire-feed-re-writers, the New New York Times would be three pages long and published weekly. Good journalism is a slow, labour-intensive business. And what about unglamourous local stories? Let’s not forget that the two most famous reporters of all time – Woodward and Bernstein – were junior reporters when the broke their most famous story: Watergate. A story, let’s also not forget, that began life as a dull local burglary.”

Unfortunately, Carr then remembers where his current paycheck is coming from and reverses himself a few paragraphs later, arguing that most newspapers have devolved into tabloids, and, hey, will you look at all the great journalistic practices taking place at TechCrunch?!

So What Is The Salvation?

Perhaps the model for real journalism is a non-profit news organization like NPR. After all, as some of Walter Cronkite’s obituaries noted, even in the heyday of journalism, news reporting was often a loss leader performed as a civic duty by the major media corporations. A great news report also created a halo effect for the entire organization.

Conversely, many of today’s so-called news organizations pander to sensationalism (“all Michael Jackson, all the time”) in order to draw the audience numbers that mollify advertisers, investors and creditors. The result is a 24/7 abuse of the word “news.” That’s why I’d love to see the L.A. Times or N.Y. Times launch its own cable news network with the standards it sets for its paper.

In the meantime, I’ll proudly pay for a subscription to the L.A. Times as long as it exists. (And if you also believe professional news organizations are worth saving, please at least click the link to that article in the L.A. Times.) Real professional news organizations do the heavy lifting that makes what I do possible.

Just imagine a world in which all the news reporting and analysis came from bloggers, tweeters, and corporate-issued press releases… That would make the neo-fascist freak show Fox News look like a paragon of journalistic excellence. It would make the seditious and anti-intellectual Bush years look like the Enlightenment.

In short, free news might sound like a great deal now, but it ultimately comes with a very high price.

What lies in store for MySpace?

MySpace is losing it. And I’m not talking about its members defecting to Facebook.

Last year, the once mighty, world dominating social network that had crushed its predecessor Friendster suddenly found itself splattered on Facebook’s windshield. At first, MySpace responded by copying Facebook features, but copying a competitor is not a long-term success strategy. In fact, it just gives the competition credibility.

So MySpace gave up the fight and is fully rebooting by going after a niche market…

Now I completely endorse focusing. If you can’t appeal to everyone, focus on one core segment and fulfill all their needs. Your company may no longer be as big as it once was, but you’ll inspire greater loyalty. Plus, a tighter market focus helps attract advertisers looking to target that particular segment.

Niche marketing, after all, is how MySpace blew the doors off Friendster.

Early on, MySpace recruited independent musicians, which was brilliant, since many pop artists are cult brands who command a devout, fanatical following. Sure enough, music fans glommed onto MySpace, which rapidly grew around this lifestyle — a far better attraction than just “making friends.” Because of the indie music focus, MySpace also didn’t have the junior high stigma of Friendster; indeed, many Friendster users quickly “graduated” to MySpace.

Then greed set in.

As it grew to millions of users, MySpace lost its music focus, and tried to be everything to everyone. This attracted hordes of new users, but the site lost its cool, particularly as the spammers and predators moved in. At the same time, MySpace allowed other upstart startups, such as imeem and Pandora, to encroach upon its music territory.

Then MySpace lost its lead in the social networking world, and despite efforts to become more user friendly, the exodus accelerated. So MySpace’s parent company, News Corp, decided to do a full wipe and system reinstall. They replaced MySpace’s executive leadership (including the founder), laid off a third of the workers, even dropped the insipid motto “a place for friends” from the logo.

So the big question we armchair analysts are asking is, where will MySpace go from here? Will it return to its musical past? That would make sense. Even though MySpace Music doesn’t enjoy the buzz of Pandora, it’s still a hit with music fans, with traffic increasing over 1000% in the past year. Pearl Jam premiered its latest single there and hit 100,000 plays in just hours. With an undivided focus on music, MySpace could dominate the sector.

But that’s not exactly what MySpace has in mind.

Game On?

According to Reuters (7/23/9), News Corp digital head Jonathan Miller has the cure for all that’s ailing the site: “MySpace is and will be more in the future a gaming platform, a space for people to meet and play games.”

Games? Did he just say games?

“You must focus, and in our case we are focusing on music, games, video, things like that.”

Oh, games and music. And video. And things like that. You know, something for everyone. I guess MySpace has a different definition of “focus” than most people.

But, really, why games?

Miller says, “None of the traditional media conglomerates are also significant video game players, so to speak, and I think that that’s the missing piece of the equation, particularly when you see how much time is spent playing games online.”

Missing? Uh, well, there’s Sony. That’s a traditional media conglomerate and a major electronics brand, and I think Sony does games — you know, something called the PlayStation.

Oh, and there’s Disney, which also has online gaming. Last I checked, Disney is a traditional media conglomerate.

And while Apple and Microsoft are not “traditional media conglomerates,” they’ve got some gaming going on. Make that a lot of gaming. In addition, there’s this little site called Facebook that also has a fair number of games.

So, uh, gaming is not exactly unexplored territory here. In fact, the one traditional media conglomerate that hasn’t really done much in terms of gaming is… News Corp.

Now, there’s nothing wrong with venturing into a crowded space if you’ve got an original idea and the financial muscle to back it up. iTunes wasn’t the first online music store. And we’ve discussed the succession of social networks here. There’s also a chance that MySpace could become The Best Online Gaming Platform Ever.

However, when you’re talking News Corp and Rupert Murdoch’s master plan to crush the rebel alliance and conquer the universe, gaming just doesn’t seem to be the most natural alternative.

What I Would Do If I Were Rupert (bwahahahaaa)…

Consider this: News Corp owns the Wall Street Journal and Fox News, the two largest media bastions for right wingers in the country. So my suggestions?

1. Spin off MySpace Music as its own purely music-focused site. To bolster its command of the market, MySpace should also acquire imeem, which is trying everything to make a buck. That would win the favor of the record companies who blew money invested in imeem as an alternative to iTunes. MySpace Music would then become the ultimate online destination for music fans.

Megyn Kelly: Reason to watch Fox News (volume off, of course).

2. Use the MySpace platform to create a conservative social network. In other words, do to Facebook what Fox News did to CNN (you know CNN, the former news site that tried to be all things to all people before devolving into a 24-hour tabloid). Call this new socnet something like “Stage Right,” and fiercely enforce ideological purity by charging a membership fee and making new members swear on a Bill O’Reilly book. WSJ subscribers would get elite status,  fancier profiles, and access to VIP parties, all of which would promote newspaper subscriptions. All the Fox News hosts and anchors would have profiles, and the ones who look like supermodels would share extra photos and videos with their “friends.”

Politics inspires as much passion as music, yet there’s no major socnet that caters to one side or the other. (Forget the tiny, under-publicized Ning-based sites.) Murdoch could use Stage Right to promote his shows and publications, while selling ads to the likes of Halliburton, the Republican National Committee, and airlines that fly to Argentina. Such an integration of News Corp brands seems more logical than some foray into a saturated market where the company has no experience or properties.

And when you’ve got hot reporter babes, who needs video games?

Update 7/30/9: And you thought I was just joking around: according to TechCrunch, the WSJ is going to launch a LinkedIn rival called WSJ Connect. Interesting note in this report: the WSJ already has a community section that is essentially a “ghost town.” Gee, you’d think they’d know a little something about business over on Wall Street…

Update 11/17/9: You know that bit where I suggested that MySpace buy imeem? Well, who knew that Rupert Murdoch reads my blog, ’cause that’s exactly what’s happening: “Confirmed: MySpace Looking to Buy Imeem” (Peter Kafka’s MediaMemo).

Still a troublemaker.

Orwell is not only spinning in his grave, he must be doing triple salchows.

Amazon kindled a web-wide furor this morning when it yanked digital copies of two books from users’ Kindles: George Orwell’s 1984 and Animal Farm…

Apparently, when you buy an e-book for your Amazon Kindle, you’re only buying the license to read it, not ownership of the book itself. Amazon can revoke that license at any time, including after you’ve made your purchase. Buyers did get full refunds, but this wasn’t just another product recall.

Yeah, the Orwellian ironies have been pointed out by the NY Times’ David Pogue and — in a more histrionic “grab your torches and pitchforks” manner — by TechCrunch’s MG Siegler, who spews, “Amazon, Why Don’t You Come In Our Houses And Burn Our Books Too?” In Siegler’s view, Big Brother lives in Seattle and goes by the name Jeff Bezos.

I see all this as more of a business decision and a licensing issue than an act of censorship.

Overall, I’m just happy to see techies (particularly the geeks at TechCrunch) reading things longer than 140 characters.

While the various parties battle it out with lawyers and laments — “don’t piss me off, man, or I’ll write a vicious article!” — there’s one temporary solution:

No batteries required.

Animal Farm + 1984 in one hardcover book for $15.60. It’s shatterproof, sand proof, built to last decades or even centuries, no batteries required, and you can own it forever, resell it or give it to a friend. Crazy cool, huh? Oh, what will those zany scientists ever think of next?

Update: There’s actually a very logical explanation for this just reported by the New York Times:

“An Amazon spokesman, Drew Herdener, said in an e-mail message that the books were added to the Kindle store by a company that did not have rights to them, using a self-service function. ‘When we were notified of this by the rights holder, we removed the illegal copies from our systems and from customers’ devices, and refunded customers,’ he said.”

In other words, the books were stolen merchandise. If you buy stolen goods, even if you weren’t aware that they were stolen, the authorities still have the right to retrieve them.

Update 8/2/9: New TechCrunch blogger Paul Carr (stablemate of the raving MG Siegler above) agrees that Amazon rightly retracted those books. More reason why he’s my favorite TechCruncher.

Web 2.Uh-oh

Just over a year ago, Wired magazine proudly proclaimed that the future would be free, an argument based partially on ad-supported free sites like NYTimes.com. Of course, it was hard to take this manifesto seriously since Wired still charges for their magazine (cover price $4.99).

It was also misleading because it appeared during the height of the second dotcom bubble, when most of the free websites and services weren’t really living off their ad revenue. Some still aren’t. The New York Times website, for example, couldn’t exist in its current form without the financial and content support from its parent company.

I saw this fantasy revenue model first hand in Silicon Valley: most “ad-supported” startups were really living off deep-pocketed benefactors, such as VC’s or giant corporate parents. If these startups ran out of money, they simply turned to their sugar daddies and said, “Please, sir, I want some more.” They treated rounds of funding like a Major League Baseball player treats trips to the steroid pusher.

Then came last year’s big blowout, when every sector of the economy did a simultaneous faceplant, scoring a perfect ten in synchronized sinking. Many VC’s and corporate parents suddenly told their fledglings, “You’re on your own, kid” and shoved them out into the cold winter. This came just as many giant advertisers cut their ad budgets, including the online ad budgets that were supposed to be immune to advertising downturns.

You know that look the coyote in the “Roadrunner” cartoons gets when he finds himself standing in mid-air with nothing beneath this feet? That look crossed the faces of hundreds of dotcom entrepreneurs at the same time.

Making a Splash… in the Deadpool

TechCrunch’s Deadpool — the hot destination for the morbidly obsessed — reports on tech failures. And, sadly, it’s steadily growing. Here are a few recent Deadpool inductees: divshare, Fuzz, jumpcut, Juicy Campus, Eyespot, Fleck, Flektor, Springwidgets, wallop, Uber, QikCom, Coghead, WebbAlert, Bemba, Jubii, Dodgeball, and Jaiku.

Quick: what do many of them have in common?

Yes, many have ridiculous names that are hard to remember, spell or explain (friends should not let friends drink and name). But that was all part and parcel of an overall failure to communicate. In other words, their marketing sucked. Good naming or bad, how many of these companies had you ever heard of?

Granted, not all of these companies had big daddy money to burn, but others had millions of dollars yet refused to invest in serious advertising. I’m not talking Super Bowl excess, but perhaps some ads in, say, Wired could have helped. But I guess if all one cares about is rounds of funding, why build awareness beyond industry circles? “Yay, we got mentioned in TechCrunch and NewTeeVee and Scobleizer! The centuries-old rules of business do not apply to us because we’re so 2.0! Now we just gotta wait for someone to give us money!”

That mentality was particularly inexcusable for those whose revenue models were based on selling ads: How could they sell something they themselves didn’t believe in doing? It reminded me of this lasik eye doctor I met who wore contact lenses because she didn’t trust the surgical procedure for herself. (Side note: I still wear glasses and contacts today for this reason.)

Dodgeball and Jaiku, by the way, were both babies of Google, which lives off advertising but generally does very little of it for itself — or, apparently, for its offspring. Google is often held up by entrepreneurs as a model of achieving success without advertising. While the company and its products are great in many respects, Google’s marketing practices aren’t ideal for everyone. And as evidenced by Dodgeball and Jaiku, even almighty Google isn’t infallible.

The End of Free

Last week my good friend Preeti told me that a free service she uses, SplashCast, is now charging. In the company’s blog, SplashCast VP of Business Development Tom Turnbull provided an explanation, which I found both honest and insightful about the entire industry:

“As many of you know, on January 28, we announced that we would no longer be offering our free SplashCast product. As we have hopefully made clear, this has been a very difficult decision for us. The user generated content product was our first product, and we love it. That said, we simply haven’t figured out a way to build a business around it… SplashCast is not a big company. We aren’t Google. We aren’t NBC. We are a startup. Startups, especially in this economy, have to make tough decisions. They have to focus on doing one or two things well. We aren’t fat cats over here at SplashCast. As expected, the vast majority of respondents weren’t interested in paying a subscription fee to use SplashCast. Hey, I understand this. I use the scores of online services, most of which are free. Every once in a while, I might pay for something. In terms of those who were interested in paying, the average fee was very low. We’re talking a few dollars. Simply put, we don’t see SplashCast building a meaningful subscription based business. Additionally, many community members asked about the possibility of SplashCast selling ads against user generated content. We’ve taken a very close look at this approach. Unfortunately, for a wide range of reasons, advertising won’t work in the user generated context. The behemoth of the UGC industry, YouTube, isn’t even close to figuring this question out. Believe me, if we could make a meaningful business out of the free SplashCast product, we would. Therefore, we have stopped offering new free SplashCast accounts.  However, after listening to the community, we have decided to leave the free product in place for those who have specifically asked us to do so for them… Also, there are other services out there that do some of the things that SplashCast does. For example, you might check out Embedr…”

So in addition to grandfathering in existing users, SplashCast even recommended a rival. Smart move: why not burden a competitor with freeloaders?

The question is, will charging for previously free services work? Would it work for any of the free sites and services you use now? Would you stay with Facebook if they charged even a minimal fee? Would you watch YouTube videos if they cost even just pennies per view? Would you be reading this article if I had charged for it? (No, you don’t have to answer that.)

As the Wired magazine article mentioned, these free sites have taught an entire generation of consumers that media content is free. Faced with this ineluctable trend, some traditional media brands followed suit with bottom-line-wrecking free services, which is now forcing many to downsize or to simply shut down.

So while all that free content was great for consumers — at least at first — it also boosted the unemployment ranks. And when people are unemployed, they don’t buy cars or computers or $3 cappuccinos, so those corporations that actually make and sell things cut their advertising budgets. And when those corporations don’t advertise, guess what happens to all those ad-supported free sites without sugar daddies?

An entire industry with falling-coyote looks in their eyes.
Maybe this “free” business model wasn’t such a good idea after all.

Time To Pay Up?

I can’t speak for everyone (though I often pretend to), but I would pay for services and content I like. I already do so with music and apps at iTunes, photos at iStock, and upgrades here at WordPress.

My recommendation for companies that want to start charging: offer several tiers and packages, including a free option and, more importantly, micropayment options. For example, I like using LinkedIn, but the difference between their free account and their next tier up is $24.99/month, and for my purposes, the additional benefits aren’t worth that much. LinkedIn currently claims 36 million users — if they could get just $1 from each user per month, they would make an additional $432 million per year.

In addition to making money, micropayments also get users into the habit of paying. After I bought my first iTune (U2′s “Vertigo,” which was an iTunes exclusive at first), making future purchases was too easy, since all I had to do was click a couple of buttons. The lesson: make like a pusher and get prospective users hooked on that first little hit…

Now some sites will always remain free. Wikipedia insists on living off donations. And I make my income from developing marketing strategies for others — no reason to view my blog as a business.

But let’s consider YouTube, which continues to experiment with ways to monetize its content, as some analysts estimate the site will lose $470 million this year. What would entice you to pay to watch YouTube: an ad-free experience? a higher-quality video? having your video rating count for twice as much? having your comments appear at the top? an invitation to YouTube events and parties? exclusive first views of select videos? access to uncensored videos? a chance to appear in a video with your favorite YouTube star?

A large corporation like Google could also negotiate partner discounts as a bonus for your membership. For a $20 annual subscription to YouTube with all those benefits I mentioned, you would also get, say, a $20 discount at Amazon.com or Virgin America. In return, Amazon and Virgin would receive $20 of free YouTube advertising per registrant.

It’s like free, but different.
And new models like this may need to be implemented now or never.

I love Wired because they’re willing to go out on a limb and make declarations like everything should be free. But print media is getting beat up by free Internet content, which is now getting beat up by awful revenue models. So the entire industry needs to rethink this “free” business, because the way it’s going, those who claim “the future is free” might have nothing left to eat but their words.

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Related Article: Pipe Dreams: Did Silicon Valley Pick The Right Role Model?

Update 3/8/2009: Just got an email from Amazon offering me two years of Wired for $20, with $10 credit at Amazon in return. Coincidence?

Update 3/24/2009: Interesting look at Web 2.0 music sites in CNET from a few weeks ago. I love how SpiralFrog’s founder talks like everything is simply dandy, only to have his company kick the bucket just a few weeks later. Those tech entrepreneurs can lay it on as thick as any Hollywood producer or DC politician.

Update 3/25/2009: TechCrunch notes that one of the largest ad-driven “free” sites, Imeem, is “rumored to be in serious trouble” and is now trying to sell things to its user base of teenagers and college students. Imagine running a free amusement park, attracting millions of kids, and now trying to get them to buy souvenirs in order to cover your millions of dollars in debt. Think Disneyland could have made it on T-shirt sales? Good luck with that!

Update 5/7/2009: I love this line in TechCrunch’s latest report on Imeem’s troubles: “In the perverse world of music streaming licensing, the bigger your audience, the more money you lose.”

Update 1/17/2010: Imeem is history, and word has it that the New York Times is going to start charging for online content. Sorry, Chris Anderson, free is NOT the future of business. Indeed, it’s already becoming history.

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Shout out to @Preeti for her contributions to this article!

Shameless plug: Need professional consultation on your business strategies? Contact Atomic Tango…

Illustration by Jeremy Hidalgo (www.borntodesign.net)

Here’s expensive proof that I should stick to marketing and steer clear of the stock market: I invested in two radio companies.

The first, Westwood One (WWON.OB), seemed like a stable cash flow deal. Westwood One produces radio programs for syndication, including broadcasts of NFL games. The way I saw it, demand for pro football is insatiable, and since we mere mortals can’t invest in the NFL, this is the next best thing, right? Well, apparently not. As advertisers fled from radio, so did investors. Westwood One is now worth 9 cents a share and was recently delisted from the New York Stock Exchange.

The second, Sirius satellite radio (SIRI; now called Sirius XM — at least for the time being…), is worth even less: 6 cents a share. They’re seeking Chapter 11, and according to Rory Maher of paidContent.org, we Sirius common shareholders are about to get hosed. My investment in Sirius was pure speculation, since I was looking for some wild risk to balance out my boring bank CD’s. (Yay, excitement.) Since my friends who have Sirius love it, I thought it might have a future. Of course, I violated my own personal rule: don’t invest in anything that I don’t personally use. If I wasn’t willing to shell out $13/month for radio, what made me think the rest of America would flock to it?

But Wait, There’s More…

To put an exclamation point on my investment IDIOCY!, I discourage my own clients from advertising on radio. Good marketing, bad for my stocks. Here’s why I do that:

1. Most radio commercials are painful to listen to — and that drives listeners away. No other advertising medium contains more shouting. Apparently, the agencies that create these spots are short on ideas and try to make it up on the volume. Others think repeating a phone number sixteen times will excite listeners. As a result, we listeners reflexively change channels as soon as an ad comes on. Some radio stations might claim great ratings, but as I tell my clients, the commercials often go unheard.

2. Radio ads are difficult to act on. Once upon a time, radio was the primary entertainment medium in American households, with families gathered around a set to listen to a show. Thus, a direct response radio commercial made sense — the listeners were at home where they could make a phone call or scratch down some quick info. Now many consumers listen in their cars, or at the shop where they’re busy working. And unlike television commercials, there’s no YouTube for radio ads, where people can discover and share the great ones.

Yes, some radio commercials do work — I particularly liked Bud Light’s “Real Men of Genius” campaign (one of the few radio campaigns that you can find collected online). But that’s a rare exception. With the infinite advertising options available today, radio isn’t my first choice, second choice, or even fourteenth choice.

And here I was investing in radio companies.
Put down the stock-trading website and back away, Freddy.

Clearly Wrong…

Then there’s Clear Channel, which once owned 1200 radio stations across the U.S. I never invested in them because I detested their politics (the Dixie Chicks deserve an apology!), but one of my relatives worked for Clear Channel, so out of deference to her, I had held back my criticism of the Mordor-like empire. But recently, after nearly a decade of dedicated service to Clear Channel in various capacities, she got unceremoniously laid off along with thousands of others. There’s now a Facebook Group for fired Clear Channel employees that claims, “There IS life after Clear Channel. There ARE places you can work where you will be considered a human being and not a piece of equipment.”

So now Clear Channel is fair game, particularly since this bogus statement is still on their website:

“We believe Clear Channel’s people are our most important asset. Our teams make the critical difference in how we perform and their skills, talents and determination separate us from our competitors. We also believe people can achieve their full potential when they enjoy their work, so it is a priority to provide a workplace where growth, success and fun go hand in hand.” — [Clear Channel co-founder] Lowry Mays

Way to treat your most important asset, Lowry.

I won’t recount all of the various grievances about Clear Channel — Wikipedia has a list of criticisms you can check out and decide for yourself.

I’m writing this post to talk about how Clear Channel contributed to the collapse of its own empire. As notes the Washington Post, “As the company grew, it received unfavorable press for its size and influence on music playlists and artist development. Clear Channel was criticized for homogenizing the sound of FM radio…”

Obviously, as a marketer, the only thing I want homogenized in my life is milk. For everything else, I want variety and character. And I’m not alone.

I remember when FM stations had strong brands, and people would swear allegiance to a particular station just like they would swear allegiance to a particular sports team. The stations would advertise their differences, and try to develop unique personalities to attract larger and more devoted followings.

Then Clear Channel came and issued corporate-approved lists of songs that their radio stations had to follow. The days when “disc jockeys” could pick and play songs of their choice were over. (With a system called Prophet, Clear Channel even eliminated local DJ’s in some smaller markets.) At one point, my relative was managing a Clear Channel classic rock station, so I suggested that she play tracks from the vastly underrated Aerosmith album, “Rock In A Hard Place.” She liked the songs, but could not play them until they had been approved by focus groups.

Ooh, the f-word.

I hate focus groups. Why should a statistically insignificant number of people, who are afraid of making mistakes under scrutiny, be allowed to limit what the rest of the world can enjoy? If everyone listened to focus groups, there would have been no “Seinfeld” show, no Red Bull, no telephone answering machines, and no minivans.

OK, maybe the world would have been better off without minivans.

Clear Channel based their playlists on what focus groups had approved. One problem: if someone in a risk-averse focus group loves a song, that song is probably a common hit that many people already own — particularly now that you can buy your favorite songs for less than the price of a latte. So people who buy a lot of music (who the record companies love) don’t need to listen to a Clear Channel radio station and all those shouting commercials to possibly hear their favorites. They just turn on their iPod.

In the good ol’ days before evil marketers focus-grouped music, listening to radio was about being enlightened by your favorite DJ, who would play some of your favorites, then introduce you to some of her personal faves. There’s still one radio station in Los Angeles that continues to do this, and it receives critical acclaim and a devoted following: KCRW. Of course, it’s a public radio station, immune to the influence of homogenizing hegemonies. Long live public radio!

And it wasn’t just the tiny underfunded public radio stations that provided a Clear alternative.

No Monopoly For You!

What Clear Channel chose to ignore was the fact that, even though they were building a near monopoly in radio stations, the competition for portable music was increasing — particularly a little invention by Apple called the iPod. Ironically, as if they were in cahoots with Steve Jobs, Clear Channel helped drive music lovers to their iPods, where they could listen to hundreds of their favorite songs anywhere anytime without interruption. As for music discovery, listeners learned that they had a better shot at discovering something new and cool on TV shows, YouTube, the wildly eclectic Internet-only radio stations, and even Apple’s own commercials — who needed radio?

After Clear Channel sold out to private equity firms in 2006, some of their stations returned to being experimental, with creative new formats and more freedom to play esoteric songs. But it was too late. Many of the people who are now left listening to commercial music stations are those who can’t or won’t spend money on an iPod or the requisite hundreds of songs — and those aren’t exactly the consumers that advertisers or record companies want. (Add that as #3 to my list above.)

Today, Clear Channel tapped the remaining $1.6 billion in its credit line, and some are wondering if the beast will survive.  Should Clear Channel go belly-up, I’m guessing the few remaining radio lovers won’t be singing “the day the music died”; more likely, we’ll all break out into choruses of “nah nah nah, nah nah nah, hey heyyyy, good-bye…”

But what do I know? After all, I invested in Sirius.

***

Update 2/12/9: According to today’s NY Times, not even Google could sell radio ads for Clear Channel.

Update 3/24/9: In recessionary times, the goal of marketing is to steal market share, as opposed to seeking organic growth. Consequently, the L.A. Times ran a full-page ad for itself yesterday, arguing that an ad in the Times was more effective than ads on all of the top radio stations in L.A. Obviously, the marketers at the Times can smell blood in the water. I’ll be curious to see radio’s response in this clash of the dying.

Update 4/14/9: According to a report in TechCrunch, a startup called Goom is bringing the model of commercial radio to the Web. And the question on everyone’s mind is… why? Writes MG Siegler of TechCrunch, “I don’t know about you, but I had two core reasons that I stopped listening to traditional radio long ago: Crap music, and DJs. Goom, apparently, sees those as strong suits.” Well, apparently, institutional investors like this bland, failing, traditional-media model enough to sink $16 million into it. Looks like I’m not the only one who’s a sucker for radio investments. Goom? Bah.

A screengrab from a YouTube video of an Apple television commercial about reading a book on your phone now appearing on a blog.

I hear it all the time:

“Advertising is a waste of money.”
“If you have a great product, you don’t need to advertise.”
“Word of mouth is more effective than traditional media.”
“It’s impossible to cut through the clutter.”
“Most consumers tune out or TiVo past commercials.”

While these declarations might be true in some cases, many bullheaded companies still invest millions in advertising — and not just during the Super Bowl when everyone is paying attention to the commercials.

Are these companies just clueless losers who are stuck in the past? I don’t know — would you describe Apple that way?

Apple might be the only Silicon Valley company that grasps the value of great advertising. It’s also one of the few that’s still doing well in this economy.

Want proof that Apple’s ads are working? MacRumors.com reports that the iPhone app “Classics” enjoyed a 600% sales surge after being featured in an Apple commercial.

I guess App buyers aren’t so fixated with their iPhones that they don’t watch television anymore.

This follows the slew of pop artists, including Feist and Yael Naim, who have enjoyed major career boosts after getting the Apple spotlight.

So, yes, there’s truly a lot to be gained from exploiting new technologies and new media — which Apple knows a few things about — but there’s also a lot to be said for basic television. That old dog is still doing the trick.

Conclusion? It’s not advertising that’s a waste of money — it’s bad advertising.
Some companies know the difference.

Update 2/26/9: Advertising Age (subscription required) just reported on “a growing body of evidence which suggests not only that TV advertising still works, but that may be working better than ever.” Among several studies the article cites is one Ball State University study that discovered “TV remains the dominant medium even for reaching youth, despite the inroads of digital and social media.” Add to that the fact that more people are staying home to watch TV than ever, thanks to the recession, and TV may actually become more attractive. One key caveat from the article: “creative quality makes a big difference, in many cases explaining more about success and failure than media choices.” So before launching your next ad campaign, be sure to consult an ad agency that knows what it’s doing.

Related Article: “Viral” Does Not Mean “Free”: The Reality Behind The Buzz

Just like in the interactive zombie film The Outbreak, you keep running from the creatures, and just when you think you’ve found a new sanctuary, they sniff you out and keep coming and coming and coming…

The creatures I’m talking about here are Hollywood stars and studios, and the “you” is the independent movie producer or fan looking for a place to call their own…

"Hope this film scores at Sundance. I could use a break..."

Look at the Sundance Film Festival, which began in 1978 as a showcase for independent films. While it’s still the Super Bowl for indies hoping to get discovered, it’s now as commercialized as the Super Bowl, with giant corporate sponsors placing products in every nook, and Hollywood bigwigs booking all the best rooms and restaurants months in advance. The indies still get some spotlight, but they’re now sharing it with the likes of Richard Gere, Ethan Hawke and Don Cheadle — hmm, where have I heard those names before? — whose film Brooklyn’s Finest was one of the many star-studded flicks that premiered at this year’s Sundance.

Sundance: Owned.
Next up? YouTube.

Today’s L.A. Times reported that major talent agency William Morris is negotiating a deal to feature its talent on YouTube. So move over X-Rated Abigail, Dance Evolution dude, and pillow fighting French Maids — you might find yourself sharing YouTube’s bandwidth with such William Morris clients as Russell Crowe, Denzel Washington, Emma Thompson and producer/director JJ Abrams:

“The pending deal would also give William Morris clients something only the biggest stars to date have been able to command in film and television: an ownership stake in the videos they create for the online video website, according to people familiar with the discussions. Under the scenario, William Morris would also lure some of the talent agency’s major consumer brands to YouTube’s programs as sponsors — a milestone for the site, which has a massive online audience but has struggled to attract advertising.”

And that advertising is key.

While YouTube will continue to showcase amateurs and independent producers, the advertisers clearly want mainstream media. Notes the article, “Advertisers who wouldn’t think twice about buying time on VH1′s ‘Rock of Love,’ a reality TV series featuring Poison front-man Bret Michaels and scantily clad women, remain squeamish about promoting products next to the videos YouTubers create.”

Damn advertisers.

Now, Hollywood on YouTube is nothing new. Indeed, YouTube’s popularity is largely due to Hollywood-produced content such as “Lazy Sunday,” the Saturday Night Live skit that attracted 5,000,000 viewers to the relatively unknown site before NBC ordered the video taken down. And long before all this William Morris chatter, YouTube had forged partnerships with Universal Music Group (where I launched my career), Playboy, 20th Century Fox, the NBA and other massive megacorporate media providers.

So what does this mean for the indies and amateurs?

I have several friends who produce content for YouTube and participate in its revenue sharing program. On the plus side, Hollywood content will draw more traffic that might chance upon my friends’ work. The deals also ensure that YouTube has advertiser revenue to share. On the minus side, indie videos could get muscled off of YouTube’s coveted homepage, where the logic behind video selection is a carefully guarded secret. In addition, Hollywood content will also nudge many amateur videos off the “most viewed” and “most subscribed” lists, where many new filmmakers get discovered.

The bar has also been raised on quality. As I wrote in my post on Joss Whedon’s “Dr. Horrible”, the talent and production values that Hollywood brings to the table are putting enormous pressure on amateurs to keep pace. One of my filmmaker friends told me that, just a couple of years ago, a few simple special effects in his videos could elicit oohs and ahhs, laudatory comments, and thousands of views. Now, jaded YouTube viewers are sounding like the girl in the Billy Idol song: they want more, more, more.

I do believe extraordinary amateur and indie videos will still surface. There’s a certain innocent charm to middle school students in Pittsburgh cranking out a rock song — a charm that Hollywood can’t replicate:

Consequently, this Pop Rocks video attracted over half-a-million views in its first week (helped, of course, by the fact that the Steelers are in the Super Bowl). Hmmm, amateurs working with powerful brands — there’s an idea worth exploring… (And I’m not just talking about those tired “user generated” commercials.)

But for most YouTube producers, the turf keeps getting more crowded with Hollywood moguls and their big-budget productions. How long before the indies are forced to hire Hollywood stars just to compete? If you don’t think that will ever happen, take another peek at Sundance, where one of this year’s most talked about movies, Push: Based on the Novel by Sapphire, featured Lenny Kravitz and Mariah Carey… as supporting actors.

Update 4/16/9: Three months after I wrote this article, TechCrunch asks a similar question: “Is Web 2.0 Abandoning the UGC Ship?”. Meanwhile, my friend Nalts notes that YouTube is following the Hulu route by streaming full-length Hollywood content.

Update 5/6/9: Metacafe actually beat YouTube to the punch (for once) by kicking independent producers to the curb and focusing on professional content. The VC-driven wannabe site just terminated its much vaunted Producer Rewards program. I guess Metacafe got tired of copying YouTube and decided to copy Hulu instead.

Here’s how to exploit the Super Bowl without spending the $3,000,000 for a 30-second commercial…

1. Be an attractive woman
2. Talk about doing something crazy
3. Build a website

Voila — you’ve got national coverage, including today’s L.A. Times sports section and a plug by a certain marketing blogger.

That’s what comedian Amy Borkowsky has achieved with her highly publicized quest to find a husband. The never-married 40-something is trying to raise $3,000,000 to run a personal ad during the Super Bowl, and has put up a site, “Super Bowl Single Girl,” to help raise funds for the… um, worthy cause. So far, with just over 3 months till the Super Bowl, she’s raised about $2,000.

But if her goal is massive publicity, she’s already succeeded with millions of dollars in free hype. Score after the first week: Amy Borkowsky 1, Media Suckers (including me) 0.

Update 1/29/9: While Borkowsky didn’t even come close to raising the money needed for a Super Bowl ad, she scored something even better. No, not a husband. According to today’s L.A. Times, she’s getting her own reality show, “Amy Borkowsky Will Do Anything to Get a Husband.” And starring in your own reality show is the new American dream, right?

Hmmm, isn’t there like an economic crash, two wars, and — what do you call it? — oh, yeah, a Presidential election going on?

Meanwhile, the top two stories over at NationalEnquirer.com are about Cindy McCain and Joe Biden.

If ignorance is bliss, then Fox News is the happiest place on earth.

And here is an interview with him and some of his peers…

LaFontaine died Monday. There are many voiceover actors who sound like LaFontaine, but he will be impossible to replace… “In a world without Don LaFontaine, the silence is deafening…”