A framing of uncertainty in the media industry.

I’m both an MBA student and a recovering consultant, which means that I am constantly thinking in frameworks. I am, indeed, a walking cliche.

As a music aficionado and industry employee, I am constantly reading about the burgeoning challenges facing the media industry. There are countless articles on this topic, and while the topics range, the common thread is uncertainty. Given the overwhelming number of changes the industry is undergoing, media companies across all verticals are asking big questions about the future state of the industry.

Based on my own research and conversations with ~20 executives in a wide range of roles throughout the industry, I developed the following framework to add some structure to how we should be thinking about these uncertainties:

Framework for uncertainty in the media industry

The top half of the framework is a simplification of what the market believes to be true today:

1. Blockbuster content will continue to succeed through traditional business models and channels
2. The value of niche content is still unproven. It can only succeed with improved discovery and monetization.

In the majority of my discussions with media leaders, their focus was on identifying how the future of niche content will unfold. Some had a similar outlook to Bob Lefsetz’s recent post:

The “Long Tail” was a fraud. Millions of tracks on Spotify have never been played. There’s so much information that your missive is buried. Now, a song can truly be a hit but not become one. Because the gatekeepers, who were supposed to be eviscerated by the internet, decided against it…

So welcome to the new world. Where big is bigger than ever before. And where you’ve got to be good to get a chance, but you don’t have to be the best of all time. You just have to get everybody on your team, from the investors to the marketers to the media. You’re not saving the music business, or the movie business, YOU’RE SAVING SOCIETY!

Although Lefsetz presents a strong opinion, the industry lacks consensus on whether or not there is value in the “Long Tail.” The questions of discovery and monetization have yet to be answered.

The bottom half of the framework summarizes these key questions on which the uncertainty about the future of media hinge. Discovery covers 3 major themes:

1. Where will media be consumed? New platforms are constantly being introduced (think the evolution from Facebook to Instagram to Snapchat. If that wasn’t complicated enough, the rules of engagement for how to use these platforms are also constantly evolving, not to mention this evolution is controlled mostly by pop culture and not by the creators and managers of the platform. In addition, new devices to interact with those platforms are also constantly evolving (think PC to laptop to smartphone to virtual reality).
2. Who will be the gatekeepers? There has been a lot of literature on how the role of traditional gatekeepers in media has diminished over time (e.g. Record Labels & FM Radio). Although it initially may have seemed that the Internet was displacing the role of a gatekeeper at all, in fact the Internet has simply given rise to a new set of gatekeepers. The new power regime has yet to settle, however. For example, browsing the internet initially meant surfing AOL. Now, it likely means scrolling through your Facebook news feed. In the future, it could be controlled by messages from your friends in WhatsApp (read more on that topic here). In any case, each of these services has the power to act as a curator in a way that most consumers don’t even recognize but in a way that businesses do.
3. How will content be curated? Over the past several years, there has been an rise in algorithmic-powered curation with the design and creation of powerful recommendation engines behind services such as Netflix and Pandora. The use of an algorithm allows these services to provide personalized recommendations at scale. However, the scope of data about user preferences and user context remains narrowly defined and narrowly collected, which makes it difficult to consistently provide accurate recommendations — think of the last time you had to scroll through Netflix for 30 minutes before you found something you wanted to watch. As data collection and analysis continue to evolve, media platforms will work to find the right blend of human, algorithmic, and crowd-sourced curation.

Monetization poses an additional element of uncertainty. Because consumption of media has shifted away from a model of ownership to a model of access, big questions remain about the future of payment for media content and media experiences:

1. What content is not devalued? As the market has shifted from ownership to access, many consumers, especially those in the younger generations, have become conditioned to believe that content is free (or mostly free). The sheer volume of views on music videos and music tracks on YouTube points to this trend. It is unclear whether as the younger generation ages and grows their dispensable income, expectations will continue to demand free content or not. One hypothesis is that consumers will expect most content for free but be willing to pay only for content that has a special meaning to them. Another hypothesis is that all monetization will have to occur on experiences rather than content.
2. What new models will work? Subscription and ad-supported are the primary models for all types of media access. As consumers approach their limit of number of active subscriptions and avoid ads with ad-blocking technology, a question about what is the optimal monetization model for the media industry arises. Will the same model for monetization work for all verticals? Will monetization move direct-to-fan? Will subscription services survive without vertical integration of content suppliers? These questions, among others, remain to be seen.

In a dynamic and transforming industry such as media, the volume of uncertainty can seem overwhelming. This framework offers one perspective on how to think about the key uncertainties the market is facing in the short to medium term.

As part of an independent project, I will be conducting a deep dive piece of research on content discovery in the millennial generation aimed at answering several of the discovery questions posed above. Check back for updates as well as other musings on the future of media.

Libby Koerbel loves to analyze ambiguous questions, listen to live music, and meet new people. She is an expert strategist with experience at the Boston Consulting Group, Pandora, Universal Music Group, Muzooka, and Pritzker Group Venture Capital. She is currently a MBA student at the Kellogg School of Management.