The shakeout and disruption in the media industry hasn't come close to being worked out yet; next year will be just as disruptive as this year has been.
While some of the big companies are starting to understand what it is they're up against, there aren't really any answers as of yet. Disney (DIS), as far as big companies go, I think have shown the strategy that most companies will have to embrace during this time of turmoil.
They've taken steps to get leaner by eliminating no longer needed positions. The company also negotiated a deal with Apple (AAPL) iTunes to download various products; they didn't wait around too long to make a decision of get involved with fear tactics of suing everybody in sight. They are now lean, are in the next growth space, and cut back on making movies so they can keep a hand on expenses while 
things continue to be unpredictable. This is more than other companies have done.
While the acquisitions of MySpace by News Corp. (NWS) and YouTube by Google (GOOG) are hailed as great moves, they really haven't proven anything yet as far as long-term goes.
The industry is in what I call the "stretch" phase. They are looking ahead to where future growth is, while looking at what's making money now, and trying to figure out how to keep the old going long enough to give the new time to become a significant source of revenue. They are in a balancing act that will probably take several years to work itself out. Do it too quickly and they can cannibalize their existing revenue streams before they really have to. Do it too slow and they will be so far behind other companies that they will struggle long into the future; if they survive at all as contenders.
What's the reason things are taking a while longer than expected? The consumers haven't decided specifically what it is they want yet; so the vote isn't in. Nobody can say yet that the decision has been made and so they can pour their funds into it to make it grow.
David Sanderson, head of Bain & Co.'s global media practice said: "Media companies have learned from previous experience that they are going to have to take a few risks and experiment, I'm not sure we have zeroed in on the ultimate business model here. Consumers are not yet voting for what they think is the best business model. We're going to see maybe a greater proliferation (of ventures) than a shakeout."
I believe he's right here. The problem why people aren't voting is also because studios haven't come up what it is they're looking for. Until they do, there will be a need for continuous experimentation and waiting until clear direction is given.
Until then, they need to be positioned like Disney is until the path is known.
I think part of the big problem with Disney is resting on their laurels too long while Eisner was asleep at the helm. Poor marketing strategies and bad business decisions have done more to hurt Disney's bottom line than any of their terrible films have done in recent years.
And consumers are definitely voting when it comes to the quality of rubbish being spewed out in movies. Unfortunately, they aren't voting nearly enough to make the studios sit up and take notice.
Everyone wants to know what the next big thing is, when they should instead be focusing on the quality of the product they are churning out right now.
Posted by: The Judge | November 22, 2006 6:47 PM | Permalink to Comment