by Frédéric Filloux
From valuations to management cultures, the gap between legacy media companies and digital natives ones seems to widen. The chart below maps the issues and shows where efforts should focus.
At conferences and workshops in Estonia, Spain or in the US, most discussions I recently had ended up zeroing on the cultural divide between legacy media and internet natives. About fifteen years into the digital wave, tectonic plates seems to drift more apart that ever. On one side, most media brands — the surviving ones — are still struggling with an endless transition. On the other, digital native companies, all with deeply embedded technology, expand at an incredible pace. Hence the central question: can legacy media catch up? What are the most critical levers to pull in order to accelerate change?
Once again, it’s not a matter of a caricatural opposition of fossilized media brands versus agile and creative media startups. The reality is far more complex. I come from a world in which information had price and cost; facts were verified; seasoned editors called the shots; readers were demanding and loyal — and journalists occasionally autistic. I’m coming from the culture of great stories, intense competition (now gone) and the certitude of the important role of great journalism in society.
That said, I simply had the luck to be in the right place at the right time to embrace the new culture: Small companies, starting on a blank slate with the unbreakable faith and systemic understanding that combine into a vision of growth and success, all wrapped-up in the virtues of risk-taking. I always wanted to believe that the two cultures could be compatible — in fact, I hoped the old world would be able to morph swiftly and efficiently enough to catch the wave, deal with new kinds of readers, with a wider set of technologies and a proteiform competition. I still want to believe this.
In the following chart, I list the most critical issues and pinpoint the areas of transformation that are both the most urgent and the easiest to address.
1. Funding: The main reason why newcomers are able to quickly leave the incumbent in the dust. When venture firms compete to provide $160m to Flipboard, $61m to Vox Media, or $96m to BuzzFeed, the consequences are not just staggering valuations. Abundant funds translate into the ability to hire more and better qualified people. Just one example: Netflix’s recommendation system — critical to ensure both viewer engagement and retention — can count on a $150m yearly budget, far more than the entire revenue of many mid-sized media companies. Fact is: old media companies in transition will never be able to attract such level of funding due to inherent scalability limitations (it is extremely rare to see a legacy media corporation suddenly jumping out of its ancestral business.)
2. Resource Allocation. Typically, the management team of a legacy media will assign just enough resources to launch a product or service and hope for the best. This deliberate scarcity has several consequences: From the start, the project team will be in the fight/survival mode, both internally (vs. other projects or “historical” operations); second consequence, in the (likely) case of a failure, it will be difficult to find the cause: Was the product or service inherently flawed? Or did it fail to achieve “ignition” because the approach was too cautious? The half-baked, half-supported legacy product might stagnate for ever, without making sufficient money to be seen as a success, nor significant losses to justify a termination. By contrast, a digital native corporation will go at full throttle from day one with scores of managers, engineers, marketers and sufficient development time for tests, market research, promotion, etc. The idea is to succeed — or to fail, but fast and clearly.
3. Approach to timing. The tragedy for the vast majority of legacy media is they no longer have the luxury of long term thinking. Shareholder pressure and weak P&L impose quick results. By contrast, most digital companies are built for the long term: Their management is asked to grow, conquer, secure market positions and then monetize. It can take years, as seen in many instances, form Flipboard to Amazon (which might have pushed the envelope a bit too far.)
4. Scalability vs. sustainability. Many reasons — readership structure, structurally constrained markets — explain the difficulty for legacy media to scale up. At the polar opposite, disrupters like Uber or AirBnB, or super-optimizers such as BuzzFeed or The Huffington Post are designed and built to scale — globally.
5. Customer relations. On this aspect, the digital world has reset the standard. All of a sudden, legacy media companies appeared outdated when it comes to customer satisfaction, from poor subscription handling to the virtuous circle of acquisition-engagement-retention of customers.
In the chart above, my allocation of purple dots (feasibility) illustrates the height of hurdles facing large, established media brands. Many components remain extremely hard to move – I personally experience that on a daily basis. But there is no excuse not to take a better care of customers, not to reward the risk-taking of committed staffers, assign resources in a decisive manner or induce a better sense of competition.