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How's the Media Industry These Days? Confused.

Media companies and creators seem to be entering a new period of confusion, as the financial, technological and consumer behaviors they counted on are changing rapidly.

Asa Mathat

It’s no secret that the media industry has been high on the list of businesses that have been disrupted by the Internet and is struggling to find a new footing.

For a few years, things appeared to be settling down a bit, as the music, written word, and video businesses seemed to be on promising digital paths.

Record labels and artists were selling music on iTunes. TV networks sold new shows there and at Amazon, and sold old ones for streaming to Netflix. Big news organizations churned out iPad apps, and more started charging for their online content, even as some of their star journalists found they could fund their own breakaway sites.

Those tentative paths to digital stability, though, are either faltering, or at least coming under serious question. In their place, media companies and creators seem to be entering a new period of confusion, as the financial, technological and consumer behaviors they counted on are changing rapidly.

How do I know this? I attended last week’s Code/Media conference and listened to speaker after speaker address these issues. The air of uncertainty was palpable.

Take the music business, the first to be swamped by the digital tidal wave. At least in the U.S. and some other rich countries, the CD business has collapsed, and now the paid digital download business which replaced it, via services like iTunes, has fallen off a cliff.

In their place has come the rise of music streaming services like Spotify. Most of these offer optional subscription plans, but the vast majority of consumers prefer using them for free, while enduring ads that generate too little revenue, in the record labels’ opinion.

Then there’s Pandora, the very popular Internet radio service that also is mostly ad-supported, and worse — from the labels’ point of view — operates under federal regulations that don’t require it to do deals with the labels, only to pay royalties that the industry considers way too small.

Perhaps that’s why Universal Music Group CEO Lucian Grainge kept emphasizing onstage that his industry needs paid subscription streaming services to survive. “The whole conversation is obviously about digital music delivery moving from ad-funded into paid digital subscription,” he said. “Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors.”

 Universal Music Chief Lucian Grainge
Universal Music Chief Lucian Grainge
Asa Mathat

Over in the news business, New York Times CEO Mark Thompson declared that, for his company and its competitors, “the battle will be won on the smartphone.” To that end, the Times launched a slimmed-down, $8-a-month mobile app called NYT Now. However, Thompson conceded that “we’ve not sold as many subscriptions as we would have liked,” and that the company is “looking” at giving the app away for free.

Free can work, if it gets younger readers to upgrade to subscriptions or attracts lucrative ads, but it’s a contradiction of the Times’ widely lauded pay-wall model, which many believe has bailed the publisher out in recent years.

Meanwhile, Ev Williams, the co-founder of Twitter who is now running Medium, a new site for long-form writing, defined the company as primarily the operator of a publishing platform for outsiders, but said it was trying to be a publisher itself, and is hiring journalists.

But he conceded that he didn’t have a real business model yet, and wasn’t profitable.

What about TV and movies? Warner Bros. Entertainment chief Kevin Tsujihara, who has a strong digital background, nevertheless defended the movie theater as a “rich experience.” And he said that owning, rather than streaming, movies and TV shows, is still desirable. “For some things, people want to continue to watch them more than once — particularly kids’ movies,” Tsujihara said.

But he conceded that “we’re constantly looking” at on-demand digital distribution.

Filmmaker and screenwriter John August said he sees short, online videos as mostly “promoting this thing that I’ve made. That’s the goal. That’s the end product.”

Sitting next to him was Ze Frank, who heads BuzzFeed’s massive video-production unit, who defended short, original, online videos as an important part of the “stream” in which people now live, and not just a way to get people to watch longer, traditional video, which he called “the garden.”

Looming over many of the sessions was the question of where digital content people create should live. Facebook’s Chief Product Officer Chris Cox said the giant social network is talking to publishers about letting Facebook host their content — not just promote it.

 Facebook Product Chief Chris Cox
Facebook Product Chief Chris Cox
Asa Mathat

But Medium’s Williams said, “I think it’s a scary world if all the content is on Facebook,” and You Tube’s content boss Robert Kyncl said the Google-owned video service is seeing increased growth, despite Facebook’s growing interest in video.

A couple of celebrities railed against content companies. Rapper and record producer Tyler, the Creator, said he’s in the process of cutting out the middleman for his work. And comedian and talk-show host Chelsea Handler said her former home in traditional TV, E! Entertainment television, was like “junior high,” and that she was moving to Netflix to “grow up” and have more control.

Of course, there were some firmly optimistic predictions about Web-based media. Longtime media executive Peter Chernin predicted that subscription-based live sports would be heading to the Web — someday. Hulu founder Jason Kilar expressed high hopes for his new company, Vessel, which will offer early access to music videos for $3 a month — with ads.

Wrapping it all up with his usual bombastic contrarianism was billionaire and “Shark Tank” panelist Mark Cuban.

Cuban attacked YouTube as having had more failures than successes, said traditional TV is still dominant and will be so for a long time, defended movie theaters (of which he owns some), and challenged many of the assumptions media companies make about user preferences.

“Bits are bits, and they will migrate to the most profitable distribution for them,” Cuban declared. And that would be traditional TV, which he said is just an “application-specific network” that is now digital, just like the Web. Even Netflix, which he praised, is mostly composed of programming from traditional media, he noted.

 Mark Cuban
Mark Cuban
Asa Mathat

Cuban also said that too many assumptions about consumer preferences are based on the habits of young people. “The older you get,” he said, “the more valuable your time becomes … and the less you’re willing to work to consume content.” Since traditional TV is easy, it’s “the path of least resistance.”

Confused? So is the media industry.

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