Wow, it never ends. Smart people at “old” companies continue to think that they are entitled to earn the same level of profits simply by doing the same old thing in a new channel.
Case in point? Rafat Ali of PaidContent has a great quote from Sony BMG CEO Andy Lack (via Reuters), emphasis mine:
At the same speech, Lack said it could be 2009 before digital music becomes a large and profitable business for the major music companies. “I’m not making any money on this,” he said. “(Apple Computer CEO) Steve Jobs … has got two revenue streams: one from our music and one from the sale of his iPods. I’ve got one revenue stream that a proctologist would have a hard time analyzing. It’s not pretty.“
Hey Lack, have you completely lost sight of the fact that customer needs change, and that when they do, revenue streams change (i.e., The Profit Zone moves)? Don’t ding Jobs because he’s smart enough to recognize that distributing bits is a commodity business, unless its differentiated via brand, ease-of-use, etc.
But Music Co’s are hardly alone in this. Newspapers are right there with them. At the Media Center’s Mobile Media conference a few weeks back, Rafat Ali (yep, same Rafat) was brought up at the end of the first day to talk about mobile media deal flow.
Instead, he did the unthinkable; he told them exactly what they needed to hear, saying (I’ll call this a paraphrase, but I’m 99.99% confident it’s a quote), “The thought of newspapers playing a major role in mobile borders on ludicrous.” (I can’t believe no one blogged this!)
The old media execs went, sorry… ape shit… and got super defensive. After all, they were at the conference to learn how to start “dabbling” in mobile (while Yahoo, Google, MSFT and dozens of start-ups have hundreds of folks building next gen mobile offerings).
The best statement from one of these guys (again, a paraphrase), “The 18 year olds don’t come to us now, but in 10 years, they’ll want our offering.” Yeah buddy, after 10 more years of XBOX 360 and Virtual Earth, Yahoo Music and Local Traffic Widgets, and Google searching, they’re going to beat down your brand’s door. Uh huh.
Customer needs change. Profit zones move. And while the newspapers are busy thinking their core competency is collecting whuffie (err, Pulitzers) for writing gilded prose, their competitors (who embrace both technology and innovation) recognize that the Newspaper’s real competency was in being a market maker, and are busy intermediating (right Pete) every relationship they can.
But hey, what do I know. If I were 64, earning $600K a year and sitting on millions in stock, I’d probably be using my profit to prop up my flagging stock price by paying divdends and doing stock buybacks, and running my online division as a “profit center”, instead of investing in the future. Not.
“Customer needs change. Profit zones move.”
Many of the larger studios have dealt with labor unions for decades, so maybe that static outlook on life is deeply embedded in those businesses…?
This article is a few years old, but in this current economy, it really goes to show you that those who have grown and adapted to change over these times will have a much better chance at surviving.