Should Traditional Media “Burn the Boats”?

It’s an interesting chapter for traditional media these days, where the advent of iPads (assume, if you will, that they will be “broken” or hacked to allow unlicensed or un-proprietary content), Boxees, Hulus and Netflix Streaming continually tests the ability of mainstream media to expand its price and library footprint.

Whether it be buying a big library like MGM (post-Sony/Comcast) or Miramax (post-Disney), the real value studios or private equity see in these sizable libraries is the money they will throw off in terms of license deals. Basically, 7-year “ultimates” – i.e., revenues from the many license windows of distribution.

That this money is now pointing more to more at the lower revshares of the iTunes/iPads/Apple TVs, YouTubes and Hulus reduces the overall payloads and valuations considerably.

It’s almost like adjusting for “technological” inflation. Will the studios adjust?

Questions have to be asked: Can the studios keep their accretive acquisitions and productions at the rates they are by adding staff to their digital distribution divisions? Will digital growth eventually narrow media losses, vis-a-vis by distributing content more intelligently in the primary traditional windows, followed by smarter delivery to digital windows?

With the influx – “flux” in the sense that the numbers are good, then bad, then qualified – of Blu-Ray and the impact of digital home 3D when it arrives later this year, it’s clear that the film industry is aiming to increase the digital quality of its theatrical films. This provides some protection in terms of making piracy more difficult via bigger files to torrent/download; but ironically, it also affects digital distribution, whereby lower resolution media files are being created for online, mobile, etc.

In effect, we’re cheapening the downstream media experience in technology – you know, the forward-moving, Mooresian Law based innovation industry in Silicon Valley – because the “apples to apples” license fees aren’t there to match the higher production costs. Users are becoming used to commoditized media online – it’s lower res and the same content sits everywhere. The search tools may be better, but there’s very little “quality” control. Remember MP3s, as lower resolution music files, decimated the music labels not so long ago.

Jump to Marc Andreessen and his Cortes metaphor. Per Techcrunch:

Legend has it that when Cortes landed in Mexico in the 1500s, he ordered his men to burn the ships that had brought them there to remove the possibility of doing anything other than going forward into the unknown. Marc Andreessen has the same advice for old media companies: “Burn the boats.”

Despite trying time and again, Andreessen’s observation is that media companies have no aptitude for technology, nor do they really understand what technology companies do.

The one thing technology companies do really well is deal with constant disruption. “Microsoft is going through this right now,” he points out, “Ballmer is not complaining about it.” He’s tackling it head on. So did Intel when Andy Grove gutted it to shift from memory chips to microprocessors. So does every technology company CEO.

It is ingrained in the industry Andreessen comes from, so it is just obvious to him: “You are cruising along, and then technology changes. You have to adapt.” Media companies need to learn that lesson fast. To the extent that their products are now delivered and consumed as digital bits, they too are becoming technology companies.

So, how does this roll-up or “reverse carve-out” (to paraphrase studio lingo) change studio content distribution? My read is that studios put more resources into distribution, digital and traditional, to make sure it’s not just a simple sales agent arrangement, nor is it a quantity game of delivery.

Rather, studios need to understand the dynamics of the technology, and the social or lifestyle connection needs of consumers. Further, they must be able to actively get in front of new tech designs as opposed to passively offering resistance.

I’ve made the point with New Medici’s “media+lifestyle” tagline that media has to be understood in terms of lifestyle these days. Users’ lifestyles control their media consumption. In effect, media is but an input to lifestyle, not the other way around. Personalization rules.

Traditional media options are interestingly all about quantity – too many channel opportunities – when users crave quality (“Mad Men,” anyone?) and personalization of programming (DVRs, all?).

Better put, users want quality AND a great POV to target the content they can appreciate.

When studios start to realize these “lifestyle-serving” programming needs, e.g., by creating channels that aggregate and speak to more specific audiences, and/or by integrating their content into community-driven technologies better, Andreessen’s boat-burnings will lessen.

Think of lifestyle content and connection as a media life preserver.

Last, a by-product of this media “sea”-change? We all get better content and programming fit to our lifestyles.