Thursday, August 14, 2008

Media is a long-game - Apple shows the way

Great to see movies available on iTunes in NZ today. I have a US account that I have been using for buying movies, music, TV shows and apps but have used it sporadically based on the hassle of getting credit into my account as I don't have a US credit card.

Today's announcement has reminded me of how important it is to have a long-term view if you are going to enter the media market.

I've been lucky enough to be involved in the majority of Telecom NZ's media offerings over the last 7 years. There will be a bunch of you who are disparaging about Telecom's efforts here - fair enough.

The one thing that frustrated me the most was the lack of a commitment to a long-term plan by Telecom to its media strategy. Basically, depending on the exec involved, it veered from one play to the next, driven by short term objectives. This is not just true of Telecom - other telcos and ISPs locally have had the same approach, and Vodafone globally and locally has been schizophrenic about its approach.

Apple's approach is driven by an appreciation about the fundamentals of the media industry.

1. It is not possible to make money in media over the short-term or even the medium-term. The margins are too slim - less than 10%. Over a long term - say 5 years - with a consistent approach, all those individual sales of low margin items add up, you build an audience and then you can monetise that in other ways (including advertising). Apple is starting to look more and more like a pay TV play the way it is going with apps and media sales. Check the graph - 5 billion songs in 5 years!

2. The media business is built on relationships - no relationships, no trust, no deal. I like dealing with media people if only for the fact you can legitimately talk for hours with them trying to find common ground and that is a legitimate business reason.

It's basically a long tail with people relationships. Today's announcement by Apple is about adding some more to that long tail.

This appreciation has meant that Apple has been able to work through the Universal issues, release DRM-free music and, its my pick, will be the first store to launch Beatles tracks - the Holy Grail for some at least.

Planning on a media play for your business ? Don't go there unless you have a 5 year plan and the support to go with it.

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