6 Lessons For the Key Players In New Media

This post was originally as a contributed piece to Fortune.  It is republished here for Digital Quarters readers.

Tech’s top firms — from Apple and Google to Amazon and Netflix — are vying to reshape media with different game plans. Here’s what they each need to know.

Digital media has the power to change the world. Actually mastering this 21st century business (and art) is unbelievably hard, however. That begs the question: The top media companies all know they need to make changes — but how do they find the right change and execute well? Let’s look at this question through the lens of six key players in the digital media revolution.

Apple (AAPL): Transform the rest of our digital experience.
It may seem arrogant to give advice to the one company that has surprised everyone again and again by being light years ahead of the industry — as well as the consumer. Yet, in a new era of leadership, the most important thing for Apple will be holding on to Jobs’ core values and strength. As corporate leaders go, Jobs was always the best change agent on the planet, and he was never willing to accept the status quo. That’s why Apple is a perennial leader when it comes to devices and distribution for premium media content like music and movies.

The Apple crew must extend its golden touch to the rest of the digital media device world. It’s time to supply the living room with a first-class TV experience; and to seamlessly flow all entertainment between the mobile, iPad, TV, and desktop worlds. AirPlay, iCloud, and AppleTV aren’t all the way there yet. Apple’s next challenge is to make devices that leap forward and bring entertainment and applications wherever I am, and to know me as one person across all of these environments. To do so — and to do so well — will take a huge imagination. And, even without Jobs himself, it’s clear that if anyone can do it, it’s still Apple.

Facebook: Be everywhere the consumer is.
More than any other company on the Web — even Apple — Facebook has changed the nature of digital experiences. It’s already established itself as the dominant social operating system for consumer audiences. And yet it has the potential to go much, much farther. If you need more proof, just this month Facebook announced that it will be facilitating the spread of mobile applications, not to mention linking into them — finally bridging the gap between Web and app. It’s invading Apple iOS’ and Google Android’s territory, providing the cross-application linkages that have always unequivocally been the job of an operating system.

Increasingly, Facebook has the opportunity to wire consumers, applications, data and devices together. But for Facebook to do this, Mark Zuckerberg will need the kind of imagination that Steve Jobs had. Indeed, Zuckerberg will have to imagine a whole new ecosystem, this time one where Facebook facilitates all connectivity. He’s proven he can execute already. But can he take on a vision this big?

Google (GOOG): “What got you here won’t get you there.”
This trademark phrase from Wetpaint COO Rob Grady is particularly apt in Google’s case. Google is the undisputed king of finding answers to questions — as long as they’re being asked from desktop and laptop computers. But when it comes to applying its great search strength to mobile environments, tablet devices and communications, Google is still lost. While the Android operating system is clearly one of the winners, it doesn’t give Google the essential financial success in mobile that it has on the desktop. Google needs to reinvent itself. It needs to make a bold “burn-the-bridges” move, adopting a Reed Hastings-like philosophy that the company cannot rely on search alone. Only, in Google’s case, it’s even harder.

Here’s why: Hastings had already clearly identified the next wave’s product at Netflix (NFLX) — streaming video over the Internet — but Google has to find a new vision altogether. This is not to say that Google needs to exit the search market by any means. But, instead, it must reinvent its own search portfolio, the way Intel (INTC) reinvented the microprocessor generation after generation, always allowing its newest chip to put the last one out of business, before the competition did. Indeed, Intel’s sustained success was built, in part, on destroying what worked and replacing it with something that worked even better. Google’s new vision should surely have three components: mobile, search and social. The good news is that, thanks to Android, Google already has A+ platforms to build on the first two.

But search needs to get beyond the query box, and the mobile device can be more than a phone plus PDA. Google’s challenge — and its opportunity — is to reinvent it as a completely connected device that is woven into the fabric of daily living. It should know where I am, who I’m with, and what I’m doing — or at least have some educated guesses. It should make the next interface leap that helps us leave the thumbs behind. And, it should be a digital companion that picks up on environmental cues and helps me live my digital life. Siri has opened our imagination; but Google has amazing voice recognition, algorithmic and platform strength to accomplish these things. Now it sorely needs to understand people. That’s the most pressing — and most problematic — task for Larry Page and his team in 2012.

Amazon (AMZN): Fully bridge digital media and commerce.
If Facebook is the ultimate platform for social connectivity, it’s pretty clear that Amazon should be the ultimate platform for media and commerce. Amazon has already made amazing progress in redefining itself. It started as a bookseller, became a retailer, began representing other retailers and, most importantly, has morphed into a media and device company. And, as if that’s not enough, its Web Services power tons of other companies that make the Internet fascinating.

That said, a scattershot approach won’t help Amazon become the single defining platform that bridges digital media and commerce. Amazon has tremendous assets in its catalogue, in terms of both physical and digital goods. And it also has devices that give it a unique channel to the consumer — for the time being, at least. But to fulfill its true potential, Amazon needs to extend its platform all the way to commercial transactions, wherever they happen.

Beyond digital goods, Amazon should be working on digital currency and customer management; an acquisition of Square would be a tremendous accelerator here, and it would ultimately help Jeff Bezos and his team power transactions wherever in the world they take place. What Facebook is to our social transactions, Amazon should be to our commercial ones — an OS for commerce. Indeed, Amazon has the opportunity to provide OpenTable-like services, for all commerce, not just for the restaurant industry. It’s already got the goods and the customer relationships. <ow it just needs the focus on the bigger opportunity.

Yahoo (YHOO): Decide what the brand really stands for.
On one hand, Yahoo is the most impressive all-digital media company there is. It has tremendous access to a huge audience of consumers, a broad product portfolio, an unrivaled heritage as a first-generation superstar and a unique reach into Asia. And yet, it’s also the most disappointing digital media company in the marketplace, so much so that its brand increasingly stands for nothing in particular to most of its audience.

Of late, attention has been focused on Yahoo from a financial point of view. But whoever eventually buys the company must look beyond integration, splitting and cost cutting. Instead, the acquirer will have to figure out what to do with Yahoo’s core. And it all comes down to one key question: What can Yahoo provide to its audience to earn their attention every day?

To date, the hook has been email. Yahoo Mail is responsible for about 75% of Yahoo’s media traffic. But Yahoo Mail isn’t growing. In the last year, it shrank slightly (<1 %), according to data from comScore. So, for Yahoo, the choices are to innovate in communication to leapfrog Gmail, Skype, and the lot; or else to do the hard work and start figuring out again what Yahoo really stands for. The company has great roots. It has a natural brand for serendipitous discovery, for fun and interesting news to make your day. The bottom line is that Yahoo should be able to execute on both the options listed above, hopefully without waiting for the financial dust to settle.

Washington Post (WPO): Re-inventing media’s most ravaged category.
If we had to name the most ravaged sector of media, it would certainly have to be newspapers. Don Graham recently said the industry is “collapsing.” But, he’s not just watching it happen; he’s actively and energetically intervening. I’ve been incredibly impressed by the way Graham and his team are up for re-inventing the category, especially as I’ve talked to other organizations that are nearly paralyzed. Instead, WaPo is applying the greatest growth trend of the Internet — social media — to its business. With its inordinately valuable and trusted brand at stake in the Washington Post, the risks are clearly high. Rather than acting out of fear, Don and his Chief Digital Officer, Vijay Ravindran, are taking aggressive advantage of opportunities to engage, grow and retain their core audience. At the same time, they’re downshifting to the younger audience that just isn’t buying newspapers. The Washington Post Social Reader is the flagship example, and it’s a bold move to jump ahead of the consumer and create a new experience for people that they didn’t know they needed, all on the social Web. [Full disclosure: My company Wetpaint works with the Post.]

We will see other awesome and amazing talents emerge in digital media over the next decade. These greats-in-the-making will help build on the staggering changes that technological change has wrought.

Netflix – It’s Wall Street’s Error, Not Reed’s

Change is hard. Change is scary. Change is costly. Change is essential.

This is no more true anywhere than in today’s unbelievably dynamic digital media business.

In February of this year, I outlined the characteristics that define great leadership in this tumultuous digital media industry – and will determine who ultimately succeeds.  I published it in my Media Success newsletter that month (reprinted below), and it has remained a sidebar feature ever since, as the definition of a perfect game.

The 7 Variables For Media Success

  1. Focused strategy and leadership
  2. Meaningful destination brands
  3. Content and experiences craved by audiences
  4. Scalable channels to acquire new audiences
  5. Reach the audience when, where, and how they want
  6. Robust revenue streams (advertising and other)
  7. Profitable business model that scales

Those with these seven attributes will win in media.

 

And that’s why I hereby nominate Netflix CEO Reed Hastings for real-time membership in the Digital Hall of Fame. 

His extremely controversial and determined decision this week to split his company in two is both phenomenally ballsy and smart.

Hastings sees where the world is going, and, instead of resisting, he is getting out in front. He knows that his DVD service today is immensely profitable, and yet it is on a long slow ramp toward zero.  And, at the same time, Internet-delivered video is a whole new, and far more valuable, business.

Sound familiar?

It’s the same dynamic throughout most large old media businesses.  And yet – unlike many in old media – Reed is doing something aggressive about it.

Rather than playing to short-term profits on the DVD business, he is turning full-tilt to the business with the greatest strategic value. If I’m not convincing on this point, please read Mark Suster’s trenchant analysis.

Yes, Hastings communicated his new strategy poorly. But he admits as much in his widely distributed apology. So, with this mea culpa now delivered and digested, let’s get off Hastings’ back, and get back to the most interesting dynamics at play here:

Far beyond any villainy on Hastings’ part, and far beyond any damage to his customer base for changing his product line, I suggest looking for someone else to blame by pointing the finger at Wall Street.

Verrrrrrrrry hypocritical.

The Street talks about its desire to see long-term strategic vision; but whenever it’s there, right in plain sight, investors collectively blink – and then sell, sell, sell. Indeed, the current sell-off of Netlfix’s stock is one of the most alarming signs of the Street’s misunderstanding of media’s strategic future. And now, looking forward, I pity any CEO who turns to Wall Street for strategic validation.

Let’s keep the spotlight on Netflix, though.

I wholeheartedly agree with Hastings.

And there’s no question – in my view, at least – that broadband-delivered content represents the much more important and valuable business opportunity for his company. The fact that he decided to split the service lines at Netflix simply confirms openly what was already inevitable, if previously hushed.

For some reason, Wall Street just doesn’t get it.  And, in my opinion, its punishing resistance to Hastings’ moves is akin to pummeling AOL for thinking beyond dial-up service; yet, as we all know, that company is a decade overdue in figuring out its next wave.

I’m a believer in facing facts, truth-telling, marketplace opportunity, and getting to the sweet spot first.

So, having said that, I’m putting my money on it. Yesterday, I bought Netflix shares. It’s the first single stock purchase I’ve made in media in a couple of years; and I made the buy after seeing a CEO – who has all the variables dialed in to achieve on the next big opportunity in media – do the absolute right thing.

Facebook’s New Media DNA

Credit: James Duncan Davidson/O'Reilly Media, Inc

For a company that has sworn it’s a communications utility, and not a media company, Facebook sure does have some outstanding media talent on its Board of Directors.

Included, of course, is The Washington Post Company’s Don Graham, who is successfully bridging the print and digital generations.

And Now Reed Hastings of Netflix.

I’m wondering whether Mark Zuckerberg has changed his mind, or whether something different is going on.

And, as I’m thinking over what an increasingly social world means, I’m asking myself whether a communications utility is really any different from a media company.

The answer may be “no.”

Here’s why: Increasingly, the “distribution” part of media is being handled by lots of point distributors, each passing along to their own network, rather than by big companies that own dedicated equipment or spectrum like newspapers and broadcasters did.

And, as for content creation, we all know it’s gone from an oligarchy of anointed editorial sources to legions of content creators and commenters.

For Reed Hastings, he has a ton to learn from Zuckerberg about how to re-imagine content creation and distribution.  But Hastings, for his part, can help Zuckerberg learn how to rapidly build and scale a powerful business model that is increasingly playing in the world of content.

After all, no matter how Facebook likes to think of itself, it’s increasingly in the business of connecting audience to content.

So, that pretty much makes it a media company.

However the company defines itself, though, it’s clear to see that Facebook is playing a key role in digital media’s evolving model.  And it’s a smart of Mark Z. to learn from Hastings – who is one of the best in the world at innovating to serve today’s consumers in new and untold ways.