The Telcos are the new media monopoly

Autumn 2014

There is no shortage of industry commentary of the fate of the mass media in the age of the Internet but what patterns and insights emerge when you scrape, bake n’ shake the big data. Do statements like "Formerly separate industries colliding on Internet. Newspaper vs magazine vs broadcast TV vs cable TV vs wire service, now all compete and "Distribution going from locked down to completely open, anyone can create & distribute, no $ premium for control of distribution " stand up to scrutiny when measured against the big data?

A quick glance at the change in consumer spending indicates distribution has shifted from Publishers to Telcos. Everybody else plays a premium to connect to the network. It's just the owners of the network have changed. The monopoly has simply changed hands.

The data plan is the new magazine, journal and newspaper subscription.

Telecom revenues vs Newspaper revenues

All of which is to say.

You don't disrupt industries. You disrupt consumer behaviour.

How smartphones disrupted print

The big data suggests Rupert Murdoch got it wrong when he said "Content was the emperor of all things electronic". The big data suggests mobility is the emperor of all things content. If you can't access it on the move, on demand, in real time, it is superfluous to the mobile experience.

The key being consumers believe network access and content to be one and the same thing. The network is the channel. And this is what old media, be it print, music, radio or TV appear to have misunderstood in their attempts to establish new business models on the network.

The network isn't free. In historical terms it's actually very expensive. It’s just that the revenues are now flowing into the coffers of the Telcos and not traditional media.

Free and the disruptive network is just the cover story.

Here is one more mash-up to demonstrate how the US Telcos disrupted old Media by pivoting consumers habits from paying for "portable" media (e.g. CDs, Magazines and Newspapers) to paying for mobile data.

Mobile Data vs Music and Print

The point being. The disruption wasn't about making the connection. It wasn't about the web. The Internet. If it was the disruption would have happened in the previous decade. It was about movement. About mobility. About media on demand, any time, anywhere.

This is why the Telcos are the new media monopoly.

The consumer thinks: I've paid to join the network, the media channel, so why should I be expected to pay for content?

So let's expand the sample. Add more media into the mix.

Data vs Content revenues

As you can see the consumer still spends 7x more on data than they do on content.

The next question is what happens when advertisers are paying for all that Free content and Retailers are spinning new dollars through the mobile network channel? Whose network business model reigns supreme? As the Iron Chef would say.

Data vs Content Revenues

The answer is, not surprisingly, the Telcos. The cost of being on the network is 1.75x greater than the level of commerce generated across the network. Seemingly we are more interested in making the connection than profiting from the connection.

Now let's explore a fiction. Let's explore the idea that people won't pay for content on the network.

Here is a slightly different match up. It compares Mobile Data with Pay TV.

Data vs pay TV Revenues

Now this is important because a. it disproves the idea that people won't pay for content on the network. b. It demonstrates that old media can make money on the network. c. But even when they do it isn't as good a business model as “money for nothing and your clicks for free".

Moving on what happens when we widen the data sample even further? What happens when we introduce broadband into the mix?

Data vs Content Revenues

This is what Analogue Dollars = Digital Pennies really looks like. Hundreds of Digital Dollars for the Telcos. Dimes and pennies for the rest of the players in the new media landscape.

Advertising funded free being the only model that allows you to stay in the game while you and the rest of the media industry try and work out what hit you.

Data vs Content Revenues

And, yes, even if we throw eCommerce into the final mix we discover the dollars being spent across the value chain are still monopolised by one player. The Telcos. The gatekeepers. The network tollbooth.

Data vs Content Revenues

And, yes, there are many ways you can bake this cake. Cut this pie. e.g. SMS was still bigger in 2012 than the rest of the global digital media landscape.

Data vs Content Revenues

But in the end the story looks the same. Telecoms monopolises share of customer wallet in the new media landscape.

Data vs Content Revenues - Spend per Capita

All of which is to say.

You don't disrupt industries. You disrupt consumer behaviour.

And that's why Telecoms, and not Silicon Valley - be Google, Facebook, Amazon, Microsoft, Yahoo! or Apple - has emerged as the new media monopoly.