What’s missing in most of the discussions media executives have about their businesses' future? The audience. Media execs across the board—in print, television, movies, and music—worry about shrinking profit margins, unpredictable technology shifts, and the ever-present specter of piracy. All of which is entirely understandable. But too often they miss what’s most important—not technology itself, but the shift in behavior and expectations that occurs as audiences embrace some technologies and ignore others. That’s the change that’s ultimately going to matter.
This came up last summer when Peter Passell, editor of the quarterly Milken Institute Review, asked me to write about disruption in the media industries. When an economist mentions disruption he's usually thinking of Joseph Schumpeter, the Austrian/American theorist who 70-odd years ago introduced the idea of “creative destruction”—the notion that outmoded industries and companies will inevitably collapse and die as new ones arise. This kind of thing provokes terror in the hearts of the people running conventional media corporations, who anticipate (with considerable justification) that they are going to be on the receiving end of it.
So, what should they do? Again and again, the response has been to experiment ineffectually while simultaneously trying to hang on to once-dependable business models. Which is exactly what not to do.