As major media consolidation deals bring more and more publishing houses into private hands, the challenges of converting these properties that can respond to the needs of niche markets are becoming more acute.

Photo credit: Tina Rencelj

Combining infrastructure and staffs cannot be the only factor leading to more success in publishing markets that are by their nature highly decentralized. There is a gap in management skills, industry outlook and strategic vision in publishing companies that is going to be hard to fill without confronting the waves of users who are eager to create their own decentralized media markets.

Here the full story:

The abundance of private financiers willing to purchase media properties seems to know no bounds recently. As Market Watch (requires registration) notes the hope of many of these private investors is that after a few years of tweaks and tucks out of the glare of impatient public markets major media properties will rise phoenix-like to become hot investments yet again. In the meantime the consolidation of media properties into ever-larger private holding companies is accelerating rapidly the move towards global consolidation of media ownership.

Not every one of these moves to private ownership may be huge from a Rupert Murdoch's perspective, but when you have a multi-investor deal for combining Penton and Prism Business Media that reaches up to around USD 530 million in total value the bets on a bright future for consolidated media properties are becoming pretty steep.

In business media, where high-end audiences in specific market niches are more likely to be captive communities for efficient and effective publishers, there is good reason to think that these private bets are going to pay off pretty handsomely.

But in many instances these investors must face the broader realities of an industry that is beginning to reflect an increasingly narrow set of outlooks on both its audiences and itself.

While greater efficiencies are gained by consolidating staffs and infrastructure to produce a wide array of publications via large holding companies, the challenge that many of these companies face is that cutbacks alone cannot produce staffs that are efficient at creating new kinds of online content that interest online audiences. The technology may get lean and mean, but editorial operations are benefiting far less from consolidations.

The resulting gaps in media content quality are being filled increasingly by the audiences themselves.

With weblogs, wikis online video and a host of other tools both individuals and enterprises are becoming far more adept at creating their own editorial value.

As Google's USD 1.65 billion deal for YouTube underscores the stakes for getting more diverse content from user-generated sources are increasingly high - so high that one wonders whether major media companies may not have created a new bubble of their own as they hunt for the next YouTube.

The problem with combining the consolidation approach to traditional media with the "spend at all costs" approach to capturing diverse user media is that you may wind up killing both investments in process. Not many user-generated media plays are going to wind up being the great revenue producers that media companies may hope for, even if they do generate significant amounts of audience share.

In the meantime the capital drained off on these oversized user media bets take away badly needed resources to bolster up traditional editorial content. There will be one or two user-generated content plays next year that turn out to be (maybe) worth huge investments - and the rest will be wasted money.

In the wake of these opposing forces of consolidation and diversification, content producers need to think carefully about how they are going to position themselves for profitability moving forward.

A few quick suggestions:

• Keep the focus on content, not distribution

  

  An acquisition like YouTube doesn't come along all that often, and when it does there's the temptation to think that you're buying a distribution channel. But user-generated media is a very movable feast, able to switch at will to the next interesting channel. A channel it is, but one that's highly independent of the content producers using it.

  By contrast CBS News, which has been making aggressive use of YouTube as a venue, is thriving by trying to get content into the hands of new audiences in a venue that they value. Media companies need to think along similar lines where possible and think more about how they can be leading producers of content in user-centric venues.





• Keep the focus on adding user content to niche markets

  

  While the emphasis of late has been on the "glory deals" that lead to major consolidation coups, these mega-deals are not necessarily going to lead to mega-solutions for publishers' problems. At its heart the online revolution is about developing highly valuable content for niche audiences, out of which can grow the enthusiasm for more widespread distribution of content.

  When you're faced with legions of user-publishers whose motivations for putting out great content may be far more complex than the typical ad-supported media outlet it's going to be harder and harder to find an editorial focus that can out-run targeted communities of users already empowered to communicate with one another. Instead, learn how to help them run with one another - one niche at a time.





• Keep the focus on getting the right leadership

  

  At a recent media industry committee meeting I was surprised to hear some of the veteran industry insiders complaining that recent industry event panelists had been a little too quick to pat one another on the back and avoid some of the real pressing issues facing media companies. The surprise was not that this was happening - the "whistling in the dark" has been all too evident for years, now - but that industry leaders were challenging publishing companies to embrace the challenges confronting them.

  In military circles power runs with those who have leaders who understand the battlefield at hand: being able to consolidate power is not the same as knowing how to put in place top-level and middle management who can use that power effectively to confront key issues in distributed markets. Entrenched media management teams must look beyond the next round of back-slapping events with colleagues and think about who is really in touch with the distributed markets that they need to conquer.

While many good things may yet come out of this latest wave of media consolidations, private investors must acknowledge to themselves and to others that the risks are far higher and longer-term than many are willing to admit.

In the meantime smaller and more nimble independent publishers are springing up left and right to fill in corners of niche markets that will be hard to win back into mainstream media.

To win big: think small.

Originally published by John Blossom as "Think Big, Think Small: The Conflict Between Media Centralization and Decentralization" on November 27, 2006.

Find out more about John Blossom and the management consulting services of Shore Communications Inc. covering enterprise, media and personal publishing at Shore.com.

Credits
Magnifying Glass - Photo credit: Colin & Linda McKie
Packages - Photo credit: silense
Wooden rudder - Photo credit: Arturo Limón