There still seems to be this magical belief in some circles of the old ... er, traditional ... er, let's say "established" media business that all balance will be restored when that dollar lost in magazine advertising revenue or CD sales or TV spots is made up for with a dollar earned online or through another digital channel. Sorry, but it just won't be that simple.
That last 10%
There's no evidence that will happen any time soon, and it shouldn't be the magic moment we're all waiting for. Instead, companies have to revise cost structures, eliminate biases from legacy business models and find new ways to make up for the decline in traditional revenue streams. If you've traditionally been a magazine publisher, maybe half of that lost dollar can be made up for in online-ad revenue and another 20 cents from conferences and 10 cents from overseas licensing and 10 cents more from premium subscription services. And that last 10 cents may have to be made up for in reduced costs.
Those numbers are completely made up, of course, but that's the mind-set needed to reinvent the model. The point is to have necessity be the mother of invention rather than to wait passively for the dollar that's disappeared from your left hand to show up in your right.
As has been noted in this space at various times, Ad Age (and our parent, Crain Communications) faces many of the same challenges as the companies we cover. I've used this column periodically to discuss those, not to polish our image or tout our successes but rather in the spirit of opening a dialogue on the evolution of the media business.
Embrace the digital revolution
It's not easy, this transition, but it is exciting to be one of the people charged with figuring it out. Besides, we have no choice. Keith Ruby -- who was honored at Ad Age's Marketing 50 event last week for helping turn a woman's MySpace popularity into a profitable business -- offered this bit of advice: Embrace the digital revolution, because it's going to happen "with or without you."
That sentiment was echoed by a denizen of the established-media universe, Dow Jones CEO Rich Zannino, who told Forbes.com that print will eventually make up less than half of his company's revenue. "Our plan is not without risk," Rich said, "but the risk of the status quo is even greater."
The same is true at our shop, which is why Ad Age goes to market as a brand that exists across many platforms rather than a media product defined by a method of distribution. It's why the digital/online and events/conferences segments are the fastest-growing parts of our business, even as print remains the biggest and most profitable (and, for many in our audience, the most highly valued expression of our brand). Ultimately, it's not about one segment vs. the other; it's about serving the customer.
Once we accept that a dollar here isn't going to be swapped out for a dollar there, more creativity and innovation should result. But a true mind-set shift is a necessary first step.
I was reminded of that again when I recently spotted a headline that read, "Digital Music Up 80%, but Shy of Lost Revenue." It quoted an industry group's estimate that digital-music sales increased from $1.1 billion in 2005 to $2 billion last year. But the story quickly deflated that achievement by noting that the rise in digital sales failed to "cover the decline in CD sales."
That anyone thought it should betrays a dollar-for-dollar mentality. The music business shouldn't look for one stream to replace another but should explore multiple revenue sources, including ad-supported distribution models that have so far seen little industry support.
Maybe those who crack the code can even find a way to turn that lost dollar into two earned ones.
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Scott Donaton, former editor of the publication, was last week named the new publisher of "Advertising Age."