Wednesday, December 3, 2008

Are There Too Many Content Choices - Condé Nast Pulls Plug on Properties

Classic business lifecycle means that when products and services move from segmentation to fragmentation, then customer shares get smaller and smaller. Over time, these fragments can no longer sustain their business model and must get acquired or disappear. Look at any industry, any product line, and eventually, because of internal, technological, environmental, and other factors, consolidation eventually occurs and the fragments return into viable segments. Need some examples, how about the auto industry today, Accounting companies, Banks, and yes even content.

Condé Nast is shutting down sites and others will follow. If they can't adequately create a business model that will become profitable, the brands must adapt or die. What surprises me today is that TV networks have yet to see much consolidation. Currently, I would describe the number of cable networks as highly fragmented. If history is a guide, then it cannot sustain itself and reductions must occur. Initially, I expect some brand extensions to reduce back to its parent network. If the network's niche cannot sustain a positive cash flow, the network may need to go dark. In addition, alternate ways to view content, via VOD and the web, may limit available content on these extension brands. Lastly, declining ad revenue means that their is less money to support too many networks. This will filter down to ultimately affect a networks' longevity.

Networks need to own their content and all its distribution platforms. Those that rely on buying rights better buy all the rights, domestic and international, streaming, VOD, etc. Otherwise, it may lose its audience share and ultimately its value to the consumer. Streamlining the business model will become the next step. It's what the auto industry is facing today and what content companies are starting to experience.

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