El.pub Analytic Issue Number 7
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Contents: Introduction | Types of convergence | Convergence in practice | Problems | Entertainment and media 2001 - 2005 | Conclusions
Reading the annual reports of companies that in the past have been considered the backbone of publishing whether of information, books or newsprint, the overall impression is one of change. Whether it is Penguin or Macmillan in the UK, Axel Springer or Gruner + Jahr in Germany, Hachette or Flammarion in France, the structure of the industry is changing in two ways. There is a consolidation of the industry with growing internationalisation through acquisition, and there is a broadening of the scope of the expanded companies not only into new media but into other traditional media such as radio and TV.
Many of the publishing houses of the past have been absorbed into major groups that may be information oriented, entertainment oriented or part of larger industrial groupings. The largest European groups such as Bertelsmann, Lagardère and Vivendi are global players.
Bertelsmann has divisions for book, newspaper and magazine publishing, music (records), printing, TV, multimedia and science publishing. Of the Bertelsmann turnover of 16.5 billion in 1999/0, books account for about 25%, records (BMG) 28%, newspapers and magazines (G + J) 17%, printing (Arvato) 13%, TV (CLT-UFA) 10%, science 4% and multimedia 2%. So publishing in its traditional print media sense is less than 50% of the total.
Lagardère Media generates about 60% ($7.2 billion) of the group turnover (12,1 billion) in 2000, the other activities being high tech industry EADS (space, aviation, telecoms) and Matra Automobile. The media divisions cover books (Hachette), newspapers and magazines (Hachette Filipacci), distribution services and digital (Lagardère Activ which includes radio and TV).
Vivendi Universal had 12.4 billion turnover in the first half of 2001, TV & films (Canal+, Universal Studios) 35%, publishing (books, magazines, science, PC games) 13%, music (UMG) 24%, telecoms (Cegetel, SFR) 28%.
An important point in the restructuring of the media business is that new media is not at first sight a major part of the individual groups. The dotcom does not figure strongly in the balance sheet. Multimedia and e-commerce is not the most profitable part of the new business. However, a closer look reveals that whilst technology does not dominate the financial reports it is a major factor in the restructuring and forward thinking.
Middlehoff states: "Our aim was to expand our core businesses, integrate Internet activities and - at the same time - strengthen our position as the world's leading Web-oriented media company. We have succeeded in all of these areas.... As the world's most international media company, our dual strategy is designed to generate quality content and obtain direct access to media users the world over."
Six months later the 2001 interim report states: " Important steps in the implementation of Bertelsmann's Internet and content strategy included the takeover of the US music website CDNow, which became part of the Bertelsmann eCommerce Group, the extension of the cross-divisional Bertelsmann Content Network, and the joint venture with iSyndicate to re-use content throughout Europe."
At the same time Reuters were writing in their 2000 Annual review: "Today, we use Internet-based technologies to satisfy the world's growing demand for information. ... Today, the widespread adoption of Internet technology greatly simplifies our focus. Since industry standards have emerged, we have not had to create proprietary technology. Instead, we are designing a corporate architecture for our product lines which are built on Internet Protocol (IP) standards."
Similar views are found in the reviews of Pearson (Prentice-Hall, Addison Wesley Longman, Penguin Books, and the Financial Times), Wolters Kluwer (electronic sales up from 20% to 26% of turnover between first half 2000 and 2001), and many other companies that are active in new media.
The essential difference between these companies and the failed dotcoms is that they have applied e-commerce and other technology methods to their existing profitable media businesses. They have used technology inside their own operations to improve efficiency and gain competitive advantage.
Reuters, which at one time ran expensive and proprietary networks to deliver information to clients say: "What impact does the Internet have on margins? ... Internet technologies are free. We don't have to pay to invent them. The 'last mile' link to the customer is free of cost to us. Customers have their own equipment and have to maintain it themselves."
Bertelsmann say of their Content Network (BCN): "Convergence is the magic word. Distribution channels are being digitized, new ones developed and hitherto discreet technologies networked. ... BCN operations rest on the following three pillars: Building media-neutral brands, Becoming a content broker, Founding external content joint ventures."
In essence convergence has meant a rise in the importance of content management that digitisation has enabled, and not the more fanciful cultural and technological changes that were forecast. The successful players in the new media world are those that are making their content work harder, both inside the organisation and outside with clients. Digital technology has put different content types on an equal footing with regard to re-use, distribution and management. Text, images, video and sound can be cut-and-pasted into new products, called up from digital archives to the editors desk, bundled into new packaging for clients to access or re-use in their own organisations, and generally managed in new and value-adding ways, irrespective of whether they are finally sold in a digital or a traditional form.
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