Wednesday, February 16, 2011

Video Killed the Radio Star

Today Borders filed for Chapter 11 bankruptcy protection. Everybody points the finger at Amazon when a brick-and-mortar book retailer has trouble. It seems to make sense to blame virtual stores when physical stores fail. I'm not sure whether it is electronic commerce or the electronic book that has brought the United States second largest bookseller to this point. Either way it makes me wonder about the consequences of new inventions. How many buggy makers went out of business when Henry Ford began producing the horseless carriage? How many employees will lose their jobs because Borders plans to close 30 percent of their store locations?

I work in an industry that is rapidly declining due to the Internet. Online advertising is replacing print. I look at the music industry to try and study a similar transformation. It isn't identical but you can find common themes. Music has been sold on many different media since it was first recorded. Although it wasn't the first form of recorded music, the album lasted the longest. Eventually, vinyl gave way to tape in order to be more portable and tape gave way to compact disc to be more durable. Behind the scenes, analog was replaced by digital as the media evolved. During this time the music companies and the distribution channel stayed intact.

Enter iTunes

Apple changed the music industry by removing the media. Then they changed it again by becoming the distribution channel. Who is to blame that your local record store closed? Not Apple, it is the fault of people who stopped shopping there. It is certainly more complicated than this but in the simplest form no business can survive without customers. The musicians are still making music and the record companies are still around but this transformation wasn't just to a different media. This time it really was different. Now you can create and sell the product without a physical manifestation. Without an item to manufacture, ship, store, display, and hand to customers there has been a drastic change take place.

Not Just a Different Media

The Print Advertising industry initially viewed the Internet as a new media. Just like recorded music moved from cassette to CD, what was originally transferred to paper could simply be transferred online. You can look at electronic phone books that are identical to the print version. The media changed but the product remained the same. Behind the scenes the production process changed over to digital but the product did not evolve. Eventually the publishers came to realize that Google had created a new and different marketplace. At least as different as iTunes is from the record store. Don't be confused; advertisers are still advertising and consumers are still viewing advertisements. Just like there are still musicians making music and people continue to listen to it. The difference is that record companies still create the product that is sold through iTunes. Apple didn't start signing acts or producing songs. Google did.

When Google created the new online marketplace it removed the necessity of the publishing company. An advertiser can't print their own Yellow Pages ad but they sure can make their own Adwords ad. So is it Google's fault that the Print Advertising industry is dying? No, it isn't. It is the same people who quit shopping at the record store. Google is not to blame for people who don't want to read the Yellow Pages. Google didn't kill print advertising, people killed print advertising. What Google is doing to the industry is killing the equivalent of the record companies.

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