Thought Catalog

The Weird Economics Of Digital Media

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Why we’d be wise to treat it as a shrinking industry, long-term.

I love the Internet. Right now, I have 29 tabs across four browser windows. I have another 10 open on my phone, 1,804 favorite tweets, an untended Instapaper account, a significant Netflix queue, and a seemingly infinite volume of YouTube I’ve been meaning to watch and artists I’ve been meaning to check out and writers I’ve been meaning to read and a list of essays I, at some point, fully intended to write.

That’s all to say – there’s a lot of content out there. Here’s a fun visualization of what is created and seen in one second at a handful of top sites. On WordPress, the operating system that extends from personal blogs to media titans, over 20,000 posts are published each day.

It’s not just creation that’s growing. We’re spending more time with media too. In 2015 academics project Americans will consume media for an average of 15 hours per day.   From 2008 to 2013, that consumption grew at 5% per year. If we printed all this media and stacked it, it would cover the 50 states, 14 feet high.

The cause of this growth is obvious: it’s the digital, web and smartphone revolution. It’s that anyone can publish now – words, video, songs – at nearly no cost. We can read, watch and listen whenever we want, most often for free.

And this is exactly what is so weird about digital media – it’s one of the few things we consume every day that we don’t pay for, at least not with money. We pay with our time. This is mostly great, but there’s a downside – namely, it’s hard to spend time wisely. I have an unknown amount of time – between, say, three minutes and sixty years to live – so I’ll go for that listicle. When I have a fixed quantity– say, 100 dollars to last a week — I know quite precisely how to spend it. But the way we pay for our media today sits in a human blind spot, and it’s why we feel publishers are being crass when they take advantage of it.

Regardless, the time-spent and the content proliferate, and billions more users get access. So those of us in the media industry must remember that all those new eyeballs don’t foot the bill. Advertisers do.

Advertising is not a growth industry like the Internet. Ad spend is tied very closely to GDP – in fact, since the 1920s, it has hewed a band between 1 percent and 1.4 percent of GDP. Advertising is a cold war business — different companies can spend more to steal market share from each other, but on the whole, no one can get consumers to spend more money than they have.

So the economic situation of the media industry as a whole is that supply has grown incredibly, while demand stays the same. That makes media look a lot less like a high-growth industry than we in the digital world may assume.

Of course, in any transition there is opportunity. Digital ad spend is growing at 18 percent per year. That’s a great business to be in right now. But in the long run, the future for media companies looks a lot more competitive than it once was.

Overall, this is a good thing. First, media companies act as intermediaries between writers, performers, singers, creators, and their readers, viewers, and fans. In the past, those few owners of a printing press, a film studio, or a cable distribution deal had a lot of power. Technology removes unnecessary middlemen, so now media companies will have to work harder, provide more service, accept thinner margins and give more value straight to their creators.

Second, we’ll see influence or cultural meaning becoming more important than ever, as “time” becomes ubiquitous. Influence is not merely “click-y.” So, those who truly inspire and lead us will do well, while those who feed junk into that ever-expanding pit of time will be less interesting to advertisers.

It is a fascinating time to be in media, and I’d encourage anyone with the passion to come after it. But, the growth of content and time will translate only into revenue shifts, not boosts. We shouldn’t expect the same outcomes as those who produce microprocessors, or biotechnology, or clean energy. The media industry doesn’t do much to increase global productivity per head. We are a bunch of interesting browser tabs, revealing personal essays, breaking news, engrossing TV shows and human stuff that make us smile and cry. Over the long term, it’s going to get more and more competitive, and feel like a shrinking industry. But, as I return happily to my reading queue, it’s worth it.TC mark

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