The word that should be banned in all media companies

by John Einar Sandvand on April 24, 2011 · 17 comments

It is used in lots of board rooms these days – as an expression of the danger newspaper companies are in. But in fact the executives would be wiser to ban the word. What word? Read on.

Publishers' worry about print revenues may harm their potential in developing good business models for digital media

Publishers' worry about print revenues may harm their potential in developing good business models for digital media

I have heard it used so many times in different media contexts. We are afraid of it and try to avoid the effect of it. It is a word that makes media executives sleep less at night.

It is called “cannibalization”.

Yes, we would love to build new digital revenue streams. We dream about how users will pay tons of money for our excellent and unique content. But it better not have any harmful effect on print revenues!

So the thinking goes.

To put it in another way: Digital revenues are fine as long as they do not “cannibalize” print revenues!

This line of thought influences product development, pricing strategy, marketing and editorial workflows in many media companies.

It is a dangerous way of thinking.

In fact the word “cannibalization” should be banned in media companies. Using it will only cause harm to media’s chances of surviving the massive digital transformation we are witnessing.

Did you hear me?

Ban the word “cannibalization”!

Yes, I really mean it.  Don’t allow the executives or other employees to even use it!

Why should the word be banned?

Let us start with the basic statement that I keep repeating here at BetaTales:

What can become digital, will be come digital.

Now, then: What does this mean?

It means at least two things:

  • Print newspapers will at some stage be extint. We can argue about when it will happen, but the trend is very clear
  • This being said, the major strategic challenge for media companies is not how to save print revenues, but how to build a successful business model for digital content

Why should using the word “cannibalization” be a problem?

Because even using the word implies a mental context that will in fact be counter-productive in producing the efficient future business models of digital media.

Let me ask you a question, all CEOs of media companies:

What do you think is the most strategic important issue to focus on for the next five year?

  • Saving as much as you can of your print revenue?
  • Or: Building digital revenues as fast as you can?

I have already given you my answer: You need to have full mental focus on buiding future digital business models.

I know many of you will answer that you will be able to balance both.

I don’t believe you.

In fact I think many media executives still underestimate the major challenges facing our industry. They think they can transform a business model of the past to the digital future. If that is the way you think, managing “cannibalization” makes a lot of sense.

But they will be proven wrong.

Instead I believe the winners will be those who have been liberated from their past business models. They focus primarily on how they can build a digital future, and less on how to save the print business a few more years.

I am not saying that media companies should ignore the print business, which is still the biggest revenue stream. Continue to develop the product, increase quality, lower costs and make distribution more efficient! The printed paper will be an important platform for media content for many years still.

But do not let considerations for the print product limit product development in the digital area!

Stop worrying about cannibalization!

Instead you should set your digital products free to compete in their own markets – without considerations for effects on the printed products.

There is an interesting success story to study within the media group I work for myself: Schibsted Media Group.  More than ten years ago visionaries within the corporation realized that classified ads inevitably would move from print to online.

Instead of saying that all efforts should be put into protecting the lucrative print ad revenues, they suggested to start a new company that would try to be the leading digital market place for classified ads.

A company – finn.no – was indeed started in March 2000. It set out to be the market leader in online classified ads in Norway. Prices were only a portion of prices in the newspaper. The newspapers were instructed to market the new online classified ads brand.

It is no secret that there was a lot of discussion within Schibsted about this strategy. Yet it proved to be one of the big success stories.  Finn has for years operated with an extremely high profit margin, driven by its position as market leader in online classifieds. And how did Finn become market leader? By aggresively seeing the opportunity early, before the market had developed and matured.

Today Schibsted is No. 3 globally in online classified ads, according to Businessweek. That’s not bad for a company from a small Scandinavian country.

Market dynamics in the news business are different from the classified ads – and the same rules may not necessarily apply. Yet the main lesson is the same: Make sure to focus on what will be the future!

Many media companies try to offer print and digital products in bundled subscriptions. That may very well be a smart strategy, provided that it is done in a way that will lead to a future business model for the digital media. But if the main purpose is to slow down the fall in newspaper readership without any clear plan for the digital future, such a strategy probably will fail.

I believe the mental focus in the organization is extremely important for media companies that are in the middle of a radical digital transformation.

The losers will be those who put all their energy into slowing down the digital transformation and saving the past. The winners will adapt a digital-first strategy to rush forward to build a new, smart and sustainable digital business model.

I don’t think you can win by doing both.

Therefore: Start by banning the word “cannibalization” in your company.

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  • http://www.facebook.com/perryawilson Perry Wilson

    Great post. I think often ‘cannibalization’ is used when what’s really meant is ‘keep current customers where they are and only attract new customers to the new channel’. This mindset doesn’t take into account the needs of the customer.
    Sadly, banning the word may just mean they will come up with a new word for the same concept rather than looking at the the problem from a different point of view.

    • Christocracy

      Great article. Shame about the big, fat spelling error in the last paragraph.

      What’s the opposite of winner?

      • Lgrillo

        What spelling error?

  • Kp

    Excellent post. So what you’re saying is “Go ugly early”?

    • http://twitter.com/JohnEi John Einar Sandvand

      Depends on what you mean by “Go ugly early”. I am not argueing that publishers should drop their print business. I think printed newspapers will be an important platform for many years still. But we should not let concerns for the printed platform limit what we do in the digital area. That would be a recipe for loosing, I think. And I am not convinced that the old business model can be replicated to the digital world just like that. If we have to choose between slowing the digital transformation and building new digital business models, I think the answer is obvious. We need to put most of our efforts into buildings models for the future, not preserving the past.

  • http://www.kexino.com Gee Ranasinha

    Well said.

    There are far too many companies within the publishing ecosystem (publishers, printers, designers, etc.) that spend all their time reminiscing about “the good old days.” They keep telling themselves that, as the global economy picks-up, so will their old revenue streams, and everything will revert to “normal.” Perhaps they say it so loud because they believe that it’s more likely to happen that way.

    Industries have tried to influence customer behavior for years. The music industry wanted us to continue to buy LPs, then CDs, to shore-up an outdated and increasingly-failing business model. It took an outsider, a computer company, to see past the existing business preconceptions and delivery a new offering with Apple’s iTunes Store. Hollywood is going through a similar introspection at the moment.

    The immediacy and convenience of digital content delivery – whether that content is music, movies, newspapers, books, whatever – will inevitably gain the vast majority of market share.

    As a media company, you need to work-out what your business model will be for the foreseeable future. It doesn’t matter whether you aim for the large chunk of the pie-chart or the smaller one: the important thing to realize is that your industry has changed immeasurably and you need to re-evaluate your business value offering in order to remain relevant.

  • http://twitter.com/timoargillander Timo Argillander

    Good post. Strategy is about making choices and you cannot focus on too many things. Abandoning earlier choices will hurt and that is why people tend to protect the status quo with words like “cannibalisation”.

  • http://twitter.com/jonasbergring Jonas Bergring

    Great post – also bear in mind, that “cannibalization” somehow assumes that ‘old customers’ do not change their behaviours – which they do

    • http://www.betatales.com John Einar Sandvand

      Yes, you are right. A main point here is that the digital transformation is inevitable. And people do change as they realize digital products offer better and more convenient solutions to their needs. So the main challenge for media companies to develop good digital business models for the future. That will take a lot of time, work and failures. Waiting to get on with it is the worst choice to make.

  • http://twitter.com/MMMAgency Nora Pike-Greene

    Having spent years in Print and Online media I can agree that the change to digital media must be welcomed and anticipated and executed carefully. I don’t believe however that print media will completely dissolve. We like the quick any time, any where access to news, specialized content, social media, etc., but many still and always will like to thumb through a real newspaper (might only be a weekly), a real magazine and a real book. Certainly, the change is obvious. I’ve watched the classifieds basically disintegrate at a rapid pace, year after year and revenues drop considerably. If the revenue is not shifted to new media and at a much faster pace than normally happens in the Newspaper companies, surely they will continue to lay off, lose products and eventually fold.

  • Ricliev

    Great post. I spend a lot of time convincing decision makers to take their heads out of the sand and see the wider picture. I can not ban the word, but i’ll redirect them to this post whenever I hear them say it :)

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  • Daniel Höpfner

    yeap – u r right! great post, it’s time to move now and not to wait. If you wait, it’s like the music industry in the end ’90s – the storm is coming and than nobody is prepared and looks astonished.
    http://www.pressmatrix.de

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