For much of their history, media companies have been part of usually discrete or separate industries—that is, the newspaper business stood apart from book publishing, which was different from radio, which was different from the film industry. But the Internet and convergence has changed that—not only by offering a portal to view or read older media forms but also by requiring virtually all older media companies to establish an online presence. Today newspapers, magazines, book publishers, music companies, radio and TV stations, and film studios all have Web sites that offer online versions of their product or Web services that enhance their original media form.

Companies Struggle in the Transition to Digital

However, putting up and locating information on the Internet can be problematic. Traditional broadcast and cable services have challenged sites like Google’s YouTube for displaying content that appears online without permission. In 2007, Viacom, owner of MTV and Comedy Central, sued Google and YouTube for $1 billion for the unauthorized posting of more than 150,000 video clips—including episodes of SpongeBob SquarePants, South Park, The Daily Show with Jon Stewart, and MTV Unplugged. For its part, Google said YouTube has lived up to the requirements of the 1998 Digital Millennium Copyright Act, noting that “the federal law was intended to protect companies like YouTube as long as they responded properly to content owners’ claims of infringement.”²⁰ In response, Viacom noted that Google/YouTube had done “little or nothing” to stop copyright infringement. Viacom’s lawyers argued that copyright violations appeared to be central to the Google/YouTube business model: “The availability on the YouTube site of a vast library of the copyrighted works of plaintiffs and others is the cornerstone of [the] defendants’ business plan.”²¹ But in June 2010, a New York federal judge threw out the lawsuit, marking a victory for Google’s popular YouTube site. The judge said that under copyright law it would not be fair to hold Web sites liable for merely hosting videos from content providers like Viacom that might be illegally posted, particularly if sites like YouTube promptly take down the videos after being notified. In 2012, though, a federal appeals court overturned the decision, arguing that “a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website.” YouTube responded that the lawsuit “is a dispute over a tiny percentage of videos long ago removed from YouTube.” The court’s decision meant the lawsuit cases were revived and could again be tried in court.²²

As the Google/YouTube case demonstrates, the Internet’s ability to disrupt old business models continues to present challenges for traditional media companies that, like Viacom, are still uncertain whether this type of Internet exposure actually works as a form of promotion for their content, drawing in new viewers and readers. In addition, these companies are unsure of how to take the next step—getting people who are accustomed to free online content to pay. Some categories of media content do better than others. For example, a 2012 Nielsen survey found that “tablet owners aren’t opposed to paying for the media they really want.” In the United States, 62 percent of tablet owners had paid for downloading music, while 58 percent paid for books, 51 percent for movies, 41 percent for TV shows and magazines, 27 percent for streaming radio, 22 percent for sports, and only 19 percent for news.²³

The Rise of the New Digital Media Conglomerates

The digital turn marks a shift in the media environment from the legacy media powerhouses like Time Warner and Disney to the new digital media conglomerates. Five companies reign larger than others in digital media: Amazon, Apple, Facebook, Google, and Microsoft. Each has become powerful for different reasons. Amazon’s entrée is that it has grown into the largest e-commerce site in the world. In recent years, Amazon has begun shifting from delivering physical products (e.g., bound books) to distributing digital products (e.g., e-books and downloadable music, movies, television shows, and more), on its digital devices (Kindles). Apple’s strength has been creating the technology and the infrastructure to bring any media content to users’ fingertips. When many traditional media companies didn’t have the means to distribute content online easily, Apple developed the shiny devices (the iPod, iPhone, and iPad) and easy-to-use systems (the iTunes store) to do it, immediately transforming the media industries. Today, Apple has a hand in every media industry, as it offers the premiere platforms of the digital turn. In 2012, Apple became the most valuable company in the world, with shares worth $625.3 billion.

Facebook’s strength has been its ability to become central to communication and social media. As Facebook’s number of users surpassed one billion worldwide in 2012, the company still struggled to fully leverage those users (and the massive amounts of data they share about themselves) into advertising sales, particularly as its users move to accessing Facebook via mobile phones. Unlike the other four digital companies, Facebook lacks hardware devices to access the Internet and digital media. Google, which draws its huge numbers of users through its search function, has much more successfully translated those users (and the information provided by their search terms) into an advertising business worth more than $42 billion a year. Google is also moving into the same digital media distribution business that Apple and Amazon offer, via its Android phone operating system, Nexus 7 tablet, and Chromebook. Microsoft, one of the wealthiest digital companies in the world, is making the transition from being the top software company (a business that is slowly in decline) to competing in the digital media world with its Bing search engine and devices like its successful Xbox game console and its new Surface tablet. Microsoft also owns Yammer, a business social network, and holds a small ownership share in Facebook.

Given how technologically adept these five digital corporations have proven to be, they still need to provide compelling narratives to attract people (to repeat a point from the beginning of the chapter). All five companies are weak in this regard, as they rely on other companies’ media narratives (e.g., the sounds, images, words, and pictures) or the stories that their own users provide (as in Facebook posts or YouTube videos). The history of mass communication suggests that it is the content—the narratives—that are enduring, while the devices and distribution systems are not.

The Digital Age Favors Small, Flexible Start-Up Companies

All of the leading digital companies of today were once small start-ups that emerged at important junctures of the digital age. The earliest, Microsoft and Apple, were established in the mid-1970s, with the rise of the personal computer. Amazon began in 1995 with the popularization of the Web and the beginnings of e-commerce. Google was established in 1998, as search engines became the best way of navigating the Web. And Facebook, starting in 2004, proved to be the best social media site to emerge in the 2000s. For each success story, though, hundreds of other firms failed or flamed out quickly (e.g., MySpace).

Today, the juncture in the digital era is the growing importance of social media and mobile devices. Like in the earlier periods, the strategy for start-up companies is to find a niche market, connect with consumers, and then get big fast, swallowing up or overwhelming competitors. Instagram, Foursquare, Twitter, and Zynga are recent examples of this. The successful start-ups then take two paths—either be acquired by a larger company (e.g., Google buying YouTube, Facebook buying Instagram) or go it alone and try to get even bigger (e.g., Twitter). Either way, success might not last long, especially in an age when people’s interests can move on very quickly.