CONVERGING MEDIA

Case Study

Shifting Economics

The advent of the Internet has brought about a number of major economic changes, and as media continue to converge, we can expect the status quo to keep shifting. For example, when the Internet was first emerging as a mass medium in the early 1990s, one of the most popular ways of accessing it was through a subscription to America Online (AOL). AOL offered a simple, easy-to-use interface with its own e-mail, chat, and other content, as well as early Web browsing. As the World Wide Web became more popular, AOL stock soared as it made the then-novel experience of exploring the Web manageable, and its “walled garden” approach to access helped parents shield children from unsavory aspects of the Internet.

But as the Internet became less mysterious and more commonplace, that model of access became less relevant; while AOL’s 2001 merger with Time Warner failed, Time Warner found greater success with another telecommunication spin-off: Time Warner Cable, which began to offer high-speed Internet access in the late 1990s. This model—getting Internet service from a cable or phone company—has become more dominant.

This development has, in turn, changed the way many people pay for media content. Before the converged Internet, the easiest way to gain constant access to a particular song, album, or movie was to buy it, on discs or cassettes. Some consumers still buy physical CDs or Blu-ray discs, of course, but those particularly conscious of clutter, budget, or their own shifting tastes may instead opt to stream their music online on services like Spotify, watch TV shows on Hulu, or, it must be said, download media illegally. All of this requires a high-speed Internet connection, meaning that money that might have gone to music labels or movie studios now heads toward telecommunication providers.

Authors and owners of media content are still trying to figure out how best to navigate this altered economic landscape, experimenting with different methods of generating revenue. Cable television, for example, so often packaged with high-speed Internet, could eventually become outmoded like AOL as more people subscribe to services like Netflix or Hulu Plus, where programming is less bound by particular channels or airtimes—and fees don’t match those charged by cable companies. These services also pay studios to license their programming, which could be a path to traditional profitability for individual movies and TV shows. The main hubs of digital convergence—Apple, Google, Amazon, and Facebook—have become important conduits for mass media content, with their applications, online stores, and enormous user bases and may continue to grow. Consumers, of course, will continue to spend money on media and communication, but where that money ultimately goes, and who reaps the greatest rewards, may not stay constant.