CONVERGINGMEDIACase StudyShifting Economics

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

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, vinyl LPs, 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 equal 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. Of course, in the current converged media world, some of those groups creating the programming are also owned by the video-streaming services, such as NBC Universal and Hulu.com. In many homes across the country, the company that provides broadband Internet is Comcast, which owns NBC Universal.

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Mobile technology also plays a big part in the shifting economics of convergence. Mobile phone companies compete with one another and with cable and broadband companies to sell Internet access to consumers. Most of those mobile phones and tablets operate on one of two dominant operating systems: the Apple iOS system and the Android system developed by Google.

Whichever operating system a mobile device uses, it represents a still relatively new convergence between person-to-person communication, mass communication (often via social media and video- and photo-sharing sites), and a staggering amount of commerce. Device owners can download books, music, movies, and games directly from the iStore or Google Play. Popular apps for sites like Pandora, Spotify, Hulu, and Netflix bring together mobile technology and online streaming of music and video. Consumers can choose from thousands of other apps that boost the potential usefulness of a mobile device exponentially. And, of course, many businesses—from pizza chains and coffee shops to retailers like Amazon—have apps that allow consumers to buy goods directly from their smartphones. Apps also allow for easier access to social media sites, which collectively represent one of the main hubs of convergence.

It’s important to remember that part of the shifting economic landscape in the digital age is related to the unpredictability of what will succeed, what will fail, and what will be replaced by the “next big thing.” It wasn’t terribly long ago, for example, that MySpace was the biggest social media network and wildly popular sites like YouTube and Facebook didn’t even exist. What is predictable is that consumers will continue to spend money on mass media content and ways to access and use that content, and a great deal of effort will be expended by a lot of groups to get a piece of that pie.