Can Media + Web3 be a Viable Alternative to the Walled Gardens?
Can Media + Web3 be a Viable Alternative to the Walled Gardens?
The history of media shows that new technologies, regulations and changing user behavior breed the Mother of Invention creating a new paradigm shift...is Web3 "it"?
As we’ve reviewed previously, the monetization and user acquisition model for media companies has remained unchanged for nearly three centuries. Though technology has extended the reach and capabilities for creativity and engagement with audiences, the means media companies leverage to monetize their audience remain almost exclusively the combination of advertising and/or subscription.
Local to Global
Purely as a function of logistics and signal strength, early print and broadcast media reach was limited to the cities and communities where they operated. Newspapers and periodicals served a town or city due to circulation costs, and then radio and television stations were limited by their signal reach or FCC regulations. Print Syndication and Broadcast Networks were created by content owners as a way to exploit the local media owners’ limitations to build a national audience with national brands. As a result, syndication was the earliest form of content distribution across multiple cities, placing uniform content across dozens or hundreds of local media properties.
With the emergence of Web 2.0, and persistent, high quality bandwidth, the limitations of distribution that had both plagued and profited media in the 19th and 20th centuries were erased, allowing content and information to be consumed anywhere it could be accessed.
Monetization & User Acquisition
Prior to on-demand content, media consumption had mostly been a zero sum game for media companies based on the content and use case. Most people would read one newspaper on the commute into work, and one on the way home. They would only be able to watch or listen to one radio or television program at one time—until the internet and non-linear video allowed users to self schedule their programming. These pre-internet models created cut-throat competition amongst media companies and paved the way for the massive media consolidation we saw in the United States in the post Telecommunication Act of 1996 era (1996-Today). One the reasons for this consolidation was the massive cost of user acquisition as a result of the geographical moats controlled by legacy media companies. Networks acquired affiliates and content companies, and affiliates merged to create more scale of distribution and access to audiences. More distribution = more eyeballs = greater ad monetization opportunities. The goal is to build the biggest audience, which creates leverage with brands and their media agencies, leverage with creators and production companies and use the savings of shared services across the entirety of the organization to pay down acquisition costs.However, the same legislation that paved the way for consolidation, also armed a new type of media company with the protections inherent in Title V of the Telecommunications Act: 47 U.S.C. § 230.
Whether a media company is empowered by legacy distribution channels or powered by internet protocols, the fundamentals of the business remain the same. Paid content + Ads; or Free content + Ads.
Media as a Co-Operative
Producers and creators have more access to distribution than at any time in history. Any individual can self publish their content to be accessible to nearly 5B people globally. Or they can license their content to any number of platforms to distribute to their audiences on their behalf. However, the same fundamental issue that occupied William Randolph Hearst and Joseph Pulitzer in the late 19th century is still an issue today for creators and media companies alike—the acquisition and retention of audience. “Yellow” and sensational headlines have always worked, but today those headlines are powered by centralized algorithms to maximize eyeballs and one of the many reasons the walled gardens are under attack. Users, creators, and regulators are all searching for a better model.
How does a challenger media brand or creator compete in the 21st century?
As they say, necessity is the mother of invention. And that leads us to the promise and potential of Web3.
Web3, as a philosophy, is borne as a result of the consolidation of power in communication and distribution of entertainment and information. In spite of the “democracy” of distribution that the internet affords, it is gated by a handful of walled gardens who extract a significant toll for access to their massive audiences. The reality is that this is a free market and these walled gardens have every right to leverage their significant resources to maximize revenues and shareholder value (within the law), however the same disruptive weapon that crushed traditional media companies can potentially be reconfigured as a co-operative model to combat their dominance.
The concept behind a cooperative Web3 media company revolves around these principles:
1.) Users and creators are incentivized through shared value creation and governance of the platform;
2.) As the platform grows in value, the members within the community are rewarded for that expansion in the form of tokens and/or income/rewards;
3.) If the incentives are aligned properly, the community reduces the cost per user acquisition by leveraging the combined network to increase the pool of creators and users, which directly benefits everyone within the community.
Do you need to be a DAO to make this work?
A DAO is a decentralized autonomous organization, a legal and philosophical construct that conveys ownership and governance to the community. As we’ve seen with Constitution DAO, and other organizations, there is good and bad that comes with this design. The biggest selling point for the community is governance, say in the roadmap, or ability to vote on strategic direction. This makes sense in abstract, but as an ownership structure this can be problematic. I do not believe that you need to be a DAO to apply the principles of Web3. You can apply governance in the form of feedback voting mechanism based on token ownership for features and the roadmap without being entirely decentralized and autonomous, and still maintain a traditional corporate structure for day to day operations.
What media companies are doing this today?
We are in the early innings of applications within Web3. Last week we reviewed a few industries who are dabbling with NFT’s as a means to benefit from the community interest in crypto projects. The most applicable example that we are aligning within our incentive structure at Data+Sports, is the Brave Rewards program and the Basic Attention Token. Though our concept differs, the Brave Rewards program allows users on their Brave browser to replace and amplify advertising impressions during their media consumption on the Brave browser in exchange for $BAT tokens. In this scenario users are not simply receiving “free” content in exchange for the harboring of their intent and content consumption data, they are receiving tokens of tangible and fungible value for their time, which is then monetized through advertising. As a challenger media brand, a model such as this can build a community and transfer your customer acquisition costs into rewards for users.
Next week we’ll dig in further into the creator engagement and rewards model to help accelerate the development of Web3 media companies…