Rise of the Socially-Integrated Media Empire

Rupert Murdoch built his media empire, News Corp, the old-fashioned way… by vertically and horizontally integrating deep and wide into the layers of the media industry (e.g. from production to distribution). But with his acquisition of MySpace, Murdoch has gone down a new path… a new dimension of strategic corporate development that I like to call “social integration”.

Just as the name implies, social integration targets the ownership of critical assets in the social media supply chain (e.g. social networks like MySpace or People Aggregator, socially-programmed video services like YouTube or VideoEgg, social photo services like Photobucket or Flickr, socially-curated news sites like Digg or Newsvine, etc.). But in a radical departure from the old vertical and horizontal integration strategies of traditional media, social integration recognizes the fact that social media, by definition, shifts much of the media supply functions directly into the hands of the audience itself.

In other words, with social media, the consumers are in control of production, programming, and distribution … which is a complete reversal of the traditional media model. This reversal in control leads to some interesting consequences, the most obvious being the impact it has on the translation of core competencies within traditional media organizations (they become largely obsolete in the context of social media). But the greater long-term consequences of social integration involve strategic market development.

As social media continues its stunning incursion into the overall media landscape and usurps valuable mindshare, particularly from the younger demographic, the degree to which a traditional media company socially integrates into its audience is rapidly becoming the proxy for its ability to survive the future. But in order to survive via social integration, the players must first understand the real strategic implications of social media.

Many traditional media companies view social media as sort of a “farm league” and a promotional vehicle for Hollywood, one that will augment but not threaten their existing brands, copyrights, talent, and superior storytelling resources. This is a critically flawed view and it’s reminiscent of the strategic mistake that AOL made during the ‘90s. AOL viewed the Internet at large as a wildly chaotic resource that they needed to tame and manicure behind its walled garden. To some extent, AOL treated the Internet as a subset of its proprietary service, positioning itself as the gatekeeper to what they deemed valuable and worthy. This is precisely the way traditional media (especially Hollywood) views social media today.

But just as the Internet was not a subset of AOL, social media will *not* become a subset of traditional media. In fact, social media will increasingly begin to compete directly with traditional media consumption. Yes, it is true that the media output produced and distributed by the audience itself will generally be of lower production value and quality. Even so, they will prove highly competitive to Hollywood products, as the personal engagement factor inherent in personal media outweighs any loss of production value.

So given the competitive nature of social media and the operational challenges it represents, why should media companies even think of embracing social integration? Because they have no choice… social media will continue to take market share away from traditional media, regardless of whether the media companies participate or not.

And if that’s the case, it’s better to eat your own children… otherwise, Google and Yahoo will gladly oblige. At the end of the day, the media conglomerates should view social media much like they did the rise of cable TV. Cable eventually took half the market away from traditional broadcast TV, so the media conglomerates vertically and horizontally integrated their way into cable in order to buy back market share. They should do the same with social media by pursuing a strategy of social integration. Rupert Murdoch already made his first move, and it looks like NBC is about to take their first baby steps. Welcome to the new world of socially-integrated media empires!
Robert Young is a serial entrepreneur who played a major role in the invention & commercialization of the world’s first consumer ISP, Internet advertising (pay-per-click ads), free email, and digital media superdistribution.