The New Media Elites
It has become a staple of Sunday newspapers, television talk shows, and late-night news programs: the cautionary tale about the Internet turning America's youth into a generation of socially inept zombies, plugged in but tuned out, incapable of any conversation longer than an instant message, and headed for a sedentary life of weight gain, eye strain, and information overload.
But if anyone is in danger from the growing power of the Internet and its transformative effect on communication, entertainment, information, and commerce, it is not America's youth but the old media themselves. Companies such as the New York Times, Walt Disney, News Corp., and NBC/Universal, as well as magazine and book publishers, are increasingly losing ground to a new breed of media elites who grew up in the digital world and are now out to control it by offering content and services to users worldwide. "These new entities have emerged with real businesses and real earnings," says independent media analyst Harold Vogel.
Just how quickly the landscape is shifting was demonstrated in the past two weeks. Google posted blowout profit numbers in the third quarter, with earnings rising sevenfold, handily beating estimates as its stock pushed the $400 mark. Rival Yahoo! saw revenues rise 42 percent in the quarter. Microsoft, which increasingly sees online portals as its greatest threat, announced it would offer Web-based versions of its dominant Windows and Office software packages as it shifts more resources to the Internet. Even AOL, battered during the dot-com bust, has regained some luster, with a host of suitors from Yahoo! to Microsoft to cable giant Comcast seeking a piece of the 110 million-viewer Web portal. Time Warner directors met last week to discuss the offers, as AOL cofounder Steve Case left the board to pursue his own healthcare ventures. Old media's woes continue to mount, meanwhile. The largest shareholder in Knight Ridder, the nation's No. 2 newspaper chain, called for the company to be broken up and sold partly because it cannot capture ad dollars that are migrating to the Web. Merrill Lynch analyst Lauren Rich Fine pointedly noted there might be a shortage of buyers, given the "secular challenges" facing traditional media houses.
Full speed ahead. It's hard to remember that Google, Yahoo!, and MSN were barely on the radar screen a decade ago. It was a dial-up world where only a small percentage of Internet users had high-speed access to the Web. Traditional media companies, with their film, television, and news operations, controlled the content universe and determined what was news, releasing information and entertainment products on a schedule of their choosing. Today, more than half of U.S. households have high-speed lines that allow them to easily access and download music and video from the Web onto an array of devices from laptop computers to cellphones to iPods. The average person now spends three hours a day on the Internet, and with the explosion of blogs and social-networking sites, where users provide free content, the line between consumers and providers has all but disappeared.