Heard on the street
Apr 20th 2006
From The Economist print edition

Podcasting will change radio, not kill it

BLOG and wiki were already dictionary words in 2004 when Adam Curry, a former show host on MTV, used his own celebrity and the underlying technologies of blogging to popularise yet another next big thing: “podcasting” (which provided him with a new nickname, “podfather”).

The word itself is hip but not helpful. The “pod” comes from Apple's iPod, a fashionable portable music player—a stroke of marketing luck for Apple, which initially had nothing to do with podcasting. The “casting” comes from broadcasting, which means sending a radio signal to an entire population in a particular geographic area at a particular time. Confusingly, in some respects that is the opposite of podcasting. But none of this matters any more. As with blogs and wikis, people are discovering podcasting as something genuinely new.

It works as follows. A podcaster records something—anything from music to philosophical ramblings, professional news or snorting noises—into a computer with the aid of a microphone, then posts this audio file onto the internet. There, people can listen to it and, more importantly, subscribe to a “feed” from the same podcaster, so that all new audio files from that source are automatically pulled down as soon as they are published. Whenever listeners dock their iPods or other music players for charging, the feeds that have newly arrived on the computers are transferred to the portable devices. People can then listen in their car, while jogging, or wherever and whenever they please.

It is not quite true, therefore, that podcasting is to audio as blogging is to text. Podcasting is about “time-shifting” (listening offline to something at a time of one's own choosing, as opposed to a broadcaster's), whereas reading blogs requires a live internet connection and a screen. More subtly, podcasts are different from blogs and wikis in that they cannot link directly to other podcasts. This makes podcasting a less social, and probably less revolutionary, medium.

Nonetheless, its rise has been nothing short of astonishing. Mr Curry's own podcast, The Daily Source Code, has several million listeners. Apple's iTunes, the software application and online music store that makes iPods work, currently lists 20,000 free podcasts and is adding them at a fast clip, all before podcasting's second birthday. Podcasting is even expanding from audio to video, although this trend is as yet so new that several words (“vodcasting”, “vidcasting” , “vlogging”) are still vying for the honour.

For listeners, the appeal is threefold. First, they become their own programmers, mixing the music and talk feeds that they enjoy. This liberates commuters, say, from commercial radio stations that, in America especially, seem only ever to get dumber and duller. Second, podcasts liberate listeners from advertising, and thus put an end to the tedious and dangerous toggling between the car radio's pre-set buttons at 100km an hour. (However, some podcasters are experimenting with putting advertisements into their podcasts.) Above all, the time-shifting that podcasts make possible liberates people from having to sit in their parked cars to hear the end of a good programme.

For creative types, professional or amateur, the appeal of podcasting is much the same as that of other participatory media: it dramatically lowers the costs of producing content. All they need is a microphone, a computer and an internet connection, and most people already have those.

Hammed radio
Does podcasting therefore spell the end of radio? “I don't really buy into that per se; what we're really seeing is a big mash-up of stuff,” says Mr Curry, the podfather. Podcasting, terrestrial radio and another newcomer, paid-for (ie, mostly advertising-free) satellite radio, are all carving out their niches in people's crowded media lives. The limiting factor of podcasting, says Mr Curry, is that it is “inherently asynchronous” (ie, not live). “If they find Osama bin Laden, don't go running to your iPod,” he adds. Breaking news, call-in shows (an old-fashioned form of participatory media) and other live programming will still work on terrestrial radio.

This might lull radio bosses into a false sense of security, however. “I'm not sure that the average consumer is going to want to hear, you know, Joe podcasting out of his garage,” says Mark Mays, the chief executive of Clear Channel Communications, America's largest radio broadcaster with 1,200 commercial stations. Mr Mays claims that when people buy an iPod they will reduce their radio listening for a few months, but then increase it again to educate themselves about new music. “And where else to go for music than their local radio station?” asks Mr Mays.

If they are young, they will go anywhere but to their local radio station, says David Goldberg, the music boss at Yahoo! “The odds that you and I like the same five songs in a row are very low,” he says. “If you hate Metallica, you're not going to sit through three minutes hoping that the fourth minute gets better.” To young people today, song sequences are simply “playlists”, which happen to be among the easiest things to share with friends online, so this is what Yahoo! concentrates on doing. It lets people listen to music (for a small monthly subscription or pay-by-download) and then rate the song. Yahoo! then uses its knowledge of the online communities formed by its users to recommend the right kinds of songs “by connecting you with other people who like the same music”, says Mr Goldberg.

The effects on radio, while not lethal, will therefore be large. Radio broadcasters understand that they need to make commercial radio less disagreeable to listen to, which above all means shorter advertising interruptions. This is why Clear Channel has introduced a campaign called “less is more”, in which it sells fewer minutes to advertisers in the hope that this will drive up ratings and prices.

Historically, radio has been good at adapting. When Franklin Roosevelt gave his “fireside chats”, radios were in the living room and families gathered round them during prime time. Then television came along, and radios migrated to the car for use during rush hours. Podcasting may herald yet another migration, to a place and context yet to be determined.

Wonders of the metaverse
Apr 20th 2006
From The Economist print edition

A fantasy world where people make their own films

“LET'S build a really cool swing and see if we can get somebody to sit on it,” says Philip Rosedale. A few clicks later, there is the swing, and quite an artful one. Onlookers have gathered to watch. One, named “mermaid”, declines to sit on the swing, but another, called “ninja”, hops on and rides for a bit. Then a dragon comes along that is so beautifully crafted that everybody stares.

Technically, all this is happening not in real life but in Second Life, a “metaverse” (for “metaphysical universe”) created by Linden Lab, a San Francisco internet company. Mr Rosedale, its founder, says that Second Life is “not a video game but a place where people make things.” This is hard to imagine until one sees it, but then instantly addictive. People who log on to Second Life create an “avatar” (ie, an online extension of themselves). As avatars, they mingle, go to parties, create what they wear and drive in, build the houses where they live, paint pictures and compose music.

Second Life is not as separate from real life as one might expect. Larry Lessig, a real-world author, recently gave a book talk in Second Life, and lots of avatars showed up. People own copyright in real life for the things they create in Second Life. Avatars trade their creations in “Linden dollars”, convertible into hard dollars on Linden's currency exchange, which has a monthly trading volume of $4m. One user, Anshe Chung, pays Linden Lab the equivalent of about $200,000 a year to buy land in Second Life. Ms Chung turns a profit by developing this land into residential communities (such as “Hangzhou”, “Gotland”, “Emerald Island” and so on) and charging avatars rent. “It's the purest way of profiting from creativity,” says Mr Rosedale.

A lot of the things created in Second Life are exported into real life, as fashion, songs and so on. One user, Natha Keir (whose avatar is called Kermitt Quirk) created an online multiplayer game called Tringo, which is a bit like bingo but more fun. Tringo started as a game within the game but has now taken on a life of its own outside Second Life.

Other avatars have created cameras and are filming things that happen in Second Life. In effect, some avatars become actors for other avatars who become directors. These new directors then post their films to websites in real life (“real” having become a slippery concept by now). “You can be the next Coppola here,” says Mr Rosedale, as he watches one such film, in which a cowboy is just sauntering into a saloon and gun-slinging appears imminent. “Second Life reduces the cost of filming a movie to zero.”

Second Life opened in 2003 and is now inhabited by about 100,000 people from around the world (still a small number compared with the video-game giants). Unlike earlier generations of video games, which appealed mainly to narrow demographic groups, Second Life is popular with women as well as with men, and with middle-aged people as well as teenagers. If there is a trend, Mr Rosedale says, it is perhaps that Second Life does best in places with bad weather, fast broadband connections and unexciting entertainment options. He considers British suburbs an excellent growth market.

In time, metaverses could disrupt the economics of mainstream film-making. Philip Evans at Boston Consulting Group estimates that Linden Lab has so far invested about $25m into the Second Life environment. But as “about 90% of the content is created by the players”, calculates Mr Evans, this works out at a total “investment” of perhaps $250m, which brings Second Life up to the budgets of Hollywood blockbusters. “The production values are amazing,” says Mr Evans. This potential economic disruption to Hollywood, he thinks, “could be the harbinger of something very much bigger.”

The gazillion-dollar question
Apr 20th 2006
From The Economist print edition

So what is a media company?

FOR his first few decades in the media industry—at CBS, then Walt Disney, then Warner Brothers, where he was chairman and co-chief executive—Terry Semel felt pretty clear about what media companies were. He was running them, after all. Then, in 2001, he left Hollywood and went to Silicon Valley as the new boss of Yahoo!, the world's largest internet “portal” (gateway). A self-avowed technophobe who barely knew how to use e-mail, Mr Semel suddenly found himself in “meetings with a bunch of 23-year-olds”. He already had the ambition to turn Yahoo! into the archetypal “21st-century media company”, but suddenly he was no longer so clear on what that meant.

Mr Semel has spent the past five years educating himself, counselled by trusted advisers such as his daughters, aged 24, 19 and 13. The first does a lot on the internet, the second does everything on the internet, and the third “lives online” and has so many beeping devices that Mr Semel, who has a New York accent and the kind of humour that goes with it, occasionally wonders “whether she is trafficking”. Between them, they have helped him to work a few things out.

The internet “is a much larger change than the coming of television” in the 20th century, says Mr Semel. In the past, “someone decided that the news goes on at 11 o'clock at night; people like my wife never even saw the news, because she never stayed up that late. We all grew up when somebody else was the programmer; now the user is the programmer.” That is change number one. To Mr Semel it means that Yahoo! must do more than provide technology. “We decided to open Yahoo! up, so that anybody using [their personalised start page] MyYahoo! can instantly go wherever they want to go,” even if that leads to the web pages of rivals. That credibility, he thinks, will keep users coming back for a “deeper engagement”. As people spend more time on Yahoo!'s pages—news, blogs, e-mail, chat groups, photo and music sites and so on—whether as their final destination or as stops on a journey, Yahoo! can put more and better advertising in front of them.

Change number two, says Mr Semel, is that—unlike in television, say—“you don't need hits”. Many small audiences are as good for advertisers as few large audiences, and indeed may be better. This has huge implications for content, turning it into one long continuum—from professional to amateur, from blockbuster to subculture niche. Chris Anderson of Wired magazine calls this stretched statistical distribution “the long tail”. In his forthcoming book of the same title, Mr Anderson argues that old-media economics, which are biased toward the hits at the “head” of this distribution, are being replaced by new-media economics, which allow creation and consumption along the entirety of a much longer content tail.

Yahoo!, says Mr Semel, will therefore be happy to mix professional content and user-generated content, no matter how small its potential audience, on its pages. The general direction, however, is towards ever more user-generated stuff. In March, Yahoo! said that it would limit its own production of content.

Where does all this lead? “It will look more and more like a stock exchange,” says Mr Semel. An exchange, that is, for users who “offer” (create) and “bid” for (search, navigate, share, enjoy) content. And a stock exchange for advertisers, who bid against one another to have their sponsored links placed in front of these users.

Open outcry
To most old-media executives, the conversation turns baffling at this point. They find it much more reassuring to insist that, in one sense, media companies will probably never change. They are still, at heart, audience aggregators that make money by selling advertising to third parties who want to reach those audiences, or by charging the audiences directly through subscriptions, or a bit of both.

Upon closer examination, this is not so reassuring. Using this definition, the media industry now includes strange newcomers. Google, for instance, “happens to be a media company run by technology people”, says Larry Page, its co-founder, because virtually all of Google's revenues come from advertising. In fact, Google is the most valuable media company in the world, with a market capitalisation about half as large again as that of Time Warner, the largest “traditional” media company. This is remarkable because Google, an internet search engine with lots of other free internet services, explicitly does not produce that which media companies have traditionally manufactured: content.

“We're engaged in a semantic exercise,” says Jeff Bewkes, the number two at Time Warner. “Is Google a media company? It's a weird discussion, what is a media company.” Ultimately, he thinks, “everyone is going to the same media place but they're coming through different doors to get there.” This still begs the question: What does that place look like? And do all the doors provide equally good access?

“The history of the world would suggest that the newer companies that were designed for the medium will prevail, and will then combine,” says Jonathan Miller, the boss of AOL, a rival to Yahoo!, partner in search technology to Google and itself part of Time Warner. That is because the newcomers are at ease in the long tail of content, whereas old-media firms tend to get stuck trying to generate hits.

Exchanges become necessary because people need help navigating around this huge continuum of content. In the present century, says Paul Saffo of the Institute for the Future, “you get large by allowing the many and small to gather on your lawn.” This is the media equivalent of what eBay, a Silicon Valley neighbour to Google and Yahoo!, has done for the trading of secondhand goods among individuals. It is what Wikipedia has achieved as an encyclopedia. It is also very similar to what, say, the New York Stock Exchange does.

Vinod Baya and John du Pre Gauntt at PricewaterhouseCoopers, a consultancy, argue exactly this in a report called “The Rise of Lifestyle Media”. Successful media companies, they write, will become “marketplaces that let consumers search, research, share and configure their media experiences.” To be good, these exchanges need to combine “a personalised media experience with a social context for participation.” Instead of “exclusive ownership of content or distribution assets” (the stuff of old media), the media marketplaces will compete in their “knowledge of consumer activity”, which they will use both to interact more intimately with consumers and to match them better to advertising that is unobtrusive and helpful (itself a novelty), and thus lucrative.

The analogy to marketplaces has another important implication: network effects. The value of networks (such as the telephone or postal systems) and exchanges (such as eBay or the New York Stock Exchange) increases dramatically as the number of participants rises. Once achieved, network effects also become barriers to entry by rivals. If they are looking for an exchange, for instance, both buyers and sellers will gravitate towards the market with the greatest liquidity in a given share or bond.

This is why a lot of new-media companies are now hurrying to create marketplaces with network effects before somebody else does. YouTube, a start-up launched about a year ago, lets people upload and share their own videos. It already transfers more data each day than the equivalent of an entire Blockbuster video-rental outlet. It goes without saying that Time Warner's AOL, Google, Yahoo!, Amazon and other internet companies are also working to exploit network effects.

This race to become the most liquid media marketplace has just started, and the winners are not yet obvious. But the giants, Yahoo! and Google, do have a head start. They already have network effects in their advertising, and emerging network effects in some types of media (text-based blogging, say) that can be transferred to other types (such as video). That is because the distinctions between different types of digital files are becoming increasingly unimportant (assuming a good broadband connection). To savvy teenagers, it's all just stuff passed around among friends.

A tale of two markets
As it happens, Yahoo! and Google have very different visions about what a media exchange should look like. This might be surprising, because on the surface the two companies are very similar. Their headquarters are in adjoining and equally drab suburbs; each was founded by two friends at Stanford University; and “both have assembled audiences of users the likes of which the world has never seen,” says Michael Moritz at Sequoia Capital, the lucky venture capitalist who early on invested in both of them.

But Jerry Yang and David Filo, Yahoo!'s founders, started their company as a hobby, says Mr Moritz. It was always meant to be a media company, and a rather relaxed, human one at that. Larry Page and Sergey Brin, by contrast, have always been “intellectually obsessed” with their mathematical algorithms, says Mr Moritz. This shows. Today, Yahoo! does interesting research into the sociological aspects of the internet, whereas Google hires the world's top computer geeks.

This is not unlike, say, the rivalry between the New York Stock Exchange (with its tradition of open-outcry floor traders) and the NASDAQ (where trading has always been done by computers). In news, for instance, Google displays stories selected by computer algorithms, whereas Yahoo! uses human editors to select the line-up. Caterina Fake at Yahoo! (and the co-founder of Flickr) says that Google's people “solve problems by brute-force computation”, whereas Yahoo!'s approach is “about people, behaviours, sociology”. Speaking for Google, Tim Armstrong, its advertising boss in North America, counters that Yahoo!'s talk about “creating a community has some of that old-media tone about it; is the future for corporate-created communities or user-created communities? Google has a high trust level in users.”

It is a religious war, in short, but one where worshippers for once get the benefit. Yahoo! is working on the social “folksonomies” described earlier in this survey. Google is working on solving problems such as providing (without charge) the enormous online storage required for all this uploading of media files. It is also working on the economics to ensure that not only Google but its users too get some of the financial benefits of their creativity. Google Video, for instance, is a service (or rather, the rough draft of one) in which Google lets anybody upload video. The main innovation is that the creators can determine whether their video is free or has a price. If it is charged for, the creators get 70% of the purchase or rental money and Google keeps the rest.

Where does all this leave old-media companies? For a number of years, they might continue to do well without changing, because many innovations (like Gutenberg's movable type) take decades to become mainstream. A few of these companies stand a decent chance of turning themselves into a genre-specific brand (such as “family content” for Walt Disney). Others, such as Viacom, which recently split its distribution and content into separate companies, are preparing for a future as content producers at a specific point in the “tail”. Yet others, such as News Corporation and Time Warner, are staying vertically integrated for now, and trying to combine old-media empires with new-media marketplaces (MySpace and AOL, respectively). But this is risky, since “in an attempt to protect the one you could screw up the other,” as Mr Evans at Boston Consulting Group puts it.

For old-media moguls who have become new-media moguls, such as Yahoo!'s Mr Semel, all of this is tremendous fun to watch. “Until recently they were just being protective, keeping their arms around their copyright,” says Mr Semel about the old industry that he left behind. “The faster they start to pay attention to making stuff for people like Yahoo!, the better for them.” They've been warned.

What sort of revolution?
Apr 20th 2006
From The Economist print edition

Both good and bad—but it's too early to say in what proportions

AS A rule, some people, such as Jacobins, tend to be more enthusiastic about revolutions than others, such as monarchs. Another fairly reliable rule is that revolutions abrupt enough to be associated with a single year (1642, 1789, 1848, 1917) tend to cause trouble but rarely bring lasting change. By contrast, revolutions gradual enough to be associated with a name (Renaissance, Reformation, Industrial Revolution) often do have enduring effects. A third rule, or hypothesis, might be that revolutions seem never to be entirely for the better or the worse, but somehow manage to combine both.

This survey has argued that society is in the early phases of what appears to be a media revolution on the scale of that launched by Gutenberg in 1448. This invites comparisons. There are Jacobins and monarchs to be found in both revolutions. In the first, the Jacobins were, by turns, printers, publishers, Protestants and writers; in today's revolution, the Jacobins tend to be those bloggers, vloggers and podcasters that bay for the blood of the odious “MSM” (mainstream media). As to monarchs, the first revolution had popes, monasteries and the real thing; today's revolution has, well, the MSM. Both revolutions are firmly in the category of gradualist, name-not-year revolutions.

That leaves benefits and evils. Gutenberg's revolution undoubtedly had enormous democratising effects. It enabled entire populations to read the Bible in their own language, liberating them from Latinate clergies that had kept them in superstitious serfdom. Further on in the revolution, people got news from far-flung corners of the world; one of the things that impressed Alexis de Tocqueville during his travels through America in 1831 was that even frontier families in remote Michigan had weekly newspapers delivered to their doorsteps. And the dramatically lower cost of disseminating the written word allowed many more people to express themselves creatively.

Each of these benefits also seems to have had a dark side. The availability of religious texts in the vernacular led to literalist and fundamentalist movements, and indirectly to religious wars. The surge of textual expression produced not only classics but also pornography and propaganda. Printing presses reproduced “Mein Kampf” just as accurately as the Gospels.

Hell or heaven?
Against this backdrop, the big thinkers about today's media revolution tend to veer towards extremes of optimism or pessimism. Often the alignments are surprising. For instance, Michael Moritz, the venture capitalist who became famous for spotting both Yahoo! and Google, has a strongly pessimist streak. He worries about “amplification of the internet soapbox” and imagines what role user-generated media would have played in “1931 in Munich, how easy it would have been to broadcast the message; I think the Nazis would have got power quicker.”

Paul Saffo, a futurologist and one of the world's most enthusiastic technophiles, also looks at the downside. “Each of us can create our own personal-media walled garden that surrounds us with comforting, confirming information and utterly shuts out anything that conflicts with our world view,” he says. “This is social dynamite” and could lead to “the erosion of the intellectual commons holding society together...We risk huddling into tribes defined by shared prejudices.”

Now for the optimists: Lee Rainie, the director of the Pew Internet & American Life Project, a research foundation, believes that “people will become not less but more aware of differing arguments as they become heavier internet users,” because contradictory views are just a hyperlink away. A survey by Pew appears to confirm this view. Mr Anderson of “The Long Tail” says that “opinion is a marketplace, and marketplaces work when you have liquidity.” Liquidity is exactly what participatory media provide.

Some people worry about what the new media will do not only to democracy but also to brains, thoughts, grammar and attention spans. These concerns usually arise out of encounters with teenagers in their native habitat—ie, in front of screens with several simultaneous instant-messaging “threads” (“cu2nite bfz4evr”—“see you tonight and best friends forever”), besides iTunes and a video game running in the background, blogs in the foreground, and homework in the small window to the bottom right.

Other people are not worried at all. Steven Johnson, the author of “Everything Bad is Good for You”, argues that the very things about new-media culture that scare older generations actually make younger generations smarter, because participatory media train kids from an early age to sift through and discard clutter, thus “enhancing our cognitive abilities, not dumbing them down”.

Linda Stone, a former executive at both Apple Computer and Microsoft and now a consultant, argues that the affliction of “continuous partial attention” is in fact a hallmark of the era that is now ending, not the one that is starting. For the past two decades, Ms Stone thinks, many people have felt overwhelmed and anxious, constantly afraid that they could miss out on social opportunities if they concentrate on any one thing. This is now producing its own backlash, Ms Stone argues, because as people “long for protection and meaningful connections, quality over quantity”, they are “discovering the joy of focusing”.

Many new-media companies understand this, she says. Just as Google calms the chaos of the web with a clean white page, other companies are working on the filtering technologies that could—counter-intuitively, perhaps—make the era of participatory media more serene than the era of mass media.

The honest conclusion, of course, is that nobody knows whether the era of participatory media will, on balance, be good or bad. As with most revolutions, it is a question of emphasis. Generally speaking, people who have faith in democracy welcome participatory media, whereas people who have reservations will be nostalgic for the top-down certainties of the mass media. Joseph de Maistre, a conservative who lived through the French Revolution, famously said that “every country has the government it deserves.” In the coming era, more than ever before, every society will get the media it deserves.