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Executive Summary

The proliferation of new sources of information amid the rise of digital communications, along with the empowerment of private individuals to disseminate their voice to a limitless audience in real-time, has overwhelmed and confounded the entrenched interests of the media establishment. Meanwhile, the massive generational shift that’s already underway from the so-called Baby Boomers to their progeny only promises to widen and amplify this transformation in the years ahead.

Digital video recording and online video is already gathering critical mass in the marketplace, and advertisers are starting to rethink their spending budgets and targeting strategies in fundamental ways as the public learns to avoid their commercials. While national TV advertising on broadcast and cable still serves as the best option for some firms seeking a mass market, increasing numbers of advertisers are realizing that these outlets cost more than they’re worth, and digital ad networks are offering attractive alternatives that can be more effective and significantly cheaper. Online advertising also offers far better metrics with which advertisers can gauge their returns on investment.

Traditional media outlets in print and on the airwaves were caught flat-footed by this online explosion, and with their audiences in decline and their longstanding business models being up-ended, they’re having trouble capitalizing on all the excitement. Having seen the end of the latest economic boom in the U.S., shares of the nation’s largest media conglomerates — Time Warner, News Corp., Disney, Viacom and General Electric — are all trading below where they stood eight years ago while the economy faces a likely downturn that economists say could be long and deep.

Print publishers are in the worst shape of all, as they struggle to translate online audiences into meaningful revenue while Google funnels up the ad dollars migrating to the web. Classified ads of all kinds have virtually abandoned newspapers for cheap, online alternatives, like Craigslist, and key advertising industries like autos, real estate and retail are floundering in an economic malaise. Those print assets that haven’t been carved up and sold are either owned as trophies by billionaires that don’t need investment returns, or they’re under siege by angry shareholders.

Out of uncertainty and fear, opportunity arises, and it’s clear that digital communications — for all the chaos they have wrought — represent an economic opportunity that can be exploited by those best-positioned for the new age.

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