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Change Is Good, If You Change, Too: Examining Category Innovation

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By Nathan Cooper

We’re living in dynamic times where new modes of consumer behaviors and attitudes have the power of shifting entire industries.

Take the music industry, for example. In the early part of the century, new technology like Napster and LimeWire introduced the game-changing concept of file sharing. The music industry resisted innovating in ways that were fresh and relevant to music listeners. In fact, they fought it – attempting to maintain their model of full price album purchases. As a result, the entire music industry endured a major blow to business. It was not until the advent of iTunes years later, and ultimately the emergence of pay streaming services like Pandora and Spotify that the music industry regained momentum and the good favor of its consumers. Today, the innovation continues as the music industry embraces change.

For other industries, the problem wasn’t resistance to change – it was simply being blind-sided by change. Also in the early part of the century, the print industry was challenged to innovate in an Internet-fueled world. Digital newspaper content was initially provided free-of-charge as the Internet was seen as a high traffic, ad-supported, and open-source environment. Yet, competitors like news blogs, search engines, and Craigslist had crippling effects on newspapers. Regular citizens even became competitors with the advent of consumer journalism and Wikipedia. The newspaper industry attempted to do right by the consumer and exist within the ethos of the Internet, but it ultimately could not survive financially. It took drastic overhauls in their online model to develop models that were close to profitable. A pioneering hybrid adopted by The New York Times in 2011 is a model that mixed subscription and pay elements. But even this model, with all its successes, can have shortcomings and growing pains.  Had the newspaper industry seen the change coming (and not relied solely on the reputation of their brands), they could have helped define the rules of digital news.

Currently, we are watching another category innovation unfold before our very eyes. Technology is generating real change in how people are consuming traditional television content. In juxtaposition to the newspaper industry, the television industry sees the change on the horizon. Yet, television is slightly behind the curve, and to-date has only taken reactionary measures to compete with original content providers like Hulu, Netflix, and Amazon. Unlike the music industry, the television industry is willing to be a part of the innovation instead of fighting it. HBOGo will soon be available without a cable subscription, and similarly CBS plans to offer an all access streaming option.  

At the FCC, the unbundling of cable packages is starting to resemble an a la carte approach to gaining a stake in consumer decision-making. Even the art form of content development is innovating to meet consumers at their needs; with writing that melds with binge viewing and that understands that quality is of paramount importance in a saturated landscape.  While there is an acceptance to change and a willingness to take part in that change, the television industry must continue to evolve alongside the consumer through innovations in order to shape the future rather than become a thing of the past.

Nathan Cooper is a Senior Quantitative Analyst at Insight Strategy Group.

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