In the next article of the series, “The Network Revolution: Creating Value through Platforms, People and Technology,” authors Barry Libert, Megan Beck and Jerry (Yoram) Wind look at how people and platforms are disrupting the media and entertainment industries. Libert is CEO of OpenMatters and Beck is the chief insights officer. Wind is a Wharton marketing professor and director of Wharton’s SEI Center for Advanced Studies in Management. They also wrote a book called The Network Imperative: How to Survive and Grow in the Age of Digital Business Models. The authors would like to thank LiquidHub for sponsoring the research for this series.

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Remember that decades-old public service announcement asking parents, “Do you know where your children are?” That ad could not have anticipated that the answer one day would be this: They are somewhere uploading their favorite videos of themselves — or their cats — to YouTube, posting photos to Instagram and sending disappearing messages on Snapchat.

For today’s social and video networks, the human network — you and me — is changing the entire business models of publishers, TV and radio broadcasters and even cable TV companies as well as content providers in entertainment, news and sports. The real question, then, is not whether broadcasters, advertisers and content providers will be disrupted by the power of us and what we produce and distribute — but how quickly?

To put this in context, more than 20 years ago, the only outlet for individuals to broadcast their own personal and local interests was to use public access television channels or write letters to newspaper editors. But today, we hold a lot more power as broadcasters using digital outlets like Facebook Live, Twitter, Instagram and Snapchat. And for good reason. The old definition of broadcast and entertainment was simplistic: Content mainly came from the establishment and sent in one direction, to us. But that reality is changing as the media and entertainment and industries are being turned upside down and outside in.

The YouTube Phenomenon

YouTube posted its first video on April 23, 2005. That video, Me at the Zoo, has subsequently been viewed 34.5 million times in 11 years. In less than a decade, YouTube has changed everything about television — from what we watch, to when we watch it and who makes and produces that content. Indeed, in less than a decade, it has become a threat to the conventional business model of television — but not in the way the world expected.

“AT&T is trying to transform from asset-heavy to content-rich and network-centric.”

YouTube was originally created to make it easy for everyone to create and upload their own personal, homemade videos and post them to the internet so anyone could see them. It quickly became a destination of its own, one that challenged and continues to challenge traditional TV broadcaster business models.  In time, YouTube became the platform upon which ‘we the people’ posted what we liked and what ‘we watched.’ Unlike traditional print and broadcast outlets, there is no central team or gatekeeper trying to read our minds and create content based on the establishment’s understanding of what we desire. And — at least initially — YouTube was free of commercials.

The incumbents did not react well to the YouTube phenomenon. One digital video short from Saturday Night Live called Lazy Sunday, starring Andy Samberg and Chris Parnell, racked up 5 million views but was pulled by its producer — NBCUniversal — two months later. In YouTube’s infancy, many television, movie and music companies were quite worried that users would either steal their copyrighted material and post it online for free or just shift their viewing behavior from TV to the internet. Those and other fears proved to be correct. We, the people, were about to be direct competitors to the likes of ABC, NBC and CBS.

Today, YouTube is a massive digital platform and virtual network fueled by the people that is on par, if not bigger, than almost any TV or cable network. And by most accounts, Facebook Live and YouTube will continue to grow in importance as user-generated content on digital platforms become direct competitors to intuitionally generated content on traditional mediums — whether distributed through traditional means or online.

Incumbents Play Catch-up

Traditional media companies are doing all they can to challenge our growing numbers and content. Witness the recently announced, and pending, purchase of Time Warner by AT&T for $85 billion. This acquisition, if approved by regulators, will single-handedly transform AT&T into a content goliath. The new combination will pair AT&T’s more than 130 million mobile customers with Time Warner’s rich film and TV offerings (Warner Brothers), news (CNN), premium cable (HBO), entertainment (TNT), sports (TBS) and other offerings. In essence, AT&T CEO Randall Stephenson is trying to transform his asset-heavy company (with low valuations) into a content-rich and network-centric organization. But will it really allow them to transform this old-style network into a virtual network that carries what we produce and create?

According to AT&T’s leadership, “Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen … [and] it will disrupt the traditional entertainment model and push the boundaries on mobile content availability for the benefit of customers.” For AT&T, the deal would eclipse its nearly $50 billion DirecTV acquisition and may be its biggest acquisition since paying $67 billion for BellSouth in 2006.

Verizon, the nation’s largest mobile carrier, is also trying to keep up but via a different route. The telecom company is focused on building its digital platform with the acquisition of AOL and Yahoo, with their ad networks as big a lure as their new media content offerings, as it gears up to compete with Google and Facebook for digital advertising dominance.

From our perspective, both companies are trying their best to modify their business model. But according to our research on business models, the real question is this: Are they doing the right thing or do they need to become real technology companies or network orchestrators to win in this age of platforms and networks?

Sports and Entertainment — a Similar Challenge

Much to everyone’s amazement, the once solidly reliable generator of TV ratings in live sporting games — the NFL — has seen its audience slip in 2016. The Wall Street Journal reports that ratings fell 10% in the first month of the pro-football season. That’s an amazing statistic given that football is one of the most important content franchises in traditional broadcast and print media.

Why did ratings fall so precipitously? CBS CEO Leslie Moonves told the paper that the presidential election might have diverted some viewers. Others point to the availability of football on other venues, such as Verizon mobile phones and Twitter that could have siphoned viewers from traditional TV. Notably, Nielsen doesn’t fully track viewership on the different platforms, so this gap could have undercounted ratings as well. Cord-cutting also could be a factor as people ditch high-priced cable TV.

“Sports, entertainment, broadcasting, publishing companies that cling to the old way will continue to lose ground.”

After the election, NFL ratings have rebounded but remain down so far for the season, according to Sports Illustrated. However, we believe that there are fundamental shifts taking place that could spell trouble for the NFL in the long run.

  • First, today’s broadcasts of professional football have structural issues that are out of sync with our on-demand, real-time culture. There are many people who can still watch a four-hour game, but it is getting harder to find them.
  • Second, the commercial-kickoff-commercial sequence in the games just doesn’t align with our approach to life. Can you imagine putting up with multiple interruptions as you try to be productive at work?

Finally, just witness the power and growth of Fantasy Sports to understand the ‘power of us’ alongside traditional sports to understand that we want and will pay for a role in this new game of entertainment, sports and broadcast.

The Bottom Line

It’s time to change the core beliefs — or mental models — of media and entertainment companies if they want to survive, and thrive in the age of platforms and networks that are built around us and our ability to create, produce and generate content. From our perspective, the deeply held beliefs that historically drove success for media and entertainment are being upended in a world that has both models — institutionally generated content on their platforms and user generated content that thrive on online platforms.

Based on our work around the globe, it is clear that companies have entrenched immune systems — organizational systems that were built to resist change, especially shifts forced upon them by digital platforms and networks that are eating their world, such as Uber, Airbnb, YouTube or Snapchat. Media and entertainment companies are no different.

To be sure, they have done a lot in recent years — consider the ‘TV Everywhere’ initiative in 2009 by Time Warner and Comcast to put cable video content across platforms, as well as creation of so-called over-the-top providers like Hulu (owned by broadcasters), HBO GO and CBS All Access. But their position remains precarious. Just look at Netflix’s rise. As of the third quarter, it had more than 47 million U.S. subscribers — almost 87 million worldwide — more than double that of Comcast in the U.S., the nation’s largest cable operator.

Sports, entertainment, broadcasting and publishing companies that cling to the old way of doing things will continue to lose ground. Premium content, such as the great sports franchises of the NFL, NBA and MLB, will remain valuable. As would telecom companies like AT&T and Verizon that provide a vast, national network. Those at risk are companies that rely mostly on their own content, and not the content of their network using extensible and scalable digital platforms to give users a place to share their own creations.

The same is true for entertainment. While there will always be an appetite for professionally produced content, increasingly, these networks act as a megaphone that lets users’ voices be heard — both as co-creators and network contributors. The real question is this: What will the future look like when it comes to ownership? No one knows as cord-cutting takes place and everyone becomes his or her own broadcaster and fantasy sports team owner, a result of building platforms and networks where we are at the center.

The Future Is in Our Hands

The future of entertainment, publishing, sports and broadcasting industries is now firmly in our hands. We now have the tools, platforms and capabilities to do what we want, whenever we want — and that means, we can read what we want on the run, watch what we want at any time whether it’s entertainment or video-chatting with friends or family.

Today’s technologies offer freedom from the routines of yesterday — including sitting and watching NFL games, TV or cable channels, as we have the choice to work more at our own schedule, versus a media company’s schedule, thanks to on-demand and user-generated programing. If media and entertainment companies want to stay relevant and valuable in the future, they will need to build a strong relationship with us, and give us a place in their programming and on their networks — or else, we might just spend all of our time on YouTube or Facebook Live.