Gestalt: The Empire Strikes Back

"To lead the people, walk behind them."
Lao Tzu (Chinese taoist Philosopher, founder of Taoism, wrote "Tao Te Ching" (also "The Book of the Way"). 600 BC-531 BC)

Gestalt: The Empire Strikes Back
by Christopher M. Schroeder
http://publications.mediapost.com/index.cfm? fuseaction=Articles.san&s=57904&Nid=29784&p=204 904

I just finished John Man's sweeping biography of Genghis Khan and, though I'm usually proud of my historical literacy, I found myself stunned at the impact he had on the world. I had always dismissed him as a brutal conqueror who raped and pillaged his way across the steppes, with little lasting legacy - a view that could not have been more wrong.

He and the Mongols were extremely sophisticated attackers who, time and again, faced large and dismissive empires that took their own size and place in the world for granted. Genghis Khan's determined and brutal light cavalry possessed speed and innovation unmatched by kingdom after kingdom.

My own dismissiveness reminded me of the worlds we inhabit in media today. Traditional media companies, along with former upstarts in new technology, have now largely become what they once railed against. All share a common foundation: They are, with rare exceptions, defenders.

Oh, they may tip their hats to the innovation of the Golden Hordes surrounding them, cut deals with them, even try to replicate upstart technologies in their own kingdoms. In this day and age, juggernauts don't dismiss the upstarts. First and foremost, their stances lie in defense.

This development might appear inevitable; at some point, those who succeed must rally and defend their success. But what never ceases to stun me is that when the Empires finally realize it's time to go on the attack, the first place they aim at is their customers.

The music industry is a great case in point.

Bob Lefsetz, who has one of the most insightful blogs on the music industry, recently said it best: "I really thought the [major labels] were going to survive.

They've fumbled the future again and again. They sued their customers, they put FBI warnings on their products - what are they, a branch of the GOVERNMENT?"

A colleague from the software industry recently reminded me that an industry can't adopt a fundamentally hostile attitude toward its customers and still survive. He recollected that his industry spent the '80s experimenting with all sorts of DRM that bordered on just crazy. Anyone remember the Lotus "dongle," a piece of hardware you had to plug into your computer to make the software work? Eventually, the industry learned that annoying customers wasn't a sustainable business model.

More importantly, the software industry not only stopped attacking customers, but created products and services so cheap and customer-friendly that the entire marketplace grew exponentially.

The music industry has made some headway of late. Consider, kids who might copy CDs and give them to their friends have little problem paying $2 to $3 per ringtone. And with video games, where an average PlayStation game may contain a dozen or more songs, part of the $60 kids pay goes right to the labels.

Music subscriptions, of course, are the ultimate pro- consumer model. "Imagine a world where 300 to 500 million consumers have a mobile gizmo like an iPod on high-speed wireless networks and pay $10 a month for all they can listen to," my friend in the software industry says. "That's a $3 billion to $5 billion per month industry right there - all recurring revenue.

Compare these dollars to the current size of the music industry; it doesn't take a Ph.D. to do the math.

Defending your castle is a natural thing, but the best defense can be a great offense. And the best offense doesn't consist of attacking your consumers, but of devising innovative ways of meeting consumers' needs.

Christopher M. Schroeder is CEO of The HealthCentral Network (www.healthcentral.com) a leading collection of online health and community web properties. He formerly ran washingtonpost.newsweek interactive, and is a regular contributor to Media Magazine and Mediapost.