There is a metaphor that goes like this. If you place a frog gently in a pot of cold water and gradually simmer the water, the frog will float there quite placidly. As the water heats up, the frog will not notice the slow rise in temperature. It will grow used to the gradual change and will eventually allow itself to be boiled to death.
This is a great metaphor for how technology has an effect on everything around us and often times we don’t notice.
For many of us the thought of a driverless car feels much too far ahead in the future. This conjures up images of the Johnny Cab in the science fiction classic Total Recall.
However, like the boiling frog, many of the building blocks are being put in place for this future. It is happening, but it is happening gradually.
iTunes, TuneIn, Radioplayer, iHeartradio and Distribution
One of the best moves Steve Jobs made with the Apple ecosystem was when he convinced record labels that iTunes could be the answer to their digital music sales. (He needed this as he had seen others fail with their digital music players) At the time labels were not really selling music digitally and were certainly not making much money, if any. Bear in mind, at the time piracy was rampant and Napster was in its prime. ITunes seemed like a no brainer.
Inadvertently, labels handed over a huge chunk of their future to Apple and with it their opportunity to learn about digital touch-points. They lost their direct connection with the end user, the listener, the fan. They also lost their opportunity to build a distribution pipeline and create an end-to-end experience. (Some labels have since invested in platforms like Spotify).
Now let’s turn our attention briefly to Radio stations and aggregator apps. Radio stations (and publishers) are not so much selling their listenership, but rather access to their community. To be able to survive in the future they need to retain and amplify those relationships with their communities.
Radio stations should be obsessed by data, user engagement and listener events. This strengthens the relationship with the listener. The only real way to “own” the relationship is own the digital distribution through apps, data (email, push, social etc.) and all digital and physical touch-points. To hand this relationship over to an aggregator such as iHeartradio or TuneIn means the relationship is built with the aggregator. If you are a clever brand like iHeartradio you capitalise on this as soon as possible and launch events such as the iHeartradio music festivals.
Yes, I understand that radio needs to ensure it reaches the listener on every available platform. Yes, I understand that many radio stations do not prioritise the funds necessary to build exemplary radio apps (I argue they should). Yes I understand that Tunein, iHeartradio and Radioplayer stand a better chance of getting a radio app into the car via the car manufacturers than a series of local radio stations. However, I do not understand how you do not invest heavily in digital platforms to remove all friction for the listener.
Netflix and Distribution
If you think back to the early days of Netflix, if you were like me you checked it out on a free trial, found a load of B-movies and older movies and bounced out of there.
In his wisdom, Netflix CEO Reed Hastings realised that he was in a very precarious position being dependent on the rights holders for their content. Like a landlord suddenly hiking up the rent on the tenants, he was susceptible to a hike in content rights at any stage.
What if he invested the money in Netflix Original content rather than in the rights to distribute such content? What if his team used data to inform the content people were looking for? What if he bet the future of the company on this? Well, you know the answer; this accelerated the growth of the company. It was a fortunate and brave move by Netflix, a couple of years later the networks launching their own plays such as HBO GO and took out the middle man.
Hailo and MyTaxi
I wrote a blog a few weeks back about the importance of mapping to the future of city mobility and to mobility services such as Uber and Hailo.
Holding in your mind the thought of Netflix not falling prey to the content owners. Now think about how companies, who pay a license for mapping software could fall prey to the owners of that mapping software. What if those mapping software companies even owned their own version of the driverless car? In that instance, a company would be very vulnerable and ripe for disruption.
Daimler is one of the biggest producers of premium cars in the world and the world’s biggest manufacturer of commercial vehicles; their brand Mercedes is probably the best known of their products. Daimler has recognized some very important aspects about its future. Firstly, it has realised that there is a trend in the world towards owning less stuff and experiencing more experiences.
Airbnb, for example means I can stay in a city and spend more of my money on experiences than on the accommodation to stay there. Likewise, people are gravitating towards the mindset that it makes more sense to use cabs (soon to be driverless) to get around rather than have a car sit in a parking spot all day.
What happens to the Daimler share price in that world?
So, in their wisdom Daimler invested in MyTaxi, an app based mobility service such as Hailo and Uber that keeps them relevant in a new “ownerless” society. In that world they need to own distribution, they need to know how a city moves; they need to have a direct relationship with their customer.
Imagine a near future, where I can book a Mercedes, which has no driver and I can pay a little extra for the class of the Mercedes I want.
Now imagine I can activate that fleet of cars that I used to sell in a whole new manner. It can become a logistics service beyond people and deliver things.
A deeper understanding of data about a city means cost efficiencies on fuel on mileage, on wear and tear on the vehicle and logistics of how to best synchronise a drop off with the next customer pick up become possible.
Daimler just bought a majority stake in what used to be Hailo to form a master brand called MyTaxi. The move will see Hailo merge with MyTaxi and be headquartered in Germany. It is a perfect synergy. From the Hailo side, they were the one in most danger living in that middle world of iHeartradio or Netflix before the started creating their own content. Now Daimler can use the strengths of Hailo and MyTaxi to develop an eco-system for the future.
In the vein of our analogy, Daimler is the like the big movie label investing in Netflix so it owns both content and distribution.
One last thought — The vehicle as an advertising platform?
In Ireland, most radio listenership happens in the car. When we move to a driverless car this frees up the driver to do other things such as read, sleep and watch. That is one imminent threat for radio, but what if the manufacturer decides to become an advertising platform itself?
Think about Facebook monetising the distribution platform, it has developed by charging publishers to reach their communities on social media platforms; what if car manufacturers did the same? So, to get top position on a radio you may have to pay the car manufacturer for top ranking? Then what if the car manufacturer sold audio advertising on the car radio they provide in the car? What if they sold video pre-roll on the TV they provided in the car? What if they offered a rev share to the content producer just like Facebook does with instant articles?
With a change in society moving towards an ownerless or sharing one, car manufacturers will be looking for new revenues to replace lost ones. Incumbents in many sectors such as Radio and indeed TV should be looking out for this and should be looking to deepen audience relationship. The sad reality in so many businesses is that the managers are short-term focused only concerned with next month and next year and not on the future sustainability of the company.
One thing is sure; we will see more consolidation, more acquisitions and more disruptions. It is going to be an interesting ride.
On this week’s innovation show I speak to the CEO of Hailo, soon to be CEO of MyTaxi Andrew Pinnington. I thought it would make sense to include a great chat I had with Laurie Winkless, author of science and the city. Laurie tells us about smart cities and more. Finally, we talk with Gearóid Mooney of Enterprise Ireland, we hear his story, about his role and how EI can help startups, scaleups and established companies.
Check it out below or Tunein, iTunes, Soundcloud or www.theinnovationshow.io
We are also on RTÉ Radio 1 Extra Saturdays at 3pm and Tuesdays 7am.