Convergence Scrambles the Media Status Quo

Comments Off on Convergence Scrambles the Media Status Quo
Convergence Scrambles the Media Status Quo

Despite all the hype of “media convergence” since the late 1990s, until recently the reality has fallen short. Convergence was supposed to bring all of the digital technologies together. Because of this vision, billions of dollars were lost on bad business decisions.

During the frenzied days of the Internet boom, venture capitalists seeded startups that mentioned the magic word, “convergence” despite the fact that their business plans couldn’t explain how the business would turn a profit.

In January 2000, AOL and Time Warner announced a $165 billion merger, claiming that the combined company would emerge as the first dynasty built on convergence. According to the plan, consumers would watch AOL content on their televisions, and they would view content from CNN, HBO, and Time magazine on the Internet. But the deal was a disaster, and the combined company’s stock lost 70 percent of its value over the next 30 months, leading to a $2.4 billion shareholder settlement.

Once the hype settled down, convergence became a subject for ridicule, as all the wires from PCs, TVs, and stereos continued to sprawl in different directions.

But now, as The New York Times1 reports, those premature visions of convergence are finally starting to become a reality. Today, people watch videos on their cell phones. They listen to music on their laptops. And they download TV programs and view them on their iPods.

What has changed since 2000 that suddenly makes convergence possible? The driving force behind this trend is the rapid adoption of high-speed Internet connections.

According to a study by the Pew Internet & American Life Project,2 39 percent of American adults in urban and suburban areas now go on-line at home with high-speed Internet connections. And even in rural areas, 24 percent of adults are using fast Internet connections. With faster connections, it’s possible to download large digital files, such as movies, television programs, and songs, in minutes rather than hours.

At the same time, the Consumer Electronics Association predicts that Americans are accelerating their adoption of the electronic devices behind convergence. For example:

  • Sales of MP3 players will reach $4.5 billion in 2006, after a 200 percent gain in 2005, and nearly one in three MP3 players will allow users to play videos.
  • Wireless phone sales, which grew to 104 million units in 2005 and sales of $13.5 billion, will surpass $16 billion this year.
  • Digital television sales will increase to 18 million units this year, and 85 percent of them will be high-definition TVs...

    To continue reading, become a paid subscriber for full access.
    Already a Trends Magazine subscriber? Login for full access now.

Subscribe for as low as $195/year

  • Get 12 months of Trends that will impact your business and your life
  • Gain access to the entire Trends Research Library
  • Optional Trends monthly CDs in addition to your On-Line access
  • Receive our exclusive "Trends Investor Forecast 2015" as a free online gift
  • If you do not like what you see, you can cancel anytime and receive a 100% full refund