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disruption

Masters research on Dalton Pierce Digital Disruption Quotient

By | Disruption | 2 Comments

Remember this post and this formula?

The DPQ was our effort to explain the massive disruption suffered when technology starts to influence customers and business, in particular media and publishing businesses. It has survived many conferences, discussions and debates, but now we’re delighted a graduate student at RMIT has picked it up and will put it to the test for his Master’s thesis.

Matty Soccio is a former colleague of ours at Lonely Planet. He’s from the hallowed world of book editorial, so without our digital fanboy tendencies he will doubtless prove a good cynical tester of some of our predictions – and if he’s a good scientist he will be going in trying to disprove our work! Here’s Matty’s thinking on what he is about to undertake.

Breaking Down the DPPQ

The words ‘digital content’ elicit a plethora of intriguing ideas and misconceptions, though you can’t find fault in those who are out there everyday furiously tapping keyboards or skimming thousands of pages of online information in an effort to understand. I should know – that’s me too.

But why? Why are we spending all this time that we could be making meaningful friendships in the ‘real’ world, attempting to find out more about the struggle to control and ‘monetise’ ethereal concepts that we can have little hope of mastering?

Now that I’ve decided to take the plunge back into the academic world, I’m beginning to further realise the folly of ‘control’ in the digital media landscape. Perhaps the idea isn’t about control; hell, even ‘management’ could be considered as somewhat of a misnomer here. Maybe the word that future electronic publishers should be thinking about is ‘harness’. Harness the enthusiasm of millions of online contributors out there. Harness the power of new devices that are changing the way we consume content of all types of digital content. Harness the joy people get from discovering something new.

In my first semester I’m discovering what my own field of research will be. So far? The extraordinary creators of Luna Tractor have effectively given me free rein to break something of theirs.

As dedicated readers of the Luna Tractor blog would know, a theory called the Dalton-Pierce Digital Disruption Quotient raised a few eyebrows at its perplexing suggestions about the future possibility of continued control and success of traditional paid content business models in the publishing and media sector.

How does the economy affect their ability to attach tried-and-true business models to future technology/consumer trends? Are the old ideas of ‘content economics’ hiding a longer-term problem in the future of the publishing/media sector? Are the devices that people consume media on, and the consumers themselves, changing the way they consume at a faster rate than traditional organisations can keep up? Will digital content (whether it’s writing, video, whatever) continue to have an economic value on it in the near future? Many large traditional publishing organizations hope so. The Dalton-Pierce Digital Disruption Quotient may hold a key to these questions… however, there should be emphasis kept on the term ‘may’.

My aim isn’t to prove or disprove the DPDDQ, but to understand what the theory itself can tell us – is it a proverbial crystal ball or the ramblings of mad scientists? If I can show a subsequent conclusion from the results of the theory, all the better. For now (at these extremely early stages of my research) I’m content to find out if I can further my understanding of it.

If this means breaking it, fine. If it means succumbing to its lure of concrete results, perfect. By blogging my progress readers can hopefully draw their own conclusions from my results, and participate in the never-ending knowledge pool that is the digital world. In other words, to share the journey and knowledge transfer that will help to develop our understanding of this world.

The Dalton-Pierce Digital Disruption Quotient

By | Disruption, Technology

This marvelous graph was produced by Michael DeGusta in an erudite post on The Understatement blog on the disruption the recorded music industry has endured in the last 40 years. It’s a gloomy picture, and working for a publisher (of books, magazines, video, apps and eBooks) gave us cause to ruminate on some of the underlying drivers of the collapse of music publishing.

In a nutshell, after a decade of economic crisis the music publishing industry no longer sells a lot of CDs, album sales have been replaced by sales of singles on iTunes, and pirating has been widespread. The only legacy format remaining is kept alive by the vinyl nerds (and I’m looking at you James).

There are a plethora of moving economic variables at play in this chart from the time CD sales peaked around 2000, but we think it’s possible to turn it into a mathematical formula that can be further explored by publishers in books, video, and newspapers. We call it the DPQ, short for the Dalton-Pierce quotient:

Where:

m State of economy (misery index): the misery index is the inflation rate added to the unemployment rate. It is a raw, but effective index of economic suffering.

f Format of content: in music, the arrival of the widely agreed standard of the MP3 file enabled recording, storage, playback, sharing and commercial transactions to take place over a single song.

a Atomisation of content into chunks: the single has replaced the album as the unit of consumption in the music industry. You can read all about that on the original post.

d Devices for consuming content: in music the arrival of MP3 players (notably the iPod, but remember the Rio?) heralded a major change. Cheap, portable players were supplemented mid-decade by cheap, gargantuan hard disk drives that could store a whole music collection. If you doubt the impact hardware can have on an industry, check out the arrival of the Sony Walkman and the consequent fattening up of the cassette market on the chart between 1982 and 1985.

c Control of distribution: a trip to the music store to buy the latest album or 45 was a great adventure for me in the 1970s and 1980s. Music publishers grew strong and controlled the retail supply chain with iron fists, including the complementary industries in radio and tv for promotion of songs and albums. Nobody controls the internet – the best you can hope for is to control part of it – like Amazon music and Apple iTunes.

So the maths is simple: disruption is accelerated overall by the context of poor economic times, when consumers are motivated to change their spending habits. When the denominator in the equation gets smaller (as in the internet becomes the channel, and you lose control), disruption gets bigger by a lot. The multiplier effect of the 3 components of the numerator is self-explanatory – and in music publishing all 3 were impacted. Hence, massive disruption.

The same formula can easily be applied to other publishers and media – I’m presenting a short paper on this subject at the 2011 AIMIA V21 conference (Digital DNA) in Melbourne on the 12th of April, and look forward to a robust debate. The good news is there is a solution to making the quotient work for you, not against you.

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