Demographic Shift

Like Fred Wilson, I read a lot in an attempt to triangulate my understanding of our world. However, recent unrelated events seem to triangulate to a major shift that few seem to discuss: The one from a world controlled by Baby Boomer to one where younger generations are taking the steering wheel. This has major implications as it represents the first seismic demographic shift since the late 1960s.

Let’s first take a look at the data points from recent weeks:

  1. RockStar Games releases “Grand Theft Auto 4”, picking up US$500 million in its first week of release.
  2. Barack Obama uses younger demographics to win democratic nomination.
  3. Primetime no longer so prime as younger viewers shift time and place of shows.
  4. Some VCs look to demographics as an opportunity space.

All those data points seem to highlight a major shift in the demographics of influence. For most of my lifetime, the core influencers have been the baby boom generation (aka. my parents’ generation) and their hold on politics and consumer behavior from the late 1960s on has been uncontested up until now.

But that may be changing.

Media

Up until recently, media consumption was divided between TV, radio, and print when it came to news and movie theaters, recorded media (VCR in the 80s and DVD now), TV, and live performance (and I’m grouping both live music and theater in that category) for entertainment.

In the 90s, we successfully established the Internet as a source of delivery for news but most efforts to do turn the net into an entertainment channel failed due to network and CPU constraints. Those constraints disappeared since the turn of the century and the net started to take a stronger place as an entertainment channel in the last few years.

While the net is slowly eating up the traditional media budget, another market is started to eat into the pie and that is videogames: it first started within a small subset of the overall population (males under 35) but is slowly starting to spread to a wider population as can be seen with the success of the Nintendo Wii and of certain virtual worlds (like Club Penguin or WebKinz, aimed at kids).

Similarly, it appears that traditional media is suffering from a slump in their own advertising revenue as a result of not only decreasing audience but also decreasing amounts of support from advertisers due largely to the fact that most non-digital assets are not easy to track in terms of response rates (an issue I’ve addressed in the past in several different posts.)

So the question now is where the value will reside moving forward. Many of the smarter media companies are now starting to understand that their product is not necessarily in the delivery medium (for the longest time, print publishers have assumed that their goal is to deliver paper-based products; music publishers were tied to whatever format, be it record, 8 tracks, tapes, or CD, they packaged their product in; TV producers have looked to their channel as the center) but that the value they add is in the packaging and financing of interesting offerings in a cross-media fashion. This is the driver behind efforts like the recent acquisition offering of CNET by CBS and Ars Technica by Conde Nast.

What we will see here is a progressive move to anytime, anyplace as far as any entertainment or news package is concerned. Mass media is not really dead, it’s just made up of an aggregated model now. This is a model that some stars like Madonna understand and have adapted to, according to the New York Times (emphasis mine):

Madonna’s show, to promote her new album, “Hard Candy,” was also part of a technologically sophisticated, 21st-century product rollout that involved multiple media tie-ins. It was broadcast live on the Internet by MSN and on cell phones worldwide by Verizon and Vodafone. In addition to the 750 spots given to fans on the line — that’s on a line, not online — about 1,000 were given to radio contest winners, and 200 to members of Madonna’s fan club, which now has a social-networking component.

The secret here is to appeal to the audience on its own terms and where it is. Some less savvy executives may think this is a temporary blip but I suspect that, as far as media is concerned, it’s only the tip of the iceberg. Talk to teenagers today and they have little understanding or patience for media that does not fit their needs.

This, however, does not mean that everything needs to be free. Many new media advocates will claim that, in the new world, copyright is dead and value from media can only be extracted indirectly. For example, they see rock concerts as the way to extract value from music tracks that are distributed for free. While those types of economics are fine, they seem to leave some money on the table. For example, it is true that teenagers look to the value of an MP3 track as low or even 0. However, the same teenagers buy music from the itunes store or download and pay for ringtones. And let’s not forget last year’s experiment by Radionhead, which put all of its album online for free in a “pay what you wish” model: if people will always opt to go for the free option on a good, then Radiohead’s US$10 million first week sale for their CD doesn’t make sense. Once again, this goes back to the new fundamental rule that, as long as you offer your goods across a wide array of media, you will maximize your offerings.

Politics

In the intro, I also talked about Barack Obama and how he appears to defy the prognostication made by many commentators. I would venture to say that the reason for his continued success in the face of any existing model is also based on the realization that he, as a candidate, can make himself available in any media form. A measure of the online success in multiple media shows the story (thanks to Techpresident, we can easily see that data as it relates to MySpace, Facebook,  YouTube, Technorati, eventful, meetup,  and traffic data accoring to Compete and Hitwise.) When looked through the traditional lens of comparing election cycles to earlier ones, as most TV commentators appear to do, the Obama campaign can’t survive. But the problem is that such lens does not include the data above.

For all my lifetime, the storyline of American media consumption and of politics has been largely formed around one single demographics class: baby boomers. My generation, Generation X, was considered a wasted one as Baby boomers looked at it as poitically apathetic, and generally seen as a bunch of slackers with no interest in corporate lives. There might have been some element of truth to the story line as members of Generation X came of age in a cynical world where they were told that the corporate life was no longer a guarantee of lifetime employement and where they were consistently reminded that social security would fail and they would pay for the system but not benefit from it. As a result, many turned away from traditional institutions and started building alternatives.

The most visible alternative model is the rise of the Internet economy which was largely built by 20 and 30 something and funded by older people who understood some of the value being created. But along the line, many other things changed: first, the work-hard/play-hard ethic moved, as people got a bit older, to a need for a better work/life balance. This was a byproduct of dropping the boundaries between office and home. As the two merged, a new set of boundaries needed to be created.

As more of those boundaries changed, some social mores were also affected. In a way, one could argue that the boomer’s self-obsession created a counter effort that led to more collaborative and more society-centric views. Because they had been beaten down by their elders, GenXers tried to build a system that swung the pendulum on the other side: one where age/culture/race/sex/etc… were de-emphasized through the electronically mediated space of the Internet. This is not to say that all the problems associated with those categories went away but I suspect that a study of demographics would show younger people to be more tolerant and generally more on the left side of the political spectrum than older people (maybe a representation of Churchill’s “Show me a young conservative and I’ll show you a man without a heart. Show me an old liberal and I’ll show you a man without a brain“)

Enters Obama, a candidate who, by most measure can be considered further to the left than Hillary Clinton. When he talks, he highlights partnership, and generally looks to a more “European” approach to society. This seems to be a rebuke of much of the individualist type of policies highlighted since the Republican era. And that’s where the pundits start having trouble. Is the 2008 presidential cycle like 2004? 2000? 1996? 1992?

The truth of the matter is that the 2008 election cycle is unlike the other ones because of a substantial demographic change. Obama’s voters tend to be people who have not previously been very involved in the political process. Some are from particular racial background but I suspect that a bigger part of the story is the demographic clash that’s coming our way.

The interesting thing is also the type of opportunity this can present from a political messaging standpoint and an issue standpoint. Some of the issues that were considered as dangerous to approach in previous election might now be safer due to the different outlook (for example, I have read somewhere (and don’t remember where, which is why I’m not linking to it) that younger Americans tend to be more willing to pay higher taxes in exchange for a bigger social net).

I suspect that the Obama campaign is currently surprising pundits for three main reasons:

  1. It understands that media and politics are intertwined and works hard to run itself as a media organization.
  2. The campaign understands that media is now participatory, and ought to be consumed across multiple channels when the consumer wants to.
  3. The campaign understands that it can find voters where no other campaign has gone to get them. That means bigger registration drives and an increase in the number of new people signed up on the voter’s rolls, something that could have a very important impact not only in this election but in a lot of future ones too.

Conclusion

I am sure that I’m only scratching the surface of a pretty important phenomenon with this entry but I have to admit a fair amount of surprise as to why this doesn’t seem to be more noticed. I also wonder whether my assumption here are wrong and what the larger impact of such a demographic shift could be. I’d appreciate comments from others as to what they think it ought to be.

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