What is Digital Media, anyway?

This is the first Blog entry from the new Digital Media Team at Covington Associates.
Learn more about us here.

The term "digital media" has evolved significantly since 1999, when I joined the senior management team at one of the early pioneers in digital media, Avid Technology [NASDAQ-AVID].

Until the mid-nineties, and before the proliferation of the public Internet, the digital media industry was focused on the systems for creating, editing, enhancing, recording, and playing back visual or audio media, most often for use in the media and entertainment industries. Avid led the way with Oscar®-winning products like the Avid Media Composer for editing film and video and Digidesign ProTools for editing, mixing and mastering audio as well as products for shared storage and media asset management. Other important companies in digital media in that period were Apple with its media friendly computers and software, Adobe with PhotoShop and After Effects, AutoDesk/Discreet Logic with the Flint/Flame/Inferno composting and effects line, and Dolby with 5.1 surround sound.

With the growth of the Internet and the explosion of new digital products and services came a new category within digital media, often called "new media," which reflected the transition from analog to digital forms of both media creation and consumption, and use of new technologies for distribution of content. Large bandwidth "pipes" were deployed across the world with the help of Cisco, and it became feasible and affordable for companies like Akamai to move "rich media" over the internet through increasingly powerful streaming video solutions. In audio, through the use of MP3 files and P2P networks (led by companies like Apple and iTunes, and the more controversial BitTorrent, Napster and Grokster), music distribution (legal and illegal) exploded, and decimated the music industry. The film and television industries have intelligently reduced their commercial risk by partnering with companies like Comcast, Netflix, and Hulu for new digital distribution models for their content, but the outcome is far from clear as broadly successful revenue models do not yet exist.

As Web 2.0 infrastructure took root, and driven by companies like Facebook and Twitter, yet another digital media category evolved called "social media." This drove the growth of social networks and other means for large scale internet-based collaboration, communication, and commentary. The media types included in social media are exceptionally diverse: text, photos, video, audio, digital art, games, virtual goods and "mash ups" of a variety of sources. Other centuries-old media staples like books and newspapers are evolving into digital form as a result of e-books and other tablet reading devices, through the efforts of companies like Amazon and Apple.

Now with the advent (and competing definitions) of Web 3.0, one can speculate about the new contours of the term “digital media.” I would love to hear Marshall McLuhan’s suggestion.

So here is my try: Digital Media is central to the increasingly data-driven, collaborative and frictionless worldwide consumption of all types of information. It is comprised of technologies, platforms, data and knowledge for the creation, management, distribution and monetization of existing or newly created digital forms of communication, art and performance.

John Bowen and I are focused on the current evolution of Digital Media, from a perspective of more than two decades of experience within the industry. Our Digital Media Team looks forward to working with companies in all aspects of digital media in regard to their corporate finance and M&A needs.

Ethan Jacks is a Managing Director at Covington Associates. He can be reached at 617-314-3950 or ethan@covllc.com.

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