change
there’s a saying “if content is the king, then distribution is the kingdom”, and that’s the very real game content owners and operators are playing to win right now. the good news is technology drives and enables the game for both.
yes, going back to the origins of tv creation and distribution is certainly possible for content providers but they essential abdicated the ability to control both creation and distribution when cable, then satellite, became a better means of getting tv. what’s more they never really understood the end user, and that is critical today. both the age of broadcast and cable where ones of oligarchy, where a few controlled the viewing habits of the many. in na it was originally the 3 networks - abc, cbs and nbc - in most of the rest of the world it was government run channels, because that was one of the few ways to make the economics of tv work absent the ‘hollywood machine’. in the broadcast area these networks controlled the majority of the content creation and the distribution through the relationship with local station owners who put up transmitters throughout the country. but the pipes were dumb and the form of monetization - 30 second spots - an interruptive one-size-fits-all model.
not only where pipes dumb and one-way, but the video quality wasn’t very good for many people, so along came better distribution technologies in the 80’s, in the form of cable and satellite. what’s more these distribution technologies required people to authenticate to get access and eventually cable became two-way as they realized these pipes could form the last mile of the internet as well as carry pay-tv. broadcaster were disorganized and short-sighted compared to the cable operators who banned together and eventually consolidated giving them immense buying power. but fundamentally they created a better way to watch tv, better quality and much more content thanks to aggregation. consumers bought cable where it was available and satellite where it wasn’t. broadcasters soon found that the primary form of distribution was via this so-called mvpd (multichannel video programming distributor) and not directly to consumers over the air. in response to losing their control of distribution there was consolidation of stations and networks owning lots of stations in order to give them power to negotiate content licensing deals with the mvpds. for a time cable and broadcasters were happy, save the occassional black-out due to content and distribution deal disputes. the broadcast content creators got paid nicely per sub for their content which they often bundled. think espn, which really only had one popular channel, but they negotiated the carriage of 9 by bundling them together and charging 7 cents per sub. that soon adds up.
then along comes the internet. at first it can’t really do video at all well - think of the debacle of the aol tw merger, and does anyone remember microsoft's webtv? the dot-com implosion of 2000 allows tv and mvpd execs to take a big sigh of relief and to pronounce ‘tv is not music or newspapers, it will live for ever’. and it will, but in a very different way than it has in the past.
the primary change is that the internet can now do tv and the consumer is learning that fast and furiously.
so now the game for content owners and distributor alike, is how do i control that relationship with the consumer? as a distributor - remember the mvpds still own the primary pipes to the consumer. comcast went from making more money at better margins from broadband vs. paytv over a year ago. 5g is still 5 or more years off, and many think it’s not going to be good for video. and even though there’s been a resurgence in over-the-air antenna buying most people don’t even know you can get tv that way, plus you’d have to combine it with other services to get a good selection of channels. so, the mvpds have all the profile information of the user, but they've abused the customer for so long, through near monopoly and high pricing, that they’ve allowed the emergence of so-called virtual mvpds, netflix being the most dominant of this new breed. (btw even though we typically refer to them as over-the-top companies this term misses the fundamental point that even though they’re putting a major dent in the paytv business - this year in na netflix has more subscribers than all of cable put together - it’s those same mvpds that are bringing you netflix via broadband, and making a lot of money doing so. the point being, cable shavers, cutters and nevers, are really paytv shaver, cutters and nevers. people are still buying broadcast from those distributors. they still by-and-large are the kingdom.
the content creators are also complicit in the emergences of these virtual mvpds, by, just like with cable in a past era, licensing content to netflix and amazon instead of them building out their own d2c relationship. disney sold netflix their content library in 2012 and helped them establish what seems like an insurmountable lead in d2c, especially with their kids zone content. what’s more both netflix and amazon have proven it’s not so hard to be content creators. netflix has won 37 of 128 emmy nominations.
who’s going to win - origin companies or the current controllers of the pipe? very possibly neither. perhaps the new media company is not a media company but the largest shop in the world, amazon. there’s an argument that media is just a means to an end, and that pure media plays have had their time. amazon, youtube, facebook and perhaps apple are playing a different game. for them media is just a medium for other transactions - shopping, data, community and products. companies where video is just their business are looking highly fragile in this new world where big numbers driving personalization of all different kinds of experiences and transactions is a grander game played with longer timelines. in this world i think you’ve got to give the bigger, deeper pockets of the distributors the upper hand. yes, content is still very important, but what we find is there are now many, many kings all fighting over an ever expanding global kingdom. for that global kingdom domination you need ultimate distribution and high intelligent understanding of individual users. this means actionable data on a massive scale.
the good news is that any company, like ours, that can power this tv transformation, for both content owners and distributors, is in a good place. we are an arms dealer. we just need to make sure our weapons are easy to produce and are super smart to hit the target.