October 7, 2007
Digital or Die?
It what has to be an epiphany of sorts, EMI gets the message that content’s value is no longer under the control of the producer but now the consumer. In a related article a poll of RadioHead users have the belief that music should be free or nearly so. Ok, so what does this have to do with broadband services?
Well how about this — every major broadband provider today has as their business model the belief that content, NOT transport, is the key to their survival. Well if the consumer is in the mindset, like those in the music business above, that content should be free or at least nearly so; then the business mavens at Verizon, AT&T and DirectTV had better put on their thinking caps. Of what value would it be to an AT&T to buy or partner with a Sony if the inherent value of the video content was devalued by the consuming public that you intend to charge?
Possible? Highly in my view. If the recording industry is the canary in the coal mine, then there are serious cost challenges ahead for broadband providers. It is increasingly common to see recording performers to build their own label and sell direct to the consumer, eschewing the major recording labels. As a result the cost of the content dropped 5x its previous level and the artists are better paid for their efforts. This is a MegaTrend that needs to be watched. From a future consumers perspective the reason to have the broadband is not to be charged for the content but the fact they are able to access nearly free content. That has major impacts to the broadband providers cost models.
If the trend comes to pass — advantage Google.
Filed under AT&T, Google, Time Warner, Verizon by Dr. Dog
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Comments on Digital or Die? »
The entire old guard in digital delivery business is likely doomed - by their own business model. Content is in the wild, and like it or not, will never to return to their closed systems as a premium product at the levels as in the past. The future is in aggregating and delivering content without regard to its source. AT&T and the rest of the litigate rather than compete crowd need to provide a big open pipe and quit playing the content game if they want to stay in business. Sony is likely already dead as a content company, and needs to return to its roots of making the content look nice and sound good if they want to survive at all. Just my opinion.
Lets take Verizon. They offer three services today on fiber:
* FTTP - the fiber transport.
* FIOS - the content provisioning, audio and video.
* VoIP - digital phone.
As it is right now a customer who subscribes to all three services engenders VZ’s love as they have a 18mo payback on a 24mo contract. But if that same customer only subscribes to FTTP the payback is in years not months.
Aggregation regardless of source may or may not be the way to go. The rub is the how? Lets run 10 years into the future. 70% of the music content is now in private label (eg: the bands themselves). 50% of the video content is also self produced. The consumers themselves if they follow certain producers would go directly to their website for purchase/download. As I see it, if a Verizon wants to tap this kind of dispersed market they have to be prepared to enter a % royalty agreement with the producer.
But from a cost model that’s a lower value thing than any of the BISP’s are doing today. They would also have to incur the labor to manage such content. And all sorts of questions arise. Treat this as pay per view? Use an iTunes model via subscription? Do a pay by the dip like WalMart does? Who knows?
And this is why they are likely doomed by their own business model. Uptake on high value add services will probably spike for a couple of years, but are destined to become obsolete simply because there are a rapidly growing number of very low cost competitors coming online that don’t need “distribution” help. Phone service is destined to become an application that is universally free. Want to see the aggregation model - look no further than Amazon. They currently offer the independent writer a spot in their marketplace for little or nothing and offer excellent exposure, excellent digital delivery, and a payment system for a small commission, Look for this to go into indie music and video by next year. Problem is amazon operates at nowhere near traditional Telco margins,and has nowhere near their overhead.
» Digital or Die Follow Up. @ 11:27 am
[...] Remember this post - digital or die? Well I want to direct your attention to the following information post - Everything in the Music Industry is Up. The take away piece is – Indeed, it appears that every single part of the music industry except the sale of compact discs is up. [...]
RadioHead Results In… | @ 2:59 pm
[...] November 6, 2007RadioHead Results In… And the results confirm what we have been preaching here — content wants to be free as in ‘beer’. Or at least that is how the consumer sees it. [...]