Is Content Still King?

Throne 

When I first got heavily involved in the world of digital media at the beginning of this decade, I was quickly informed about one of the fundamental tenents of the media biz:  content is king.  I was exposed to that lesson fairly early on while grappling, with virtually no leverage, with studios, TV producers and music labels alike.  The deal typically offered by the content king was the deal the distributor took and all good content was considered “lost leader” programming from an economic basis.

However, over the past few years, the tide has started to shift.  TV and box office figures are flat and music sales are generally down.  IP distribution platforms that have relied solely on licensing “mainstream” content have failed to fully connect with users (eg Movielink, CinemaNow, Vongo and Napster) and have spent millions of dollars to achieve modest member penetration figures. 

Conversely, YouTube exploded on to the now dubbed “social media” scene with a technology and solution platform so elegant and effective the company came to control over 60% of the video sharing marketplace in 24 months and now has inked major deals with Google, who acquired them, and Apple, who is promoting them on its new iPhone commercials, in the last 12.  The YouTube business rose to prominence without a business model that included any content licensing of the “mainstream” content.  The company, simply put, developed a powerful platform solution, one of the clear keys to victory (per my recent post on the subject.)  Now, next generation video IP sites are also rising in popularity (well, on a publicity basis at least) and one would assume that the group which includes the likes of Joost, Slingbox, Orb and others will produce at least one or two more big hits. 

I don’t believe it’s far fetched to consider that a “Web 3.0” (man I hate the idea of that term though) world will be largely predicated around figuring out transformational ways of consuming media.  I consider this notion…which is a first stab I’ve laid out on this idea:

  • Web 1.0: The Age of Commerce (redefined–eg Amazon.com, eBay)
  • Web 2.0: The Age of Communication (redefined–eg MySpace)
  • Web 3.0: The Age of Consumption? 

In this next generation world, which I’ll certainly have to explore more in subsequent posts, will the object formerly known as the tail (technology) be wagging the dog (the content)?  Consider, for a moment, the recently publicized negotiations between Apple and Universal Music.  The original iTunes agreement between the two companies is coming to an end and the Universal Music plan is to move to a month to month model rather than agreeing to a deal with Apple that would include no shifts in iTunes pricing or royalties and certainly no splits to the labels for the iPod device sales.  Stepping back from the actual banter of the negotations for a moment, I find it interesting to simply recognize the fact that a leverage shift appears to have clearly resulted here in the first place.  And, I would even venture that, in the world where Universal Music and Apple are no longer in business together, a lose-lose scenario would result but UMG would feel the pain much more so than Apple.  To Apple, they’ve moved on from “just music” now within iTunes and are a massive platform for music, onlined education, TV programming, movies and more.  UMG, on the other hand, would be losing sales volume from the recently dubbed #3 music distribution platform.  Numero tres–just behind Wal-Mart and Best Buy.  Greed is being labeled as the negotiation buzzword but I think “stupidity” would be more apt to describe the act of walking away entirely from Apple.

I guess what’s more realistically happened here is a moderate shift in power where meaningful content companies are much more “on par” with meaningful technology companies than was once the case.  Digital piracy has much to do with that as does the natural innovation continually occurring inside tech companies (but not so much inside content companies.)  A YouTube could make the splash it did with virtually no content licensing activity in place but, to make it in the long run, they’ve come to realize that at least some deals with mainstream content solutions are important.  Social media and unformatted, viral video is certainly popular but it’s also not likely long-term in terms of critical appeal.  Talent and quality programming still have a home.  Similarly, a Universal Music Group must negotiate reasonable and fair agreement terms with an Apple or else suffer the consequences of even more burdensome piracy than already prevalent.  And the potentially landmark appeal process on the RS-DVR case with Cablevision, which not only appears to be casting legal doubt on the “RS” but also the “DVR” concept in general, clearly demonstrates how vital it is for technology and content to be lock-step in sync these days.   Anyone who has ever used a DVR knows how dramatically it changes the TV consumption experience–but, what good is a DVR without any content worth recording?      

As a user of digital media and a business person in the space, I’m certainly glad the leverage tides appear to have shifted some–it opens up the opportunity for technology companies and effective distribution platforms to play an even bigger role in helping define the media industry, and perhaps Web 3.0 activities, going forward.   

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1 Comment

Filed under Music, Tech, Video

One response to “Is Content Still King?

  1. Pingback: Is Content Still King? Update. « Chillin’ in Suite 200

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