Tuesday, May 27, 2008

Content vs Distribution

Great article in Fortune about "The Jeff's" - Bewkes, Immelt, and Zucker - and the planned spinoff of Time Warner Cable from Time Warner Entertainment.

Where verticle integration was once key to control, Time Warners separation of content from distribution seems to indicate otherwise. Each entity would be free to go after more of its own to get larger and stronger. For Time Warner Entertainment, the chance to increase its content holdings with the acquisition of NBCU from GE. And for Time Warner Cable, the chance to work toward the acquisition of the Cablevision Systems, 3.0 million strong, in the NYC metro. Viacom made the decision to sell its cable systems a decade or so ago to concentrate on content ownership.

So, which would you rather be, content king or distribution king?

A look at other industries affected by technological change may provide a clue. For the railroad owner, changes in transportation made the airline owner more convenient and faster. The horse and carriage trade lost out to the automobile. Speed and convenience was again a factor in consumers switching providers. And with the internet, broadband beat dsl and dial-up; speed and convenience.

So now comes the entertainment industry. Cable pricing is going up faster than inflation. Consumers are tired of all the choice and would prefer a la carte, provided that the total cost remained cheaper. Content owners have found a way to directly reach viewers through an internet connection. Just watch the usage rates at Hulu continue to soar. While those that rely on a license fee are reluctant to change the model; aggressive upstarts with nothing to lose are reaching viewers directly through IPTV. As content owners separate from content distributors, watch as a new battle begins to emerge.

Ad-Hungry Nets Develop On-Demand Rivals To Tivo

No matter how easy the DVR and Tivo is to set, viewers would prefer to not have to do anything. And when shows go over their allotted time, these recording devices are not yet smart enough to automatically adapt. Just consider what happened this past week with the American Ido finale. Viewers that didn't add time to the back end heard Ryan Seacrest get cutoff as he announced that the winner was David ... How frustrating!

The downside to not pre-recording shows and relying on the cable VOD version of broadcast is that they can disable the trick features, including fast-forward. So you never miss a show, but you never miss the commercial either.

I still believe that most viewers would prefer to let their VOD manage all recording for them. Especially if it also enables the show to follow the viewer from TV set to TV set. The mobility of the recording is not yet offered with the DVR and this added flexibility could also be marketed as a benefit to the viewer. Start the show in your living room, finish it in the bedroom.

While I don't believe this broadcast VOD service would completely replace the DVR, it would enable viewers to watch shows that they forgot to record only to later here the water coller chatter the next day how funny or engaging the previous night's show has been. Or when the last 10 minutes were not recorded. Now the viewer can tune in and catch up with the shpw.