Friday, August 15, 2008

Content vs. Distribution

Back on August 10, I wrote that Content is King. And in that analysis of content verse distribution, I noted how many are pushing to separate the two. To date, Time Warner Entertainment is spinning off its cable distribution arm; shareholders at Cablevision want them to sell their programming arm, Rainbow Media. And per a Bloomberg report, analysts are reporting that Disney may sell its owned and operated television stations to focus strictly on content. "Disney owns stations in cities including New York, Los Angeles and Chicago. A sale would depend on at least those outlets in the biggest markets remaining affiliated with Disney's ABC TV network, Miller said. ABC has broadcast agreements with about 231 TV stations in the U.S., he said. ... Disney spokesman Jonathan Friedland called the report ``purely speculative'' and declined to comment."

So the chicken vs. egg question may now be settled; content is more powerful than distribution. Owning content allows more flexibility on how best to share it; by unlocking the distribution side, content creators are no longer limited to where they can place content. And yet, wasn't vertical integration once considered to be a very powerful foothold. To know confidently that you owned not only the content but also had a guaranteed distribution path to the consumer. But You Tube and the internet changed the environment that content creators work in. It eliminated the barriers to the user and opened the pathway to reach them in multiple ways. For Disney, it appears that they no longer need to own the broadcast network to distribute content.

So for Time Warner and maybe soon for Disney, the focus will be content. For Cablevision, shareholder sentiment is leading to a split. So will others follow suit? Will NBC take a similar strategic path and consider selling its O&O networks? Or must NBC first worry about whether GE wants to keep it as a business unit? That question will be settled first before any discussion of a split would occur. Still, it is fascinating to watch the entertainment landscape continue to change. Stay tuned.

Interesting news. Cablevision has just made an announcement, a quarterly dividend of $0.10 to improve its stock value. In the short term it should placate shareholders; in the long run, they still smell blood and want to further unlock the value of the company by splitting distribution from content. Will it happen? With Cablevision, you never know.