Tracking ideas not people

 

In 2003 I developed a concept I called AISS, which stands for All Ideas Start Somewhere. It was just a series of thoughts, nothing was ever built.

By today’s standards it isn’t anything to make you look twice, it was simply an idea to track what I saw would be the vast publicly available reaches of content. And then to understand how that content moved through the various technical layers that presented it to us, the public.

It was clever, for its time, but I still couldn’t get anyone to spend money to put it together. It is, of course, a lot easier 10 years later to claim with hindsight, that it was a good idea.

Since then, of course, various parts of the concept have come to pass, completely independently of me, and none in the exact format that I was suggesting. My logic was not unique, just early and unconnected to working capital.

That said I still think that an opportunity has been missed. The thing that I think is still absent is best thought of as a missed turning, a right / left option that when taken led into a murky forest instead of an angelic dale or meadow.

In 2003 I was suggesting that the unit of tracking should be the content itself, and that we needed to monitor the movement of the content through our digital ecosystems.

Instead we track people.

The internet is a vast looking glass that hardly anyone uses to its fullest potential. Instead of understanding what people want and giving it to them, we instead understand where people are and give them what we want them to have.

As everything changes, nothing changes.

Marketing has spent most of its life pushing crafted messages at vast demographics hoping for response rates that are typically less than a fraction of a percentage point. Brand marketing has hitched its wagon onto any number of perceived positive memes hoping that some of that positivity will attach to the brand itself. It’s a logical idea, but I’m at a loss as to why no-one seems to use the internet’s salient visibility to track the ideas or memes that are naturally liked by the target demographics.

Instead we have built a vast people tracking infrastructure that is so sophisticated it was co-opted by the NSA and GCHQ. This isn’t about the Snowden revelations, or at least it’s not about the morality of the Snowden revelations, it is instead a short note to point out that we have built such a great and vast tracking panopticon that even the spies wanted in.

And in return? Well, we still don’t get response rates that beat what we could get 20 years ago while we are failing to build trust with our customers over the use of their data. And the key words in that last sentence? …their data…  it might sit on company databases today, but it is still their (the consumer, the prospect, the customer) data. It should be treated as such. 


Who’s going to pay? (part 3)

The reason for this series of essays is to explore the problem of remunerating content creators in a world where the most powerful and ubiquitous modern infrastructure (computing) has become massively decentralised and deeply personal, but also utterly essential to the very functioning of modern society.

money

Problematically for some, computers are also, by design, huge copying machines.

There is no way around this. Modern general purpose computing is built on an architecture that has to be able to copy data, and everything we consume on a computer is data. To take away this function is to reduce computers to simple appliances with limited functionality, which in turn dramatically reduces their value to you personally and to society.

I have argued (part 1, part 2) that each change in audio visual content distribution technology has introduced a new category of content, and a new (or several new) monetisation channels. Among many other changes these particular ones incentivise 2 things.

First they force the owners of the new distribution technology to become content producers themselves and then, secondly, subsequently and consequentially, the new technology owners align their business needs with the existing incumbent businesses. This alignment of need helps create a smooth introduction, for the new tech, and reduces tension between substantial business lobbies.

As such, previous disruption in this space, heralded by technology changes have been relatively friendly affairs. This time it is different.

  1. The new content style, introduced by this round of technology is a mixture of user generated content (UGC), ‘reality’ real time programming and higher quality productions that have decentralised production. All of these ‘new’ content styles are executed by a significantly larger caucus than ever before. Decentralisation is never welcomed by businesses built on a centralised position of control.
  2. The new paradigm has not introduced a new monetisation channel (yet). Worse, it has in fact gone the other way and taken away monetisation mechanics (geographic pricing and staggered release), while introducing high levels of uncertainty into business planning due to piracy (this is a smokescreen in my opinion but one that the existing content lobby is very vocal about).

The upshot of all this is that the existing market as a whole (for audio visual entertainment) has not reacted positively to these changes (the internet), and the new ‘owners’ of the distribution technology are not subsequently aligned with the owners of the old distribution technology.

In each of the previous disruptions the overall market grew with each change. That generated more money and everyone was happy. I believe that this will eventually prove to be true this time as well. However, before that can happen we will need to see significant changes to the overriding business models in play. There will be some losers. They are fighting with every weapon they have.

As ever a sensible line of enquiry is to follow the money. So, returning to our key question, we must ask who will be paying for the content?

My key premise is that it will have to be the owners of the new distribution technologies through a redirection of some of their profits into content production, all enabled by the technology backbone (that they largely own, to the extent that it can be owned) that also enables the UGC universe to flourish.

In short, you and me, via the money we give to Google.

Ah, if only it were that simple. People have been asking Google to pay for content for years…

Well it isn’t so much more complicated actually. It is a simplification to reduce the whole burden (privilege) of funneling the money, to one company, but it won’t be just one company. As I suggested in the 2nd essay the obligation for funding will fall to those companies that succeed in monetising this new communication technology infrastructure. Google is leading the pack, but we must also look at Amazon, Apple, Facebook, Microsoft and others.

Ah but If only it were that simple, too…

Some significant shifts in both consumer and business culture must occur. It’s easy to speculate what the answer needs to be, quite another thing to forecast exactly what these changes will look like, and to understand how they will be come to be.

So trying to find a line of clarity let’s start with making our case by examining where money is coming into this new system, regardless of where we think that money should now go.

Any increase in computing clockspeed should lead to an increase in the amount of data that is passed over the network, if only because there is little need otherwise to increase that clockspeed.

This is a nuanced but essential point. From a business perspective this is the consumer incentive that leads to us paying the infrastructure providers to build ever faster networks. If a faster computer could not improve your experiences why would you buy one? For faster computer you can read, interchangeably, faster network. As more and more activities become driven via IP protocols the network and the hardware both need to be able to handle the increased speed and data requirements.

There is no point building 1gigabyte broadband if consumers do not own hardware that can manage such data speeds. But more importantly if there is no real consumer benefit to such improvement in all around speed then no-one would buy the faster product in sufficient volume to make it a profitable business.

So to understand where the money will come from, we have to ask ourselves what is it that will justify this massive increase in network and hardware speed, essentially what functions will be enabled that otherwise would not exist?

The answer is quite broad, broader than just better audio visual entertainment and it is precisely these functions, unrelated to the entertainment industry, and how important they are, that is taking the power to control the landscape away from them.

Let’s start with everything you do on your smartphone that is not watching Youtube, Vimeo or other video content.

Samsun S4

There’s quite a lot of that isn’t there. Now I’m not a prolific user of apps, but here is what I use my smartphone for…

  1. Phone calls
  2. Email
  3. Holding my calendar
  4. Alarm clock
  5. Instant messaging
  6. Organising my contacts
  7. Taking photos
  8. Taking quick memos (voice and typed)
  9. Recording bits of music really quickly (me, my guitar)
  10. Maps, getting from a to b
  11. Web browsing
  12. Searching (voice and typed)
  13. Access to certain cross platform essentials via Dropbox (mostly pictures of my mineral collection)
  14. To do lists
  15. Checking the weather
  16. Checking the time
  17. Timing my pasta
  18. Simple calculations
  19. 1 game (really, they all want my address book!)
  20. Pocket – reading content
  21. Youtube – watching content

Only the last 2 get remotely close to the ‘content’ industries and in both cases in ways that the content industries would be wise to dislike.

Ok. Sticking with the personal theme we should acknowledge the strange phenomena of lifelogging, the desire to create a persistent and ambient record of everything that happens to you via always on cameras, and other sensors, carried on the person. Sounds a bit sci-fi and clumsy? Not anymore, not now that Google glass is a reality. Not everyone will persistently upload their Google glass output, but some people will.

Less extreme, but still a significant user of computing power and bandwidth is the use of health and fitness apps to capture a wide range of biological data points and the associated data driven by the instructed corrective habits (did you run that 5 miles, like I told you?).

Power joggers today will tell you precisely how far they have run, how many calories they burned and what percentage of their training regime obligation they have delivered. Some might even collect data on the number of footsteps.

Then there are the loggers that go beyond just the classic fitness regimes, the ‘quantified self’ lobby. Hours slept, pulse rate (per hour, per day…per minute?), blood pressure, pupil dilation…..as computing becomes more personalised so can we increase the personalisation of what we capture.

Beyond this simple interface between ourselves and our machines we must also acknowledge that there is a secondary call on the computing infrastructure brought into play by this ever increasing data collection behaviour. That secondary call is what we do with this data after we collect it and send it to the cloud.

In short we compute it. OK, so calculating your calorific trade per kilometre run isn’t likely to put an intolerable strain on our infrastructure, this is true. But nonetheless there are 2 additional impacts, both derived through scale. Delivering those simple calculations through a cloud platform is relatively easy. Doing it for 2 million people across America, 20 million across the world? And moreover, doing it on their timetable? That’s more of a challenge.

Still compare that to the bigger value in this trend, the societal impact of the largest collected data set of actual human biology data points, aggregated and delivered usable to the medical research entities of our modern society?  Leaving the potential moral implications of such a thing to one side for the moment, you can at least understand that we are talking about a very significant enterprise, the sort that can only be undertaken by serious money. Powerful money.

OK, let’s move away from what happens with your phone, which by the way is much more sensibly understood as a computer. The phone part of a smartphone is categorically the least important thing on it (see Venkat’s “Manufactured field of Normalcy“).

If you look at my list, above, it should strike you that that is a list, first and foremost, of computing tasks. If we move on to the realm of my home / work computing setup we add a few more. They are important tasks (a fundamental pillar of this whole position actually) even though I am going to pass over them quite quickly right now. In essence they are the acts of creation that decentralised computing has made easier and easier.

So, this essay is a good example, in fact, everything on this blog, too. Every Powerpoint presentation I have to create, every piece of music I write and record, every photo I edit, every bit of code I write. (OK, code, that’s a stretch but I am actually signed up with Scratch, trying my best to get a real (if basic) experience of this fundamental, but increasingly invisible programming layer that controls our lives, and at the same time encouraging my nephews to get on board early).

And once this is all created? Why then I share it…I send it out for other people to find and consume. I have access, as an unimportant individual to the same distribution platform that is now an essential part of the Hollywood complex (whether they understand that yet or not).

So far, very little I have described involves the business output of the TV or movie industry, yet everything I have listed is provided by businesses that are only functional because of the internet.

It gets worse (or better, depending on your perspective).

Let’s talk about the internet of things (IOT) and how that is going to make calls on the inherent infrastructure of the internet. The internet of things in its most basic formalisation is the addition of identifiers and sensors to objects that previously did not have them.

From Wikipedia.

Radio-frequency identification (RFID) is often seen as a prerequisite for the Internet of Things. If all objects and people in daily life were equipped with identifiers, they could be managed and inventoried by computers.[3][4] Tagging of things may be achieved through such technologies as near field communication, barcodes, QR codes and digital watermarking.[5][6]

A director of the RFID Technology Auto-ID European Centre at the University of Cambridge Helen Duce[9] created a bold vision of a new RFID-connected world: “We have a clear vision – to create a world where every object – from jumbo jets to sewing needles – is linked to the Internet. Compelling as this vision is, it is only achievable if this system is adopted by everyone everywhere. Success will be nothing less than global adoption.

So this is your fridge telling you that you’ve run out of milk and it’s time to haul yourself down to the grocery store, right? Well, yes and no. It’s just as feasible and possibly more likely that the fridge won’t bother to tell you at all. It will however, tell the servers at the grocery store where you have your account, that you need some milk. It will also talk to your personal server, where you will have established a set of rules that your fridge follows. You might for example allow milk to be ordered automatically, but are more coy about monitoring how fast the tonic water (Gin and tonic anyone?) gets downed. Either way, the point is that significant amounts of bandwidth will be taken up with machine to machine transfers (M2M).

Internet of things graphic

High frequency trading (HFT)? This is the application of algorithms that look for small advantages in stock movements and take value by making many very small trades very quickly.

Something like 30% of all stock trades today are high frequency trades, this is down from 60% in 2010. This article looks in some depth at why HFT is experiencing its first downturn since its original introduction. There are a number of reasons mentioned in the article, but the one that pinged my curiosity the most was the desire to locate data management hardware as close as possible to the exchanges themselves.

Speed doesn’t pay like it used to. Firms have spent millions to maintain millisecond advantages by constantly updating their computers and paying steep fees to have their servers placed next to those of the exchanges in big data centers. Once exchanges saw how valuable those thousandths of a second were, they raised fees to locate next to them. They’ve also hiked the prices of their data feeds

Human reflexes can’t take advantage of price differentials measured in thousandths of a second. I have included this example to demonstrate exactly how utterly dependent today’s infrastructure is on quick computing, let alone tomorrow’s. So, dependent, if it wasn’t clear, that an innate business decision such as where to build your office is governed by the gain in thousandths of a second in transfer speeds.

So in summary we have:

  1. A huge amount of personal activity based around computers, smartphones and tablets
  2. A significant extension of connectivity requirements coming from the internet of things and the widespread deployment of API’s
  3. The phenomena of M2M data transfer growing alongside the internet of things

Taken together these activities represent an important % of the modern consumer dollar and the future underlying infrastructural layer of ALL business.

In a way everything, not just the future of monetising AV content, is influenced by the internet and who can effectively monetise it.

As of the 26th June 2013 (when this was written) the top ten global firms by market capitalisation included, Apple, Google and Microsoft alongside banks, oil companies, global reach retailers and huge commodity producers.

[As a quick aside with regard to a specific source for market cap figures, there is variation between the data sources returned with a simple Google search. Nonetheless, even within these variations the observation stands and is quickly verifiable via Google if you so wish]

Telco’s start to appear between positions 30 and 40. Walt Disney, the first of the big AV content players comes in at 48, but beaten by Intel, Amazon and Cisco, News Corporation is at 93.

The telco’s are an interesting and important category. They currently own the last mile connections (the bit that connects your devices to the internet) for significant parts of the consumer broadband universe. If you add in the cable companies who also play in the last mile now, and we start getting close to the essential nature of the Gordian Knot at the heart of this conflict.

The telco’s are currently squarely aligned with the cable operators. Both are protecting, and acting in accordance with, their legacy business models.

Cable is a legacy of the entertainment business and is acting according to the principles I have been describing, playing to control both content and distribution.

Telco’s on the other hand, even though they have never been involved in content production, have been leading the development of internet access across the networks they already own (dial up originally, and then as an accident of their position in that market, 3G and 4G), which has afforded them a position that aligns very tightly to the entertainment lobby.

  • Content/cable wishes to have control of the distribution network.
  • Telecommunications as a sector is a business predicated on control of the distribution network.

Or put more acutely, telecommunications is exclusively a distribution network, and one that is in a temporary position of it’s maximum importance to the world. Telco’s are at the peak of their role in the world’s history, and they know this.

It sounds as though they should be enemies though, seeing as they both want control of the same thing? Well yes, you’d have thought so. Something else must be happening. I’d hazard that we are witnessing a loose conglomeration based on the principle that “my enemies enemy must be my friend”.

The telephone industry model was simple, they built wires to your home and you paid for those wires to carry telephone calls to you. That model is now challenged on 2 fronts, fatally.

  • The (eventually) inevitable rise of ambient wireless connectivity
  • The construction of fibre networks by businesses that are not telco’s

And guess who is leading on both of these fronts? Yep, Google.

If we go back to the sector makeup of the top 10 businesses by market cap (tech, banking, natural resources and global retail) we can see that the sectors with the ability to monetise the internet are clearly defined. Banking, resource extraction (oil, gas, minerals) and food have been there for a while, the ones that are now there specifically because of today’s landscape are tech and retail.

So, who has all the money? We are left with the naked premise we started with, that the 4 exemplars of the modern economy will need to step up to the plate. So, how are they doing?

Facebook, Tumblr, Twitter, Instagram etc…

I will start with social, simply because they are currently doing nothing to explicitly drive a reallocation of monetary resource to creators directly.

Indirectly however, they are very important. They largely solve the discovery issue for new creative producers, help massively with building a fan base and also provide easy to access platforms for distribution and ongoing communication.

Indirectly they are also an important part of driving the overarching adoption of any new paradigm. As an homogenous template they are fundamental to quickly disseminating new behaviours. However the new discovery, distribution and consumption mechanics turn out, you can guarantee that social media will have played a part in facilitating original discourse and the Darwinian selection of the successful ideas.

The other thing to note about social, in this context, is that as a sector it hasn’t really worked out its own business model yet. Perhaps once that conundrum is sorted we may see a more explicit contribution from social networks to the funding of content.

Apple and the other hardware manufacturers…

There is a lot of variation in the different approaches, and indeed in the goals being set, by specific companies in this space. Apple take the PR lead in terms of their perceived impact on the world in recent years, but have done little to suggest they want to press their advantage into the emerging landscape beyond building a new form of rentier class through their app store positioning. I am not impressed with the current iteration of Apple TV which seems to be a simple play to maintain the status quo with big content (the 2010 upgrade removed the hard drive and the ability to save files).

Presumably this is a holding position while the wider game is fought elsewhere? Although if I were to speculate I might suggest that a company so deeply imbued with both the positive and negative parts of Steve Jobs personality, is not yet equipped to play in a content world that will eventually have to embrace decentralised distribution of intellectual property.

There are other hardware companies making a much more direct assault on the status quo.

Intel for example. They have gone straight for one of the remaining monetisation strongholds of the content industry, the bundle.

They are releasing a set top box, that is said, will deliver content directly via IP protocols regardless of who a consumer buys their broadband from, without forcing consumers to choose a specific bundle of channels. Much like Apple TV and ROKU, essentially, but without the obligation to purchase channels you have no interest in. It isn’t going to be straightforward by any means as it requires a sea change in the way cable channels do business generally and specifically in the way they build relationships with the current gatekeepers such as Disney and TIME Warner.

For me it feels like a thin end (as in of the wedge) strategy that could well unravel the whole currently dominant approach. To make this work Intel will need to rewire the relationships that gatekeepers have with the content producers, the channels themselves. If that is successful, and it can only be successful by delivering a long term sustainable business model for those cable channels, then I expect this to bolster the destruction of monetisation channels started by Netflix’s decision to make the whole of House of Cards available at the same time.

This would be a world where content is made, and is made available to the consumer on their terms, and survives on its merits as programming, not its presence as filler to attract eyeballs and advertising revenue.

But it will be a fight. Not only do Intel face a mammoth set of negotiations under circumstances of good faith, they are also potentially in a situation where they face anything but good faith. Accusations are already being made of anti-competitive practices and undue pressures being brought to bear. Without any first hand knowledge of the situation I might suggest that this could be the incumbent’s only real defence, if, as has been reported the $58bn a year Intel simply intends to outspend the market to gain position.

I think that the progress Intel makes, or doesn’t make, will be an important bell weather for the evolution of modern AV entertainment.

Ok, what about Microsoft? Traditionally a software vendor of course, and even though they have recently entered the hardware market with tablets and the windows phone, there is another sector of their business where they have a long standing presence in the hardware sector. Console gaming.

The furore around the recent XBOX launch is somewhat instructive, in several different ways.

Firstly the launch buzz seemed to ignore the fact that the XBOX is (was?) first and foremost a gaming console. Watch this cleverly edited Youtube clip of the launch.

The point is well made after only about 15 seconds.  As has been predicted in the gaming sector for a while, there is an opportunity (a need?) to compete for  the ‘living room’ hardware leadership.

TV is compromised, TV content is going to be delivered over IP protocols, and if the TV is exclusively replaced by computers then the console business is likely to lose out to the computing business. Why would you have a console and a computer wired into your big screen when you only need one?

So, the XBOX has gone after the TV position.

They made a mistake though. The same mistake that Apple made with their TV product. They tried to launch it under the guise of the incumbent content business model, replete with all the protections and controls that they are used to in console gaming and a few more besides (to keep their new TV partners happy maybe?).

So, they insisted on an always on internet connection to play games (even single player mode) and introduced a slew of additional barriers to true ownership of the games themselves. So, it was suddenly no longer permissible to sell your game on to someone else once you were done with it.

It was a disaster with the gaming community, a largely young, male and technically skilled caucus and coincided with the launch of the PlayStation 4 featuring none of these new ‘features’. For those of us who don’t use consoles we had the pleasure of some wonderfully amusing combative advertising from Sony, and eventually a very rare business move these days, a volte face 180 degree removal of the offending policies. Wow.

Can I hear the gears shifting? Are these companies starting to yield to that ancient, yet seemingly forgotten, rule of business, ‘give your customers what they want’. Maybe, however, there is much still to happen before we can call winners and losers.

Next up, Amazon, the poster boy of e-commerce.

Amazon, along with Google, are particularly important because a) they are playing in so many spaces, and b) they already own business properties that traditionally belong in the AV entertainment sector.

Their most recent move, with regards to content (of course it’s worth noting they do own LoveFilm), is the launch of self-financed pilots which the users can watch and vote for and feedback on, the pilots receiving positive feedback being the ones that get made.

Ok, it’s a bit gimmicky in my opinion. I’m really not sure if such a feedback mechanism is a sustainable business model but it is nonetheless interesting because it is a very public experiment in taking more function away from incumbent big content.

The wired article  is interesting for a couple of soundbites…

You just replaced Hollywood executives.

Amazon released its first wave of TV show pilots and is pushing them all out to viewers and letting them decide which ones get made. This is in stark contrast to traditional networks, which order a pilot, analyse it to death to ensure it fits the precise demographic audience advertisers want and then shoehorn it into the schedule.

Which tells you where the tech community sees this going. For my money the most biting quote is the top comment which reads…

Cant watch it in France.. I hate region bullshit.

And then the follow up…

VPN or proxy server my friend. A very simple solution to implement and takes less than 2 minutes to set your browser up to use a proxy server. Search for “fresh proxies” in yahoo, Bing, or Gibiru and go find a youtube video or a good blog article top learn the process.

So, for clarity here we have a frustrated customer who wanted to give Amazon money, but couldn’t (because of Amazon policy), being directed towards technical work arounds.

Aside from this attention grabbing move, the wider role of Amazon is actually more fundamentally important than just this play for the streaming market. For all the functions I talked about earlier, that are enabled by our modern communication infrastructure, the one I didn’t mention at all is e-commerce.

Amazon is the king of democratising e-commerce.

Their footprint in e-commerce is substantial. Aside from the headline grabbing position of their own e-commerce store (which is worth an essay in itself, and there are many such essays online), Amazon also own a surprising number of ‘profile’ e-retail business, including Zappos and pets.com

Amazon owns these

They offer finance to businesses that are established on their platform, and they also offer a wide range of services that allow you to power your e-business using their technology and fulfillment.

Amazon ecommerce

And as if that wasn’t impressive enough they also power vast swathes of the backend infrastructure of a large range of established and sizable businesses, including the likes of Netflix and Pfizer.

Amazon web services

If it ever comes down to a simple fight between an installed and high functioning computing layer in society, and the entertainment lobby’s business model, I can only see one winner and that won’t be Hollywood.

Google

And so we come at last to Google, the granddaddy of internet monetisation and scope creep. Where should we start. How about with Eric Schmidt’s assertion that Television is already over.

That was in reply to a question he took when he was talking with a group of advertisers. They wanted to know when internet video would take over from traditional TV. His answer was bullish and, in the UK at least, certainly does not take into account the massive disparity (still in favour of traditional TV) with regard to time spent, per day. Nonetheless this is not a frivolous man, he does have reasons for holding this opinion. It may take some time yet but the march of demographics is surely on his side, even if other factors don’t get us there quicker.

“More 18 to 34-year-olds watch YouTube than any cable network in the United States”

TV isn’t going to go away anytime soon, (radio, surely and incontrovertibly, beaten up by TV still exists after all) but in the same way that the concept of peak oil signals an important threshold with regard to the costs of oil extraction we should maybe consider his remarks as a recognition that we have already passed peak TV.

What about the move to position Youtube as the go to platform for non-user generated video content? In recent times Google have tried to sponsor healthy content production for Youtube with the promotion of brands and personalities via their own channels. More recently they changed tack slightly and announced that they would allow some channel owners to charge for subscriptions (55/45 split like the ad revenue).

This Guardian write up asks, “Can YouTube make subscription pay”, but in my opinion misses the main purpose of this experiment, citing the risk as a reduction in the reach of the platform (from free to paid, not the most scintillating observation), they are missing the converse position that this offers an opportunity for reach, of any scale, to content producers that otherwise have none. In my analysis, this is a risk free experiment and a first market position, exploring a potential monetisation mechanic for a future dominated by such decentralised distribution as YouTube and the like. They will not incur any significant cost to do this, so why not?

Looking beyond YouTube

Google play in so many spaces, largely financed by the success of their advertising business, and this breadth of exposure in many ways is the key element of their long term business strategy.

Frederic Filloux offers a somewhat bleak take on where Google is heading, and paints a convincing picture of a possible hegemony based on a wide ranging application of Google’s vast data sets as a significant risk mitigation asset across almost any substantial engineering project of the future. He’s not talking about the data they currently use to serve ads, he’s talking about the kind of data that gets used to build usage models for viaducts and road building schemes. Big industry.

It certainly explains why Google might take their mapping product so seriously. The most interesting fact for me, that surfaced through the Apple maps debacle was that Google employ 7,100 people to build and maintain their map product while Apple only employ 13,000 non retail staff for their entire business. Google is not mucking about when it comes to maps.

Then, building on the maps phenomena, there is Google’s driverless cars. What value should we give all that map data in a world where driverless cars are the norm?

Ingress, Google’s real world gaming concept, is according to this piece, a clever tool with which to extend data capture into spaces that cars are not able to get to, while Google glass will be a big part of the quantified self and persistent record movements. Robert Scoble was certainly impressed.

[If none of this seems relevant to the issue of content production and its economic underpinning, the argument (a quick reminder) is that the massive explosion of function outside of audio visual entertainment, that now shares the internet with the content industries, is the reason why the content industry can no longer control their key distribution platform. I am hoping to show here, that Google seems to be playing a wider more strategic game, in thrall to that observation, than anyone else, and subsequently it is Google revenues that will, through a variety of mechanics, end up making significant contributions to the content production payment challenge.]

Everything I have mentioned so far pales compared to the 2 big plays Google are making that should really be sending out the warning signals to the content industry.

  1. Google fiber
  2. Wireless connectivity

The fiber experiment started in Kansas city with the installation of 1 gigabyte internet connections at a family friendly price. Certainly this is what all the headlines told us. They weren’t telling lies. They just omitted to mention the other part of the experiment. The move into content distribution. A significant piece of information, and a clearly stated goal (emphasis added).

“Local content included: Google Fiber will offer content from local institutions, such as educational videos from a hospital or school. The company said the goal is to become a content-publishing platform.”

They want to be the medium and the message,” Lawrence Lerner, president of management consultancy LLBC, told SNL Kagan. “The endgame for them is to become that overall knowledge and information provider. What they’re missing is content.

While Google has loads of user-generated content through YouTube Inc., getting legitimate access to premium content can be complicated, as programmers still call the shots. Google Fiber does not offer Walt Disney Co.’s ESPN, News Corp.’s FOX News or AMC Networks Inc.’s AMC cable channel, but it is in negotiations for carriage, Google spokeswoman Jenna Wandres told SNL Kagan.

I was particularly drawn to the quote “they want to be the medium and the message” as it seems to be somewhat consistent with the phrase “content is King, distribution is King Kong”, which is worth a revisit here.

The key takeout from the King Kong quote is not that a company should prioritise owning distribution over content (if they were lucky enough to have the choice) but that any leading player in this game will always strive to be both King and King Kong, there is no other way to win.

Time’s take is interesting, especially if you remember they are competitors to Google as Time Warner. It’s a very polite article but revealing. They point out that Google has been making very expensive and highly strategic purchases since 2006, buying up dark fiber and paying $2bn for 111 8th avenue, the former Port Authority building and important “telecom carrier hotel”.

Their take? This is a wakeup call to the broadband industry of America, a kick up the arse, an instigating play to force the wider ISP community to provide hyper fast broadband to the masses. The incentive? To increase the number of searches that Google get paid for. Hmmm. Maybe, I’m more inclined to think that investments of this scope and cost are indicative of a desire to take a much more controlling market position, in many sectors, rather than fire-starting competitors in just one.

On Thursday, six years later, we got our answer. And it’s still no. Google’s goal, by building the fastest city-wide broadband network in the country, is not to compete with the giant national cable and telecom firms. Rather, it’s to shame these legacy giants, including Comcast, Time Warner Cable, Verizon, AT&T, and others into improving U.S. Internet performance.

What else could they say (my emphasis added)?

OK, so what about wireless connectivity and eventually ambient connectivity?

Remember Larry Page talking about wanting to experiment with his own private experimental country. I thought that was pretty crazy. It is, however, starting to make more sense. See these tweets.

google tweets

White space is the unused wireless spectrum owned by TV companies. Google wants it.

Then we have the move into wireless connectivity. That it is being trialled in Africa and Asia. A result of historic realities and a clear understanding these emerging markets are going to be ever more important. Google really isn’t playing for shits and giggles.

Apparently They have even developed technology that would allow them to deploy connectivity via Balloons. Sounds crazy? Sounds like genius to me.

The move would also allow Google to get to this new population first before other carriers descend en masse. With numerous cable companies and wireless carriers in the U.S. and Europe crying foul that Google benefits from running “over the top” apps and services their networks with little benefit to the carriers themselves, Google’s first-to-market wireless service in these underdeveloped areas would allow the company to get out ahead of its “competition” and circumvent their ability to prevent Google from effectively serving new audiences.

If they can make it work in the emerging markets, and those markets in the next 30 years are the growth markets (individually and as contributors to global growth), then you can, eventually, expect it back home too.

Right enough scary links about Google’s ambitions. I seem to have gotten away from myself. It’s time to wrap this whole piece up.

My argument is simple, even if the detail is extensive.

  • Whoever can monetise the distribution technology usually ends up playing in content production too, in the most simplified version of events, to avoid being taken to task by the leading content producers, a negotiation position if you will.
  • Because the latest iteration of distribution technology is the pyramid base for so much more than just the audio visual content industry we need to acknowledge that the control of this technology is not going to remain with the entertainment lobby.
  • The leading lobbies that can compete with Hollywood for control are Hardware (Apple), Social (Facebook), e-commerce (Amazon) and search (Google). These are the business sectors that lead, globally, in monetising the web.
  • Of all these companies the one to really watch is Google. They sell hardware (android), are big in social (G+), make most of their money because of e-commerce (search), and on top of all that, as it stands today, they are search (search).

Google is playing everywhere.

So, to return to the key premise of this essay, who pays for content? Google does.

Via the money we give them for organising the world’s information.

No content, no search, no revenue.

There may come a day when their business isn’t dependent on search revenues but that’s not happening any time soon, although I’d bet a pound to a penny that that is a topline objective of their strategy. In the interim, however, every other project is funded by the search money.

Who pays for content? Google does, they have to. They’ll find increasingly oblique ways of doing it but mark my words, they will redirect monies to ensure that content is still produced for a while yet.

Earlier I suggested that the big content businesses and the telco’s were in a conflict with the reality of modern computing technology. I very much stand by the observation that they are entangled in a Gordian knot. A Gordian knot is, if you recall, a knot that is impossible to untangle.

The only solution is to cut the cord. Break the model. Move on.

Cable and telco’s describe the provision of entertainment content, via internet protocols, as ‘over the top’. This is an interesting piece of semantic self-delusion, at an industrial scale. There is no technology our world has known that is more embedded and potentially invisible, yet fundamental and essential, than the internet protocols that are fueling our modern epoch. Over the top? Nope. A much better analogy is the deep foundation required for any modern building, large or small. Essential and going nowhere.


Who’s going to pay? (part 2)

Catch up (a summary of the first essay in this series)

CatchupTV

Before we get to the current disruptive infrastructure change, the internet, let’s summarise the story so far.

With Hollywood we had a simple model. Films were made, and money was extracted from consumers at the cinema. Originally this whole chain (studios and cinemas) was owned by the one business lobby, but even when this was broken up by law the whole thing worked in thrall to simple interdependency.

Television arrived and introduced new infrastructure that could be described for the 1st time as industrial, and was, as a result, shepherded and regulated by government. Consumption moved into people’s own homes, which changed the money extraction problem. Hand in hand with the new but fundamental government role, this was solved by the introduction of advertising in the States, and a TV licence fee in the UK. Alongside Hollywood the TV networks also became content producers.

Finally moving from an exclusively terrestrial system of distribution to cable and satellite technology, introduced further changes on both the content and the monetisation sides.

The key change was the introduction of subscription as the cash extraction mechanic, which in turn led to a proliferation of channels and an ability to service multiple smaller audiences, sometimes even defined by a single sporting event.

Importantly the cable companies also made inroads into content production taking the fight competitively to Hollywood by making movies, as well as the programming we more traditionally associate with television.

With each change the number of players increased, and yet to date, everyone who ever played the game is still playing.

  • Content: Hollywood, terrestrial, cable and satellite TV companies
  • Infrastructure: Studios, movie theatres, televisions, terrestrial broadcast (analogue to digital switch is ongoing), cable networks and satellites
  • Monetisation: Cinema receipts, advertising and subscriptions

There is another broad, but important, trend here, one that will get more pronounced when we examine the impact of the internet. At each stage industry control has diffused; consumption has moved from a communal public space privately owned (cinema), to a private personally owned space (home) while at the same time the number of options available to the customer has massively increased. And then, on top of that, video introduced time shifting and portability. Video, interestingly enough was the first time we heard the big content companies start to complain and litigate (at scale) over issues of intellectual property.

The internet, nothing will be the same again

Now at this point it does start to get more complicated even though the infrastructural changes themselves are actually fairly straightforward in many ways.

There is one big reason why the game is substantially different this time, but before we get to that lets look at how the model I showed in the first essay fares in a world with the internet.

The infrastructural change of note (beyond the internet itself), with regard to movies and TV content, is streaming technology as provided today by Netflix, LoveFilm and a host of others. It hasn’t yet (and it may not) change in a substantial way, the actual format or style of the content being produced, as TV and cable both did. The content currently available on streaming services, is the same style of movie and TV show that we are already very familiar with. This is no accident as, alongside Netflix and the other new entrants are the incumbent big content players, HBO, Time Warner and Sky amongst others. They have developed their streaming channels as another distribution point alongside their existing portfolios.

My model suggests that there should be changes in both the style of the content and in the monetisation mechanics. The issue of content is subtlety oblique and I tackle that in the 2nd half of this post. Changes to the business model are more straightforward.

The 2 big changes that we can comfortably identify right now, that are inspired by streaming technology, are both losses of control, the loss of staggered geographic releases and the loss of scheduled viewing.

The existing incumbents have resisted making these changes because they challenge certain enshrined elements of their existing business practices. It’s a sphere of discourse that has played out against the backdrop of content piracy and what to do about it. Those who oppose the more draconian measures to stop piracy such as DRM, spyware and certain bits of dangerous legislation have consistently pointed out that there is, and always has been a substantial audience willing to pay happily for content delivered to them in the way they want it (I am one such person).

Game-of-Thrones season 3

Two elements that have caused much consternation to potential customers (who therefore become potential pirates) are the aforementioned limited geographic rollouts and staggered scheduled releases. So, Game of Thrones, became the most pirated TV download of all time because it was only available to certain subscribers (HBO subscribers – it wasn’t something that could just be downloaded on its own – on a scheduled release) and because it was not available legally outside the US at the same time as it was available inside the US. In the face of these restrictions people turned to piracy en masse (1 episode alone racked up 4.28 million illegal downloads).

The current streaming incumbents are moving to make their geographic releases more sensible. Most recently the Game of Throne’s producers have announced such a change, but are still stalling on the ability to download the content without a full subscription.

It’s quite instructive that the director of Game of Thrones and HBO disagree about how much of a good thing piracy has been for Game of Thrones, or not, as this divergence of opinion reveals a fault-line in this new internet distributed world. The artist, the auteur, wants as wide a release as possible and with a massively successful piece such as Game of Thrones that would be most easily achieved by making it easy to buy as a one off and not as a subscription. On the other hand, for HBO, runaway successes are essential as they effectively become lock in’s that justify the subscription fees that their customers pay month in and month out. They can’t imagine life without such revenue controlling mechanics.

Ok, so we can see that the Geographic restriction will be eased what about scheduled release?

Well, this is where it gets particularly intriguing because, surprisingly, this is also a business model issue, and one that is directly enabled by the arrival of streaming technology. Let’s take a look at what Netflix has been up to recently.

Firstly, as a new entrant, as all new entrants in my model have done previously, they have become content producers. It wasn’t always so, and until only recently, when they produced and released House of Cards, Netflix licensed all of its content, something that was becoming increasingly expensive for them. On its own this is not a significant challenge to the incumbent’s business models, indeed as my model shows this mechanic over time has been a major reason why incumbents and new entrants tend to align quite quickly. What is a significant challenge, however, is that Netflix have made the full run available as soon as you have bought your subscription. In short this means that you could buy one month and then cancel your subscription having watched every episode in a monster weekend House of Cards marathon. This is a huge change in the monetisation model as it effectively makes it possible to buy individual pieces of content and not a full subscription.

house-of-cards-kevin-spacey

Netflix obviously hope that people will maintain their subscriptions anyway, as a result of giving them what they want – the ability to consume on their own terms – and only time will tell if it works (although early indications are good). This is an inspired way, in my opinion, of delivering to customers what they want while still, potentially, maintaining the long term subscription revenue base. Inertia can be a powerful business tool.

Meanwhile, even though, HBO has moved to make subsequent productions of Game of Thrones available globally on a more sensible timeline, with US audiences only enjoying a 1 week advantage over the rest of the world, they have not invalidated their perceived lock-in as Netflix have done, by killing the staggered release. I suspect they will eventually have to align and the new infrastructure will have once again fundamentally changed the monetisation model, as well as the consumption habits (indeed because of the consumption habits).

Ok, so that’s what’s going on as far as my model is concerned. We can safely predict that if Netflix’s experiment with monetisation is successful, then the rest of the industry will follow. Geographic staggered releases are already being eroded and we also have a new content style in terms of the mass of user generated content (I will explain shortly how this affects these established content companies).

For now the biggest observation is that the changes to the monetisation equation have been negative changes (loss of revenue generating mechanics), whereas previously they were always additional new ways to extract money. This alone is enough to explain why the incumbent content players have been slow to adopt the internet and have seemingly fought against it every step of the way.

Nonetheless this is still only half the picture, there is something else also happening in the internet space that makes this particular infrastructure handover more destructive to the incumbents than previous changes.

The new kings have arrived

If you recall, we noted that through all the preceding changes no group was forced from the industry. Movies, terrestrial/network TV and cable were all able to co-exist as legitimate profitable businesses. Part of the reason for this, was that each new technology also enabled a significant increase in the volume of content consumption, the market, therefore, was always growing and there was enough room for the new entrants.

Each group of new entrants (always arriving via infrastructure) was eventually forced, as noted above, to develop a niche of content, and to become the producers of that content. This is an important observation. Why do I suggest they were ‘forced’ to become content producers? Certainly it wasn’t done at the pointed end of a knife.

On the one hand there were the realities of the differences between the different consumption paradigms. Television was particularly suited to, for example, news broadcasting (and required to provide it via government legislation) in ways that cinema was not. Similarly the concept of short drama programming (30 minutes) on an episodic basis was also more suited to TV. The subscription model, as previously explored made niche viewing profitable. Someone had to make these new content formats. And also, beyond these logistics it is simply basic business strategy that you just aren’t going to give up such a fundamental part of your leverage.

If content is King, and it is, and if distribution is King Kong, which it is. Which do you want?

The answer is both. And that meant that the opportunities afforded by the new content formats needed to be grabbed and controlled. And they were. There are, as we all know, production companies that make content but that don’t own or control infrastructure. But there are no companies, so far in this tale, that own the critical infrastructure but that do not also make content. If the opportunity to play in both hemispheres of your market is offered only a fool would decline.

This leads us to the big thing that is different with the internet.

It all comes down to one simple fact, which is this. The new technical infrastructure is not unique to the entertainment content industry. The new infrastructure has subsumed the entertainment industry, and pretty much everything else, by reducing it all to information, or more accurately perhaps, data – the lingua franca of the network. The management of this data is not in the sole preserve of the companies that make entertainment content simply because the movement and management of data, via the internet, is a much bigger enterprise than the entertainment industries are.

More specifically the new infrastructure doesn’t explicitly need to monetise entertainment content, and therefore doesn’t need to become a content producer. For the first time in this saga this pits the new world against the old world in a real fight, although not a terribly fair one if truth be known.

The new world is best characterised by 4 companies representing industrial business groupings that, seemingly, hold the future to monetising the internet. These companies are exemplars rather than exclusive players (also these categories are somewhat porous, and getting more so, particularly with regard to these specific businesses).

  • Search – Google
  • Retail – Amazon
  • Social – Facebook
  • Hardware/Software – Apple

I said I would explain why user generated content was relevant to this exploration of the business mechanics of the entertainment content industry. Here we go.

The fact is that we can now all produce hoards of ‘stuff’ across almost any content category you care to mention, as amateurs or would be auteurs. Writing, music and filmmaking are all now within the grasp of a huge common mass. Moreover functional access to both production and distribution is also within easy reach.

This ability to create content, both meaningfully and trivially, and (more critically) to have access to the infrastructure that can, for minimal effort, distribute it, is not a direct challenge to the content produced by the incumbent professionals. Even though it is quite possible to spend an hour or so lost on Youtube, and whereas there is much non-infringing video content online this dearth of legitimate user generated content, as a competitor for your time, is not the reason why big content is so unhappy with it (or rather the technology that enables it).

What it does is fill up the social networks, it gives you something to do with twitter and it makes a field of content so vast and so varied that you need Google to find your way around it. It is part of the reason why people trade their personal data for access to their ‘free’ digital tools, Facebook, Google, Twitter etc.

In short, it is a significant part of what drives the businesses of the new owners of the modern communications industrial infrastructure (as defined in this series of essays), the big 4. Without this explosion of freely created content the big 4 would, simply, be less powerful and less transformative.

As if that wasn’t destructive enough, incumbent big content has to contend with another model destroying conundrum. This is where the conflict becomes quite visceral. On the one hand we have the position that easy distribution and communication (and lets be honest, simple copying) builds creative markets (consider fashion, without copying there can be no fashionable trend), yet on the other hand we have the position that copying and distributing content deprives the true creators of their due rewards.

Both sides of the argument are somewhat correct. Paradoxical truths are, of course, very good harbingers of paradigm shifts. The internet is the classical, the most powerful, disintermediation tool we have ever created and big content is the classical mediator. As such it is facing catastrophic change. One such big change will be to realign who the ‘true creators’ are, in terms of who gets the rewards.

Whereas previous changes have produced new industry entrants, defined by the infrastructure they control, which have fairly quickly managed to align their interests (as a business group, not necessarily as individual companies) with the incumbent business lobbies, this time things are very different. There is no alignment, at least none that is obvious so far, and just as significantly these new power groups are also massively dominated by individual companies (more easily focused) that have very quickly become huge on a global scale.

This dynamic is demonstrated best by a cursory look at what happened last year with 3 pieces of legislation, SOPA, PIPA and ACTA. All of these were sponsored by the incumbent content industries via powerful, paid for governmental allies (senators and congressmen) that they had been building relationships with over the years, for exactly these kinds of situations, to get legislation passed that protects their interests. There is nothing controversial about this, we all are aware that this is how the system works.

This massive lobbying failed, and it failed in large part because much of the new world business grouping lined up against it. The reason being that these legislative approaches would quite simply have been highly detrimental to their businesses models, and regardless of the political manoeuvring of the hefty and not to be disregarded power of the RIAA and the MPAA, the new entrant’s business models proved to be more important.

However unfair this might be we simply cannot afford to break computing. But if we don’t then the business models of the existing entertainment content industry become untenable. The incumbents haven’t given up yet, but they really should, they cannot win.

None of this helps us with the problem of paying for the production of content. This is one of those immutable things not affected by your position on the piracy good/bad spectrum, the production of content costs money.

So, who is going to pay? I’m going to have a go at answering that question in the third and last essay in this series by looking at how the big 4 companies are positioning themselves with regard to the content industries.


Who’s going to pay? (part 1)

This is the first in a series of short essays looking at the problems involved in paying for modern entertainment content. Obviously the consumer, eventually, pays, every time. This exercise is about whose hands their money passes through, and whose bank account the cash finally resides in. This first essay introduces a model and looks, briefly and incompletely, at recent history.

 

I have a simplified model of the entertainment content industry, it has only 3 elements, the content itself, the necessary infrastructure and a monetisation scheme. It looks like this.

JB entertainment content model
According to this model, infrastructure is the fundamental article of change. I use the term nebulously to include some things that perhaps are not traditionally labelled as infrastructure. So, for example I refer to the burgeoning camera, recording and projection technology that launched the Hollywood we all know and love as infrastructure, even though I realise that this is not a perfect descriptor. Infrastructure broadly covers 3 disciplines. Making content, distributing content and consuming content.

Infrastructure is the fundamental element of change because transformations in the infrastructure lead innovations across the whole industry. As a result infrastructure changes also lead to innovations and adaptations on both sides of the money structures, covering both costs and revenues.

Of course, somehow or other, money has to be extracted from the customers. This, therefore, is the acute part of the model, where business success or failure resides and where the motivation for competitive dynamics comes from.

Understanding the interplay between these 3 elements, historically, can help us make some predictions about what is going to happen as the current turf war plays out.

This is a broad brush strokes model and I’m sure there will be some elements that cause difficulties at the more granular levels but as a fairly high abstraction it is a useful way of looking at these businesses and how they exchange power amongst the key players.

Hollywood (the golden age)

As a consequence of there being less enabling technology available during the golden age it is the most straightforward of the examples we will look at. It has been said that it was a simpler time, and in this case that is certainly true.

The studios hired the writers, the actors, directors and cameramen et al, and they also owned and operated the sound stages and hired the locations used to make the movies as well as the technology itself, from the camera’s to the editing rooms, and everything else in between.

gable460x276

In an early and effective example of vertical integration they also owned the infrastructure for distribution and consumption, the cinemas and drive in theatres that people visited to consume the movies.

Monetisation is always tied to the infrastructure…somehow or other. In this case monetisation, was actioned through the theatres. Access to the customer’s wallet occurred at the point of delivery, and that point of delivery occurred on land owned by the content makers.

As a result the consumption infrastructure, the cinemas, had a very important role, in some ways the most important role, the collection of the cash.

The model was simple, the market was limited and controllable and there was no tension, no conflict over ownership, as everything was owned by one business lobby, the studios themselves. Obviously there was significant competition between the studios, but in stark contrast to today’s world there was no conflict over which industry group was able to take the money from the customer.

This happy scenario lasted until 1948 when anti-trust laws were brought to bear forcing a separation of these 2 business structures, and studios were forced to divest their theatre chains.

Content and monetisation still needed to work well together, (they were after all in a mutually dependable relationship), as the cinemas needed good movies, while good movies needed an audience. Both of these, now separate, industries owned fundamental parts of the infrastructure. There was a forced synergy and an effective, functional, detente.

Television

Television introduced some pretty knotty complications.

The infrastructure requirements changed a great deal, although not uniformly across our 3 infrastructure categories. The technology for making moving pictures (the content) did not change much. It got better, TV eventually went from black and white to colour but fundamentally there were no paradigm shifting breakthroughs.

The same was not true for either the distribution or the consumption infrastructures.

TV

We all know how enormous an event the arrival of TV was. The delivery of moving pictures into the household was a huge event in the modern history of the human race. As such it is no accident that TV was originally, largely, a governmental endeavour.

I sometimes think we miss quite how impressive TV’s arrival was from an engineering perspective. We take ubiquitous industrial communication infrastructure for granted today without even a second glance. But back when TV was being turned into a mass market product, all of a sudden the new commercial entities needed to build out networks of distribution (broadcasting nodes etc) at industrial scales, and build wholesale and retail businesses that would put reception technology (the TV’s themselves) into homes. Broadcasting was not a small town theatre with 200 seats, it was big engineering, big technology.

The infrastructure required for TV marked the arrival of an industrial scale in the entertainment content game, and this, of course, made the thorny problem of cash extraction anything but simple.

In the UK the government adopted a scheme for licensing TV’s in exchange for cold hard cash, while in the US the problem was solved when advertising was made legal in 1941. In both countries the monetisation schemes came in exchange for a public service obligation, delivered by the new TV companies.

The content production business also changed. With the entrance of the TV networks as original creative producers, alongside the Hollywood studios. For the first time Hollywood had competition for the production of moving pictures. There was, fortunately, significant clear water between the format of big international movies and say Dixon of Dock Green so it wasn’t particularly difficult for them to live together.

Part of the reason for this was that they relied on entirely separate monetisation schemes, based on entirely separate consumption and broadcast infrastructure.

Satellite and Cable TV (1970….)

The next change in my little (and highly incomplete) trawl of broadcast history was the arrival of yet newer methods for distributing the content. Instead of broadcasting via radio waves we were now able to dig up the ground, to make a physical connection to the household directly via cables or to utilise the newly burgeoning satellite technology with consumers required to buy a satellite receiver alongside the television itself.

As with the original arrival of TV these new technical paradigms forced changes in the other parts of the model.

Consumption was still exclusively via television sets, so that didn’t change much (although some people needed access to the kit required to receive satellite, as mentioned above, which was easy enough actually). But the creation of privately owned distribution technology (cable or commercial access to the satellite network) meant that the monetisation model could now be stretched to a subscription basis. Because the delivery was via infrastructure which was privately owned, as opposed to being flung over the very public airwaves, a connection could come with a simply stated price.

The subscription model meant that the content production part of the equation could, via the proliferation of channels with built-in discrete payment mechanics, produce content for specific and tailored audiences. This changed the dynamics governing what content could be made profitably.

As a result the subscription mechanic is responsible for many of the innovations in content over the years.

Big sport became big TV. In 1975 the thriller in Manila opened up the opportunity of appointment viewing for big sporting events, and boxing indeed spent many years as a staple of the cable/satellite distribution companies, the payment model being stable enough for big revenue shares to include this new class of content producers (the sporting federations) and the cable networks as well.

Movies also went through a number of innovations. Terrestrial TV had been broadcasting Hollywood’s movies for some years, but on a very different timeline, controlled by Hollywood, designed to protect Hollywood revenues. It could be years before big movies came to TV.

Subscription models led to the creation of movie specific channels, creating a new tier in the timed release schedules (Cinema, Pay for cable (individual movies), pay for cable (movie channels), terrestrial TV). This of course is very much like the publishing industry’s delivery of hardbacks and paperbacks with staggered release schedules.

Finally, the new cable and satellite companies, of course, also became content producers, alongside Hollywood and the terrestrial TV companies. In stark contrast to the existing TV networks the new players, in the late eighties, started to compete, incompletely, with Hollywood, introducing the made for TV movie concept. They also started to produce quality programming, drama and comedy series, alongside appointment viewing specials (comedy, music and sport).

Even though control was diffusing, the number of significant players increasing and competitive overlap becoming more likely, the 3 elements of the ‘moving picture’ industry (Hollywood, TV, cable) were still able to live alongside each other. The next infrastructural change would not be so kind. The internet, as we all know is not respectful, of incumbent industries.

We have seen how infrastructure is always tied to monetisation. Which, unsurprisingly explains why businesses want to manage, or at least have significant influence over, the control of it. We are, probably, all familiar with the phrase ‘content is king’ , I rather like the addendum , ‘distribution is King Kong’.

The 2nd essay will look in some depth at how the internet has changed the picture.