History is repeating itself, literally before our eyes. It is not even particularly ancient history, and the new victims are standing helplessly by, literally watching the repetition.
There are fundamental changes underway in the video entertainment segment, which are starting to feel eerily like changes that occurred in music not long ago. The music entertainment field was never the same after its democratization, with the introduction of Internet platforms, and nobody was profitable strictly on music ever again, not even the Internet music platforms. The video entertainment field seems determined to follow suit.
Some of the elements that led to the downfall of music – at least from a business perspective – included (1) disaggregation of content (iTunes) offered at a price ($0.99 or less) at which neither the content producer nor the distributor can really profit, no matter what the split, (2) customizable on-demand streaming, free of charge, that has even lessened the incentive to spend $0.99, and (3) digital piracy, that has even lessened the incentive to listen to customizable on-demand streaming for free.
Free viewing on YouTube and Hulu are not even the most interesting free products, so forget all that. Instead, we have the nation’s largest cable operator, Comcast, offering all kinds of video entertainment online to its cable subscribers, on demand, at no extra charge. We have Netflix offering instant online access to movies, on demand, unlimited in number, at no extra charge. We have Boxee offering on-demand viewing, including social networking and sharing and music and a home networking environment, at no cost to operate.
We see where all this is going, don’t we? If the music field before video provided us with any lesson, then we can surmise that video content will start to trade at an ever growing discount, as will advertising related to the medium. Consumers will begin to receive their services from an increasingly fragmented universe of sources, in increasingly customizable formats, and in increasingly disaggregated forms: In short, any program, any time, on demand, and free, or almost free of charge.
For the consumer, this is wonderful. For a business operator, not so much. Perhaps, as a result, not wonderful for the consumer either in the end.
In a sense, an environment such as that illustrated by consumer music and video entertainment, poses similar issues to those of net neutrality. And like the case of net neutrality, the question is whether any business will continue to provide a quality service when it isn’t paid to do so.
Free access, free service, can only really be commercially viable in the case of a portal, and in particular a portal that is sufficiently profitable in certain business lines to give away others at no cost just to attract audience. There’s only one portal these days which fits that description. Not coincidentally, it is a big supporter of net neutrality, free video, Internet music, and all sorts of other giveaways.
Disclosure: No positions.
Disclosure: No positions.