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With power, responsibility, and we may be seeing some at last

|Includes: Apple Inc. (AAPL), AMZN
I’ve posted here in the past about the deteriorating value of content, which in a highly fragmented, customizable, and interactive digital environment, approaches zero. In no small part, this has been an environment built by and around Apple and Amazon, both of which have been at the forefront of the movement as leading distribution platforms and trendsetters in their respective fields of music and books. And these two have not limited their strategies to content e-commerce, but have taken the strategy a step further with segment-defining consumer hardware – the iPod/iPhone and the Kindle – both of which transfer the emphasis away from the song or book title, and to the delivery protocol. The medium is the new star, and when the star makes a move, this is felt by the industry near and far.

Many would argue that what has been to Apple’s and Amazon’s gain, has been to the detriment of their counterparts in the supply-chain, and this is evidenced by the shambles in which both the music and publishing sectors find themselves. Perhaps it’s unfair to pin the blame on two companies, albeit highly influential ones, for all the ills of all the meek and helpless sector bystanders. Maybe theirs were inevitable fates in the making for decades, or at least years, what with the Internet being after all a disruptive medium. But nevertheless, with great power comes great responsibility, and I think we are beginning to see both Apple and Amazon exercising the responsibility part of that well known adage, thankfully for all those who do not share in their great power.

Specifically, there has been some development of late in the relations between these two distributors and the content production world at large, of which development we may see some positive results in the year ahead. More specifically still, I am referring to the reported discussions taking place between Apple and the television networks for an a la carte consumer offering that would on its surface appear to undercut cable subscription revenues; and to the deals being executed by Amazon with publishers for an increasingly popular digital book offering that would on its surface appear to undercut the revenues of traditional publishing.

The reason for emphasizing the term surface, and implying that first appearances are deceptive, is this: When the value of a product begins to approach zero, (Godfather reference: “Senator, my offer is this: Nothing.”), then it is a lifeline to the drowning when the leading customer and market trendsetter offers to buy your product at a set price, any price, that is not zero. Doing so establishes a sector benchmark, a foundation, which will serve to end the free-fall and preemptively set a stop on quickly dwindling price points.

From here, the industry can build. From here, cost structures, business models, and capital structures can be reset. If the quality of content offerings and their market-leading distribution mechanisms can justify a price – rather than free access – then these structures and business models will have longevity. For all involved – not least of which Apple and Amazon themselves – it is important that quality content should survive, which in a free access world is unlikely to happen.

It’s good, therefore, to see that steps are being taken, and it’s a reaffirmation that, in the long term, market forces do prevail… even if this is not immediately obvious.



Disclosure: No positions.