Nine Reasons Why The Video Biz Isn’t Totally Toast
Many tech types assume that video is doomed to follow music into the no-longer-making-money-from-content-better-go-on-tour-and-sell-t-shirts industry, apparently thinking that piracy and new distribution channels will so devalue the product that it will be nearly impossible to monetize. Bill Gurley posted a few weeks back a long-necessary 101 on affiliate fees that clearly illustrated a rather robust value chain that wasn’t going to be upended by new distribution anytime soon but the story is much bigger than those fundamental economics. While we are without question in the early stages of some degree of “creative destruction” of the existing video business there are several, actually fairly diverse, reasons why video isn’t screwed. Somewhat in a particular order:
1. I won’t watch my favorite movie as many times as I listen to my favorite song. Yes, I know: obvious use case differentiation here. But it’s worth remembering that the time spent jumping through whatever increasingly sophisticated hoops are necessary to download a video illegally isn’t going to be amortized nearly as well as the average illegal song download.
2. The labels didn’t control the pipes but the video suppliers do. That difference, and the attendant ability to monitor and moderate traffic on those pipes, puts MSOs in a wholly different position. It’s one thing to empty out a store when the night watchman is asleep and quite another when the owner is standing at the entrance with a loaded gun. Fan of net neutrality? So am I but I wouldn’t be surprised if the price of a deal on net neutrality legislation were to involve some kind of exception specifically targeting infringing traffic.
3. Apple would prefer that content owners get paid. First, they built iTunes into an incredible machine for getting users to pay for content. Then, by barring Flash they’ve kept multitudes of free content off of the 100MM iOS devices sold thus far. And now, just hours ago, Steve Jobs made it clear: in Google’s (ad-supported) world content owners suffer, in Apple’s (premium world) they prosper. This is by no means the end of free content but it’s a seismic shift and clearly strategic for Apple.
4. Bandwidth caps. Practically speaking, AT&T’s move away from all-you-can-eat bandwidth impacted only one type of content: video. Look for revenue-sharing, unmetered deals to be cut between the carriers and the sports leagues/networks/studios to keep the consumer sell simple. Will there be unmetered tiers for torrents? Hmm, uh, no. The Pirate Bay should probably not sit around waiting on a call from AT&T BD…
5. Video ads are the most effective ads of all time and we’re used to seeing them. Beyond affiliate, rental and download rev you can actually make money off of ads too? Damn, I’m beginning to think I should get out the camera…
6. Video has release windows and users are used to them. This alone isn’t enough to save either TV or Movies but it’s worth pointing out that music was largely binary: it was available and you had it in your collection or you didn’t. Video users can typically rely on a timeline of availability with diminishing costs of viewership/ownership as the content ages. Even if these windows continue to conflate it provides a better environment for steering users into legitimate channels. Live events, of course, continue to exist on their own plane.
7. Long before digital, music had a “mixed tape” culture. It’s a subtle thing but music users didn’t need to be trained to “steal”, many were already doing it.
8. Music artists are heroes to their fans, movie studios are not. You expect Les Grossman to sue you; he will sue you and he’ll enjoy it. Contrast that to all the hand-wringing about musicians having to sue their fans.
9. There are already loads of options out there for legal video. Will they deter everyone? No, but they’ll deter many.
So, what did I forget? I’ll hold off on a discussion on the OTT space for another post but will close with what I think is pretty instructive, Steve Burke from Comcast doesn’t actually think they’re competing with Google TV: “It’s likely to be more devices, more things in more devices, but at the end of the day, it’s clearly in a program company’s interests to have a cable company or a satellite company or a telephone company paying them affiliate fees for their programming…”