Content distribution disintermediation, likely winners and losers
Disintermediation isn’t a buzzword, its very, very real. Now it has come to video content distribution. It happened to stock brokers, travel agents, and eventually Borders and other booksellers. Blockbuster has already fallen victim, but now the threat of disintermediation looms over the major over-the-top video service providers.
In business school, I had a entrepreneurship professor that hated buzzwords and would not allow them to be used in class discussion. Then one day he actually wanted to hear “disintermediation”. We spent half of the class talking around the term trying to obey his “no buzzword” rule until someone finally said the word. In other words, disintermediation isn’t a buzzword, its very, very real. Now it has come to video content distribution.
It happened to stock brokers, travel agents, and eventually Borders and other booksellers. Blockbuster has already fallen victim, but now the threat of disintermediation looms over the major over-the-top video service providers. In other words, Netflix’s free ride is over. As has been highlighted by the sudden departure of Sony content from Netflix (due to a contract clause limiting the number of online subscribers that Starz could stream its content to, as reported by CNN Money), the low-cost access to content that Netflix has relied upon is drying up.
In other examples of Internet-driven disintermediation (travel agents, stock brokers, book vendors, music), the suppliers (airlines, stock sellers, authors, musicians) have benefited little (or even suffered) while the consumer has claimed most of the value added by disintermediation, in the form of lower prices. However, in this case, hot content is still a monopolized market, and I believe that the content owners will see more of the value that is created by disintermediation in this case than consumers. In other words, studios will begin using flat content pricing schemes with their customers. Exclusivity will become rare and expensive.
Unfortunately, this means that a consumer nirvana with inexpensive access to the hottest premium video at commoditized will likely never materialize. Those of us not willing to pay $50/month or more will be forced to settle for older or other long-tail content. The “deals” that exist now will evaporate as the preferential pricing extended to Netflix and others in their earliest days begins to expire. As this happens, Netfilx and its competitors will be forced to raise subscription prices or add premium tiers, just as the current crop of video service providers do.
Live Sports remains the big exception to all of this. As live events must be broadcast (or multicast) to be distributed economically as opposed to unicast, the advantage will remain with the traditional pay-TV platforms that have an inherent broadcast infrastructure … unless the FCC or other national regulators mandates that content delivery networks be given multicast access internet service providers’ networks.
What consumers can hope for:
- Lower broadband cost will lower the cost of video distribution over time. Much of that savings should be passed to consumers.
- Though media and culture critics may not see this as a good thing, more direct relationships between content creators and consumers should make it easier for those creators to please their consumers quickly.
- A more robust system of independent content financing will emerge, including crowdfunding.
What else will likely happen:
- US pay-TV will come to resemble the European model, where the TV service is a loss leader to reduce broadband and telephony churn. Prices may come down some, but most of the value creation will go to increased programming fees. As a result, broadband providers will return to having the least expensive content services.
- I believe that this disintermediation trend is part of what lies behind the Comcast NBC merger, which allows Comcast to better monetize its aggregation and distribution business (the Comcast Media Center) in the long term and realize cost savings by eliminating duplicate distribution infrastructure in the short term. It also allows the new company to make a “make or buy” decision to limit the cost of any content.
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey