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.


IMS research: excellence in market intelligneceIn 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.

Related thoughts:

  • 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.

Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
November 2018
2018 Product of the Year finalists, mild steel welding: finding the right filler, and new technique joins aluminum to steel.
October 2018
Tools vs. sensors, functional safety, compressor rental, an operational network of maintenance and safety
September 2018
2018 Engineering Leaders under 40, Women in Engineering, Six ways to reduce waste in manufacturing, and Four robot implementation challenges.
October 2018
2018 Product of the Year; Subsurface data methodologies; Digital twins; Well lifecycle data
August 2018
SCADA standardization, capital expenditures, data-driven drilling and execution
June 2018
Machine learning, produced water benefits, programming cavity pumps
Summer 2018
Microgrids and universities, Steam traps and energy efficiency, Finding help with energy projects
October 2018
Complex upgrades for system integrators; Process control safety and compliance
November 2018
Analytics quantify processes, Fieldbus networking and IIoT, Choosing the right accelerometer

Annual Salary Survey

After two years of economic concerns, manufacturing leaders once again have homed in on the single biggest issue facing their operations:

It's the workers—or more specifically, the lack of workers.

The 2017 Plant Engineering Salary Survey looks at not just what plant managers make, but what they think. As they look across their plants today, plant managers say they don’t have the operational depth to take on the new technologies and new challenges of global manufacturing.

Read more: 2017 Salary Survey

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Material Handling
This digital report explains how everything from conveyors and robots to automatic picking systems and digital orders have evolved to keep pace with the speed of change in the supply chain.
Electrical Safety Update
This digital report explains how plant engineers need to take greater care when it comes to electrical safety incidents on the plant floor.
IIoT: Machines, Equipment, & Asset Management
Articles in this digital report highlight technologies that enable Industrial Internet of Things, IIoT-related products and strategies.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
Design of Safe and Reliable Hydraulic Systems for Subsea Applications
This eGuide explains how the operation of hydraulic systems for subsea applications requires the user to consider additional aspects because of the unique conditions that apply to the setting
click me