subscription streaming has more or less ended the strategic importance of music to tech companies. In the past, any music you bought for your iPod had proprietary DRM and could only be played on Apple devices
.. Your music library kept you on a device. With streaming these issues mostly go away.
.. if you do switch to a different service you’re not giving up tracks you’ve paid money for, just a list of your favourites. Switching became easy.
.. Since music no longer stops people from switching between platforms, it’s gone from being a moat .. to a low-margin check-box feature.
.. A Taylor Swift exclusive for Apple Music might drive some iPhone sales, just as a cool new ad campaign might, but there’s no strategic lever here – no lock-in.
.. whenever I talk to music people or book people, very quickly the conversation becomes a music industry conversation or a book industry conversation. What matters for music are artists and touring and labels and so on, and what matters for books are writers and publishers and rights and Amazon’s bargaining power in books and so on. These aren’t tech conversations.
.. The big tech platform companies rolled into these industries and changed everything, but then moved on to bigger things.
.. Amazon has a big ebooks business, but Prime and perhaps Alexa are the strategic levers.
.. Tech needed content to make their devices viable, but having got the content (by any means necessary), and with it of course completely resetting the dynamics of the industry, tech outgrew music and books and moved on to bigger opportunities.
.. the shows that are watched mainly because they’re broadcast at 8pm on Saturday will suffer, and so will the channels that are watched because they’re high up on the program guide. Channel brands, shows and episodes are unbundled. We’ve been talking about this in theory for over a decade, but finally, praxis is here.
.. Amazon and Netflix have entered TV content creation and ownership in ways and on a scale that no-one from tech ever did for music or books. Amazon did try to get into book publishing and has a significant self-publishing arm, but it had little success recruiting existing mainstream authors
.. neither Apple nor Spotify created a record label. In TV, though, Amazon and Netflix are already spending more on commissioning original and exclusive content than many traditional channel brands.
.. Cancel the subscription delivery service and you lose access to all Amazon TV shows.
.. For Google and Facebook, there’s no subscription to cancel – there’s no binary (renew/don’t renew, cancel/don’t cancel) decision you might take that would cut off your access to that great TV show. You don’t close your Facebook account – you just go there less. You might stop paying for the Youtube TV service, but that won’t cut off your access to any other part of Google – nor would anyone want it to – the purpose of these businesses is reach.
.. cancel Prime and you’d lose Amazon, but what do Google & FB have to cancel? Without some platform decision to lock you into, content is marketing, and revenue, but not a lever.
.. You pay an average of $700 or so every two years (i.e. $30/month) and Apple gives you a phone. Buy an Android instead and you lose access to the (hypothetical) great Apple television service. This is why people argue that Apple should buy Netflix.
.. From a pure M&A perspective, buying Netflix and immediately limiting its business to Apple devices would halve its value – why buy a business and fire half the customers? Buying it without such a restriction would have no strategic value – Apple would just be buying marketing and revenue.
.. Apple has always preferred a very asset-light approach to things that are outside its core skills. It didn’t create a record label, or an MVNO, and it didn’t create a credit card for Apple Pay – it works with partners on the existing rails as much as possible
.. it does so with nothing like the kind of negotiating power that it had in iPod days – Amazon and Netflix (if not also Google and Facebook) have seen to that.
.. Part of ‘content is king’ was the idea that (at least in theory) content companies can withhold access to their libraries entirely, and in the past one might have presumed that that meant they had the power to kill any new service at birth. In reality, rights-holders have always had too strong a need for short-term revenue to forgo broad distribution, and few of them individually had a strong enough brand to extract a fee that was high enough to justify exclusivity.
.. They always have to take the cheques – individually to meet their bonus targets, and collectively to meet their earnings estimates.
.. for a media company to give a tech platform exclusivity is immediately to build up that platform’s power over the media companies.
.. Similar problems apply to the somewhat chimerical idea that content companies should go direct to consumer – few of them have the skills, fewer have the brand and content, and fewer still, again, have a shareholder structure to allow the short-term revenue hit.
.. the device is the phone and the network is the internet. The smartphone is the sun and everything else orbits it. Internet advertising will be bigger than TV advertising this year, and Apple’s revenue is larger than the entire global pay TV industry.
.. This is also why tech companies are even thinking about commissioning their own premium shows today – they are now so big that the budgets involved in buying or creating TV look a lot less daunting than they once did.
Everybody Should Be Very Afraid of the Disney Death Star
The first episode of the Streaming Wars is over. The rebels won. Now the empire strikes back.
Disney also acquires a majority stake in the TV product Hulu, which it may use to kickstart its entry into the streaming wars.
These additions would enrich an overflowing treasury at Disney, whose assets includes Star Wars, Marvel, Pixar, ABC, ESPN, the world’s most popular amusement parks, and, of course, its classic animated-film division
.. The deal allows Rupert Murdoch, the billionaire patriarch behind 21st Century Fox, to consolidate his own kingdom—and his legacy—around the very place where he got his start: news.
.. Streaming video has conquered pay TV and created a generation of cord-cutters; the youngest Millennials (those in their late teens and early 20s) watch 50 percent less traditional television .. than people that age did in 2010.
.. For media and entertainment companies, there is one big existential question: Get big and stream, or give up and sell?
.. Traditional television is a pure gerontocracy. The only age demo watching more TV than in 2010 are eligible for Medicare.
.. You could say Disney is spending $60 billion for a risky makeover to appeal to a younger demographic, while Murdoch is using the money to install a golden stair lift.
.. Disney’s long-term strategy is, like Netflix, to own the means of distributing its content. What’s more, this deal is a “horizontal” merger
.. With this deal, Disney would control as much as 40 percent of the the U.S. movie business
.. Its control of the sports-television landscape, between the regional sports networks and ESPN, might be even more concentrated
.. Hollywood studios should be afraid to compete with a corporate Goliath that could earn half of all domestic box-office revenue in a good year.
.. Every tech company should be afraid to get into a content war with a company that combines the
- top blockbuster movie studio, with a
- top prestige-film company, with a
- world-class television production company, with the
- most valuable franchises—Star Wars, Marvel, Pixar, and X-Men—in the world.
.. In the last fiscal year ending in October, Disney’s made $55 billion in revenue, with about 60 percent coming from television and film (the rest came from parks, resorts, and merchandise). That 60 percent is endangered: Box-office ticket sales have been flat or declining for years, and television is in obvious structural decline
Benedict Evans: Content isn’t king
People in tech and media have been saying that ‘content is king’ for a long time – perhaps since the VHS/Betamax battle of the early 1980s, and perhaps longer. Content and access to content was a strategic lever for technology. I’m not sure how much this is true anymore. Music and books don’t matter much to tech anymore, and TV probably won’t matter much either.
Most obviously, subscription streaming has more or less ended the strategic importance of music to tech companies. In the past, any music you bought for your iPod had DRM and could only be played on Apple device
.. Even if you’d just encoded your own CDs (or downloaded pirated tracks, but in either case without DRM), physically transferring them to a different device with different software was a barrier. Your music library kept you on a device. With streaming these issues mostly go away. All the major services are cross-device (even Apple’s), and if you do switch to a different service you’re not giving up tracks you’ve paid money for, just a list of your favourites. Switching became easy.
.. Since music no longer stops people from switching between platforms, it’s gone from being a moat
.. Ebooks, like music, do not seem to create any moat for any broader platform strategy.
.. whenever I talk to music people or book people, very quickly the conversation becomes a music industry conversation or a book industry conversation. What matters for music are artists and touring and labels and so on, and what matters for books are writers and publishers and rights and Amazon’s bargaining power in books and so on. These aren’t tech conversations. The big tech platform companies rolled into these industries and changed everything, but then moved on to bigger things.
.. Tech needed content to make their devices viable, but having got the content (by any means necessary), and with it of course completely resetting the dynamics of the industry, tech outgrew music and books and moved on to bigger opportunities.
.. the shows that are watched mainly because they’re broadcast at 8pm on Saturday will suffer, and so will the channels that are watched because they’re high up on the program guide.
.. Amazon clearly is using content for platform leverage – as something else to speed up the Prime flywheel. Prime has become a third pillar to Amazon’s business, next to logistics and the ecommerce platform, and Amazon is always looking for ways to add more perceived value to it, preferably with no marginal cost – TV content that it owns outright is exactly that.
.. Unlike a Taylor Swift or Kanye West exclusive, this is more than just marketing – it’s something you lose altogether if you give up something else that’s not directed related. Cancel the subscription delivery service and you lose access to all Amazon TV shows.
.. For Google and Facebook, there’s no subscription to cancel – there’s no binary (renew/don’t renew, cancel/don’t cancel) decision you might take that would cut off your access to that great TV show. You don’t close your Facebook account – you just go there less. You might stop paying for the Youtube TV service, but that won’t cut off your access to any other part of Google
.. Buy an Android instead and you lose access to the (hypothetical) great Apple television service. This is why people argue that Apple should buy Netflix.
.. Part of ‘content is king’ was the idea that (at least in theory) content companies can withhold access to their libraries entirely, and in the past one might have presumed that that meant they had the power to kill any new service at birth. In reality, rights-holders have always had too strong a need for short-term revenue to forgo broad distribution, and few of them individually had a strong enough brand to extract a fee that was high enough to justify exclusivity
.. The reason Apple TV, Chromecast, FireTV and everything else feel so anti-climactic is that getting onto the TV was a red herring – the device is the phone and the network is the internet. The smartphone is the sun and everything else orbits it. Internet advertising will be bigger than TV advertising this year, and Apple’s revenue is larger than the entire global pay TV industry.
.. This is also why tech companies are even thinking about commissioning their own premium shows today – they are now so big that the budgets involved in buying or creating TV look a lot less daunting than they once did.