IP Democracy: Toward A Flexible, Frictionless Media Distribution Model

The New York Times’ Richard Siklos raises some interesting questions about where the content distribution industry is headed. After citing the unexpected success of ring tones and DVD compilations of TV shows, and the more recent success of Apple’s sales of iPod videos at $1.99 apiece, Siklos says:

TWO lessons are apparent in all these attempts to revamp media business models. One is that the limits of what people will pay for personalization - getting what they want, when they want it - have yet to be tested. The other is that consumers are not nearly as pragmatic as they may imagine themselves.

I agree with Siklos on his first point, but think he overstates the future significance of his second. To support it, he cites the fact that Blockbuster made a lot of money from late fees paid by people who didn’t return their videos on time. But what seems more significant today about the Blockbuster example is that competition from the likes of Internet-enabled Netflix have forced Blockbuster to drop its late fees.

The broader point is that new technologies, especially those linked to the Internet, are providing users with increasingly convenient control over their media use, even as our lives get busier. Yes, there are bumps in the road (e.g., more hardware and software learning curves than I’d prefer), but it seems increasingly unlikely that any player in the media distribution business will in the future be able to maintain fat margins from longstanding user inconvenience the way Blockbuster was able to do for years with its late fees.

Siklos’ piece—which also considered the viability of services such as those envisioned by the CBS/Comcast and NBC/DirecTV deals—got me thinking about another aspect of the media industry’s accelerating evolution.

As I considered the various examples he cited, I was struck by the potential value of media distribution platforms that provide both producers and consumers with user-friendly flexibility in terms of packaging, pricing, revenue models (e.g., advertising vs. user-fees) and distribution models (e.g., streaming or download, syndication). One example that comes to mind is the platform being developed by BrightCove, the producer-end of which company founder Jeremy Allaire demonstrated to Cynthia and me last month.

The more flexible and frictionless are the transactions between producers and consumers, the more control both will have in terms of maximizing the value they extract from these transactions, which I guess is what free markets are supposed to be about.

The role of pipe owners in the equation is less clear, and seems largely dependent on how much gatekeeper control they are able to retain. This, in turn, is largely a function of whether additional pipes can be built and cost-justified, and the laws and regulation that emerge from Congress and the FCC.

While duopoly markets tend not to be especially frictionless, a strong argument can be made that politicians and regulators are more likely to add rather than subtract friction from the markets they try to regulate.

And while some believe the prospect of more facilities-based competition is either a techie pipe-dream or a political smokescreen, there are signs that Earthlink, Google and others disagree. And while building and financing access networks is a lot different than designing search and advertising algorithms, the prospects of Google—which seems hell-bent on disrupting friction-filled media models—or other entities finding ways to deploy more pipes does not seem out of the question.

Posted by Mitch Shapiro on November 13, 2005 7:02 PM to IP Democracy