In the big scheme of things, Internet video is a largely yet-to-happen ‘over-the-horizon’ event. Something big is coming, but exactly when and how is not clear. Internet video deals are not hot today. The probable reason: Many of the video deals inspired by the success of YouTube and Hulu have disappointed. Why?
The biggest success in video made its bones without the Internet. It used the US mail for distribution, and a plastic disk as its medium. Ah, the Netflix doubters…where are they now. YouTube’s innovation was to tap into the ‘obvious’ desire to share stupid pet trick videos. Hulu gained fame for letting us watch TV shows on a PC. Wonderful as these deals have been, in their way, they have not exactly fulfilled Eric Schmidt’s vision: “My TV set should just know me, and give me what I want when I turn it on” (a conversation with Charlie Rose, May 2, 2009).
Can copying rather plain vanilla offerings really have been expected to turn the world on fire? Or should we expect the real action in Internet video to come from at least aspiring to achieve Eric’s vision.
The gap between now and vision fulfilled exists for very good reasons.
The video value chain is horrendously complex. It encompasses far more than Hollywood, itself no small thing. It includes an entire advertising industry, which supports most content production, behind which sits an entire economy dependent on advertising to launch and sell everything. All Internet video advertising is expect to grow as follows:
This ridiculously low forecast is probably right. Why do I say ridiculously low? Current video advertising on TV, which supports half or more of all video content consumed, is a $100 billion per year business. Until the Internet starts tapping that level of ad dollars, it is a sign that video consumption on the Internet is still a total side show. What does it take to change this forecast?
For one, the glass in the living room, our main “lean back” video venue, has to become fully Internet savvy. Apple TV, Google TV, Netflix Streaming, and others, all have very tiny footprints today, and they can’t really grow until the living room becomes fully Internet enabled. It’s a myth to think otherwise (that smart phones and i-Pads will replace the living room glass).
That Google recently acquired a digital rights management company indicates a seriousness of purpose, and a growing sense that even the best of content will be delivered via the Internet ‘over-the-top’ of the current network and cable operator gate keepers.
There is no coherent ‘over the top’ solution yet. The goal in the end must be to use the power of ‘lean technology’ to match three players:
- The consumer, who wants their system to “just show me what I want to see”
- The content talent, who want his or her content to reach as large an audience as possible
- The person putting up the money to pay the talent, which could be the consumer themselves, or an advertiser, or a studio, all through any number of highly complexified intermediaries
Today, we have well entrenched studios confidently guarding their turf. There is an optimism insistently expressed by them that “content is king”. But as music and newspaper executives can attest, kings can be overthrown. Content is only king for the studios to the degree they can maintain control over the massing of audiences with the cash to fund content production. But eventually all content, even theirs, will be available everywhere. The studios won’t be able to resist expanding distribution for the dollars available.
In the situation where everything is available everywhere, nothing is really available, because no one can find anything. In today’s world, ‘content is king’ power comes from the oligarchic relationship between the studios and their distribution partners. These centers of power select and decide what content is put into what closed distribution system, and it is that selection process, fed to an audience with just those limited choices, that makes ‘content is king’ work.
All of the talent, producing all of the content for these oligarchs, and all consumers consuming all content, are beholden to that system. For good cause. Economic power is required to get the best stuff produced. Chaos yields nothing good.
But in a world of massive and ubiquitous content availability, the power will shift to new players that control the ‘new navigation’, i.e., to finding the content out of the vast sea of all content. The old system of producers selecting what will be fed into the system will come to be meaningless as Internet navigation mechanisms become vital. Finding the video content any one of us wish to consume will require new video navigation platforms to emerge.
This is not well understood by existing players. They are still in the mode of adapting today’s power structures to today’s Internet. ‘Let’s make a deal’ is the prevailing strategic wisdom. These attempts will gradually break down, as power in the future shifts to those services that provide, as their core business value, the greatest possible navigation capabilities. Such future platforms will give rise to the oligarchs of the future, as the number of such platforms will be no greater than the number of networks and studios today. One form of power broker will be replaced by another.
Sitting at the heart of this transformation will be the ‘lean technologies’ discussed here. The navigation systems emerging from such technology are likely to lead to value chains even more complex than today’s, as the technology will encourage many new and unanticipated degrees of freedom not now possible. While matching content to audiences is not conceptually different than matching key words to advertising messages, doing this in practice for the full video value chain is horrendously more complicated.
Yet, in the end, this simple idea, “show me what I want to see”, will overturn the traditional paths content producing talent now must take in navigating the movie studios and television networks pleading for entry into their oligarchic world. New paths will have to be worn into a new landscape. The entrepreneurs of the world, no matter how formidable the task appears, will chip away at it, and in the end, their voice will likely have the biggest say in how it all comes out.