King Content

LOS ANGELES -- Content is King, but why is that?

Content is the glue that can draw people to networks and make them stick. Content can also be a business lubricant that can generate massive frenzies of consumption. Think Star Wars, Spider-Man, or Shrek. That is why I'm spending this week at Digital Hollywood, where I hope to find out how content and networks are working together in new ways.

It's also why Light Reading has launched a new Website called Contentinople, which will be covering Digital Hollywood all week long.

So, "Content is King," is the kind of trite soundbite that fancy MBA types like to toss around, from Hollywood to New York to Silicon Valley. It's a widely distributed soundbite, but I believe it's widely misunderstood.

Viacom Inc. (NYSE: VIA) media mogul Sumner Redstone is widely cited as saying it, which as far as I know is correct. So let's take a look at what he did with content for a minute.

Redstone is an interesting guy – a visionary. He inherited a movie theater chain, National Amusements Inc., from his father and turned it into a global media empire. In 1987, National Amusements bought Viacom. Redstone — working from the "content is king" framework, knew that owning a network of distribution was powerful, but he knew it would be even more powerful to combine the network – the means of distribution – with exclusive content itself.

This scene had played out before, in the early days of movie theaters, with the emergence of the Big Five, a set of powerful Hollywood studios that heavily leveraged exclusive distribution deals with movies theaters – which they often owned as well. The federal government eventually used the Sherman Anti-Trust Act to crack down on this vertical, resulting in a historical decision on the relationship between the network and the content. It wouldn't surprise me in the least to see this case become important once again. Viacom was originally a content syndication vehicle, but Redstone led the charge full steam into production, acquiring properties such as Columbia Pictures. Viacom became a place where massive franchises were churned out and parlayed into broad consumer plays. Think about Star Wars and MTV, and that was the power that was Viacom. The key here is franchise, and that's what content is all about.

Franchise is why ESPN can demand that cable companies actually pay them for content, rather than be charged for network access, as are some weaker brands.

Franchise is how Shrek 3 can gross $120 million in one weekend. Or how a Spider-Man movie franchise can single-handedly revive the fortunes of a comic-book entity.

So how do we translate these franchise concepts to the next network, where the digital pipes that are proliferating and expanding across the globe, making access to content nearly ubiquitous and no longer time-sensitive? How does content stay king in our time-and-place shifted world?

In short: It's still the glue. In fact, content, I would argue, hasn't changed much at all. Technology has made it more sophisticated – and even higher quality – but in the end it's still about the creative franchise.

In fact, the technology may be making the franchise even more powerful. Not only do you have a book, movie, and DVD platform — you can add a Website, e-commerce, wireless downloads, and cross-promotion over all these platforms. Think of how American Idol has penetrated the psyche on so many different levels – to the extent that the audience determines its outcome. Now that's synergy.

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Scott Raynovich 12/5/2012 | 3:06:59 PM
re: King Content Everybody here at Digital Hollywood wondering when Verizon will really start to make deals for content. The feeling is that it is inevitable.
rjmcmahon 12/5/2012 | 3:06:58 PM
re: King Content I think you're misusing the term franchise. In its strict sense franchise is an authorization to sell a company's good or services in a a particular place. Movies are referred to as franchises in a looser sense, that they create demand for and fill multiple channels for commercial activities based off their trademarks and intellectual property. Hence Shrek items (Happy Meal toys, Wal Mart goods, etc.) are timed with the release of the movie.

Somebody assisting in creating a movie franchise needs to bring significant distribution channels to the table for when everything is cross filled. The major media companies like Viacom do the licensing and filling. FiOS, at it's best, is a merely another channel to be filled, albeit an insignificant one at the moment.

Why is FiOS insignificant? Because while FiOS claims to have 300K subscribers, that's nothing. That's like owning maybe 5 movie theaters in the entire world, assuming each movie theater serves about 60,000 which is probably bit aggressive. No major studio would give exclusivity to a theater owner that had only five theaters.

Also note, HB0 routinely cancels quality shows (Deadwood, Carnivale) with 2M+ active viewers as being financially unviable. So 300K potential viewers with a 10% take rate giving 30K actual customers is way to small to be able to demand exclusivity.

Ditto for advertising.

On the mobile handset side, that's a different story. Let's follow the AT&T/iphone and see what happens there. They may end up with enough customers as well as deliver a unique platform for some exclusive content. The jury is still out and I'm skeptical but it is possible.

FiOS as it is today is at least a decade or more away from being part of any "franchise" and it's PON architecture pretty much makes it obsolete upon deployment anyway.
rjmcmahon 12/5/2012 | 3:06:57 PM
re: King Content Most people want technology in order to do USEFUL or at least, ENTERTAINING things, not for the sake of technology itself. That translates to CONTENT.

BZZT. Wrong answer.

Imagine if the early PC pioneers decided that their platform use was for delivery of mass media content, so they did things like design the IO bus to support reads while hobbling writes in turn excluding r/w hard drives. Then they argued that customers only need a CDROM anyway because it does as it's designed to do and deliver Viacom's content. You know, content is king. The PC industry would have died on the vine.

So now people are running around claiming this is the exact scenario people want for the extending the PC via our networks. Nothing but hogwash.
rjmcmahon 12/5/2012 | 3:06:57 PM
re: King Content oops, lots of it's where its should have been and a to instead of a too. Sorry Geoff. The brain is too forgiving.
Mark van der Hoek 12/5/2012 | 3:06:57 PM
re: King Content Communications networks aren't about "extending the PC". They are about many things, and extending the PC is only ONE of those things. And as yet, a very unimportant one of those things in terms of market, despite all the hype. Voice is STILL king, although that is finally changing. (Many years after the pundits told us it would.)

In fact, extending the PC is exactly CONTENT. Its one of those things that people want to do, along with talking, messaging, watching video, etc.

Those who merely build technology will lose. The mass market is NEVER about technology. It's always about letting people do what they want to do, whatever that is. Technology merely enables that.

But that's okay. There's always a market for pipes. It's a commodity market, but people do make money selling commodities.

Mark van der Hoek 12/5/2012 | 3:06:57 PM
re: King Content This is quite a "Well, DUH!" article. People who don't get this are fools? Are there really people who DON'T get it? Apparently. Verizon seems to be among them.

Hello? Why else would anyone want XYZ technology? The "WOWZA" factor is fine for technoids, but even for them, it wears off after a while, and they've never been a large enough market to make massive networks financially viable. As early adopters that help get the ball rolling, they're a great crowd, and telecom owes them a lot. But by themselves they're not the engine that can drive long-term economic success.

Most people want technology in order to do USEFUL or at least, ENTERTAINING things, not for the sake of technology itself. That translates to CONTENT. If the content is not there, neither will the masses be there. Not for long, anyway. And the value of the CONTENT (be it entertainment or functional) has to be greater than the cost, be it financial or simply the effort to master new, complex technology.

So, to all those telecoms who say emphatically that they don't want to just be dumb pipes, get a clue. If you don't have unique content, you are just dumb pipes. If you are not faster/better/cheaper/all three, we'll find a dumb pipe that IS.

It matters not one whit how many MBA boasting yupppie wet-behind-the-ears Vice Presidents of Marketing & PowerPoint Slides proclaim otherwise, nor how many empty buzzwords they employ in the process, content is still king, and always will be.
rjmcmahon 12/5/2012 | 3:06:56 PM
re: King Content In fact, extending the PC is exactly CONTENT. Its one of those things that people want to do, along with talking, messaging, watching video, etc.

I think you're missing the distinction being made.

I believe people are trying to distinguish "professional" content (be it paid for by subscriber, advertiser or some combination of the two) from "user generated" content. The idea is that professional content has intrinsic demand due to things like rare and unique creativity and that VZ, through FiOS, can extract rent from this demand for uniqueness by negotiating exclusivity in its distribution. On the other hand, user generated content, like traditional voice or instant messaging, isn't perceived as rare or unique (no mass demand for any particular piece) and negotiating exclusivity of distribution per each piece doesn't work at all.

Also, the mass market isn't about letting people do what they want to do per se. Lot's of people want to exchange music over P2P networks without compensating copyright holders but that doesn't make it a market. That's theft.

Reading the following might help you a bit.

tomcoseven 12/5/2012 | 3:06:55 PM
re: King Content Access network providers are very different from content providers. One is a high fixed cost business and the other is a high variable cost business. Most content is "hit driven." Content companies scale their organizations to the nuumber of hits. A lot of their work product is outsourced to give them maximum flexibility. At any given time, as much as 70% of Hollywod is unemployed (and this is by design!). That's why we are flooded with so many senseless Internet media startups lately (that and excess private capital).

If HBO's business drops by 20%, because of the end of the Sopranos, they can cut contractors and scale back new projects until they reach break-even. Verizon can't decommission 20% of its network and lay-off 20% of its headcount.

The one content that doesn't fit this model is FOOTBALL (both US and International uses of the word). While a particular team's popularity might be hit driven, if you have exclusivity to the NFL, you have longevity. Who thinks Verizon can get exclusivity to anything with longevity?

In a high fixed cost business, the low cost supplier has a significant advantage.
Mark van der Hoek 12/5/2012 | 3:06:48 PM
re: King Content "Who thinks Verizon can get exclusivity to anything with longevity?

In a high fixed cost business, the low cost supplier has a significant advantage."

Bingo, Tom. Unless Verizon (or AT&E, or any other access network) wants to invest enough to become a second Hollywood (Vollywood?), they'd better face the reality that they are going to be dumb pipes with competition, and they'd better get efficient or die. They'll have to compete on quality (speed & reliability), price, and customer service, not content.

Any thoughts of locking in customers by being REAL content providers is just a.... pipe dream.
Mark van der Hoek 12/5/2012 | 3:06:48 PM
re: King Content You are correct that the distinction is important, but YOU were the one who brought the PC into the discussion! I was simply pointing out that "extending the desktop" is not the sole reason (nor even the dominant reason) for the existence of telecom networks. In terms of consumer demand, it's just one more thing they want, in addtion to content (exclusive or otherwise.)

As for Wikipedia, it is a source of amazement to me that people STILL refer to is as if it were a credible source for ANYTHING. There's more philosophy than rationality in that, I'm sure.

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