Disintermediation – a term you should come to know. Essentially this means “to remove the intermediary.” This has always been a disruptive process in cultures – whether affecting religion, law, education or technology. In religion, one well-known example was the rise of the Lutheran church when they felt the ‘intermediary’ process of pope, cardinals, bishops, etc. of the Catholic form was no longer necessary for the common man to connect to their belief in God.
Higher education used to be exclusive to those that could afford to attend brick-and-mortar campuses; now we have iTunesU, distance learning and a host of alternative learning environments open to virtually anyone with the time and focus to consume the knowledge.
Bringing questions of law was traditionally handled by barristers, attorneys and others – ensconced in a system of high cost and slow delivery of service. Today we have storefront paralegal offices, online access to many governmental and private legal services and a plethora of inexpensive software for preparation of common legal forms.
Each of these areas of practice fought long and hard to preserve the intermediary. We were told that our souls might be lost without the guidance of trained priests, that we might lose everything we owned if we prepared legal documents without assistance, and that only a trained professor could teach us anything.
We, collectively, begged to differ. And we slowly, with much bloodshed, sweat and tears, succeeded to emancipate ourselves from the yoke of enforced intermediation. However, like many true tools, knowledge is often represented as a sharp two-edged sword. Going it alone has consequences. There is no substitute for the compassion and experience of spiritual advisor, no matter his or her title. There are many areas of law where the specialized knowledge of legal codes, not to mention the oratorical skills of an experienced courtroom jouster, are essential to victory. The guidance and explanation of one who has mastered the knowledge of a subject – not to mention the special skills of teaching, of helping a student to reach comprehension – are many times critical to the learning process.
Now we are confronting a new locus of disintermediation: the provisioning of access to the ‘cloud’ of entertainment and information. The internet – in its largest sense – is in a new stage of democratization. The traditional providers of access (telcos, cable tv, satellite) are in a fight for their collective lives – and they are losing. Attempting to hold onto an outmoded business model is simply ‘dead man walking’ philosophy. At the most you can walk more slowly – but you will reach the hangman’s noose irregardless.
This will not be an overnight change, but we have already seen just how quickly ‘internet time’ moves. The velocity of change is on an exponential upwards curve, and nothing in our recent past has given us any reason to doubt this will alter anytime soon.
There are a number of factors that are fueling this: the explosion of the number of content creators; the desire of traditional content creators (studios, episodic tv) to sell their content to as wide an audience as rapidly as possible; the high cost and oft-perceived low value-add of traditional NSPs (Network Service Providers – telco, cable, etc.)
One of the biggest reasons that has helped to propel this change in consumer behavior is knowledge: as little as ten years ago the average media consumer associated the ‘channel’ and the ‘content’ as the same thing. Movies or news on TV came out the wall on a cord (no matter what fed the cord) – or movies could be seen on a plastic disk that you rented/bought. The concept of separation of content from channel did not exist.
Today, even the average 6-year-old understands that he or she can watch SpongeBob on almost anything that has a screen and a speaker. The content is what matters, how it gets there and on what device it is consumed just doesn’t matter much. Not a great thing for makers of networks or devices…
Fortunately the other side of the sword does exist… while the traditional models of telco provisioning of services are either antiquated or obsolete (the time/distance model of tariffs, high cost for low functionality, etc.), the opportunity for new business models does exist. What is disruptive for one set of structures is opportunistic for others.
Once content is ‘unbound’ from its traditional channels, a new world of complexity sets in: metadata about the content gains importance. Is it SD or HD? What’s the aspect ratio: 4:3 or 16:9? What codec was used (for instance if it was Flash I can’t see it on my iPad), etc. etc.
Finding the content, or the version of it that you want, can be challenging. Licensing and other DRM (Digital Rights Management) issues add to the confusion. If voice communication (aka the telephone) is stripped out of its network and now becomes an ‘app’, (for instance like Skype), who sells/supports the app? If all “private networks” (telco, cable, satellite) become essentially data pipes only, what pricing models can be offered that will attract consumers yet allow such companies to run profitably? There is a growing tendency for “un-bundling” and other measures of transparency – for instance overseas mobile phone operators are backing away from cellphone handset subsidies. This was due in large part to the prevalence of prepaid phone contracts in these regions – for which no subsidized phones can be provided. This has the knock-on effect of reducing iPhone sales and increasing Android (and other) less expensive phone hardware penetration. For instance, in the last year or so the sales of iPhones has fallen considerably in Greece, Spain, Portugal and Italy… Hmmm, wonder why??
All of these questions will assume larger and larger importance in the near future. Current modalities are either failing outright or becoming marginalized. We have heard the moniker “Content is King” – and it’s still true, much to the chagrin of many network providers. When one is thirsty, you pay for water, not the pipes that it arrives in…
Here’ s another anecdotal piece that helps to demonstrate that you cannot underestimate the importance of content ownership: as is well known, VFX (Visual Special Effects) are now the ‘star’ of most movies. A decade ago, actors carried a movie, now it’s the effects… Do the research. Look at 2011 box office stats. Try to find a movie that was in top 20 grossing that did NOT have significant special effects… Now here’s the important bit: one would think that the firms that specialize in creating such fantastic imagery would be wildly successful… NOT. It’s very, very expensive to create this stuff. It takes ungodly amounts of processing power, many really clever humans, and ridiculous amounts of time. Rango just won the Oscar… and in spite of the insanely powerful computers we have today, it took TWO YEARS to animate this movie!
The bottom line is that the ONLY special effects firms that are in business today or are remotely profitable, are the ones connected to either studios or consortiums that themselves own the content on which this magic is applied.
Content is water at the top of the hill. The consumers are at the bottom with their little digital buckets out, waiting to be filled. They just don’t care which path the water runs down the hill… but they DO care that it runs quickly, without damming up, and without someone trying to siphon off ‘their’ water…
This is not all settled. Many battles will be won and lost before the outcome of the ‘war’ is known. New strategies, new generals, new covert forces will be deployed.