Monday, November 07, 2005


Alex Rowland

Interesting post Miachael.Interesting post, Michael. I’ve actually been thinking about this issue for some time. I believe that the content market is moving towards a vertically disaggregated model like the one you described in the PC market. But while inevitable, the carriers have enormous quantities of cash and tight consumer relationships that they can use to distort the market for some time to come. While we have seen some movement on the parts of the studios to begin seriously looking at bypassing the existing access oligarchs, this process will most certainly take years given the impending release of HD-DVD/Blu-Ray. In fact, what appears to be happening is that the studios feel that they can use the Internet as a distribution channel for low-quality and physical media for high-quality. And I think most would argue that this model will exist for some time.

I would agree that complete bypass would work if consumers were united with the hardware providers, portals and content owners, but the fact is that the carriers are in a close partnership with the content owners and this relationships shows little sign of collapse (at least in the immediate future). Therefore, portals and hardware providers do themselves service to provide cooperative bypass situations that reveal the upside to consumers and content owners (even with exponential rise in user generated content we have a ways to go before this provides enough of a carrot by itself.) This eventually unites all sides against the carriers (who are really the bad guys, although Apple could go either way).

This is why the relationship between Yahoo and TiVo is so interesting. It will eventually provide consumers with a smoother transition from the world of today to the world of tomorrow. It will do this by unifying the process it which consumers select and consumer both broadcast and broadband content. Google may be there to pick up the customer after the transition due to low switching costs, but the result is still the same. Vertical disintermediation along the supply chain and open competition within each horizontal. But frankly I think you get there faster when you provide the consumer with a smooth transition.

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