At a high level, there are content creators, content aggregators, and content distributors - no matter the medium. For example, in TV -> there are content creators (various), content aggregators (media companies, who can also be content creators, and who build brand value), and content distributors (PayTV operators).
The internet changes the dynamics in media, just like it did in the traditional retailing model (cuttting out middlement and getting manufacturers closer to consumers). So, in media, content creators don't need (as desperately) content aggregators in order to reach an audience - at least the barriers to entry are a lot lower, and content distributors have no distribution limits (there is unlimited capacity to distribute (albeit the pipes do have a capacity).
Lastly, a new entrant in the online distribution medium I will name content organizers or finders -> these are the technology companies of the world who enable people to get to content in such a disorganized world. These content finders, in a way, work against content aggregators value online -> if you could find anything that would be of value to you via a Google search, for example, you would never need to go to a popular brand you know will be aggregating the type of content you like. Lastly, companies like Hulu seek to aggregate content, but, in a very horizontal manner, so in a way they are also like technology companies.
This brings very interesting elements for those businesses involved in pure content aggregation (like PayTV programmers), where as in the past, content creators had limited options to get to audiences (and consumers had limited options to find their interests), this is not necessarily true for either end of the spectrum when we talk about online distribution/consumption of content.
As such, only those content aggregators that do invest in content or strike the right partnerships with other content creators will be able to survive in an online-only world (we may be years away from having such a world, but, the fragmentation of entertainment can't be ignored). As they garner traffic and consumption, then they do exert brand value and ignite other creator's interest to be part of such network.
Sunday, March 15, 2009
The Chinese complain... are you serious?
The Chinese Premier is asking the US to comment on the quality of the more than $1Tr US Government Bonds that the Chinese own. He is worried that the US won't make good on the paper, and they can be left holding the bag. Worse yet, as the largest owner of US securities, the Chinese's alternative of selling (before they fall) looks like an impossible task (as they would crash the market themselves before they can get out).
What's pretty foolish about his comments is the fact that the reason the US is precisely in this predicament is that the whole world was willing to lend it money (all its savings) for a really long-time, thus creating the conundrum so referred to by Greenspan. All this capital that was flowing in financed huge current account deficits - basically it supported our building of homes and high-level of unproductive consumption (until it reached the limit last year).
At a very high level -> it did also benefit places like China -> a significant amount of our trade deficit was with China, so in essence, they were sending us money (USD to purchase US IOU's) that we then recycled back to them by importing even more, which they then sent back to us for more IOU's. Essentially, China lent us $1Tr so that we could buy its goods, so that their people can be employed, their industry can grow, they can get more competitive, etc.
Under normal circumstances, their currency would have appreciated, and trade would have been less... but, they were managing their currency - they prefer to lower their own citizens standard of living, their purchasing power, in exchange for providing more jobs, more factories, more production as they develop.
The real irony of this post is that the Chinese now want to sound like very serious financial managers who had bought an investment very focused on its return -> whereas we all know that the reason they bought that investment was to allow for a devalued USD vis a vis the Renminbi and to allow us to keep buying their cheap stuff.
They should certainly not be the ones worried nor publicly complaining about the risks on US Debt -> if there is any risk in it, a lot of the blame sits with its largest buyer.
What's pretty foolish about his comments is the fact that the reason the US is precisely in this predicament is that the whole world was willing to lend it money (all its savings) for a really long-time, thus creating the conundrum so referred to by Greenspan. All this capital that was flowing in financed huge current account deficits - basically it supported our building of homes and high-level of unproductive consumption (until it reached the limit last year).
At a very high level -> it did also benefit places like China -> a significant amount of our trade deficit was with China, so in essence, they were sending us money (USD to purchase US IOU's) that we then recycled back to them by importing even more, which they then sent back to us for more IOU's. Essentially, China lent us $1Tr so that we could buy its goods, so that their people can be employed, their industry can grow, they can get more competitive, etc.
Under normal circumstances, their currency would have appreciated, and trade would have been less... but, they were managing their currency - they prefer to lower their own citizens standard of living, their purchasing power, in exchange for providing more jobs, more factories, more production as they develop.
The real irony of this post is that the Chinese now want to sound like very serious financial managers who had bought an investment very focused on its return -> whereas we all know that the reason they bought that investment was to allow for a devalued USD vis a vis the Renminbi and to allow us to keep buying their cheap stuff.
They should certainly not be the ones worried nor publicly complaining about the risks on US Debt -> if there is any risk in it, a lot of the blame sits with its largest buyer.
Friday, March 13, 2009
A New Business Model for Music?
Music ownership and distribution is a broken business, its a good product with a broken business model. While we can talk about various flaws, I will concentrate on a couple:
1) Hit or miss dynamics leads to too much risk accumulation -> there is too much risk at every single record label. The music industry is not unlike the oil exploration business - you invest in various assets, with the expectation that the return on a reduced number will outweigh the investment in the losers. Betting on too many losers and you can lose the house. Furthermore, its a little different than oil exploration in the sense that by further investment in a presumably dry oil well can bring actual oil... the problem becomes when the threat of betting the house on losers, actually leads to lack of investment in potential winners, thus eroding any future winners as the current winners age. Potential solution-> create consortiums where various firms or investors spread their risks (investments) over a larger number of potential winners.'
2) Standard pricing for non-standard quality... there is a tendency to look at all music products under the same light - they have the same price, while they don't necessarily have the same value, but, wildly divergent values. From the price charged at the retail point to the idea of pricing the content the same to TV distributors or online distributors, the price is simply not discriminating the value and this could be the wrong formula.
1) Hit or miss dynamics leads to too much risk accumulation -> there is too much risk at every single record label. The music industry is not unlike the oil exploration business - you invest in various assets, with the expectation that the return on a reduced number will outweigh the investment in the losers. Betting on too many losers and you can lose the house. Furthermore, its a little different than oil exploration in the sense that by further investment in a presumably dry oil well can bring actual oil... the problem becomes when the threat of betting the house on losers, actually leads to lack of investment in potential winners, thus eroding any future winners as the current winners age. Potential solution-> create consortiums where various firms or investors spread their risks (investments) over a larger number of potential winners.'
2) Standard pricing for non-standard quality... there is a tendency to look at all music products under the same light - they have the same price, while they don't necessarily have the same value, but, wildly divergent values. From the price charged at the retail point to the idea of pricing the content the same to TV distributors or online distributors, the price is simply not discriminating the value and this could be the wrong formula.
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