Digital distribution – doesn’t anyone get it?

This has nothing to do with ebooks directly, but everything to do with the same old problems of creating and distributing non-scarce content.

Jeff Bewkes, CEO of Time Warner, thinks the solution for online television is “asking online users to verify they subscribe to some form of pay TV before they get to watch content on other platforms. Whether consumers pay through their cable company, the telephone company or a satellite provider doesn’t matter. This, Bewkes says, will preserve a robust environment for video by making sure that no matter where it is watched, it continues to benefit from a dual-revenue stream of subscriptions and advertising.”  Check out the rest of the article.

The problem here is that, once again, the distributor is looking to preserve the old ways of making money without a thought to how to provide more value to the customer.

You know why Hulu is great?  They provide easy-to-access, totally free video online.  They show commercials, but not many of them, and they try to make the ones they do show count.  Most of them are a little longer than your typical tv commercial, but usually quirky and just more interesting than your average commercial.  I’ve found myself actually paying attention to commercials on Hulu.

And of course, the big content providers are constantly trying to kill Hulu.  In the end, they probably will, making everyone worse off than before.

So, why won’t this “dual revenue stream” model work?  First of all, it will be impossible to implement with anything resembling the convenience of Hulu.  How do you prevent sharing of accounts?  That is, me and 1,000 of my friends get one cable subscription, and share a user id?  Well, what the cable companies will do is limit the number of computers you can use, or limit the IP addresses, or something like that.  Inevitably, this will prevent legitimate uses of the service.  For example, in my house we have four computers regularly in use – my personal laptop, my work laptop, my wife’s laptop, and the desktop hooked up to the tv.  Can my one cable subscription allow me to watch on any one of those?  If so, how can it prevent me from giving my user id to my neighbor?

What’s really absurd is the underlying assumption that, without subscription fees as well as advertising revenue, quality video content just can not be produced.  Think about all the television shows that only have one of those – HBO series, for example, or anything on regular network television.  Are these shows of substandard quality?

The next revolution in the way we watch video content won’t come from Time Warner, or any of the other big content providers.  They have too much invested in the old ways of doing things, and are terrified to embrace the new.  For the most part they seem afraid to even try to understand the new.

Online video isn’t about convincing people that “if content has value to them, it’s worth paying for”.  That’s utterly irrational.  Online video is all about taking something in infinite supply and using it to increase the value of things that are finite.  Until the content providers realize this, they will always have to crush the Hulus of the world out of existence before they show people that there’s a better way to do things.

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