Content Distribution vs. Creation

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By Michaelzehr
April 28, 2004

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself! had an interesting perspective yesterday on how the relationship between content creators and content distributors would evolve over the next few years. This was a side topic to an analysis of TiVo, but I think very relevant to Disney. Here's the basic thesis:

Once someone uses a TiVo-like device and gets used to watching TV without commercials they will never go back. TiVo-like devices will become part of content distribution (i.e. the cable box will include DVR capabilities) in the future. That puts the content distributor in charge of whether the viewer sees advertising, since in the future they could force ads on viewers using a DVR (much like their are DVDs that have non-skippable ads/previews at the start.)

Once they reach that point, content distributors can charge customers a fee for the ability to skip commercials, and collect a fee from advertisers for displaying ads to viewers. This is a fundamental shift in who gets the advertising revenue, from the content creator to the content distributor, [and] this will remove pricing power from content creators.

One can debate the individual points, like whether an independent TiVo company will survive, putting the ad-skipping ability in the viewers' hands instead of the distributors' hands. Or whether consumers that get used to skipping commercials will rebel if any company tries to start forcing commercials on them (like the way consumers leave companies that switch from free email to paid email, or free email to free only with embedded ads), also keeping control in the hands of the consumers.

But the basic argument has far-reaching implications for content creators like Disney.

Of course, Disney has some options and I think they're already pursuing them. For example the proposed set-top box that stores 100 movies and lets a viewer watch them on-demand, with 10 or so movies changing every month. If Disney is successful with that then I think it will represent the first time that a major content creator had a pipe all the way to the home TV. (Content creators can distribute to PCs today with streaming media, but there are still strong cultural barriers to that being successful: PCs still live in the office, not the living room, and people for the most part want to watch movies on the TV, not on the PC. Whoever creaks this "last 20 feet" problem first will probably get a huge benefit.)

Content creators could also continue to push the boundaries of embedded product placement in the content. Embedded traditional ads in content could still be skipped by whoever controls the fast-forward on the DVR, but there are other options. For example one can't really skip all the scenes in a "Back to the Future" movie that include a DeLorean, because it's too integrated with the plot itself.

This transformation is likely to take 5-10 years, but it will be interesting to see watch and see how this all plays out, and how Disney either takes the lead or reacts to the changes.


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