It's all about content ... again.
Now that virtually all the powers-that-be in media, entertainment and telecommunications are fastening themselves to Internet-connected portable video devices and platforms to be part of the take-anything-anywhere explosion, their industries are facing several mega problems.
One is the creation of original, innovative content and services customized specifically for what is unique about these outlets, such as smaller screens, interactivity and short attention spans. Another is the adequate protection of all intellectual-copyrighted material in a global virtual arena indifferent to concepts of anti-piracy and lost value.
Despite the recent hubbub over cable, satellite and telephone operators joining forces with one another and with device manufacturers, attention must turn to the differentiated content and services that will drive them.
Cable operators Comcast Corp. and Time Warner, telephone companies such as Sprint Nextel and SBC Communications, Internet service providers such as Yahoo! and Google, and even software giant Microsoft Corp. must align with one another as well as rival device-makers and platform providers in order to be more relevant and competitive in a digital broadband world.
While it looks as though Microsoft could provide the operating systems for many devices and platforms, and that Yahoo! and Google could provide management and search, it is unclear as to who or what will provide the next generation of content and services designed for interactive consumers. When the novelty wears off of being able to get snippets of your favorite television program or film, a ringtone of your favorite song, a news headline or weather report, or instant messages, what then? If ringtones can mushroom into a $5 billion global business overnight, what's next?
Although branded content will have a strong draw, interactive consumers are more sophisticated and demanding. They will pay for content and services that enrich and enhance their lives and reflect their personal interests and needs. It's as much about data as it is about video. They are more impressed with value than with the mode of distribution and device. And, perhaps most important of all and already lost on many, is the fact that there is a limit to what even the most interactive consumer will pay for the content and services they want in different places.
Until now, it's been all about form and function: the iPod, the multimedia cell phone, and (as of Monday) even a Yahoo!-driven TiVo that will allow both companies to strengthen their multifunctional capabilities among telephones, television sets, computers and other Internet-connected devices. Yahoo! in turn announced a deal to bring its broadband services and content to SBC phones, complete with an MP3 player and memory card.
Yes, consumer electronics and broadband access are going to be just that complicated and compelling from now on.
However, all of the interconnected hardware and platforms, which are fast becoming ubiquitous, will be driven by unique content and services, which appeal to consumers. And that's a whole other matter that will require more than simply breaking apart existing content and services into small pieces and bundling them in different ways.
At this juncture it is unclear what caliber of resources will be devoted to creating a new level of content and services to match such exciting levels of portability and function. But it is clear no hardware or software companies are prepared to provide an adequate level of protection and anti-piracy security for new or existing content and services, whose value is at risk.
A study released by NBC Universal on Monday put a fine point on just what is at risk not only to media and entertainment industries but also to the overall U.S. economy. "Engines of Growth: Economic Contributions of the U.S. Intellectual Property Industries," commissioned by NBC Universal, yielded "shocking" conclusions according to NBC Uni chairman and CEO Bob Wright regarding copyrighted music, books, TV shows, films and patents.
The piracy of intellectual-copyrighted products is costing the U.S. about $250 billion annually. Globally, it is estimated that more than one-third of all software is pirated. Domestically, what hits home is that 40% of the growth of U.S. private industry contributing to the all-important gross domestic product is from intellectual property-related industries. In other words, this still problematic matter is a U.S. economy-buster.
On a more insular, single company basis, if media, entertainment and telecommunications-related giants cannot preserve or protect their rights to income generated by content and services they either produce or provide to consumers, they risk their profits and overall growth.
Bernstein Research estimates that in five years the negative impact of piracy and ad-skipping for media companies (just based on U.S. sales) would be $9 billion revenues, or a $155 billion hit to their overall equity.
The other disconcerting matter is that these same companies reacclimatize themselves to creating original product -- not as easy as it sounds.
The so-called Internet bypass may force some of the big distribution and hardware companies to come to grips with these content-related matters. Once a content or service provider reaches out to consumers directly over the Internet, the sea of access devices and platforms become secondary-and the product consumers are after becomes fair game for everyone.
Despite all the fuss over blogs, pods and snippets, the vast array of content now in play is either highly personal or highly abbreviated. Minimal content is being created specifically for the unique features -- including brevity, interactivity and ubiquity -- that characterize digital broadband devices and platforms. Repackaged existing content and e-mail capacity only go so far. The proliferation of devices and networks for securing content, information and services make it competitively critical to do more than just recycle existing films, television shows, recorded music, video games, sports and news.
But you'd never know that by looking at the flurry of announcements Monday that included CBS' long-awaited on-demand arrangement with Comcast (which will pay CBS a license fee) and NBC Uni's similar on-demand download arrangement of its primetime series with DirecTV (whose subscribers pay 99 cents per hit). Just a month ago, the Walt Disney Co. agreed to make a handful of its most popular series available as paid iPod downloads.
Of course, there are far fewer original content offerings to choose from.
In the early going they range from the computerized animation of JibJab, to the continuous role-playing of the new and wildly popular online video game Warcraft, to the customized live Internet events AOL is delivering. But there can and must be more.
Last week, Comcast, Time Warner and Cox Communications announced a 20-year wireless alliance promising new products and services to be created and fostered by a $200 million fund earmarked as much for marketing as new-product development. Comcast CEO Brian Roberts referred to wireless as cable's "next frontier."
It was the first sign that media and entertainment giants might begin shifting some of the money they are spending on huge stock buybacks into investing in content and services that don't exist today. The proof will be in how they actually spend those funds, and whether any will go to supporting grass-roots content creators who can tweak conventional media's psyche.
Oh, sure, you can now e-mail comedy clips off Viacom's Comedy Central Motherload and sports clips from ESPN360. But when will you be able to use your broadband multimedia device or Smart "third screen" phone to do online comparison shopping while making a buying decision in a store, or have it explain step-by-step how to change a tire while you are stranded on the expressway?
The much-ballyhooed integrated quadruple play is not as much about the ability to bundle as what you bundle. In the future, that will have to mean being more consumer-centric, something media and entertainment companies mostly give lip service to at the moment. After all, there will be limits to what consumers will spend on content and services they need and want, just one time, from one source.
What's required is a call for a genuine creative awakening not only in Hollywood and New York but everywhere in between where artists, writers, producers, animators and performers reside. The demand will be strong -- even as attention spans are shorter -- to fill these new devices and pipelines with differentiated content that big media so far has defined only by what it knows best. This innovation will require assigned funds and resources, artistic freedom and a corporate mandate to think outside the box.
The other call must be for a far-reaching, all-inclusive anti-piracy effort on the part of those who make their fortune from content -- whether they produce, distribute or service it. Such a forceful, unified effort can be justified by the single notion that every company with a stake in the digital broadband market ultimately lives or dies by the protection of copyrighted content and service patents.
Even the retreads and repackaged existing product is in danger of not only being commoditized but by having its value undercut by its proliferation through legal as well as illegal channels.
As that occur, the viability of how much or even whether consumers pay for individual content and services on portable videoplayers and any other Internet-connected devices becomes more questionable. If you attach to that the burgeoning Internet advertising business that relies on a solid content and services base, then interactive economics are surely up for grabs.
What looks on the surface to be a digital broadband world full of outrageously bountiful and lucrative possibilities could become a desert of lost opportunities if all the companies involved in producing, moving, selling or marketing existing and newly created content don't become more proactive about protecting it.
