Content Dethroned?

By Bill Rockford

The rallying cry for many, myself included, has been “content is king.” In an interview at the Consumer Electronics Show recently, Comcast CEO Brian Roberts offered a different perspective. He said that perhaps the consumer was, in fact, king. In today’s “I want it all and I want it now” world there are numerous options for consumers to get digital content — often for free — and even though sometimes it can be frustrating, as I’ve said in previous blogs...

Content creators and publishers are facing some key challenges in the marketplace. These challenges are being discovered in the vast sea of content, in delivering the content to consumers, doing so with quality and being fairly compensated for their work.

The first challenge entails breaking through the chaos of content and finding an audience. While large studios and networks have name and brand recognition, smaller players struggle to get noticed. The key ways are to utilize distribution channels or partners such as YouTube, Amazon, or the Apple App Store. Even within these channels, being found can be a challenge — there are already apps to find apps on the App Store!

These distribution channels and others typically use a rating system driven by consumers that naturally bring the best, or the most popular, to the top. Case in point: Susan Boyle, a previously unknown vocalist who starred on the Britain’s Got Talent show, was the number one piece of content for 2009 on YouTube. The owners of the show might question who posted their copyrighted material on YouTube. Was the content generated from a videotape of their TV screen at home or is it officially sanctioned content provided by the owners of the show? Which version did the viewers watch the most? Lower quality versions were filtered out by users flocking to higher quality versions of the performance. The content owners for the show are most likely happy to receive this type of viral marketing that does not cost them anything because it should boost the viewers of the show and drive music sales for this artist.

The next challenge, getting the content to those that want it, when and where they want it, entails technology elements that may not be in a publisher’s core set of capabilities. Content creators don't really care what technology is used to get to the customer: a mobile device, HDTV at home or TV in the car. They just want to get it to those that want it and in a format that is appropriate. This challenge is often solved by aggregators, be they independent or a communications service provider (CSP).

The quality aspect of the delivery should not be ignored. Movie studios go through an extensive auditing process to ensure that their service provider partner is capable of delivering a top quality product to their viewing audience all of the time. Whether the delivery is in a traditional movie theater (think THX or 3D certified) or through a service provider, not every service provider can meet their stringent criteria.

The Apple platform will most likely always be successful because they have a formalized quality assurance process for everything that goes on the phone. Because of this a user doesn’t have to worry so much about getting apps that don’t work properly or viruses spread through their apps. On the other hand, some content providers might feel that the process is too rigorous and they would rather go with the Droid platform, which is more open. A content provider might be confident that they have put their apps through a thorough quality assurance process and they may not want to expend the resources required to get through the gate of the iPhone App Store. That decision is going to be different for each content provider. That is why both the iPhone and the Droid platforms are surviving.

Content providers are concerned about the multitude of different standards and formats that their partners use between their various networks which may be incompatible. They are worried that a consumer may decide to try downloading a movie on their cell phone, for example, and won’t get the quality transmission that it was designed for. Will their CSP partners warn their customers or block the delivery of some content to inappropriate devices? Most of the time it is left up to the consumer to decide this. If customers are allowed to download too much content all at once, it could block voice calls and other services on their network. Content providers are beginning to hold service providers accountable for all of this through contractual agreements.

The final challenge is being compensated for the work. For more traditional TV distribution, a carriage deal with the likes of AT&T, Verizon or DirecTV puts networks in front of millions of subscribers. Who dictates the terms, the owner of the customer (the CSP) or the content provider? Historically, it has been the CSP as they controlled the access to the customer, but perhaps that is changing, given the recent controversy between Scripps Network (HGTV, Food Network, etc.) and Cablevision on compensation.

Downloading and streaming media creates other challenges in the compensation model. Did the consumer get what they asked for and was the download or the stream complete? Was it the right version for their device? Content providers can only police this to a certain degree and they have to trust their aggregation partners and distribution network providers to look after this for them. For example, a pay-per-view movie may be downloaded to a DVR for five days but must be deleted after that because the customer did not pay the fee required to purchase the movie, they only paid to view it once. How does the content provider know that customers are not viewing something indefinitely that they only paid to view once? They must depend on their partners to put the systems and safeguards in place to ensure that this won’t happen.

The other aspect to the compensation question is digital rights management (DRM). Making sure that the content created is not stolen but is accessible by those who have rightfully purchased the content. Cross-platform DRM technology remains a stumbling block, however, Disney hopes to offer the answer with its new “KeyChest” service, while the Digital Entertainment Content Ecosystem consortium believes they’ve got the answer too.

Game and handheld application providers are concerned that if they don’t generate a certain threshold of revenue per month ($100 or more for the iPhone App Store or Google Apps, for example) then they won’t get compensated at all or they will be removed from the platform. Apple just removed 1100 apps from their iPhone App Store that weren’t selling. They feel that they have to make their money fast on these different platforms because with time the price of the content either goes down or becomes less popular because it is not so new. Content providers feel pressure to constantly generate new content, as well, to keep engaging the attention of their customers.

Content providers have pursued a variety of go to market strategies. Some take a loss leader approach by providing free content to engage potential customers in the hope that this will drive them to related content that they will pay for. Hulu uses a different business model. Hulu is all advertising supported Internet TV. It is similar to YouTube only the content is NBC Universal content, not consumer generated, and it is making money whereas YouTube is not.

The largest distributors can actually effect change in the content that's out there because they can enforce certain things. As a content provider, if you don't have the size to enforce copyright, quality and usage, you need to align with a large distributor or settle for best effort on a lesser service provider or the Internet. DirecTV, Comcast, Verizon or Apple can put the content in their bundle of services which are offered to the largest audiences. This gives them power. Whether the content provider is large or small, they are totally reliant on someone else to define the success of their content by protecting the copyright and usage and also by promoting it and collecting revenues for them and compensating them for usage of their content. The larger service providers can determine who is the most successful by allowing them into their service bundle.

In the end, let’s let content creators do what they do best and allow consumers to decide who wins and loses and not the delivery chain. While some answers to the key challenges being faced by content providers are presenting themselves, the question of who is king remains I think. Looking back to Comcast again, the pending deal between Comcast and NBC Universal offers a counterpoint to Mr. Roberts own comments — perhaps even he’s not sure yet.

Bill Rockford, engagement manager with Vertek Corp., has more than 10 years of telecommunications industry experience across many aspects ranging from content and advertising, quality assurance, service delivery to financial and revenue assurance. Within Vertek, Bill has been responsible for delivering results to clients ranging from multimillion-dollar cost savings and avoidance initiatives to process optimization programs affecting clients global customers. He can be reached at brockford@vertek.com.