The Clouds Are Gathering

As Distribution Moves To The "Clouds," How Will It Change Our Business?

In the wake of announcements and presentations at the NAB convention earlier this month, it has become clear that content management is moving to the clouds.  Microsoft, Cisco, IBM, Verizon, HP and others are all aggressively pursuing the development of cloud-based media management systems.  These companies are already pitching broadcasters and other content-owners on the merits of their respective cloud-based services.  So it's not too soon to ask the relevant question: "What are the implications of cloud-based content management for the entertainment industry?"

Let's start by agreeing on what we're talking about.  Cloud-based content services mean that the master copies of a large number of programs owned by various parties are all stored on massive servers operated by technology companies.  All of this content is accessed (whether for purposes of rental, purchase, streaming or download) directly through an interface operated by the third party technology provider.  Each content-owner's portal might be branded differently, but they will all probably operate in much the same way.

The reasoning for moving content to these types of services is pretty logical.   As more content is being delivered through digital streaming and downloads, individual content-owners and distributors will not have the internal resources to store, deliver and manage the greatly increased volume of traffic.  It would require huge amounts of storage and large "pipelines" to handle the fast movement of millions of large files.  Further, by outsourcing the process to technology specialists, the cost of programming and maintaining  a complex software interface could be amortized and shared among many companies.

Economically, it makes perfect sense.  Outsourcing incrementally increasing expenses which are outside of a company's core capability is generally an intelligent strategy.  So, is there a downside?  Perhaps.

I have never forgotten a discussion I had with Regis McKenna several years ago at CES.  He emphasized to me that the user experience is generally the single most important factor in the success or failure of any technology.  The reason that Apple products (and Netflix and Nintendo and Xbox and others) succeed is because they are fun and easy to use.  Successful technology products don't generally do more than their competitors; they just do it in a way that people like.

Applying this thought to cloud-based content distribution systems, I think that content-owners could lose much of their ability to customize the user experience.  If every owner and vendor of content looks and functions in essentially the same way, then the only differentiating factors are the actual programs and the prices.

Think of it this way. What if every store in a mall looked exactly the same, except it carried slightly different merchandise at slightly different prices?  No customized shopping experiences; just a different name on the door.  It would be very difficult to position your brand as a premium brand if you had no way to give customers a unique experience.  That could become a problem if all content distribution is controlled by a handful of companies.

When you commoditize anything, then price wars develop and margins go down.  The money content-owners save through outsourcing might not make it to the bottom line.  That means cloud-based systems could result in better prices for consumers and new profits for technology vendors, but perhaps little benefit for the content-owners.

That's one possible danger I see in content-owners outsourcing their customer interface functions.  Of course, if they can outsource pure technical functions (storage and delivery) and maintain control of the user experience -- and still save money -- that would be the best solution.

How do you see cloud-based systems changing our industry?  I'd love to hear some other thoughts.

The Breath of Business and Success

Watching and understanding the cycles of "life" in business are keys to longterm success.

Ok, this might be a little esoteric, but if you go with me for about 5 minutes, I think you'll get some benefit from the discussion.

In thinking about what I wanted to write this week, I was looking at the current activity in our industry.  There are new companies coming online and old companies jumping into new businesses.  Everyone is investing  money and energy in an effort to grab pieces of emerging markets.  The two most obvious examples are streaming and tablets.

In the wake of Netflix' success, there are dozens of companies scrambling to bring content directly to consumers' TV's and other devices.  On the content side, Netflix is the clear market leader, Hulu appears to be the market challenger, and there are a number of market followers still hoping to move up and challenge the leaders.  On the hardware side, AppleTV, GoogleTV, Roku, TiVo and others all have their oars in the water.  The important point is that a growing number of companies are still vying for parts of these markets.

The same pattern is present in the tablet market.  Apple's iPad is the dominant market leader, Motorola's Xoom appears to be the current market challenger, and there are a large and expanding number of market followers (some of whom might become the market challenger, like Blackberry, for instance).  Again, the point is that more players are still coming into the space.

This current phase of the business cycle is the equivalent of these markets taking a deep breath.  It is a period of expansion when resources are poured into the marketplace and everyone scrambles to claim the new spaces that are created.  But as all living beings know, every deep breath is inevitably followed by an exhale.  If living beings only inhaled, they would never release any waste, and they would die.  This is true in business, as well.

When markets exhale, it doesn't mean that they are dying or becoming weaker.  Exhaling is healthy.  The market, and the companies in that market, actually become more efficient, gain strength, increase profits and improve operations during that period.  The "exhaling" period of a market is characterized by mergers and acquisitions, where the larger players absorb the healthy smaller players, and some closures where the weakest competitors simply give up.  But even the closures are healthy as it means that the remaining companies can expand further, making them stronger and more profitable.

Ok, so what's my point?  It's this: you can't plan for the present; you can only plan for the future.  If you are in a position to participate in this period of expansion, by all means take advantage of it.  But if you are planning for the future, watch the market breathe.  Recognize that it will inevitably exhale, and position yourself to take advantage of the circumstances that will exist at that time.

Every moment is a moment of opportunity for those who recognize it and are prepared for it.  Whatever business you're in, or want to be in, watch it as it breathes and be prepared when the next breath comes.

The Essential Element For Success In The Entertainment Business

Anyone who reads my posts or tweets, knows that I love technology.  I'm always reading and writing about cutting edge technologies and how they are impacting the entertainment industry.  New tech is driving the launch of new companies, and the development of new strategies for old companies.  Technology is undoubtedly the most important factor for achieving success in today's entertainment business.  Or is it...?

As I often do on Saturdays, I spent the past couple hours looking at all of the recent entertainment and technology news.  There is plenty of it, as usual.  New methods for driving content from televisions to mobile devices, and the Internet to televisions and from clouds to everywhere.  Consumers can truly get whatever they want, however and wherever they want it.  

With all of these amazing new capabilities for viewing and listening on countless devices, what is the best strategy for success in our business?  With all of the new possibilities, the answer actually hasn't changed. Regardless of how you do it, you have to give consumers something that they really want to watch or hear.  And what do they want?  A great story.

The one essential truth of the entertainment business -- the one constant that does not change with technology -- is that people want to be touched emotionally.  That's what draws them to read, watch or listen.  They want to feel the emotional impact of the story being told.

All of the amazing new technology gives us better tools for touching people's hearts, but only if we tell great stories that trigger that emotional response.  Faster frame rates and 3D and better surround sound and IMAX all make a huge impact on our bodies, but it is the story being told that ultimately touches our hearts.  And that's what people want from their entertainment experience.  It is why they put their money down.  They want to feel the emotion...love, anger, fear, passion, humor....They are buying an emotional experience, not just raw physical stimulation.

I am more enthusiastic than ever about the prospects for entertainment success through the use of great new tech.  I'll continue to look for innovative ways to deliver content to people everywhere.  But it will only matter if the content is truly special.  

Technology is the beautiful box, paper and bows in which we wrap our gifts, but wonderful stories are the gifts.  Let's never forget why we went into this business -- to touch peoples' hearts and souls.