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Content is King? Depends on Your Point of View

By: Danielle Desjardins

Did you know it was Bill Gates who said the oft repeated media catchphrase: Content is king? In a 1996 article by the same name he wrote, “Content is where I expect much of the real money will be made on the internet, just as it was in broadcasting. The television revolution that began half a century ago spawned a number of industries, including the manufacturing of TV sets, but the long-term winners were those who used the medium to deliver information and entertainment.”

In his article in The Atlantic in July 2011 Jonathan A. Knee, from the Columbia Business School, responded for the exact same reasons that Content Isn’t King. “In fact the dirty little secret of the media industry is that content aggregators, not content creators, have long been the overwhelming source of value creation. Well before Netflix was founded in 1997, cable channels that did little more than aggregate old movies, cartoons, or television shows boasted profit margins many times greater than those of the movie studios that had produced the creative content.”

Content isn’t king. Bill Gates actually said it himself in contradiction to his title: the winners are those that use the medium to distribute content, not the producers of content.

Content isn’t king, it’s the subject, the subject of the veritable monarchs of the digital realm: aggregators in all their incarnations, from search engines, to social media sites, Netflix, Rdio, and other distributors. It makes for many reigning monarchs, but the realm is vast and the turf wars fierce.

To give an idea of the balance of power at work consider the current landscape, still made up of mostly (in terms of volume) traditional industries, broadcasters as producers.

(Sources: CRTC Communications Monitoring Report, July 2011. Profil 2011 : Rapport économique sur l’industrie de la production de contenu sur écran au Canada, APFTQ, CMPA, and the Government of Canada. Inspiration for the diagram: David MacCandless, Information is Beautiful)

We see where the balance of power lies.

Apple: the Next King of Kings?

Content isn’t king, distribution is. To wit: in most of the discussions surrounding content, we aren’t discussing the nature of the content but the distribution and the forms it takes.

Take audiovisual distribution for example. Ben Kunz, the keynote speaker who opened last May’s MIXMÉDIAS conference in Montréal, recently wrote on his Mediassociates blog that it is time to rethink even the definition of television. He cites as evidence the fact that Apple is preparing to launch their new Apple TV. Like most observers he doesn’t believe it will be a big improvement on the current gadgets. Neither does he believe it will be another mega big screen connected to the internet. Rather, he sees it as a secondary screen that won’t seek to replace the big screens that consumers have only just bought. According to him, what Apple is prepared to offer is additional, a device that allows us to consume content anywhere, at our discretion and according to our needs, but above all a new ecosystem that, like iTunes, will govern the distribution and sale of audiovisual content in all its forms.

“In a few years, you might have a little 15-inch Apple TV screen in your bedroom for movies, bathroom for morning news, kitchen for cooking channels, garage for repairing your bicycle. Apple could charge $400 each for the glass panels, make a slight margin on hardware, and lock you into a wonderful new iTunes-like ecosystem that cracks open $144 billion in ad dollars and subscription fees.”

Free Content?

In Content is King, Bill Gates added, “One of the exciting things about the Internet is that anyone with a PC and a modem can publish whatever content they can create. In a sense, the Internet is the multimedia equivalent of the photocopier. It allows material to be duplicated at low cost, no matter the size of the audience.

This is where he forgot a small but important detail: payments to rights holders – the producers of content – each time we copy their property, whether physically, by old fashioned Xerox, or virtually on the internet.

If the business model that Apple managed to impose with iTunes is any indication of what awaits audiovisual content, it’s not even close to throwing off the yoke of the distributor. According to American journalist Robert Levine, who recently published Free Ride: How Digital Parasites are Destroying the Culture Business, and How the Culture Business Can Fight Back (a program in itself), music, for Apple, is the loss leader that sells their iPods and gadgets.

“Ironically the decision that has earned the record labels the most recognition was perhaps their worst decision. Their eagerness to find a decent system of digital rights management led them to accept a method that they didn’t control, which has allowed Apple to dominate the market. They managed to extract 70 cents for every 99 cents that Apple makes, which leaves Apple with a very small profit margin after subtracting the expenses of processing online transactions and the operation of the iTunes store. The company recovers these profits with the iPod and derivative products that they use their online store to market. Like Walmart, Apple sells music to promote its products and make them more profitable, which gives them the leverage to sell the music as they see fit.” (67)

In his book, Robert Levine defends the principles of copyright and castigated the proponents of more flexible rules such as Creative Commons (in his opinion Creative Commons is cronies with Google – Sergey Brin’s mother-in-law is a member of the Board, among others.) In each corner of the ring it’s argued that more – or less – content protection encourages – or bullies – innovation and creativity.

Whether we agree or not, it remains true that the more content is liberated from the constraints of copyright, the more the profits of content aggregators increase. Should content, the star of the MIXMÉDIAS conference in Montréal, be liberated or protected? One thing is certain, without content, aggregators would find themselves kings without subjects.

Danielle Desjardins is a consultant specializing in media. She has more than 20 years of experience in the broadcasting sector. She principally worked at CBC where she notably was the Director of Strategic Planning and Regulatory Affairs. Today she works as a consultant for organizations in the media, culture and web sectors. She writes a blog where she delves into her reflections on the intersections between culture, the media, and technology.

This article was also published on the blog for MIXMEDIA Montréal, a conference by Productions Eventia Inc. on the topic of digital content which took place on May 17th, 2012 in Montréal.