Controlling Distribution

Fork Bombr posted a response to my criticism.  I do think I should note that I was likely overly harsh… especially as his post wasn’t the most egregious that I’ve seen re: Andreesen.  Nonetheless, his clarifications are interesting and merits a response.  He writes:

I never said that the content should be free, or that TV shows should all be put on YouTube before they’re broadcast advertising-free. I’m a firm believer in paying for content that I enjoy, but here’s the catch: The harder the media companies make it for me to pay for something—the more hoops I have to jump through—the less likely I am to pay for that content.

What good reason does NBC/Univeral have for pulling their shows from iTunes and putting it on their own horrible Hulu service other than iTunes wasn’t paying them enough money? Why would I go out of my way to visit a site with NBC-only content that’s streaming and non-downloadable when I’m already on iTunes buying other things? The “new business model” I was talking about was something more à la carte, buying shows I like at a reasonable price.

Two things.  First, while I agree in concept with the truism that the harder it is to pay someone, the less likely one is to pay him, I note that it is essentially a truism.  It’s like claiming that the taller the average NBA player, the less likely I am to make the starting lineup of the Nets.  Second, with respect to the substantial point, that a “new business model” in future-media would be something more “a la carte”.

Well, here’s the thing.

Controlling distribution essentially enables one to extract value.  Packaging is an essential part of that control.  Consider for a moment — is it better to sell twelve songs (packaged as an “album”) for $9.99 or one song for $0.99?  The answer depends on how many units you can sell, of course.  But to have control over that decision is critical.

More importantly, however, NBC/Universal may have made the strategic decision not to empower the category leader any more.  iTunes is a major threat to the control that media companies have over distribution.  Erode that too much, and the power of “starmaking” shifts from the media companies to iTunes.  Now the value-extracting control is with iTunes and Steve Jobs, not NBC/Universal and Jeff Zucker.  Is that a smart decision?  Who knows?  Maybe it’s a retarded decision by NBC/Universal.  But it isn’t that difficult to understand why a major company that understands precisely what business it is really in would refuse to deal with iTunes.

But let’s move on:

This line was a little insulting, really. My post was in reaction to reading about what the writers out in Hollywood are actually striking over. They want $0.08 instead of $0.04 out of every DVD sold. A DVD costs at least $10 and costs fifty cents to make. You’re going to tell me the studio needs that much of a profit? The other reason they’re striking is that they get no residuals or payments at all from online sales/viewing of their material.

NBC made a ton of “webisodes” for the Office, all of which featured advertising, which signals to me that NBC got paid for said advertising, which, in my opinion, means the writers are entitled to some of that revenue. Does that not make sense?

If this is true — and it is — and the point that Fork Bombr is making is that Hollywood is incredibly greedy and selfish… then I’m 100% behind him.  But by the same token, if the post is in relation to the change from $0.04 per vs. $0.08 per DVD sold, and residual rights from web-display… then I submit that there is absolutely no call whatsoever for Andreesen’s initial article talking about Hollywood-into-Silicon-Valley and no call for the triumphalism inherent in statements like “Artistic expression would be a lot better off if these idiots weren’t controlling what people could see, and when”.

If the issue is that Hollywood is greedy, fine — but that’s business-as-usual in any industry, right?  It doesn’t imply that the industry’s whole model is broken.  If Hollywood and the unions reach agreement at $0.06 per DVD, and production starts up again… what’s the existential threat facing La-La land exactly?

Andreesen badly overreached in his initial theorizing, because he hasn’t yet explicated the value chain and the capturing the consumer surplus in the new Silicon-Valley-style creative enterprises.  There are literally thousands of starving musicians, artists, webcomic authors, short-film directors, actors, actresses, etc. etc. out there who realize that in the real world, you have to convince someone to pay you.

It turns out that Fork Bombr and I share the suspicion of the Silicon Valley types with their head-in-the-cloud dreams of making billions with unspecified “business models”.  So perhaps our disagreement is linguistic more than substantive.

If so, I sense that he is likely to agree with me that the single most important question to Andreesen and his cheerleading crowd is my original one: Who pays?

-TS