Surprisingly good interview with Netscape founder and Silicon Valley gazillionaire Marc Andreessen the other day. Andreessen thinks a lot about the future – not in a dreamy, techno-utopian way, but because every day he has the best and brightest inventors and entrepreneurs pitching their visions to him. And what does he see?
Newspapers, magazines, television. How are these companies going to make money? What’s the future for them?
So this has been—the media industry is a microcosm of the changes that are happening, and it’s been fascinating to watch. People are always going to love music, movies, TV, and news—it’s evergreen; people are always going to get value out of media. So it’s not a question of whether people want media or not. And in fact, global consumption of media is rising very fast. It’s a huge growth market.
Agreed! So how’s it going to change?
The challenge I think is that in newspapers, magazines, and television, in particular, and books to a certain extent, you had businesses that looked like they were content businesses but were actually distribution businesses. They had controlled distribution rights on the newsstand, on your front porch, on the cable or broadcast dial.
Absolutely right. And now… what do they do when even the lowliest scribblers can bypass their distribution business?
The problem is, you remove the distribution constraint, all of a sudden you get a massive oversupply of content in each of those categories, and then of course prices come crashing down.
Hmm. Maybe the issue isn’t that there was “massive oversupply” but that there was a high cost structure and essentially a monopolized market? Why are 120-page books $24.95? Why did 12-song CDs with one or two good songs used to cost $16 dollars?
And then the adjustment process for an incumbent that’s used to being a monopoly [ed. note: thank you!] and has a high cost structure [thank you again!], then has a big problem relative to all the new entrants that have tiny cost structures or, you know, user-generated content, like YouTube, with no cost structure [e.g. this]. The interesting thing that’s happening right now, though, is what you might call re-intermediation.
Now you’re talking like the guru that you are. What is re-intermediation and how can I benefit? (Or what should I fear?)
Think of it as rebundling. My old boss, Jim Barstow, used to say there’s only two ways to make money in business: One is to bundle; the other is unbundle. Basically media is getting rebundled. And so you’ve got these new models—Spotify in music, Netflix in video, and Amazon in eBooks, right?—that are rebundling media together and, by the way, building very big companies around it, just very different kinds of companies than the ones that used to dominate.
Aha. Re-intermediation is rebundling. Why not call it rebundling? Rebundling is very appealing to me as a consumer. A few bucks a month for all the content I want? Sign me up. I’m in on Netflix. I’m in on Spotify. Might even go premium for an ads-free version.
But maybe it’s called re-intermediation because it’s not necessarily rebundling? Maybe the point is that you’re a company that makes money from the changed cost structure and distribution network even if you’re not actually providing a bundled experience to your consumers. Maybe you’re just getting-in-the-middle (like the word says!).
Spotify is a rebundler. Netflix definitely is a rebundler. But Amazon? I know they’ve tried a few approaches at this – don’t Amazon Prime members get to borrow a book or two a month or something? But I don’t think they’re close to selling unlimited access to Kindle books for seven bucks a month. Like a superlibrary, I guess. As a consumer, I would love it if they did. But is that what they’re really trying to do? And can they get there? Why can’t they? Because authors won’t allow it? Because traditional publishers are still too powerful?
Kevin Eagan has a few ideas for why the subscription model isn’t working for e-books, but he seems to be struggling with identifying serious obstacles as well.
Self-published authors beware: the model may be working for you now. But someday you may be looking back, telling your grandchildren about how wonderful self-publishing was in the last days before the Great Re-Intermediation.
Be prepared! (There will be a king!)