Can Technology Companies Create Content?
“There’s only two ways to make money in business: One is to bundle; the other is unbundle.” - Marc Andreessen
Bundling or unbundling. Every successful business is in one of these two states. Unbundling in particular is one of the key reasons that technology companies have been able to create so much growth in such a short amount of time. What’s interesting is that these technology companies are now starting to become bundlers.
Because software is so good at unbundling, we’ve seen:
- Apple unbundle the CD
- Zillow and REA unbundle real estate listings
- eBay, Monster, Seek, and RSVP unbundle classifieds
- Google unbundle the Yellow Pages
In hardware, increases in performance have seen the telephone, portable audio player, still and video camera, GPS, voice recorder, and more bundled up into the smartphone.
The near-zero marginal cost of digital content means that many of the businesses impacted by unbundling have been media companies. The result is that distance between content creator and content distributor is greater than ever.
Outside of newspapers, there has always been at least some distance between creation and distribution. But that distance was short. TV buyers, for example, fundamentally understand how to make a TV program, and what makes a TV Show popular and good.
The content distributors today (and tomorrow) are Google, Amazon, Facebook, and Apple.
Over the past decade, these companies have removed huge amounts of value (and market cap) from content companies. In that time the newspapers, magazines, record labels, and movie studios have all frantically searched for a new model that didn’t result in catastrophic decline.
These new content distributors are not content creators. But all of them are now in the process of dipping a toe in the water. All are now looking at creating content as well as distributing it in order to create even more value - primarily through advertising.
The three potential scenarios that seem likely from this experiment are:
- Content creation efforts by GAFA (Google, Apple, Facebook, Amazon) fail as a business unit, indicating to traditional content companies that the future isn’t super rosy (if these guys can’t make it work, who can!?)
- Content creation by GAFA succeeds only through leveraging their walled gardens, resulting in new media empires quickly emerging, and the old ones slowly dying
- Content creation efforts by GAFA demonstrate to traditional content companies how a modern, profitable content business model works. Those who react aggressively will jump on that train
Given the inability of traditional content creators to find a viable business model, it will be fascinating to see if the new kids on the block are able to create one.
- December 2015