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The discussion around FttH vs. cable TV, is still raging (see: The FttH versus cable debate misses the point).

While from an infrastructure perspective there are few people who disagree on the fact that, long-term, FttH is the most effective and efficient network solution. The cable operators however, argue that FttH is not needed within the foreseeable future, so they make it more of a timing issue.

And either because of ignorance or because it is in the interest of some, people also confuse content with infrastructure.

For well over a decade BuddeComm has also argued that, apart from the infrastructure issue, broadcasters and publishers are far better-positioned than telcos to market and/or produce content; so opting for an FttH infrastructure future doesn’t mean that we believe the telcos will become content providers. On the contrary, in our view it has become abundantly clear over the last 10 to 15 years that telcos are no good at content provision – on broadband, on cable networks or on mobile networks.

In the wake of newspaper collapses during recent years, publishers began sacking journalists. At that time we commented that by doing so they were destroying their own future business. Instead we argued that they should be getting rid of their printing presses. However, these presses are apparently a treasured feature in their organisations and on their balance sheets, while journalists are judged to be less valuable. How wrong can you be?

By being vertically-integrated media companies many of these organisations have not been able to come up with business models that would propel them into the new future. They remain confused about content and the way they deliver it over their traditional distribution infrastructure systems.

These old models were largely aimed at advertising-sponsored models and, to a large extent, the content was provided more or less free to the users. So many media companies extended that ‘free’ service to the Internet. However, on the Internet their models were not supported by advertising income streams, and there are simply insufficient advertising dollars to support these extended services. So it was not too difficult to see that this would be a road to disaster – and for many media companies that is already the case.

It is obvious that in an electronic era many of the commodity products are becoming free – in particular the delivery mechanisms – and in a globalised world only very large international organisations can build business models around that.

Google is one of the few companies that has been able to do this. But Google isn’t vertically-integrated, and it doesn’t own infrastructure, while the old media are still clinging to their vertically-integrated models.

Within this digital environment other content providers will have to go back to their drawing boards and analyse what their strength is beyond commodity. This can be, as we have mentioned in the past, high quality journalism, local news and other specialised services.

Obviously this is a totally new paradigm and the question is whether all those old advertising-sponsored media models can survive. Most likely not; we are already seeing some culling taking place.

However, people will always be willing to pay for services and content that are valuable to them; they buy magazines, watch pay TV, go to movies and theatres, listen to radio and a large number still subscribe to newspapers.

What is desperately needed is for the old media to hang onto any subscriptions and any users they have – not to let these customer bases erode any further – and to take these people into a new model.

Don’t give it all away free to everyone. Offer valuable extra services to these customers.

Taking myself as an example, if the newspapers I subscribe to would give me, as part of my subscription, access to their content and provide (Web 2.0) tools that allow me to personalise the service with gadgets – and perhaps social media tools – then I think I would be willing to continue my subscription. And, if at a certain point I decided not to use the printed version any more, there is a good chance that I would continue with a paid Internet subscription.

The same will apply to entertainment. I am happy to pay a few dollars a month for services such as YouTube and I even think I would be willing to pay a few dollars for Google. I value my ABC podcasts, and again a few dollars a month would not stop me using these services.

The problem with TV is not so much the content but the format. I have to align myself to the dictatorial delivery systems of their content, which, most of the time, totally contradict my lifestyle. Yet I have an insatiable appetite for content and I even know that a lot of that is available in a TV/video format – but the media companies are unwilling and unable to deliver that to me. I am happy to pay for a TV service that allows me to tap into a huge video content database with good search engines that provide me with the content I want, when I want it. This would require a horizontal merger of commercial TV, pay TV and Internet business models and this should be made available via ‘neutral’ infrastructure.

Currently the news is delivered via paper infrastructure, commercial TV via the air, pay TV via cables, and satellite and digital services via telephone networks. This might make sense to some people, but not to me.

In Australia the National Broadband Network will be a test of a horizontal integration of infrastructure delivery systems, and forward-looking pay TV companies like Foxtel and Austar are showing great interest in these new models.

Paul Budde

See also:

• Digital Media – Impact on the Media Industry
• Digital Media – Industry Business Models
• Digital Media – Internet & Entertainment Services
• Digital Media – Internet Media Companies
• Digital Media – IPTV
• Digital Media – Online Video Media
• Digital Media – Social Networks & UGC
• Digital Media – Broadcasting – Digital TV, HDTV, Interactive TV & STB
• Global – Convergence – Cable Market

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This entry was posted on Monday, August 10th, 2009 at 10:53 am and is filed under From Paul's Desk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.