February 19, 2009 by Martin
Only a few years ago, when illegal file sharing of music and the Napsters of the world were still one of the most hotly debated topics, and when Apple and iTunes was truly starting to make inroads to the market, I was sitting in a conference room with a bunch of people waiting for a software development meeting to start. The from the start casual discussion centered around the future of music distribution and who would come out on top. One of the developers, let’s call him John, a self-proclaimed music lover and code poet had just finished up some work for one of the large companies providing a media player, which at the time was building an online music store. During the conversation, which got increasingly heated, John was adamant that the big studios and the traditional distribution channel of physical medium, like CDs, in physical stores would remain the leader in sales of music. Well, we all know how that went. In the U.S. today, the trend is clearly pointing to more music being sold through iTunes than through any other individual retailer or etailer. As much as many people don’t like Apple, for good and bad reasons, Steve Jobs & Co have a vision and they’re delivering on it.
Clearly, there’s something going on in the media distribution landscape. Technology is moving faster than the business models of the incumbent content provider companies. Doh! What else is new? We already knew that. Why don’t the executives at the large content provider companies get it? OK, it’s obvious, they’re just protecting their revenues and the status quo. But, with technology changing, creating new and more efficient sales and distribution channels, and new business models to go with it, if the old ways are stubbornly held on to, these companies will eventually become irrelevant, just like the traditional sales channels of music is becoming less and less relevant by the day. A few examples come to mind, like Tower Records and declining sales at big box retailers, and so on. Here are some articles on the topic in LA Times in Q2 2008 and in New York Times on New Years Eve 2008.
It is often said that the best way of predicting the future is to look into the past. In the case of TV and movie distribution, until fairly recently, peoples’ Internet connections simply were not “fat” enough to download or stream high-quality video. Moreover, the video compression codecs weren’t good enough. That has changed. This makes the video market analogous to the music market 5-10 years ago. Thus, what happened in the music market WILL happen in the video market. At this point, it’s not a question of if TV and movies will be distributed over the Internet, but rather how soon the majority of it will be consumed through computers connected to the Internet.
If the content providers were smart and realized the potential of companies like Boxee, instead of blocking access to Hulu through Boxee, they should approach Boxee and give them a capital infusion, or simply buy Boxee out.