Why hardware devices are the future of digital media distribution

August 4th, 2009 by Daniel DiRico

iphone3gs_2upHave you noticed lately the explosive success of the iPhone App Store and the unexpected popularity of the Amazon Kindle book reader?  Of course you have.  These products and services have obviously become huge wins for Apple and Amazon, but there seems to be something larger happening here.  And that something may have just signaled the start of a massive shift in how we distribute and monetize digital content in the future.  And to many of us, that future is going to seem oddly familiar.

To know where we’re going…

We must know where we’ve been

Before the internet, media and software delivery had become a highly centralized system that offered creator(s) and/or owner(s) enormous control over delivery and distribution.  And subsequently, equally enormous control of profitability and monetization. How was this done?  Let’s hop into the time machine.

Pre-internet, if you wanted to read the New York Times, you had to buy the physical paper it was printed on.  There was no other way to obtain it.  If you wanted to install the latest version of Microsoft Windows on your PC, you had to go to the store, buy the physical disk it was sold on and bring it home to install it.  If you wanted to play a Sega video game, you had to go out and buy the game cartridge the game was stored on, which would then be playable only on the Sega gaming system (which you also had to own).  Do you see a pattern here?

The way money was made back then was not just from the content itself, but the medium upon which it was delivered and distributed.  So you have to ask yourself this paradoxical question; was the actual pulp paper the New York Times was printed on just as valuable as the news content itself?  The answer is yes, but only when the two were combined as the exclusive distribution method.

But back then and even now, we still place all the value on the content itself.  Sure, the medium was important, but it was often treated as a mere commodity.  How much competitive advantage is there in something like, paper?  In our current, de-centralized world of the internet however, where you can obtain the New York Times, Microsoft software, and Sega video games all through the same medium (i.e. the internet), this content-only focus by most content producing companies is where things are going wrong. They seem to have lost sight of two other important pieces of the pie, which we will cover in just a moment. Apple, Amazon and others know this, which helps to explain what they have been up to lately with devices like the Apple tablet (not yet confirmed or released) and the Kindle.

And now back to the future

Today we are all used to being able to obtain just about any digital content we want (either paid or free) through a Web browser in some way.  However, if this trend toward device-centric distribution continues, you will find yourself in a familiar, pre-internet kind of quasi-centralized world.  But this time it won’t be the content that is so highly valuable and valued as much as the medium (i.e. device) upon which it is delivered to you.

CAPratioIn all cases of media and software delivery, you have what we can call “the power trio” which is the content, the application, and the medium.  This holds true even for those pre-internet days.  Using the New York Times as the example, the content is obviously the written work, the application is the printing press, and the medium is well, paper.  In today’s world the content is still the same written work, but the application right now is HTML and Web technologies and the medium is the Web browser and the internet.

What is it in that power trio that is causing all the problems for the New York Times and other news agencies?  You guessed it — it is the application and more importantly, the medium.

What can we expect then?

So let us cut to the chase here and try to predict a real world example of what this all means in a future world scenario.

As content producing companies put greater focus onto the application and the medium, you may find for example that one day in the future your favorite newspaper is no longer available online via a Web browser.  One of two things (or a combination of the two) may evolve.

To read your newspaper, you may find you need to:

  1. purchase a device that is capable of delivering that newspaper to you
  2. purchase a software application that is capable of delivering that newspaper to you

Even a company like Microsoft, who has prided itself from day one to being a “software only” company (i.e. content only) has already begun to take the plunge into a full software plus hardware/device business model by building things like the Xbox and the Zune.

The executive summary

This all-in-one content+application+medium business model is one that Apple has adopted from the beginning, a model which Steve Jobs referred to as “doing the whole banana.”  But the “doing the whole banana” business model was not as successful for Apple in the days when content was king and delivery and distribution were not in their control as it is today. Over the past 5 years or so, Apple has become arguably the best example of a company that has discovered just the correct ratio of content+application+medium to bake into it’s banana bread profits.

So if you are a company that produces only content, now would be a good time to refocus on your content medium and your content application with great effort; or hire and/or partner with someone who does.  You won’t want to miss this train back to centralized station.

http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/digg_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/reddit_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/stumbleupon_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/delicious_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/technorati_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/google_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/myspace_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/facebook_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/yahoobuzz_32.png http://businesstechnologyanalyst.com/wp-content/plugins/sociofluid/images/twitter_32.png