almost 7 years on 2010-05-08


content is not only king but emperor of all things electronic - murdoch

in my 2020 predictions one of my posits was that the next decade would see a significant power swing back towards content creators and away from the primacy of distribution/filters.

we are only a few months in to the year, but i am starting to feel more and more confident about my call. since jan 1 we have already seen several instances where content creators/owners (fox, book publishers) beat back content distribution amp filters (time warner cable, amazon kindle), and i expect these early examples to become more and more frequent this year and this decade.
focusing just on entertainment content and leaving information content for another day - while it might appear that this shift back towards content owners is a meaningful reversal of the recent trend, i think that there is a relatively easy way to explain how this shift fits on the natural continuum of development.

value is a function of scarcity and where once content was relatively abundant and competitive and filtering/distribution was scarce, now filtering/distribution is just as abundant and competitive as content creation/ownership itself. the technology that gave distribution companies increased leverage over the last years has advanced to the point that it is actually flattening their overall advantage as they compete themselves higher and higher up the content curve towards scarce and therefore highly valuable content. we are moving away from a period where tech had the upper hand back towards a much more balanced and competitive market.

here is my framework for why this is happening:
1. you have a finite 'wallet' for entertainment content, with a certain number of hours amp dollars to spend per day. you spend your wallet in return for utils

2. relative to your personal taste, all the entertainment content in the world can be modeled on a normal curve/distribution. in a vacuum, pretending there are no 'filters' in the world and you are forced to spend your entertainment content wallet without prior knowledge of what is available/what you will like, your entertainment content consumption will yield an 'average' utility/happiness return.

3. of course 'filters' help you increase the utility/happiness you get from your entertainment time and money

4. historically, there haven't been many filters, and there has been a lot of content that would yield you positive return over 'mean' content -- so filters had pricing power

5. but as technology gets cheaper, filters themselves are competing more and more, and they need better and better content to stay competitive.

6. as filters compete and look for better and better content (several degrees of freedom out from the mean) content gets scarce and is empowered.

7. so, only the best content will be monetized, survive. but the balance of power will shift back towards content producers.

don't get me wrong -- it is still very hard to build great filtering systems, (just as it is very hard to produce great content), and this is an argument about the relative balance of power -- not the absolute balance of power.

technology/filtering is going to still be central to the equation. the key to the above framework, however, is that on a relative basis the economic dominance of technology/filtering over content is facing a cycle in which it will get weaker.

original swl blogposts and letters 2007-2010