DATA PROVIDERS IN RISKY GAME OF MUSICAL CHAIRS

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I don't understand why all the digital distributors are rushing to stake out ownership positions in content providers.

Sure, they need lots of material to fill up empty cyberspace, but why do they want their own captive supply? There is an incredible amount of stuff available. It's very risky to align with only one.

The television networks-the prototype programming distribution system-haven't been allowed to own their own programs because of the monetary advantage they would have in the syndication market. But under new FCC rules they can own their own TV shows and reap the syndication rewards.

But the point is the networks won't own most of their shows.

"It wouldn't make any business sense for the networks to own all their own shows," Brian Reilly, managing editor of Electronic Media, told me. "The batting average on hits and misses is very low."

The thought occurs to me that if an aftermarket develops in cyberspace, pipeline companies are going to be at a disadvantage if they're only able to resell material from captive producers. Distributors with the broadest offerings will have a leg up.

"The rush to marry hardware and software is quite similar to the media industry's frantic search for `synergy' in the late '80s," said Scott Donaton, Advertising Age's executive editor of interactive and new media.

What's driving all this activity, Scott contends, is fear. "Information providers fear they won't have a place to distribute their products in digital form, while communications networks fear they'll build a vast infrastructure ....and then have nothing to pour through it."

I think it's a lot like musical chairs. Both the hardware and the software people are afraid they'll be the only ones standing (alone and unaligned) when the music stops. But there are several big players who see no need for such an alignment. Disney has turned down the idea of buying a network when so many other distribution forms are available-home video, cable, pay-per-view, airline TV consoles, etc.

And AT&T also nixes the idea of joining forces with an information provider. "Companies announcing big alliances like MCI and News Corp. often end up in skeleton frames without any real flesh," said an AT&T spokesman. "We don't see any clear advantage to a distributor owning a content provider."

Besides, MCI's thrust seems to be on the business information and services side. I read how MCI might buy a business publisher, but how can the popular culture fare of Rupert Murdoch be of any help in that regard?

Scott believes both parties in any pipeline-product combination "are hurting themselves by limiting their options even as the number of options to the consumer explodes. Even if the alliances are not exclusive, competitors on both sides of the fence will shy away."

What it comes down to is the quality of the information being delivered, as Scott says. And no one supplier has a lock on quality.

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