Monday, January 21, 2008

What Does Pownce Have to Do With Bogus Internet Movie Rentals?

Maybe my point about Pownce got lost in a larger, broader, and more academic argument. That's fine; I'm glad to see Ted Dziuba (yes, uncov) pretty much made the same point about Pownce. He has a larger audience than I do. My larger point, of course, is that we're not always the hiking-in-redwoods, biking-to-work, inventing-computers-in-the-garage, tossing-whole-industry-paradigms-out-the-window-with-our-wicked-code folks that our narrative says we are. We're as ridiculous, self-absorbed, and self-referential as the folks we take swipes at on our blogs.

What does this have to do with Internet movie rentals? Well, Internet movies -- and VOD in general -- is one of those always-coming-never-here technologies. Even if does arrive, it'll be 10-15+ years into the (U.S.) broadband-penetration era, meaning it will kind of dribble out the exhaust pipe of innovation as an incremental use case long after its revolutionary potential has disappeared. But Netflix (with LG) and Apple are back to the baccarat table for another round of tech's most pleasant losing gamble.

While Apple and Netflix have made little gains, big ol' Safeway is now selling a wad of recent hit films at 2-for-$6. On DVD. With a non-revocable license to watch in perpetuity, carry around, re-encode (if you're "careful" how you do it), and pass on to one's heirs for the next 1000 years. Or you can just rent the films for $0.99 - $1.49. The studios aren't going to hassle Safeway about "$3=watch forever" pricing (and heck maybe Safeway is paying $2 for those DVDs), because it's a retail supermarket. They understand it and it makes sense in their world. The same reason Joe Teenager can sign up with a record club and, if he works his deals optimally, pay a better per-track price than Apple does (maybe 30% of retail).

The house will have the advantage as long as tech keeps thinking like a player (and believing its own mythos) and not like the casino (the other that it tells stories about). Who's the "house" ? ... well, studios, producers, broadcasters, cable networks, telcos, CE makers (guess what, they don't think of 'tech innovation' the way software folks do), even government ... and that's just a start.

I made this point before. Now I'm gonna take it a step further, and talk about one way to move forward.

If you're an innovator in one of these areas, and you need to get a foot in the door, take on another perspective in addition to your own. Try and find a place to live in the other industry's model of the world (their value chain/web/network). I don't mean philosophically, I mean literally. Think of it as hacking their worldview, if it makes you feel better.

Here are some examples:

  • When ecast needed legal clearance to get running with a digital library of songs in 1999, "MP3" and "Internet download" were conversation killers with record labels. ecast needed to be a jukebox, don't worry about the gears and levers inside, nothing to see here, move along. There were some hiccups in licensing until they shifted to the latter approach. Record labels know what a jukebox is and how they make money. Problem solved.
  • Mediabolic ended up taking a different course, but at one point when the firm was working on  VOD with a set-top box, they looked into subleasing excess digital broadcast spectrum time for moving their data. What does that mean? It meant they would have been in some real sense a broadcaster using TV spectrum to reach customers. Which is a whole different conversation with content owners from the "renegade startup conversation."
  • When Skip Interaction focused on travel data management, and mobile transactions, I advocated becoming a travel agency. While Skip would not likely have made much (any?) money on bookings, it changes the conversation with airlines, travel agencies, and companies whose employees travel a lot. Skip would have appeared as a "known" entity in the industry. All of a sudden, instead of requiring custom arrangements to do anything, Skip would have had a huge pile of boilerplate data and access to work from.

These examples are just from my personal experience -- I'm certain that this strategy is not at all uncommon. But we don't hear about it a lot, because it doesn't fit the plotline we want.

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