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At last week's Convergence 2.0 conference, tech exec Leo Hindery:
[F]irst took all content and distribution and broke it down into three columns using a powerpoint slide: Portals (AOL, eBay, Google, MSN, Yahoo!), Content Providers (ABC, NBC, Disney, et al.) and Non-Broadcast Distributors (Cable, RBOCs, Satellite, Wi-Fi etc.) Hindery points to the portals column and says that the $225 billion market cap represented by those five companies can be directly linked to lost money in the valuation of the companies from the other two columns. This imbalance, he says, will correct itself.
He predicts that fully two thirds of the $225 billion comes from advertising dollars. The problem, as Hindery sees it, is that the portals built their fortunes on non-proprietary content. The content providers will encroach on the portals territory and steal back the lion's share of the money the portals have accrued. He said of those 5 portals listed above, 4 would fold eventually, or be acquired. This triggered a storm of comments and blogs, since predicting the demise of the portals is not exactly a majority position. It is also decidedly un-PC: For reasons that lie more in psychology than economics or law, the Portals are regarded by the tech world as benign entities out to improve the world (think Frodo and Gandulf) while both Content Providers and Distributors rank with the Orcs and Saruman.
Some of the criticisms are perfectly valid. For example, aggregation and filtering is itself a valuable function for which Portals can charge money, and there is indeed rich business to be done in allowing users to generate and trade their own content, which is, after all, what the telephone company has done for 150 years.
But Hindery has a good point, too, in that many Internet-related business models are based on the assumption that the business will be able to free ride indefinitely on content or services provided by others. This is not a viable long-term strategy.
This comment does not apply only to Hindery's portals, though: it covers all the players. ISPs, telecoms, and consumer electronic companies have been happy to sign up clients eager to tap into free content delivered by Bit Torrent, and, to keep it even, the content companies would be delighted to impose all the costs of content protection on the ISPs. At the same time, the portals calculate how to siphon off clicks from each other, and battle for net neutrality in the vain hope that they can get someone to provide all the bandwidth they might possibly want to no cost.
Unfortunately, the world does not work like this. We cannot all free ride on each other. And we would all be better off if people would stop trying, and would stop equating their own particular efforts at free riding with truth and justice, and settle down to figure out how to make the system work for all.
posted by James DeLong @ 10:28 AM | Internet: P2P, Search Engines...
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