Tuesday, January 18, 2011

Technology Giveth, Technology Taketh away.

There would be no mass media without technology. So talking about one of the major technology issues facing the content industries seems like a logical place to start.

Technology is predictable, for just about any technology there is a progression. Technology makes the impossible possible. Perhaps at first not very well or very safe, but possible and almost inevitably very expensive at least to begin with. Then technology steadily improves, doing things better and safer. It also makes them cheaper, sometimes not until a threshold of cheap enough and safe enough have been reached, but eventually.

And that technology progression almost always lead to problems with business. When some technology is new it's expensive and some one has to shell out a lot for the equipment and has to make it back in time to replace it. And because the technology started so expensive and the initial investment was so high, It's not unreasonable that the people who fronted the money for the equipment might make a lot of money off of it. But technology is going to improve and the need for a middle man that owns the necessary equipment is going to go away. But it seems like as often as not the middle men that have been making a lot of money for a long time aren't prepared and fight tooth and nail in order to remain middle men. That's not saying that they should go out of business, but they should be looking for new ways to be a middle man that continue to grow the content.

The example of this that comes best to mind is the record companies. In the past month I've bought Indy band albums that were produced independently, advertised on youtube and I found through some combination of being picked up for ads, and people linking to them from facebook. Increasingly the record companies are being cut out of the loop of my music buying, not because of some stance of mine, but because as technology has made them irrelevant at their traditional roles, they have failed to evolve into new ones.

The lesson is that if you are in a content industry, and your stake in the business is that you own the expensive equipment, then you should have an exit strategy or a transition strategy. Because odds are that at some point the equipment will start getting cheaper.

And before I go to save a largely redundant post, the same trends in technology impact the makers of content consumption devices. Unit costs will go down, so even at steady margins profit per unit will go down, and eventually units will go down. Worse then that, there will be periodic technology plateaus where next improved type of player isn't obvious and if you're not spending R&D to find the next thing to make, when some one else does you'll be left in the dust. Case in point Sony losing it's music player dominance to Apple.

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