Say That Again

by Martin Thörnkvist


Filed Under:
complements, content, strategy, tech

Companies:
apple



Stop Thinking That Tech & Content Are Fighting Each Other

from the forward-thinking dept

The following is a guest post from Martin Thornkvist, who both runs a Swedish indie record label, and works for Media Evolution -- an organization designed to help its various members learn about and embrace new media innovation opportunities. This is cross-posted from his blog at Media Evolution, and raises a really good point. Too often people talk about technology and content as if the two are at war with each other, rather than recognizing how it's a complementary relationship.

The first quarter 2011 Apple made a profit of $26.74 billion $6 billion. An impressive 17% of that is from their latest product, the iPad. Having followed Apple's reports for some years it struck me just how unimportant content distribution is for them. In economic terms at least. 

The iTunes store counts for only 5% of Apple's overall profit. In light of that fact, I have a hard time understanding why they are upsetting content providers by increasing the areas where they take a cut of the revenue.

It's obvious that Apple, and other tech companies, are using content to sell hardware. And damn, they are good at making us buy new products each and every year.

Hook and bait

It's obvious that the main objective of dealing with content for Apple, and tech companies in general, is to boost hardware sales. These days you can't hear a mobile executive talk without mentioning the importance of building an ecosystem for content to sell handsets.

The fisherman needs both a hook and bait to catch a fish. The fish is too smart to go for a hook without bait, like customers with tech products. And the bait without a hook is a fiesta for the fish rather than the fisherman, kind of like being a fish in a bay of pirates.

When looking at the media landscape we can see that everybody wants to be the hook. The hooks are owning the customer and the ecosystem in which they interact. That means they can control price, pace of releases and the right to set the rules of the game

The media industries were used to being the hooks. That changed many years ago. Now, it's just about creating those alternative hooks of income streams yourself.

To many the question of being a hook or a bait is emotional. Everybody sees their work as the center of the media landscape and wants the rest to obey to their wills.

Stop making life hard for each other

Even though content distribution represents a small percentage of Apple's overall profit, they are making life hard for content producers by changing the rules of the game. Most recently they announced that for publishing companies to sell their subscriptions inside applications, they will take a 30% cut. It's still uncertain whether that counts for music apps like Spotify as well.

The content side is making it equally hard for tech companies that want to develop new media platforms. Music labels, film studios and book publishers can arguably be said to make it a nightmare to license their products. This is instead of acknowledging developers and engineers to be their best buddies to create new ways of providing content to customers, and eventually help them make money they badly need.

Interdependent relationship

We need to understand that technology is nothing without content and content would be nothing without technology. Technology and content for sure has an interdependent relationship.

For a long time the content producers had the upper hand. Right now the technology providers act like they have it. But in the long run they both need to cooperate to keep prospering.


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  1. icon
    Mike Masnick (profile), 24 Feb 2011 @ 12:04pm

    Re:

    The rub is "what about the converse?" How does a content company, and specifically "software", make its mark in the marketplace. Must it surrender its core skill, software, and join forces (e.g., corporate merger) with a hardware provider in order to survive? Frankly, I do not know the answer

    They need to align themselves with a *scarcity*. Hardware is definitely one, but not the only one. Certainly companies like IBM and Red Hat have tremendous software capabilities, but they've set it up so their scarcity is service. Google is a software company, and its scarcity is user attention.

    There are lots of scarcities.

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