Triple play, go away!
Yesterday we were running through four case studies from our new Broadband Business Models 2.0 Report looking at how the content aggregation and distribution businesses interact with one another. The four products we picked on are Joost, Iliad's Free service, Sky Anytime and BT Vision, but of course we've been following many others. We're seeing some common themes, plus some ideas of our own, that we thought we'd share with you:
- You have to match the right content to the right distribution system. Get it wrong, for example by picking mass market content when you should be deep in the long tail, and you'll fail. Get it right, for example by giving user generated content equal footing in the distribution system, and you'll be rewarded.
- Two-sided business models (with payment from users as well as merchants) generally beat one-sided models.
- Scale matters in both content aggregation and distribution. Sponsors and advertisers demand it, and distribution efficiency needs it. Few businesses have both. Telcos trying to build both capabiliies as a "triple play" will mostly fail.
- Indeed, always carry a wet fish with you. Whenever you hear someone say "triple play" (or "Quad" or "Quin" Play), slap them across the face with it until they wake up. It's nonsense. A dream. If anything it's "multiplex play" -- how do I use my customer relationship and distribution assets to market and deliver content from relevant aggregators to targeted users? For example, how does an ISP serving the small business market offer multicast video from a business newscast partner?
- The triple play is a vestige of what Umair Haque calls the "massconomy" -- mass production of a standardised product, versus the "edgeconomy" where everything is personalised and also understands the user is a critical producer as well as consumer of value. Iliad's TV Perso is a classic example here of going beyond bundling, by allowing users to create their own TV channels, including their own content.
- Telcos have a cultural handicap: they're obsessed with billable events. Consumers want bundles. The marketing skill is how to build and break bundles.
- Speaking of bundling, consumers want to buy product and delivery together as a package ("FREE delivery!"). They also dislike endless small charges for calls and content -- there's a large "certainty premium" that they pay for bundles. However, the classical consumer surplus analysis of bundling only applies when you group dissimilar but complementary goods (e.g. TV and phone service). And it only works to reclaim some market power for yourself. If your basic product isn't very good, because you're stuck in a "massconomy" mindset, it doesn't help.
- That means operators need to open up their assets (network, logistics, customer data) to upstream partners to help them bundle the retail proposition.
- Most vendors have nothing like the offering that the operators need. Nowhere near. Sorry.
- Content still isn't king. If you really want to make money, go re-invent the freephone number business.
Much more on this here.