Given some of the recent transactions, convergence has come roaring back after being considered dead in the wake of some disastrous deals earlier this decade. Can anyone say AOL/Time-Warner?
Despite the renewed belief that content and connectivity are a magical pairing, my take is it’s much ado about nothing all over again. At the end of the day, the pipes are much more valuable than content. Why? It’s simple: There are only a limited number of pipes but lots of content. This may live in a 500-channel universe but there’s limited way to access all of this content.
If consumers want content, they need a way to get it, and they are willing to pay higher prices for better, faster, more convenient connections. Look at how broadband prices continue to be increased with nary a whimper from consumers, who are loathe to pay anything for online services, even those they find valuable and useful.
No one talks about it much but he/she who controls the pipes, wins. It’s as simple as that.
There’s at least one person who seems to share my thesis: Rogers Communications CEO Nadir Mohammed, who provided this juicy quote to the Globe & Mail:
“We think there’s a lot of glory in dumb pipes,” he says. This is shortly before he also says, “There’s no such thing as dumb pipes.”
This quote come from the leader of a company which owns large broadband and wireless businesses, as well as radio stations and TV stations, magazines, Web sites and a baseball team.
The sudden need by pipe owners such as Bell Canada and Shaw to own content sounds like the same arguments pipe owners were making a decade ago, and we all know how well that turned out. The difference between then and now is there’s so much more content being created, which has made content is more of a commodity.
Meanwhile, the number of pipes has stayed relatively the same. Sure, there are a few more wireless carriers but it’s not like billions of dollars being poured into building new broadband networks being created. As long as pipes are in short supply, they will remain an extremely valuable asset – much more valuable than content.
Hi Mark,
I believe that content is so much more important than pipe. Add a certain quantity of pipe and you will have a price war. Add more content and as long as it is valuable, people will pay the price without price war. So if you had to choose, wich businesses do you prefer to be in? Money spents to acquire it being equal? For myself, the choice is crystal clear!
Not sure I buy into your thesis. There really isn’t more pipe being added, other than some new wireless carriers. Meanwhile, there’s tons of content out there, although I do agree that consumers are willing to pay for high-quality content.
Mark