"Technology" Alone Will Not Disrupt Video

There is a recurrent theme among technologists that technology itself can "disrupt" the video entertainment business. Sometimes it is peer-to-peer delivery, at other times mobility, user-generated video, or really-fast broadband or local storage or sometimes even search that is believed to set the stage for a disruption of the video entertainment business. 

Those viewpoints miss the mark, for a simple reason. The value people seek in professionally-created video and movies is hard to replicate on an amateur basis. And the mere existence of an additional distribution channel (P2P, mobile, Internet) can be helpful, but only when the content owners agree to license the content people want to watch. 

Skype co-founder and Atomico investor Niklas Zennstrom now says "peer to peer is not disruptive today." One might argue it was not necessarily disruptive in the past, either. What was "disruptive" was the "stealing and sharing" of valuable content, not the method of sharing. Take away lawful access and technology by itself cannot disrupt anything.

In fact, that is not likely to be the case even when content owners decide to cooperate with new technology platforms to a greater extent. Content owners will not "disrupt" themselves in the sense of destroying the value of the businesses they now run. 

They are more likely to experiment with packaging and retail pricing in ways that augment, rather than disrupt, the existing order of things. For attackers to succeed, they will still need access to the content people want to watch.

What would disrupt the business, though, is a shift in end user demand. Lack of demand for the product (video cord cutting, for example) would open the way for disruption, since declining revenues would trigger more-aggressive moves by the content industry itself. But new technology, by itself, will not disrupt the video entertainment business, unless by "disruption" one only means the adoption of new channels that displace older channels. 

Typically, that is not what one means when using the term "disruption," which implies creation of entirely new "value" and a shift of revenues, often because some new technology is available. That often is the case. 

This illustration from Wikipedia shows how a technology can "disrupt" older ways of doing things, for example. 

Innovation	Disrupted market	Notes
8 inch floppy disk drive	14 inch floppy disk drive	The floppy disk drive market has had unusually large changes in market share over the past fifty years. According to Clayton M. Christensen's research, the cause of this instability was a repeating pattern of disruptive innovations.[11] For example, in 1981, the old 8 inch drives (used in mini computers) were "vastly superior" to the new 5.25 inch drives (used in desktop computers).[8] However, 8 inch drives were not affordable for the new desktop machines. The simple 5.25 inch drive, assembled from technologically inferior "off-the-shelf" components,[8] was an "innovation" only in the sense that it was new. However, as this market grew and the drives improved, the companies that manufactured them eventually triumphed while many of the existing manufacturers of eight inch drives fell behind.[11]
5.25 inch floppy disk drive	8 inch floppy disk drive
3.5 inch floppy disk drive	5.25 inch floppy disk drive
CDs and USB flash drives	3.5 inch floppy disk drive
DownloadableDigital Media	CDs, DVDs	In the 1990s, the music industry phased out the single. This left consumers with no means to purchase individual songs. This market was filled by peer-to-peer file sharing technologies, which were initially free, and then by online retailers such as the iTunes music store and Amazon.com. This low end disruption eventually undermined the sales of physical, high-cost CDs.[12]
Hydraulicexcavators	Cable-operated excavators	Hydraulic excavators were clearly innovative at the time of introduction but they gain widespread use only decades after. However, cable-operated excavators are still used in some cases, mainly for large excavations.[13]
Mini steel mills	Vertically integrated steel mills	By using mostly locally available scrap and power sources these mills can be cost effective even though not large.[14]
Minicomputers	Mainframes	Minicomputers were originally presented as an inexpensive alternative to mainframes and mainframe manufacturers did not consider them a serious threat in their market. Eventually, the market for minicomputers became much larger than the market for mainframes. Similarly, the market for main frames and mini-computers was seriously disrupted by personal computers. Although they were not at all competitive at the time of their introduction in the 1970s, by the mid 1980s they had improved exponentially and could compete directly with the more expensive machines.[citation needed]
Personal computers	Minicomputers,Workstations.Word processors,Lisp machines
Desktop publishing	Traditionalpublishing	Early desktop-publishing systems could not match high-end professional systems in either features or quality. Nevertheless, they lowered the cost of entry to the publishing business, and economies of scale eventually enabled them to match, and then surpass, the functionality of the older dedicated publishing systems.[citation needed]
Computer printers	Offset printing	Offset printing has a high overhead cost, but very low unit cost compared to computer printers, and superior quality. But as printers, especially laser printers, have improved in speed and quality, they have become increasingly useful for creating documents in limited issues.[citation needed]
Digital photography	Chemical photography	Early digital cameras suffered from low picture quality and resolution and long shutter lag. Quality and resolution are no longer major issues and shutter lag is much less than it used to be. The convenience of small memory cards and portable hard drives that hold hundreds or thousands of pictures, as well as the lack of the need to develop these pictures, also helped. Digital cameras have a high power consumption (but several lightweight battery packs can provide enough power for thousands of pictures). Cameras for classic photography are stand-alone devices. In the same manner, high-resolution digital video recording has replacedfilm stock, except for high-budget motion pictures.[citation needed]
High speedCMOS video sensors	Photographic film	When first introduced, high speed CMOS sensors were less sensitive, had lower resolution, and cameras based on them had less duration (record time). The advantage of rapid setup time, editing in the camera, and nearly-instantaneous review quickly eliminated 16 mm high speed film systems. CMOS-based cameras also require less power (single phase 110 V AC and a few amps for CMOS, vs. 240 V single- or three-phase at 20-50 A for film cameras). Continuing advances have overtaken 35 mm film and are challenging 70 mm film applications.[citation needed]
Steamships	Sailing ships	The first steamships were deployed on inland waters where sailing ships were less effective, instead of on the higher profit margin seagoing routes. Hence steamships originally only competed in traditional shipping lines' "worst" markets.[citation needed]
Telephones	Telegraphy	When Western Union infamously declined to purchase Alexander Graham Bell's telephone patents for $100,000, their highest-profit market was long-distance telegraphy. Telephones were only useful for very local calls. Short-distance telegraphy barely existed as a market segment, which explains Western Union's decision.[citation needed]
Automobiles	Rail transport	At the beginning of the 20th century, rail (including streetcars) was the fastest and most cost-efficient means of land transportation for goods and passengers in industrialized countries. The first cars, buses and trucks were used for local transportation in suburban areas, where they often replaced streetcars and industrial tracks. As highways expanded, medium- and later long-distance transports were relocated to road traffic, and some railways closed down. As rail traffic has a lower ton-kilometer cost, but a higher investment and operating cost than road traffic, rail is still preferred for large-scale bulk cargo (such as minerals). Since rail has always been faster than contemporary road vehicles[citation needed], it is viable for passengers in populated regions like Western Europe, south and east Asia and the Northeast Corridor. When urban density increases, rail systems often become more attractive and make a comeback.[citation needed]
Private jet	Supersonic transport	The Concorde aircraft has so far been the only supersonic airliner in extensive commercial traffic. However, it catered to a small customer segment, which could later afford small private sub-sonic jets. The loss of speed was compensated by flexibility and a more direct routing (i.e. no need to go through a hub). Supersonic flight is also banned above inhabited land, due to sonic booms. The Concorde service was withdrawn in 2003.[citation needed]
Plastic	Metal, wood, glass etc.	Bakelite and other early plastics had very limited use - their main advantages were electric insulation and low cost. New forms had advantages such as transparency, elasticity and combustibility. In the early 21st century, plastics can be used for nearly all household items previously made of metal, wood and glass.[citation needed]
Light-emitting diodes	Light bulbs	A LED is significantly smaller and less power-consuming than a light bulb. The first optical LEDs were weak, and only useful as indicator lights. Later models could be used for indoor lighting, and future ones will probably be strong enough to serve as street lights. Classical light bulbs for lower light indoor use remain, possible mainly[dubious – discuss] because of sentimental and aesthetic value, although some lamps using other technologies have designs resembling light bulbs. Incandescent light bulbs are being phased out in many countries.[citation needed]
Digital synthesizer	Electronic organ andpiano	Synthesizers were initially low-cost, low-weight alternatives to electronic organs and acoustic pianos. Today's synthesizers feature many automated functions and have replaced them for home and hobby users.[citation needed]
Mobile Telephony	Mobile Discount Operators	Mobile Discount / No Frills Operators (MDOs aka. MVNOs) first focused on a low-distribution-cost-through-internet sales model. In later times, innovations like low-priced mobile-internet tariffs were brought to market. This tripped the development of a new discount category in the market which was later entered by the large discount retail chains with own branded offerings leveraging their distribution power in the lower tier of the market.[citation needed]
LCD	CRT	The first liquid crystal displays (LCD) were monochromatic and had low resolution. They were used in watches and other handheld devices, but during the early 2000s these (and other planar technologies) largely replaced the dominant cathode ray tube (CRT) technology for computer displays and television sets, although CRT technologies have improved with advances like true-flat panels and digital controls only recently.[citation needed]
Digital calculator	Mechanical calculator	Facit AB used to dominate the European market for calculators, but did not adapt digital technology, and failed to compete with digital competitors.[15]
GPS navigation device	navigationalMap	The old navigational system using maps, needed knowledge of the use and posession of a sextant, a clock and an astronomical almanac known as "Ephemeris". A clear sky was paramount for the calculating of an exact position. GPS can show the exact position, either on a projected map or in degrees N/S/E/W (low end models), in any weather.
Ultrasound	Radiography(X-ray imaging)	Ultrasound technology is disruptive relative to X-ray imaging. Ultrasound was a new-market disruption. None of the X-ray companies participated in ultrasound until they acquired major ultrasound equipment companies. [16]
Wikipedia	Encyclopedias	The paper version of encyclopedias have been outcompeted by Wikipedia. Although one can argue about the validity of all the information on Wikipedia, the sales numbers of encyclopedias confim that Wikipedia has taken over the encyclopedias market.[citation needed]

But those examples also suggest why a disruption of the video entertainment business is going to be different. In none of those cited examples was there a controlling "gatekeeper" whose own behavior could cause a newer technology to "fail." People were free to adopt the substitute product in place of the older product.


In the case of video entertainment, there is no viable "substitute product." What people want, and will continue to want, is the older product of professionally-created video. The only thing technology might change are the distribution channels. The content owners themselves are gatekeepers who can prevent any substantive change in access, pricing or packaging. And that limits the amount of disruption any underlying technology change can cause, in and of itself.