Is Distribution or Content Still King? It's Changing, Again

There is a very old debate in the video entertainment industry about whether ecosystem power is held by distributors or owners of content.

A perhaps interesting illustration of how the power could shift is illustrated by current negotiations between Apple and Disney about content rights. Disney owns ESPN, for example, considered an anchor for a streaming video service.

Disney’s negotiating is familiar. Disney wants Apple to carry more Disney channels in exchange for a carriage agreement. That is what typically happens in any negotiating session between major networks and distributors.

In this case, it remains unclear whether Apple, as a distributor, or Disney, as a content supplier, has the stronger hand. Both are powers in their own right, within the broader Internet ecosystem.

Perhaps the situation of the channels that will not be asked to be part of a new streaming service (featuring perhaps 25 channels is instructive) illustrates the changing nature of the equation.

Though I generally argue that “content is king,” at least in recent years, in past times I have argued that “distribution was king.” But that was a time when cable TV operators--only one in each market--were the sole distribution agents.

As satellite TV came on the scene, preceded by smaller hotel and satellite master antenna TV operators, as well as mostly unsuccessful MMDS operators, the number of important distributors grew. Most recently, cable TV operators, Google Fiber and now the streaming services have added to the number of distributors.

That arguably has titled power back to the content owners.

But the Disney-Apple and Sling TV services offer a way of revising  the nature of the argument. Perhaps the generally-unused adjective “important,” used to modify “channel” or “network,” is the new key.

In a world where either a la carte or skinny bundles gain share and importance, it is the small, niche channels that lose power. They won’t be included in the 20-channel or 30-channel bundles. So they lose bargaining power because the distributors do not want to carry them.

The anchor services such as ESPN will continue to hold considerable power, as they are the “must have” channels. All the smaller channels will lose value.

So “important content” is king. Not all content will continue to have the same status as in the past. And, for some time, the power of distributors is going to grow, as new streaming sevices struggle to break free and assume dominance of the distribution business.

So it isn’t going to be easy to say that “content” or “distribution” clearly is king.