Build or Buy Content Assets?
Netflix likely has proven that a streaming service does need to create original content to achieve market leadership, but also suggests such a firm does not need to own a separate content creation company to do so. Apple’s recent decision to acquire the services of Oprah Winfrey might also validate the principle.
Does that mean that Comcast, Verizon and AT&T (or other connectivity services providers) could do the same? That cannot be determined, as each has acquired content creation firms.
But there are other reasons why Comcast, AT&T and Verizon have done so. Ownership of content assets, at scale, creates the foundation for advertising revenue streams, wholesale content revenue streams and some retail bundling opportunities as well.
That matters as content creation and aggregation might represent as much as 70 percent of the total value of the TV content ecosystem, with distribution representing about 30 percent.
In other emerging ecosystems requiring distribution and connectivity, the percentage of value earned by connectivity providers might be as low as five percent to 15 percent.
In other words, connectivity providers have reasons for buying content creation assets that are related to new roles in the ecosystem and additional revenue sources, not simply the cost of acquiring content and creating original content assets.