"Platforms" Change Power Relationships in Value Chains

In the linear video business, there long has been a running debate over where “value and power” lie in the value chain, even if both content and distribution matter. 

At times, it has been argued that “content is king,” (while at other times it seems “distribution is king” (Netflix now; Comcast at the height of linear distribution).

But these days, across many industries, it might be the case that “platforms” have blurred the older distinctions between content and distribution as value drivers, across media, software and internet value chains. 

Era	Value	Key Characteristics
1950s-1970s	Distribution	• Limited TV channels controlled distribution • Networks dominated viewership • Content creators reliant on networks for distribution
1980s-1990s	Content	• Rise of cable TV increased channel options • Premium content providers like HBO gained power • Hit shows became more valuable
2000s	Distribution	• Cable/satellite providers consolidated • Bundling gave distributors leverage • Limited streaming options
2010-2020	Content	• Streaming services proliferated • Netflix, Amazon, etc. invested heavily in original content • Bidding wars for popular shows and creators
2021-Present	Hybrid	• Content remains crucial but very expensive1 • Distribution platforms also important as market saturates2 • Streaming services focus on profitability and subscriber retention

Those strategic differences arguably also have applied during the internet era, when at times internet access (distribution) has appeared to drive more value, and other times when apps or services have arguably driven more value. 

The twist for the internet value chain is the role of “platforms,” which do not neatly fit the “content versus distribution” dichotomy. 

Platforms have blurred the lines between content creation and distribution, making the distinction less clear-cut than in previous eras. Many platforms now act as both content creators and distributors. For example, Netflix and Amazon Prime Video produce original content while also distributing third-party content. 

Social media platforms such as YouTube, TikTok, and Instagram also raise different questions about the value of content versus distribution. Facebook’s platform both enables user-generated content, but also provides the value of distribution, simultaneously. 

In fact, the whole disruption of most value chains by the internet was precisely “disintermediation,” which removed some distributors from value chains (e-commerce disintermediated retail stores). 

And platforms (marketplaces) now essentially create new forms of distribution that are advantageous for many asset owners (owners of short-term lodging assets), compared to legacy providers that are displaced (hotel chains). 

Era	Value	Key Characteristics
1990s	Distribution	• Limited internet access • Dial-up modems and ISPs controlled access • Content creation tools were limited
Early 2000s	Content	• Broadband expansion • Rise of blogging and user-generated content • Google's focus on quality content for search rankings
Mid-2000s	Distribution	• Consolidation of ISPs • Net neutrality debates • Rise of social media platforms as content gatekeepers
2010-2015	Content	• Smartphone proliferation • App stores democratized content distribution • Netflix and streaming services invested in original content
2015-2020	Hybrid	• Content remained crucial but very expensive • Platform algorithms gained importance • Rise of influencer marketing
2020-Present	Content	• Increased demand for digital content during pandemic • Growth of creator economy • AI-powered content creation tools

The sorts of dynamics might be inferred for the software business as well, where at different times it has seemed that “apps” drive value, where at other times “distribution” arguably drives more value. 

Era	Value	Key Characteristics
1980s-Early 1990s	Distribution	• Limited distribution channels (retail stores) • Software companies reliant on publishers • High barriers to entry for independent developers
Mid 1990s-Early 2000s	Content	• Rise of the internet as a distribution channel • Emergence of shareware and freeware • Increased accessibility for independent developers
Mid 2000s-2008	Distribution	• Consolidation of major software companies • Dominance of Microsoft in operating systems and office software • Rise of enterprise software suites
2008-2015	Content	• Launch of app stores (Apple App Store, Google Play) • Explosion of mobile apps and indie developers • Democratization of software distribution
2015-2020	Hybrid	• Content remained crucial but discoverability became challenging • App store algorithms gained importance • Rise of subscription-based software models
2020-Present	Content	• Increased demand for specialized software solutions • Growth of no-code/low-code platforms • AI-powered development tools empowering creators

The key observation is that older dynamics (content versus distribution) still exist, but within a context where platforms now are increasingly important gatekeepers and value generators. At the physical layer, data centers and transmission networks and internet service providers remain “distribution.”

At the business and revenue layer, platforms have emerged as the key drivers of value (Facebook social media, Amazon e-commerce, Google search, Uber ridesharing, and all those embody value creation roles similar in some ways to “content” and also similar in fundamental ways to “distribution.” 

That explains why it is easier to say that “hybrid” models now predominate. For “hybrid,” substitute the word “platform.” 

Platforms such as YouTube, Facebook, TikTok and Spotify might be thought of as intermediaries--neither traditional content creators nor distributors--that aggregate content from various creators and curate it. But in some ways the platforms also act as distributors of that user-generated content. 

So “platformization” more accurately modifies former content and distribution functions in some ways, while displacing each of those functions in some ways, as exemplified by “direct to consumer” sales models. 

Perhaps the best example is Amazon, which, in its function as an e-tailer, connects buyers and sellers. In that role it essentially replaces the traditional distributor (retail stores). But Amazon also curates and funds the creation of actual content as the provider of the Amazon Prime streaming video service. 

In its role as the provider of Amazon Web Services “computing as a service,” Amazon acts as a software supplier in its own right as well as a distributor of those products. 

But if we really have to choose, we’d likely argue that platforms have usurped distributor roles more than app and content provider roles, even in instances where the platforms do a bit of both. 

Disintermediation Does Not Always Help OEMs

“Disintermediation,” the removal of “middle man” or “distribution” stages in a value chain, has been a major outcome of the internet, leading to flatter distribution chains with a new emphasis on “direct to customer” strategies. 

As a rule, that should reduce costs for goods and services suppliers.  Perhaps oddly, that has not been true for parts of the video content industry. You might expect “direct to consumer” video streaming services to provide competition and a substitute product for linear video subscriptions. 

So cable TV and telco linear video subscription businesses arguably are damaged by direct-to-consumer video streaming services, as they are distributors or “middle men” in the value chain.

But it remains unclear whether most direct-to-consumer video streaming services actually benefit so much from the flatter value chains and disintermediation. 

For starters, content owners have traditionally earned affiliate fees from their distribution partners. Disney, for example, has earned about 17 percent of total revenue from affiliate fee payments. Warner Brothers Discovery and Paramount have tended to earn about 21 percent of their total revenues from affiliate fee payments, while NBC (Comcast NBCUniversal has earned about 22 percent.

Revenue Source	Linear Model	Streaming Model	Change in Marketing Cost
Subscription Revenue	High (Bundled with other services)	Variable (Can be higher or lower depending on platform strategy)	Potentially Higher (Need to directly compete for subscribers)
Advertising Revenue	Low (Limited ad inventory)	Variable (Can be a significant source of revenue)	Potentially Higher (Need to build audience and ad platform)
Affiliate Fees	High (Revenue from cable/satellite providers)	Low (Little to no role in streaming model)	Not Applicable

Ironically, cutting out a major part of the distribution chain also has reduced revenue for content owners. 

Nor is it so clear that “direct to consumer” has actually reduced marketing and other distribution costs. Selling direct means building a fulfillment process including retail billing and lots more marketing. 

The point is that disintermediation is "supposed"to reduce costs for supplers of goods and services (original equipment manufacturers). In the case of video content owners, going "direct to consumer" has yet to do so, consistently, if at all.

Big New AI Business Models, Use Cases, Industries Will Come from Solving New Problems

One question many of us are asking ourselves is where dangers and opportunities are to be found as artificial intelligence is applied to more processes, functions, products and industries. And it might be quite humbling--but accurate--to say that much remains unknown. 

And that is simply the way new technology tends to unfold. Many firms were created using core technology developed at Xerox PARC, including 3Com, Adobe and Synoptics. But “the success of some of these departing spinoffs was largely unforeseen, and unforeseeable,” said Henry Chesrough in Open Innovation. 

Consider what innovations the internet brought that likely were unexpected by most of us, such as social media; crowdsourcing, the sharing economy or search, as well as many innovations that already were in place, such as open source. 

Many other forms of disintermediation, where steps in a value chain were removed, are obvious: e-commerce; education, gaming or user-generated content. 

Other unfolding developments, such as virtual reality or cryptocurrency, are less directly-created by the internet, but generally require its use. 

Innovation	Unexpected Value	Use Cases	Revenue Models	Companies & Industries
Search Engines	Democratization of information, knowledge discovery, access to global resources	Finding anything online, researching topics, exploring new ideas	Advertising, affiliate marketing, premium features	Google, Bing, Yandex, Baidu, search engine marketing agencies
Social Media	Connection & community beyond physical limitations	Sharing experiences, building relationships, expressing oneself, marketing & branding	Advertising, subscriptions, data monetization	Facebook, Twitter, Instagram, Influencer marketing
Sharing economy (e.g., Uber, Airbnb)	Sharing resources & assets for income generation	Transportation, accommodation, peer-to-peer rentals, skills & services	Transaction fees, commissions, advertising, subscriptions	Uber, Airbnb, Lyft, Turo, TaskRabbit
Crowdsourcing	Collective intelligence and distributed problem-solving	Gathering diverse perspectives, generating content, finding solutions, conducting research	Platform fees, micro-transactions, project funding	Wikipedia, Kickstarter, Upwork, Freelancer
E-commerce	Convenient shopping beyond physical stores	Broader product access, competitive pricing, personalized recommendations, 24/7 availability	Online sales, marketplace commissions, product subscriptions	Amazon, Alibaba, Etsy, Online retail in every imaginable niche
Open-source software	Collaborative development and access to free software	Innovation through community involvement, cost-effective solutions, customization, security patches	Donations, sponsorships, enterprise support, premium features	Linux, Apache, WordPress, Open-source frameworks for various fields
Streaming services	On-demand access to vast entertainment libraries	Cord-cutting from traditional media, personalized recommendations, global content reach	Subscriptions, pay-per-view, ad-supported tiers	Netflix, Spotify, YouTube, Streaming platforms for music, games, podcasts, educational content
Online education	Accessible learning beyond geographical and financial constraints	Flexible learning pathways, personalized courses, diverse instructors, upskilling & reskilling	Course fees, subscriptions, micro-credentials, corporate training	Coursera, Udemy, Khan Academy, Online learning for academic degrees, professional development, personal interests
Cryptocurrency	Decentralized financial system and alternative store of value	Peer-to-peer transactions, global reach, inflation resistance, new investment opportunities	Blockchain technology, transaction fees, mining rewards, DeFi applications	Bitcoin, Ethereum, Stablecoins, Cryptocurrency exchanges, NFTs, Blockchain-based financial services
Blogging & personal branding	Sharing individual voice and expertise with a global audience	Building influence, establishing thought leadership, connecting with communities, potential for income generation	Advertising, sponsored content, affiliate marketing, product sales, consulting services	WordPress, Blogger, Medium, Independent creators across various fields

And perhaps one of the lessons of innovation is that big breakthroughs happen mostly when innovators try to solve new problems, not fix existing problems.

And right now, virtually everything we see and hear about AI is how it can help fix some existing process. That’s useful, to be sure. 

But the big, unexpected new use cases, revenue models and value will happen where we are perhaps least expecting it. 

New technology can create entirely new markets and value chains when it is harnessed to meet unmet needs we did not recognize. We did not “know” we needed search or social media. We did not know we needed mobile computing and connectivity devices or personal computing appliances. 

AI undoubtedly will, in context, be viewed as an app, a use case, a function or a capability. But in other cases it will be viewed as a platform to support new business business models, industries and types of firms. 

We just don’t know--yet--how all that will develop.