Tuesday, September 06, 2005
Umair vs The Economist
I have a lot of respect for the Economist guys, but sometimes they really get tech wrong. Case in point, the latest article about the digital home. The argument (it's hard to follow) is essentially that consumers don't value the digital home, but incumbents do, so they'll try it, and it will be a big, costly error.
I think this is a specious argument. Let's take a bigger picture look at what's happening in this space.
First, 'security' is being built in at the hardware level, and being extended to all components of the platform. By now, you've heard the stories about the Wintel disabling your monitor/Blu Ray player if you're doing something naughty. This is gonna be round 2 of the good ole replication wars.
Second, in opposition, incumbents (and startups alike) are waking up to the fact plasticity is going to be one of the fundamental sources of value in a Media 2.0 world. What does that mean? Well, in simple terms, letting consumers unbundle and rebundle their own personal media. Viz, Akimbo, Tivo-->software play, Blinkx, Current, Last.fm, etc...
Third, the model that's emerging across the industry is something like buying a household license for your media - and then sharing stuff across your network. Will consumers go for it? I think the edges of the model will be pushed a bit - sharing with your friends, etc, will be possible. The marginal benefit (switching costs explode) is much greater than the marginal cost (a tiny amount of marginal revenue foregone) to Hollywood (labels, etc).
Fourth, micromedia continues to be the big unknown. Lots of players are starting to wake up to the fact that 'consumer-generated content' can give a quick hit to essentially their valuations, if nothing else. So there's going to be a lot more experimentations with different kinds of micromedia, and micromedia business models, which I think will really start bubbling up in the next year or so.
The point of all this is that the Economist, of all pubs, should know that incumbents almost always fail to push technology to the market (unless they're evil monopolists)...because doing so creates huge strategic gaps and arbitrage potential (viz, region free DVD players, Playstation chips, blah blah).
So the digital home that's being pushed by incumbents is one thing...but the one that's being created here and now by startups and micromedia visionaries is something they really should have considered, because the real digital home is going to be a synthesis of the two; a recombination of the factors above.