Douwe Osinga's Blog: The Big Guys are Scared (and getting bigger)

Sunday, February 15, 2004

The take over attempt of Disney by ComCast and the planned merger of Sony Music and BMG make the promise of the End of Big Media seem like another fairytale from the pre-millennium Go Go years. From the looks of it, Big Media is not exploding into pieces, but only getting bigger. But look closer and you’ll see that this just Big Medias way of reacting to an existential crisis that has a lot to do with the Internet.

The success of legal digital music, like Napster 2.0 and Apple’s iTunes, seems another indication that Big Music is surviving the digital challenge, but it is significant that it was a technology company (Apple) that made it happen. The original plans of Big Music didn’t include burning CDs at home, but the success of P2P networks forced there hands. These legal alternatives to Kazaa et al are using DRM that bars users from the full potential of digital music, but they also illustrate that Big Music has lost its monopoly on music distribution.

Distribution of music used to be hard work. You’d have to control radio stations, get you records into stores and finance publicity of new bands. Only the biggest of music companies had the muzzle to do that and in order for a band to succeed, they needed access to this infrastructure. The more people start buying music over the Internet, the less important this infrastructure is.

The revolution that shook the music industry is under way for the movies too. It takes a bit more time, because downloading a movie is a lot more work than downloading a song or even an album, but with bandwidth still expanding and getting cheaper, the Internet is closing in on Hollywood. The real fight here is not about piracy or which technology standard is better; it is about distribution. The Internet will allow anybody to start a tv station, just as it allow anybody to start a radio station. The desertion of Disney by Pixar is a sign of the times here; Pixar can go it alone, it doesn’t need the distribution of Disney anymore.

Comcast is cable company offering broadband Internet access; by acquiring Disney, they can add a huge content library to their offerings. With that content, they can offer their users all that they need in digital land and put them in a walled garden; there’s no need to go to the scary Internet. If this sounds like an AOL replay, it is. AOL bought Time Warner for the same reason. That didn’t work and this probably won’t either. It is panic play. But as usually on Wall Street, when the going gets though, the big eat each other.