Who Will Win the Online Media Access Game?

This week, Amazon announced its plans to offer downloadable video content, for rental or purchase. This is the "other shoe" dropping.

With digital media, entertainment content truly is simply a good which may be stored, inexhaustably replicated and sold at near-zero marginal cost, from any source which legally is allowed to sell it.

Yes, Amazon still has to cut deals with the various IP rights holders to do this, but isn't the handwriting on the wall now? Anybody with a functioning order fulfillment model and enough money can play in this game.

This being the case, I was reflecting on what, among the various dimensions of consumer choice, will ultimately create a dominant online non-real-time video content purveyor? Since sufficient competition will probably exist to force prices within a narrow range, I would expect that it will be the vendor with the superior user interface. Whoever makes it easiest to use existing, and evolving, technology, to access, pay for, view and control the viewing of stored video content will probably dominate the market. Perhaps, like the early Merrill Lynch CMA account, some competitor will even patent an especially successful user interface, in order to protect their market position.

What about real-time video content? As it happens, today's Wall Street Journal featured a page one article concerning online "geofiltering." This is the process by which existing content providers, such as local TV affiliates, are prohibiting geographically unwanted consumers from accessing their program content.

Enter the Slingbox. Two brothers from, where else, California, have developed hardware to allow you to view local content from a different network location. For instance, a consumer could watch programming from the TV in their home by accessing it via the internet and a Slingbox. Think a bit more broadly, and the ability to disintermediate any geofiltered, online realtime video signal becomes obvious. Even if broadcasters employ IP address identification to exclude certain viewers, it's easy to imagine a service developed solely to provide "appropriate" geographic IP addresses, for a price. This was done for long-distance least-cost routing years ago.

It seems to me that the companies who are really in trouble now, as the WSJ article suggests, are the local TV affiliates. How much sense can it possibly make to "sell" the same rerun, or even first run, TV program, to hundreds of local affiliates in a world where it can more easily be accessed on demand from a single URL? There goes hundreds of millions of dollars of ad revenue, and, probably, your local TV station. Perhaps it can combine with your remaining local paper to operate a zip-code-localized information-content provider. But non-local content? How can it possibly economically justify its existence for that in the coming years?