It was Bill Gates who coined the term, “content is king” back in an article written in 1996. The idea defines where the money comes from on the Internet. Gates wrote:

Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.

The article is interesting because it Gates struggles with the same issues people struggle with today: what mix of advertising, subscriptions and micro-payments will fund content on the Internet. However, in each case, the question is posed in the form: because content is king, how do we fund it?

A few years ago, I found the alternative position put forward by Andrew Odlyzko in 2001 that “content is not king” to be quite persuasive (and still do). He started with the notion that content is not king for the Internet because the killer app of the Internet was email and that is hardly about selling content. Instead, it is about communication. Odlyzko builds the case that ‘connectivity’ rather than content drives Internet adoption. Indeed, expenditure on communications has always well outpaced expenditure on content (broadly construed). Odlyzko makes the then radical case that funding the network costs of the Internet will not be primarily done by content but by some form of connectivity.

Now one of the implications of the “content is not king” argument is that there is less need to worry about instant access to content. Odlyzko argues that the costs of the network are driven by a desire to handle to peaks in bandwidth use but, in actuality, those peaks should be driven by connectivity rather than content. His idea is that streaming video will prove less economic than downloaded video. You may think that this is premised on the idea that people won’t be impatient. In fact, that isn’t the case. Downloads can occur at a rate faster than consumption (and do for iTunes downloads for example) and so both streaming and downloads can satisfy the impatient. Instead, the difference rests on the costs of local storage versus remote storage. Either way the content will have to be distributed.

This debate continues. In many respects, since Odlyzko wrote the streamers have been winning. YouTube and Netflix are prime examples of that. And not surprisingly, it is that very fact that has raised the spectre of network costs. But at the same time, connectivity has taken off in extremely strong ways. Facebook and Twitter being prime examples. People pay lots for access to these services but they actually are relatively bandwidth friendly.

But right now big bets are being taken precisely on this issue. Apple’s iPad is still premised on local storage. Amazon’s Kindle Fire is premised on remote storage. One has an advantage for downloaded content. The other has an advantage for streamed content. Ironically, these strategic choices guide almost completely the pricing strategies of the two. The iPad makes its money from selling iPads (the apps and content aren’t big earners for Apple) while the Kindle makes money from the content (with Amazon possibly selling the devices at a loss). Amazon’s strategy is premised on content being king and that is what people pay for. Apple’s strategy is not premised on that. And it is really interesting to see how those choices guide both product design (local versus cloud storage) and pricing (device versus content pricing). To be sure, in each case, a pivot is possible and neither has taken an irreversible bet. However, each has ceded a first mover advantage on the alternative option to the other. Expect to see Apple push for tools that emphasise connectivity of users and Amazon to push for content tools in the near future.

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8 Responses to Betting on content is king

  1. DW says:

    Content wants to be free.

    Margins will always be under more pressure when your product can be replicated costlessly.

    • Van der Meyde says:

      What a stupid comment.
      By your logic “drugs want to be taken” and “guns want to be shit” and “porn demands to be watched” and we as humans have no say in the matter.

      Stewart BRand’s full quote by the way was “Information Wants To Be Free. Information also wants to be expensive. …That tension will not go away.[4]

  2. tomslee says:

    I suspect there is not one medium-independent answer. For music, which we like to listen to repeatedly, it makes sense to buy it once – and content is not king. For movies, which we usually watch once and potentially are impatient for (I’m in a mood for a melancholy movie now, not next week), streaming has obvious advantages so long as the streaming is reliable – and content is king. The move on the part of the networks to encourage time-critical TV by encouraging tweeting around reality shows is surely a drive to make advertising content king again by promoting the use of a connectivity-based medium.

    Hmm. Now I’m not sure what I’m arguing. Comment is not king.

  3. dwight marcus says:

    I think the axiom should be simply “user experience is king”. It’s not so catchy, so if we like we can simply say “experience is king”. Content drives a big part of the quality user experience, but quality is stitched together from all kinds of elements – the UX/UI “look and feel” (Apple scored big with that one), device responsiveness & experience relevance to the user’s moment-to-moment needs (driving directions, restaurant recommendations), the immersive completeness of white-knuckle play (as in first-person shooters). In all of these, except in the applications that increase the completeness and quality of the daily experience, beautifully conceived and artfully-executed formal structures – whether movie, games or songs – are as old as civilization and, whether static or interactive, form the cornerstone of content. Seen in this broader light, “content is king” makes more sense. Increasingly, though, “experience” – and as the years go by this will means “augmented experience” may reveal itself to be the more accurate metric of value. If so, this means that the user’s device and the network (to the degree that it’s needed in the future) are inextricably bound to the structural and executional elements traditionally called content.

  4. Erich Ocean says:

    The iPad is not a good example of the “streaming” model anymore, since iCloud (which is free for every iPad user) has unlimited remote storage of content obtained from iTunes.

  5. luis says:

    Content is truly king. Speaking of which I think Youtube should leverage their overwhelming amount of educational videos and I’m not talking about Youtube EDU which has become a massive promo place for universities instead of a repository of educational materials.

    Many academics are posting great educational videos and materials online. The only problem is to sort the good ones from the rest and present them in an organized manner.

    This effort is being done by: http://Utubersity.com which presents the best educational videos available on YouTube in an organized, easy to find way to watch and learn.

    They are classified and tagged in a way that enables people to find these materials more easily and efficiently and not waste time browsing through pages of irrelevant search results.

    The website also enhances the experience using other means such as recommending related videos, Wikipedia content and so on. There’s also a Spanish version called http://utubersidad.com

    This is a project that YouTube should embrace itself, with curated content from academics and maybe using a different URL (Youtubersity?) so it won’t be blocked by schools.

  6. [...] saying was first coined by Bill Gates in 1996. (See article here: http://www.digitopoly.org/2011/11/26/betting-on-content-is-king/) He likened the content of the Internet to be like broadcasting, and is where the money will come [...]

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