There’s been a lot of discussion recently about Facebook’s increasing role in how people get their news, and whether or not that is a good thing and/or what to do about it. But one of the smartest things I’ve read on the topic comes from freelance tech analyst Ben Thompson, who writes a blog called Stratechery — and who put Facebook’s dominance into context with a post about how value in the media industry is moving to the edges, and publishers are stuck in the middle.
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Thompson explains how companies like Largan have gained power, just as chip makers and software providers like Microsoft and Intel did during the rise of the personal computer — leaving the companies who actually assembled and sold computers in the middle, their profit margins dwindling as value moved to the ends: specialized manufacturers on one side, and services on the other.
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So for example, in the analog world in which newspapers, magazines and other forms of publishing controlled the distribution platform and therefore the channels through which content flowed, they also controlled much of the value. But new platforms have emerged — such as Facebook and Twitter and LinkedIn and dozens of others — and they have accumulated much of the value and market power that used to accrue to publishers and media companies. As Thompson puts it:
When people follow a link on Facebook (or Google or Twitter or even in an email), the page view that results is not generated because the viewer has any particular affinity for the publication that is hosting the link… if anything, the reader is likely to ascribe any positive feelings to the author. Over time, as this cycle repeats itself… value moves to the ends, just like it did in the IT manufacturing industry or smartphone industry.”
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In other words, Thompson believes that because of the disintermediating effect that the internet has on content, value is moving towards the individual creators of that content — writers, editors, artists, etc. — and towards the platforms that allow for discovery and/or distribution of that content (Facebook, etc.) and away from publishers and media companies of various kinds.
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So what does the future look like for those media companies in the middle of the “smiling curve?” Thompson doesn’t say, but it probably isn’t going to involve a lot of smiling — instead, it presumably involves trying to squeeze less and less revenue out of a market where they are rapidly losing control, and trying to form relationships with platforms like Facebook without losing even more.
Link to the rest at GigaOm and thanks to Matthew for the tip.
PG says this is one of the principal results of the disruption that ebooks and ecommerce have visited on traditional publishing.
In the old days, the author created the manuscript, the agent sold the manuscript to the publisher, the publisher took the manuscript and, with the help of a printer, turned it into a book, the distributor took a bunch of the books and put them in a warehouse from which smaller bunches were sent to bookstores/other retailers and the bookstores sold the book to readers.
Under this model, the manuscript was of no value to the bookstores and a lot of intermediate steps were necessary before the manuscript became salable to readers. Without the internet and in an era of mass broadcast and print media, an individual author had very few ways of affecting discovery of the book, which, for most books, happened primarily in bookstores and other B&M retailers.
Today, the author creates the manuscript and either converts it to an ebook or pays somebody to do so, Amazon takes the ebook and sells it to readers. Those are the only necessary parts of the ebook/ecommerce supply chain. Discovery of ebooks takes place online at Amazon, Facebook, Twitter, etc. The rest of the old supply chain is obsolete and an unnecessary expense.
The author and Amazon are the only places where significant value is created in the new supply chain.
The fight between Amazon and Hachette is about the dominant players in the middle of the obsolete supply chain trying to remain relevant and capture more of the value that they used to take for granted.