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Cable Technology Feature Article

February 01, 2010

What's "King": Content, Distribution or Discovery?

By Gary Kim, Contributing Editor

On top of a fourth quarter revenue increase of 24 percent and adding 1.1 million subscribers to what is now a 12.2 million-subscriber base, Netflix continues to confound observers who have been arguing for years that its business model essentially is 'toast.'
In fact, Netflix subscribers are up 31 percent year over year. Also, about 48 percent of Netflix's customer base streamed at least 15 minutes of video during the fourth quarter, up from 28 percent of customers two years ago.
By mid-2010, the company projects that about 68 percent of its subscriber base will be streaming movies and television programming to computers, Web-to-TV devices like the Roku box, or the Xbox 360, Wii or PlayStation 3 game consoles.
And that's with a catalog containing older films, B-movie titles and classic-TV content. Imagine what the numbers would look like if Netflix could offer current films or current TV content.
To recast the perennial debate about whether 'content' or 'distribution' is king, the growing element is 'discovery.' In a world where shelf space is virtually infinite, inventory costs are low and choice is therefore virtually unlimited, discovery emerges as the new dimension in the video business.
In other words, 'how to find stuff' is a new element affecting the basic business model. That doesn't necessarily bear directly on appetite for professional content compared to user-generated content. 'Hits' will still represent most viewing. But more viewing will shift to less-popular bits of content. The problem is how to find it, where one is right now, on the displays one has access to, without wasting much time.
Infinite choice, in other words, represents a new problem. Leisure time is finite, content is not. That means people need filters and guidance about finding worthwhile bits of content. Brands remain important, in that regard. But ratings, recommendations and aggregation sites are more important.
To a large extent, content aggregators therefore will gain influence and importance. So the older debates about whether content or distribution channels are king will become less relevant. Not irrelevant, but less important. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Amy Tierney