February 11, 2006

All content will be FREE within 5 years…

Filed under: DRM,Music,Regulatory,Video/Film — Administrator @ 7:06 pm

A couple days ago, HBO (Home Box Office) petitioned the FCC (Federal Communications Commission) in the United States to prevent consumers from recording their content (Subscription Video On Demand) – either with a VCR, DVD, or TiVo device. Sure this doesn’t have a direct impact on those of us living in Hong Kong and China – where HBO doesn’t have the traction it has in the US – yet HBO is representative of the losing battle the incumbents (broadcast networks) fighting – and losing dearly.

My general thesis is that all content will be free in the very near future and that DRM (Digital Rights Management) is not a sustainable technology. I’m not supporting piracy; I just believe it will be very difficult to generate any revenue from content alone. Where the money will be made is on product placements and side promotions, for example. Listed companies, such as Tom.com are spending a lot of money in rights to content that they won’t be able to control – in other words, their business strategy is dead wrong.

The companies that will be the winners, the next Google, will be the companies that develop technologies to harness, distribute and monetize this free content. Yahoo, for example, if a big buyer of networks and page views (note its purchase of Flickr’s 8 million users); yet they are not a buyer of technology…

The reason I believe this sector (e.g. BitTorrent) is a massive opportunity for start-ups is simply because there is: (1) demand, (2) users, (3) exits. The “demand” and “users” are clearly defined, but the “exits” – how will they come? I believe “exits” will come from the major portals, such as Baidu, Sina, and Tencent. The reason is simple: these listed companies can’t develop this technology in-house, but it isn’t because they don’t have the capability, it just that they can’t be seen publicly supporting file sharing, for example.

This is why technology start-ups (in this space), especially in China and Hong Kong, are so attractive (at least to us) and why we believe the next MONSTER company will come from this space.

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