On the heels of the iHeart/Triton deal, The Verge has a piece extolling the longer term competitive power of tech over exclusive content. While both are important, I’d flip the ticket. In digital media markets, over time, strong tech becomes a minimum competitive requirement and content becomes the difference maker.
This dynamic is playing out now in the SVOD OTT streaming market. Netflix started out with a big advantage in streaming tech. While others struggled, Netflix streaming was smooth, even over low bandwidth. Netflix early growth was driven by good tech, decent content, and little premium competition. Soon enough, Netflix recognized others would catch up and began to invest heavily in content. Netflix has spent multiple billions per year to license and create exclusive content – outspending even scaled media companies – and it has paid off.
Smooth streaming is now the norm among OTT video apps and UI/UX is good and improving. Netflix, Disney, HBO Max, Hulu, and the other main services are now competing primarily on content, and Netflix is still dominant.
In digital audio, the winners will all offer strong ad tech solutions and good streaming app UI/UX to listeners – such tech strength will be the minimum to compete. It will ultimately be exclusive content that attracts consumers, and consumers and exclusive audio content brands that attract advertisers.
The analogy is not perfect – the Podcasting industry is built on open platforms and has a history of free ubiquitous content. For better or worse, this will change as differentiating exclusives become common and branded distribution grows brand identity based on a well known podcasts. Spotify’s Joe Rogan deal, which will see Rogan disappear from iTunes and others, is the biggest example so far. The dynamic may play out slowly, but as ad dollars grow, not to mention the potential for consumer payment, investing in exclusive content will accelerate. Yes, most podcasts will still be available everywhere, and the long tail will be important. However, the top content layer will be determinative in the long run.