At business school many moons ago, I was suitably impressed by how little most of my classmates knew about distribution, and it’s power in the way business works, the way power is distributed, the way competition is controlled.
Many, many bright ivy league students mistakenly thought that the better mouse trap wins, that technology was the path to success. But that is not the case (Beta vs VHS for those old folks in the crowd).
It’s about distribution, the ability to get lots of product/services out into the market where customers can consume and buy, the ability to decode which products/services get into the flow, the ability to control the ties that connect producer and consumer.
Why is the Hearst Castle so grand? Because William ran the newspapers, had access and control of the information going out to Everyone Every Day. One of the greatest moments in American history was when a young Ben Franklin was so sickened by the smells at his brother’s tallow factory, that he had to quit, and worked for a local publisher instead (suddenly with access to everyone, why do you think he ran the post office?)
Why did radio & TV broadcasters back in the day (days of government controlled, limited licenses) have so much power, and make so much money? How about book publishers, they controlled the capital and production to actually print a book, and get it into book stores around the country and around the world. And music and movie production companies did the same thing. They chose the acts, they controlled the production of various forms of plastic used to ship music around.
The Internet broke those locked distribution channels, especially for value that is electron friendly (vs atoms).
The old distribution not only put the economic power in the hands of a few, but also the editorial control. Those in power made the decisions about what got published, and what did not. What music got recorded, and what did not. What got broadcast, and what did not. Very tight control when you think of how many actual people were making the decisions. THEY were the experts who know (or dictated) what people wanted to see, hear, read, experience, etc.
The internet democratized all that. Now producers can reach out directly to their potential customers, fans, constituents. The middle man, the control is knocked out.
Now middlemen got into the value chain providing real value, traditionally breaking bulk, subsidizing inventory in advance of sales, allowing the factory to even out production, and finally, providing a single point of contact to access to a large number of potential customers.
But with electronic goods, and a ubiquitous global distribution platform, and easy to manage, economically viable single unit delivery and payment systems, its kind of tough for the middlemen to make a play anymore.
And while hard good middlemen are identified as such, traditional media companies (print, broadcast, music, and publishing) thought of themselves as producers, when really, they middlemen just like the plumbing supply house down the street.
It is true that the responsibility to be relevant, the create something others want, has shifted from the distribution companies to the artists, writers, and creators. They’ll have to be better marketers; they’ll have to learn how to use the new tools to get noticed, to reach their constituency.
But at least now, everyone has an equal opportunity. Say what you want to say, and if others value it, they’ll read it, listen to it, and watch your work.
Cable TV started the process in television broadcast, moving from the big 3 networks to hundreds of channels. But even that distribution pales in comparisons to the millions available on the internet. It started in Radio as the big three pulled out, and many independents took a turn, but again, how does that compare with the breadth and immediacy of the internet.
Now the news business is complaining that they can’t afford to produce “un-biased” news because of the entertainment-news popularized by Fox and TMZ and others. Come on, let’s get real, there is no such thing as un-biased news, never has been. It’s just that we all liked Walter Cronkite’s opinion back in the day.
Here are two simple illustrations to make a point.
- I learned long ago that the front page of any news paper only has so many column inches, and the airtime of a news broadcast only has so many minutes. Who decides what get’s how many column inches / minutes of airtime which photo on the front, top fold? How are those decisions made? Are there really any un-biased criteria even available? Can anyone even pretend to validate things like “most important, most relevant, most interesting, most meaningful” as objective criteria to make decisions? It’s all subjective, and the people making those decisions have biases just like everyone else. Please, old media get off the holy horse and quit pretending we’re all two year olds.
- Go to a baseball game (seems like a pretty simple, a-political, a-religious, no talk of abortion, simple rules, lots of easy-to-see data). Ask 10 people to describe the baseball game, via words, photos, or video. Depending on who you ask, you’ll hear about 10 different baseball games, based on their biases, what’s important to them, where they saw the story, what touched them.
The other night, Jonathan Sanchez pitched a no hitter for the SF Giants. But what was the Story? Was the story the no hitter itself, the pitch count, the hitter’s line, the evening’s data? Was the story the relationship between Jonathan and his Father, who hadn’t seen him pitch a major league game, but was with him in the stands, and dugout to celebrate with his son? Was the story how the 16th perfect game in Major League History (think of those odds) got away on an error in the 9th, and the events that put Uribe at 3rd for that play, that Pablo Sanchez’s wife was in labor?.
Was the story the fantastic defensive plays behind Sanchez including the catch at the wall for the second out of the 9th? Of was the story about a father and daughter, taking in their first pro baseball game together, riding the slide in centerfield, hitting whiffle balls in little giants stadium, sharing hot dogs and garlic fries and cotton candy?
What did take place at AT&T that night? There is no single answer. There is no story without context; there is no context with out an opinion, a point of view, a perspective, an agenda, a bias.
I’ve always said that Einstein’s greatest contribution was the theory of relativity. But not in the context of science, but in the context of the social creatures we are. Everything is relative based on our experiences, our expectations, our points of comparison. You’ve seen the email that illustrated where a minute is long or short, depending on if running a marathon, or running a mile. The 360 sweep of the second hand on your watch is the same, but its context that decides whether its long or short.
The unlocking of limited distribution choke holds is what’s turning old businesses upside down.