In 1450, almost half a century before Christopher Columbus undertook his voyages to discover a new continent, Johannes Gensfleisch zur Laden zum Gutenberg – better known as Johannes Gutenberg – invented the movable type print in Europe. Gutenberg appears to have been a member of the goldsmith guild, and as a goldsmith he was as much an artist as a technologist. While Gutenberg’s friends marveled at his apparatus and the first print that left his press, a poem, he quickly discovered that he had to align four important things to recoup his loans and investments: advertising, distribution, content, and audience.
Most people at that time were illiterate, so printing poems for the masses was fairly pointless. Gutenberg had strong competition from manual copyists: though their works were by far more expensive and incredibly time consuming to produce, they were also more beautiful, more artful, and could be individualized. So, using his craftsmanship as an engraver and goldsmith, Gutenberg decided to print the bible and then decorate and illuminate it by hand. The bible was his advertisement targeted at a wealthy and literate audience – the church – and contained probably the most sought after content of its time. With this advertisement, he was able to secure a deal with the church for thousands of indulgences, an arrangement equivalent to printing rights for a publisher – and the publishing value chain was born.
In the early days of printing the church appears as an early technology adopter: 20 years later Gutenberg’s process was adapted for sheet music, and the church was the first to use it on a larger scale. Crossing the chasm to mainstream was much easier with music than with the written word, as polyphonic music created a need for documentation capturing information beyond a single monophonic melody. While the church paid more per print, the mass market of entertaining music had economy of scale; printers of small batches for traveling “Meistersinger” discovered the long tail; the so-called “Guild of Announcers” was responsible for the advertising and viral marketing. But it was not the printers and technologists, nor the composers and content providers, nor the stores and markets that dominated the music industry, but sheet music publishers. They dominated the music industries with an almost unchanged process and approach for nearly five centuries because they understood two key concepts:
Digitization in entertainment – the translation of entertainment content into numbers – started in the early 1970s, a mere 40 years ago, and was technology driven. The first customer-facing venture into digital entertainment took place in video – and completely ignored the principles Gutenberg discovered and the sheet music publishers followed so successfully. In 1969 the Music Corporation of America (MCA), an American corporation in the music and television businesses, bought the usage rights for Laserdisc technology, developed ten years earlier by David Paul Gregg. It was not until 1978 – four years before the Compact Disc (CD) emerged – that the first consumer players were available. Philips produced the players and MCA the discs. The digital video player as a technology worked, but it was poorly aligned with the rest of the technology value chain, with available content, and with market demographics and demands: the player had a high resolution, the display screens didn’t; the lineup of titles were limited and mostly older movies; the player and discs were highly priced and thus not affordable for the broad mass market. The market response was crushing.
The CD, on the other hand, took the market by storm for a couple of reasons. First, CD technology was standardized by a global consortium of industry players, aligning existing global distribution channels and processes of the content producers and owners with the new technology. The smaller CD also took less shelf space, making it possible to reach a broader audience with more products. Interestingly the producers were more interested in the digital technology than the studios: studios were concerned with copyright issues; producers and sound engineers were enthusiastic about a technology that finally allowed them to expose their audience to a high fidelity that they already had in their recording studios for ten years. End-to-end digital quality allowed them to manage their brand better, and ultimately better align technologies, markets, and content.
Over the next two decades, there are many examples where purely technology driven approaches of content capitalization failed. In 1983 Germany and France explored the forerunner of Internet applications, the text-centric BTX (Bildschirmtext) and Minitel systems. Unlike the decentralized Internet, the system communicated over phone lines with a central server. The Germans celebrated the technical achievements and possibilities of the terminal and the network, tightly controlled by the government-owned postal and telecommunications service. The bold terminals were marketed with acronyms and technical details and at a high price; access to the content platform was closely monitored, fearing over-commercialization; offered services such as telephone number lookup or general information were slower and had no advantage over existing information services. The acceptance of BTX fell far behind its expectations. France Telecom, on the other hand, took a different approach: the terminal was slimmed down; it got a localized keyboard; it was distributed into households for free; it was marketed as a “service terminal”, using an already existing phone line – no word about its engineering and technology details; existing voice-based information services were shut down or limited in functionality step by step, so that the services of the Minitel were unique; the fee structure for its usage was simple to understand; platform access for third party content providers was standardized, semi-automated, and could interface with existing digital and non-digital content distribution mechanisms. Users were able to make online purchases, train reservations, check stock prices, search the telephone directory, and chat in a similar way to that now made possible by the Internet. France Telecom was able to align the technology with content and market demands, and control – not limit – its usage. The uptake rate and commercial success after the initial investment phase was outstanding.
The rush towards technology-based solutions was of course not just a factor in Europe and was not just a phenomenon in the early days of the Digital Entertainment market. Even in the 1990s companies continued to focus on just providing winning technologies. In the US, TiVo’s digital video recorder (DVR) successfully captured the markets’ imagination. TiVo’s founders clearly saw the future of digital content distribution and exchange, but acknowledged the existing limitations of broadband, and started with simple digital recording of existing cable or dish TV programming. The resulting service was no different from video tape recording with the advantage of a quicker content access and better integrated on-screen programming, but was more expensive without the possibility to exchange tapes with friends or expand storage capacity. The nature of digital recording and TiVo’s missing concept for content and intellectual property protection, as well as the impact on advertising because of the bypass nature of the technology, didn’t ring well with the existing distribution channels and content owners. Hungry to be the first in the DVR “Blue Ocean”, the founders failed to align and control technology, content, and markets. Despite their market impact, as evidenced by the fact that “TiVo moment” and “to TiVo” are even now recognized in the Merriam-Webster Dictionary, the numbers of subscribers before 2001 flattened quickly, and TiVo showed losses year after year.
[Next post in series: After The Bubble: A Market Shift]
