I had a long discussion with a fellow entrepreneur on future of online video entertainment recently. As a sparring partner I tried my best to point out some of the potential holes in his business plan. To sum up benefiting from the changes in competitive environment was really the main theme of the exchange. One thing we could agree on was that opportunities are going to open up, especially in the next few years. Somewhat fortunately we did not agree where the biggest treasures lie. To make better sense of the situation I tried to compile some of the thoughts here.
My biggest worry is that in few years time there will only be business for a very limited number of content aggregators and service providers. Choosing which calculated risks to take will thus be of tremendous importance to the livelyhood of a start-up in this space. I claim that there is plenty of space and demand for numerous differentiated services in the undergrowth of the content distribution chains. Aligning company’s strategy to warrant for the large players’ dominance from the start would in my opinion be a very good business decision.
Playing safe has never really been my piece of the pie, but sometimes starting slow has its advantages. Mass media has the distinct characteristic that there needs to be an established user and device base before it is possible to break even. Unfortunately for now there are no standards and there are no established practices for online video. Thus it will take some time before it will be possible to make profit and by that time there is hardly any first mover advantage left. Being able to adjust will definately be a major factor contributing to the survival of the startup.
During the last week there have been changes happening right before our eyes as companies have been unveiling their latest wares at CES. The flash-based HD camcorders will be making a big splash this year. I would say that consequently consumers expectations on online video image quality will start to become more rapidly. Flat screens with online service integration will slowly, but surely start affecting also content service and peripheral devices’ markets.
In conclusion for a company starting out reaching some kind of lock-in both on customers and suppliers will be imperative. To find the leverage my advice would be to keep it simple and get back to basics. Afterall whatever us engineers come up with will not be able to change all that much. The content produced may change to environmental factors and demand, but video entertainment business as is will not drastically from its core nature of combination of sweat (financing) and tears (passion).