The cable and satellite companies still seem to be in denial of the fact that dematerialization is coming. In the same way that encyclopedias have been dematerialized, their fate is upon them. Just like day planners have been dematerialized, their day of reckoning is at hand. Just like film and cameras have been dematerialized, the end is nigh. Apple TV is coming for you, cable and satellite companies, are you ready to join Encyclopedia Brittanica, Franklin Covey and Kodak in the not so exclusive club of irrelevant and waiting to expire?
Dematerialization is an economic phenomena where a product or service is delivered in a way that consumes less resources than the traditional way of delivering the product or service. This can be as mundane as using less physical materials in making a widget or as revolutionary as obviating the need for the physical product entirely.
The smartphone revolution brought about by Apple and Google is amongst the most vivid examples of dematerialization. With an iPhone or an Android device in your pocket, why do you need day planner? With the advent of super usable web browsers, awesomely powerful search engines and a glut of reasonably accurate online sources, why would even a library stock an encyclopedia on its shelves? Professional photographers excluded, what is the market for consumer point and shoot cameras anymore? Is the manufacturing and selling of physical film anything more than a minor business with a small amount of enthusiasts? If you are unsure, go ask Kodak who is having a tough time selling their patents in bankruptcy. Miraculously subsumed by the smartphone, all of these products have been magically dematerialized out of a relevant existence in the market today.
Apple's Modus Operandi
None of this should come as a surprise to the content delivery industry. Apple has done this doomsday trick before. For those who are unaware, this is Apple's business model; Identify and transform large industries where both consumers are noticeably dissatisfied and technology can dis-intermediate the existing providers.
When Apple entered the music business, consumers reviled the record companies (and still do) enough to the point that theft was considered justified by several generations of people. This complete dissatisfaction when combined with both Moore's law and the rising distribution power of the internet made the iPod and iTunes runaway successes that ushered in the death knell for big-box music retailing. POOF! Bye bye Tower Records!
The tremendous margins of the iTunes ecosystem created a horde of cash that allowed Apple to target its next victim. The phone business is different than the music business in that it was not possible to "creatively destroy" the wireless carriers. It was, however, the same in how consumers were ridiculously disdainful of the current providers. Despite the strength of the entrenched players, Apple was still able to both redefine the marketplace (by refusing any and all attempts of carriers to modify the design of the handset) and to create a heretofore unseen App marketplace that is now the envy of all competitors who are now pale imitators. POOF! So long Brittanica. See ya Franklin Covey. Wouldn't want to be ya Kodak.
So let's take a look at the cable companies. Consumer hatred? Check! Technology based opportunity for dis-intermediation? So much so that Apple is a little bit late to this party. Cord cutting has already begun. Imagine a future with a magical all-in-one Television device where consumers no longer need a cable box to watch their favorite television programs and movies. Oops! That's already here given the combination of Smart TVs and web based media distribution from Hulu and Netflix. Imagine that same device with a retina display, a well-designed interface to find and play programming, an integrated DVR and a remote that takes full advantage of the touch computing advances of the iOS because the remote is your iPad and a seamless interaction between all of your iOS devices via Airplay. Further imagine this magical device is sold by a company with a fully operational B2C sales and customer service engine for products, services and media. Does cord cutting seem a bit more compelling now?
The content delivery companies do have one big defense in place; Content development and ownership. Almost every major content delivery provider has a large amount of exclusive content in the form of television, premium series, movies, sports or some combination thereof. Some might argue that the current programming bundling models might be an advantage, but at this point consumers don't seem too keen on paying for access to channels they don't watch. If history is any guide to future events, I can see a whole lot of dematerialization going on. Don't ask for whom the bell tolls cable and satellite industries, it tolls for thee.
Editor's Note: Always enlightening and never dull, check out more insights from columnist Stephen Fishman, including: For Apps and AppStores, the Singularity is Approaching