The games they are a-changin
Remember the dot-com bubble that started during the late 1990s? Shareholders and investors around the world lost billions of dollars. Eyeballs could not be monetised at the pace that was forecast and brick-and-mortar companies did not crumble at the speed that dot-com pundits had predicted. The term “click-and-mortar” was coined instead.
However, the penetration of the internet and digitisation of content has continued to cause life-altering changes in every industry. The internet and digitisation are now the core strategies of most established global companies in the real, and not the virtual, world. In parallel, a new breed of game changers has emerged out of this technological manthan.
Look at Facebook. It was set up in 2005. It has 845 million monthly users and potentially is worth over $100 billion. Consider eBay. It started life in 1995 as an e-commerce company. It was founded by 28-year-old Pierre Omidyar. It had an electronic marketplace. It then added a payments platform now famous as PayPal. Many of us may have forgotten now that eBay was the company that had acquired Skype and scaled it up until they sold it in 2009 to a group of investors. Skype is now part of Microsoft. Microsoft has added Skype video-calling on Facebook and according to media reports, a Skype phone on Windows is due for release soon.
Amazon.com started life in 1994 with the ambition of being the biggest bookstore on earth. It achieved that ambition and then went on to be the world’s largest online retailer. It has ventured into the businesses of electronic publishing, cloud services, e-readers (Kindle) and tablets (Kindle Fire). It has 30 million customers. We will dwell on more details about Amazon’s newest disruption and how it might change the game in publishing.
Amazon successfully disrupted the book retailing business. It is now all set to disrupt publishing. The mainstream wisdom is that Amazon will fail because no one would eschew an established publisher and choose Amazon’s electronic publishing. Think again! Of course, publishers will not vanish overnight giving way to Amazon. Disruption always happens slowly in the beginning, almost by stealth. But, when it gains momentum, as in the case of digital imaging, the established players either master the new game (Fuji, Nikon, Canon and Leica) or fail to adapt and bite the dust (Kodak and Polaroid). When disruptions start, established players are either in denial and ignore the new technology, or, they oppose it. According to media reports, book stores in the US and Canada are refusing to store or sell any books published by online rival Amazon. These chains are now accusing Amazon of using predatory tactics that is threatening to destroy an already weak book-publishing and selling industry. This sounds familiar? But, you may not be familiar with the following story.
Have you heard of Amanda Hocking? Hocking, who lives in Minnesota in the US, wanted to go to Chicago but had no money to make the trip. She had written a novel but was not able to get any traditional publisher interested in her book. So, she came up with a novel idea: Why not publish the book online? All she needed was $300, and surely, she could persuade her family and friends to buy her novel online. This would garner enough money for her to make the trip. This was in April 2010. By October 2010, Hocking had collected not only $300, but an additional $20,000 by selling her books. In less than two years, Hocking has sold 1.5 million books and earned $2.5million. No advertisement, no book-promotion tours and not a single book agent or publisher or a bookstore were involved. Book sales in electronic format in the US alone were $878 million in 2010. More than 30 authors have sold more than 100,000 copies of books on Kindle’s self-publishing site. Is traditional publishing dead? Certainly not. But, the business model is being disrupted.
Now, let us move from a technology that is disrupting print to a business model that will impact the electronic media. It is well known that the world is moving from broadcasting to narrowcasting. People, who are cash-rich but time-poor, want flexibility and self service. They want to pull the content themselves. They want control over what they want to watch, when and where they want it and how. They do not wish to be constrained by cable service or the channel or the idiot box. Enter Google’s YouTube. YouTube was originally created by three young people who worked for PayPal in a Silicon Valley “garage invention”. The concept was simple: All the content was user generated and personal clips taken by the aam janta were shared. This simple tool is, in its new avatar, turning into a challenger of television channels and cables companies. According to most analysts, the convergence of television and the internet will be widespread. But, clearly something interesting is brewing in the space.
Former cricket captain of Pakistan, Imran Khan, recently delivered the Tiger Pataudi memorial lecture in Kolkata. He waxed eloquent about the evils of IPL and Twenty20 cricket matches. He asserted that the deadly cocktail of money, Bollywood and celebrities associated with Twenty20 was destroying India’s prowess in cricket and was responsible for its recent, “consistent” debacle in tests. Quite appropriately, perhaps, the chief sponsor of the Khan’s lecture was Nokia’s Lumia — the latest player in the new battlefield of smartphones. Taking a cue from Bob Dylan one could say: The games they are a-changin’.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)