Figure 1
The ability to capture value, access content, and build and maintain partnerships will continue to be critical to the success of players in this industry. The digital media industry is dominated by major conglomerates, with companies having several different core capabilities; consequently, this industry is highly inter-connected.
Amazon, a member of the Gang of Four, is well positioned not only to strengthen its position in the tech gang. Originally introduced with the bold mission to become the “Earth’s largest bookstore,” the company has quickly evolved to become a leader in ecommerce, physical and digital distribution, ebook publishing, and now digital media ecosystem creation. As some argue that Amazon is copying Apple’s strategy, Amazon has the tv and video content, ever increasing, through Amazon Prime, and the device(s), through the Kindle Fire and rumored Amazon phone. To target a different, larger market, Amazon competes in a way where it is and always has been “very comfortable operating at extremely low margins.”
So where is Amazon headed? As can be seen in the stack model (Figure 1), Amazon is already a significant player in four of the five major digital media industry layers. Will Amazon choose to venture into tv and video content creation and production, similar to how it disrupted the publishing industry? Or will it choose to continue to focus on building its ecosystem, through device(s)?
Considering the McKinsey Quarterly on the “Ten tech-enabled business trends to watch,” Amazon appears to be taking the approach of “imagining anything as a service.” Amazon is not only using its platform as a service but adding to its services through content and devices. Amazon’s core capability is servicing the world by connecting the world. Amazon has already done this in the publishing industry, successfully finding and supporting people or talent to create new material, supported by the process of connecting third party retailers, technology allowing digital publishing and storage in the cloud, and organization that ensures low prices.
With digital media, specifically tv and video, Amazon will likely take this opportunity to truly provide an all-in-one service that locks in customers. Amazon is in a very unique position where it has vast amounts of information on consumers, related to music, books, videos, and devices, to be used in experimentation through big data; similarly, it already is highly connected to or servicing consumers, sellers, and enterprises. The technology is already there, with analytics to understand the viewer and provide valuable information to the producer, along with Amazon Cloud Drive, ensuring anywhere access to consumers. The organization will be consistent with Amazon’s focus on wide selection, low price, and convenience, continuing to connect customers and other players, from content creators to OTT service providers. Finally, the process will be interesting, as it expands Amazon’s ability to be more than an etailer, distributor, and publisher, but also a manufacturer, and ultimately, an entire ecosystem provider. It is critical to remember that “Content is King!” As it has already done in publishing, Amazon needs to support independent content creation by identifying and support talent, with a process to incentivize these creators, to take advantage of the long-tail opportunities. With easy access to capital to further invest in acquiring, licensing, and/or creating content, Amazon must continue its recent efforts of building and maintaining relationships with the major content producers, to guarantee the latest and most in demand content.
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