CONTENT AGGREGATION AND MARKET STRUCTURE

We take content aggregation to mean the supply of large amounts of content via a single website, app, or platform, typically comprising content from multiple creators or copy­right owners.

The firms listed in Table 22.1 have a range of aggregation levels. At least in economic terms, however, large-scale aggregation from multiple copyright owners appears to be a dominant model in online video entertainment. iTunes, the leading VOD supplier, aggregates TV programs and movies from all the major studios and broadcast networks, as well many more minor players. Netflix offers a large menu of movies, TV programs, and other content from many different owners, including films from a number of foreign countries, to its monthly subscribers. Hulu aggregates mainly TV programs from the three major broadcast networks that co-own the site, and also offers programs from The CW broadcast network and hundreds of other ‘content partners.’ Viacom’s strategy is an intermediate case, offering programming content that has appeared on numerous cable networks through each of their own portals and often Hulu, but most of those programs are owned or licensed by Viacom, a major content provider. Similarly, CBS Interactive offers content from a number of other suppliers in addition to the CBS broadcast network. The major MVPDs’ ‘TV Everywhere’ services typically aggregate program­ming from a number of different basic and premium cable networks, in addition to other suppliers.

Whether or not content aggregation is prevalent in the online video entertainment industry is simply an empirical matter. The efficiency of both aggregating and disaggre­gating media content is enhanced by Internet architecture. Enabled by efficient search, and by the lack of physical economies of scale in IP delivery of more than one program at a time, a provider can set up a website to market even a single video program.

There are some compelling economic advantages of the aggregation model. Content aggregation in the 1990s by portals that charged flat rates per month (such as America Online) was the basis for the bundling theory of Internet content aggregation developed by Bakos and Brynjolfsson (1999, 2000). The ‘one-stop shop’ marketing model is prob­ably more relevant to the current online video market - especially to advertiser-supported sites such as Hulu, and to VOD sellers such as Amazon and iTunes that also offer digital music and other non-video products. These sellers apparently attempt to build brand identity among consumers (said to be a major consideration in the development of Hulu, for example) (Yao et al., 2008), or to capitalize on established names, as in the case of iTunes and Amazon. It is notable, however, that leading online video distributors that rely less upon content aggregation, such as CBS.com (which was the only one of the four major broadcast networks that decided to go it alone in 2007), HBO GO, and ESPN, appear to already have well-established offline name identities. Another force driving aggregation is that website operators undoubtedly experience certain economies of scale due to fixed costs, like website design, maintenance, and administrative overhead. Other Internet developments also seem to display the economic advantages of content aggrega­tion. Google TV and Apple TV, for example, partially serve as aggregators of program suppliers who are willing to be sold as part of an online package that can be watched on a TV set. Microsoft’s Xbox 360 and One, Sony’s PlayStation 3 and 4, and a variety of set­top boxes, tablets, and Internet-connection programs for smart TVs essentially function as content aggregators in a similar way.

Although the marketing and efficiency advantages of online content aggregation seem to favor larger firms, there are no compelling indications that they will lead online video distribution, at least that of professionally produced programming, to become a concentrated industry in the long term.

A related issue affecting market structure is the disaggregation of existing MVPD packages that Internet architecture makes possible. Individual content suppliers can potentially bypass MVPDs and offer their programming directly to consumers, much as a variety of Internet information providers have disaggregated print newspapers. At least to date, however, few individual networks other than HBO have attempted to step outside of the ‘TV Everywhere’ packages requiring MVPD subscription authentication from users. Even in the absence of exclusive contracts, there are strong disincentives for single program suppliers to take this step on their own. The history of both the MVPD and the online video entertainment industries to date suggests that the competitive battles are likely to be fought among large-scale content aggregators, with even new entrants like Sling TV’s online video subscription service able to obtain valuable networks like ESPN only in the context of an aggregated bundle.

22.5