The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
Consumers don’t want to be constricted on their own devices, even if they hold these devices 10,000 feet above ground. Charge for access, sure, but content or commerce behavior above ground will mirror their behavior on the ground.
To cover a future-driven sector like the digital media industry, it helps to know history, to ground you in perspective to see not just the future, but also historical trends and bigger picture. Even though lots of things are changing, and the pace of these changes seem to be increasing, some things indeed do remain the same.
Among those things that remain the same: Media moguls — and indeed wannabe and ex-moguls, too — dream of owning all of the media value chain from content to distribution. It didn’t start with AOL Time Warner, but the dream reached its apogee with it, and became emblematic of the monumental failure of such hopes.
And yet, they keep trying. A new company called Golden Eagle Entertainment, founded by ex-Hollywood biggies Harry Sloan, the former CEO at MGM and Jeff Sagansky, former president of CBS Entertainment, has acquired two companies with the intent of combining access plus content and commerce for audiences 10,000 feet and above.
The two companies in question: in-flight Wi-Fi provider Row 44, which has raised about $103 million in funding since its inception in 2004, and Germany-based content supplier Advanced Inflight Alliance. You can get more details on the deal and their rationale in our previous story. My argument isn’t about the mechanics or pricing of the deal, or even about whether Row 44 is the horse to bet on despite it having deals with only two airlines (and some more trials) compared to its larger competitor Gogo. It is more fundamental than that: the faulty logic behind combining these assets.
Here’s how the thinking goes: There’s a huge captive (literally, captive) and growing audience sitting 10,000 plus feet above ground, and one company by virtue of owning the pipe and content (and ability to get even more content through big Hollywood connections), can deliver all these amazing “inflight content and programming” services to these poor credit-card wielding suckers. That’s the pitch. If you have grown up any where near digital, you would immediately see through it.
There are three ways “content” can be delivered in-flight. In the first and oldest, servers (previously just proprietary VCRs) installed on-board offer variety of content, including options for on-demand. The second, more recent, is the in-flight live television service — the JetBlue seat-back monitor being the most high profile example of the lot. The third one that Row44 and now Golden Eagle are trying to develop, will move away from seat-back monitors to consumers’ own devices like laptops, tablets, and smartphones, and deliver content through an access portal.
And that’s where the logic breaks down. The consumers, including airline passengers, are increasingly in charge of their own digital media consumption destiny, and there is no reason why that behavior will break any other way above ground, given free (or paid) access to the internet pipe. The content part of the deal also assumes that the captive passengers are interested in mainstream entertainment content — movies, television, and related content.
Which of course they are, but as in-flight Wi-Fi becomes more common and speeds go higher and become more stable (and the price to access this goes down), the Internet usage behavior of passengers will mirror their on-ground behavior. In other words, an extension of their daily behavior, whether it is replying to emails, shopping online, working, social media, music, news, videos, or any combination of those. Consumers will use the services they are already use on the ground. And will surely not look like any of the limited services that “private-portals” service of Row 44 currently offers.
Captive ecosystems that a company like Golden Eagle are dreaming up will increasingly be unbundled. They may and will be able to charge for access, either directly from consumers or airlines or a combination of these, but on the content and commerce side they will end up looking like the increasingly unused content and commerce portals of on-ground ISPs providers.
All the content deals that Row 44 touts and Golden Eagle expects to do, ISPs have already dreamed of and implemented over the years, and look where their portals are now. Where did that biggest access plus content deal of all time end up? And to take a more recent example, how’s that multiplatform-content-access-through-cable-nets — aka TV Everywhere — doing? All of them, somewhere along the boulevard of broken dreams. Pardon the terrible cliche, but you get the idea.