Thursday, February 10, 2005


Those Who Do Not Remember the History of the Web...

TV companies have missed the lessons of the Web. They prefer to avoid learning them, and so seem doomed to repeat them. Walled gardens and proprietary technologies cannot survive for long in the digital world except in niches. Advanced TV can grow like the Web -- and create a larger pie for everyone, but the TV distributors prefer to protect their comfortable but failing monopoly business models. That will not work for much longer.

What lessons? Before the Web, in the early '90, online services like AOL, Prodigy, and Compuserve had been struggling for years, investing many millions, trying to get people online, with only the most gradual success. They used closed, proprietary technology platforms, and they limited services to the "walled gardens" of content they controlled.

When the Web emerged and became easy to use with Mosaic and Netscape, it provided an open platform that encouraged an outpouring of entrepreneurial content and service providers. The old line online services fought that tide for a few years, arguing that most people really wanted the order and simplicity of a walled garden, but soon were overwhelmed by the upstarts. AOL found a half open, half walled niche by providing a high level of customer value for casual dialup users and kids, but the others were assimilated--and now AOL is floundering again.

Cable and satellite may have a couple more years to exploit their monopoly platforms and fight any service innovations they do not see bringing them monopoly rents, before Internet TV becomes a tidal force. However, they would better serve their stockholders by moving quickly to build a relationship with their customers that is based on value rather than exclusivity, one that will position them for the new world of open media. There are huge opportunities for new and profitable services, but their monopoly-minded managers are blind to them. If they do not get ahead of history soon, history will race ahead of them.

This could also be a prime opportunity for Telco TV services, since they have the advantage of starting fresh -- but the Web dynamic is as alien to Telcos as it is to cable operators. Only time will tell if one breed of dinosaur gets nimble, or those funny little companies poking out of the grass take over.

AOL sure had a go of it though. I seem to remember when you could get dial up for $10, and AOL was able to change $25. Why? Simplicity and ease of use. AOL survived and flourished while the nimble, quick-moving ISPs went the way of the little dinosaurs. Mom and Pop subscribers who were not members of the digital elite felt safe and secure in AOL's walled garden!
AOL has it's garden but little else. The only reason people still use it is because they do not understand the Internet. Eventually they will or be replaced with those who do and AOL will be history. They screw up everything they touch, witness the recent mailblocks fiasco.
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