Recently on The Critical Path
, Horace Dediu made the point that if you have a product that depends on a network, the way to disrupt the product is not to attack the product but instead to attack the network, with the idea being that the network is what makes the product impervious to disruption. As an example, Dediu pointed to the use of bicycles in Holland. Curiously, bicycles sell for cheap ($10 was the number thrown out) and one person that he interviewed stated that she owned several bicycles and left them strewn around town.
But the curiosity doesn't stop there. It turns out that bicycles in Holland are old and rusty. Why? Because they are frequently stolen and then resold on the street. Since everyone has a bicycle, there is little law enforcement can do, so bicycles are "cheap utilitarian transport" to borrow a phrase from James May.
After explaining this phenomenon, Dediu went on to say that his hypothesis had been that bicycle travel in Holland was ubiquitous because the terrain is relatively flat and the climate mild year-round. But it turns out this was not the causality. The causality, as you might have guessed, was the network for bicycles; in this case, the roads.
The roads were built with bicycle lanes and pedestrian lanes. Because the infrastructure was in place and good condition, the populace utilized it.
In a later episode, Dediu said, "The way to disrupt the car isn't to make a better car, but to not have the car at all." The idea here was that yes, the (road) network is the way to disrupt the automobile but really, the automobile is the thing that isn't good enough and as such, there needs to be an integrated solution in place that disrupts the entire value chain. If there was a method of transport devised that didn't require a network of roads (i.e. flight) then the car AND
its value chain could be obliterated altogether.
Ok, so what does this have to do with Apple releasing a product like iTV
? The problem, simply put, is the network.
Which network? NBC? ABC? CNN?
In a word: no.The network that needs to be disrupted is the internet.
I know, I know. The internet is "The Great Democratizer" and has turned us all into "Push-button publishers". And that's all great. It's progressive. And it's in danger.
Think about it like this: how do you connect to the Internet? I'm not asking if you use an iPhone or an iMac. I'm asking how do the bits come into your house? Bonus question: how do the bits get into your workplace?
"What is an ISP?"
Indeed. An even better question: "Who are the ISPs?" Put another way, name for me an ISP that is neither an telephone company (cellular or otherwise) or a provider of televised content. This rules out AT&T, AOL Time Warner, Comcast, Knology, Charter and Dish Network to name a few.
Many times Dediu has discussed the value chain (network) that makes television impervious to disruption. But I think there is a more insidious part of the value chain that is overlooked entirely: the wires that the bits and signals flow over to bring that content into your office and into your home.
While it is true that cable television has a limited life span as does the automobile, both are entrenched and aren't likely to be disrupted any time soon. There is too much value in both the value chains and the network for incumbents to allow themselves to be disrupted.
Case in point: Hollywood has been able to stay in business as long as it has because being a fully integrated product, it is adaptable and therefore resistant to disruption, thus LA has been able to keep a chokehold on the market. If a studio makes a movie and distributes it to theaters, big box retailers (i.e. optical media) and online digitally, the studio itself is a large portion of the value chain. So the consumer continues to pay the price for motion picture that Tinseltown demands.
How could Apple disrupt the network effect of ISPs? I don't really see a way currently. Sure, Apple has a lot of wireless capable devices out in the wild, so in theory Apple has enough end points to build a mesh network, but what good does that do? The content that you want to consume is on the other end of an ISP's connection, so how could you route data without crossing over the backbone? And even if you could solve the routing problem, the radios in Apple's phones, tablets, laptops and desktops wouldn't be strong enough to carry a reliable, persistent connection to the mesh.
I think that Apple can make inroads to disrupting parts of the value chain involved with television or, alternatively, change how we think about or experience TV. But until there is a content delivery mechanism in place that doesn't require traditional ISPs–ISPs that have a duplicit interest in content delivery–I don't think that television can be disrupted by Apple or otherwise.