Why is a phone company buying Harry Potter?

Back in the mid 1990s when Sky TV was in its relative infancy a clear emblem of middle class achievement in UK homes was the Sky set-top box in a living room. The single biggest target of Sky executives at the time was to own the piece of hardware that provided the connection between the living room and Sky’s subscription-based content.

Sky had a virtual monopoly and owning the hardware sitting in the living room was the competitive advantage – unique content lay behind it, but the content providers and the customer had to pay the toll to cross the bridge to reach each other.

Twenty years on, the same approach if unaltered would make Sky (and lots of others) entirely vulnerable. The simple story of the rise of businesses like Netflix indicates the death of the ‘hardware defence’ for media companies. Hosting old episodes of Fawlty Towers ‘in the cloud’ accessible to anyone with a screen and WIFI, renders the hardware ‘moat’ irrelevant. The only real defence is repetitive creation of compelling (and owned) content.  

2014 was the first year that the number of mobile-connected devices outstripped the number of people on the planet. Various estimates put the number of connected devices at between 20bn and 50bn by 2020.

Moore's law continues, but even more striking is the ubiquity of network connectivity, and 'cloud' computing. We expect access to WIFI more than we expect access to running water.

Last week AT&T announced its agreement to acquire Time Warner for $85.4bn.

So why is a phone company buying Harry Potter?

Content and distribution are merging into one. Media companies are becoming telecoms companies and vice-versa.  Different screens - a mobile device, a tablet, a TV, a digital outdoor screen are all blurring into a ubiquitous world of ‘connected screens’. Internet firms like Google, Facebook and the likes of Amazon and Netflix have weaponised video online, posing a direct threat to old-school television and movie companies, and shaking commercial models to their core.

They are also becoming ‘telecoms’ operators, threatening the likes of AT&T. They finance undersea cables that link their data centres. They build and buy fibre optic infrastructure. Facebook builds open source telco equipment, Google offers high-speed Internet services, and Amazon hopes to become an Internet service provider in Europe. 

Software continues to “eat the world” – in fact the process is only just beginning. In media anyone with compelling content that captivates an endlessly distracted consumer will be highly prized. Ultimately it’s the only competitive advantage – everything else is a utility.