Who Pays Whom for What?

Should I pay them or should they pay me–the chief executive of a multimedia company (primarily into CD-ROM creation and distribution) asked me sometime ago, while exploring ways wand means of distributing his entertainment software over cable network. By ‘they’, he meant the cable MSOs.

Too ignorant about hat was then ‘another’ industry, I did not have an answer for him. Ignorance is bliss...

With content increasingly getting into the service portfolio of communication
service providers, I cannot afford to ignore that question so casually now.
After studying international trends and reading loads and loads of text in
magazines, I know a little more now. But the answer to that question still
remains elusive.

In most of the recent discussions, the focus seems to be the change in
positioning of different categories of service providers and changes in their
inter-relationships. Big consulting companies and regulatory agencies, who have
taken the lead in discovering the ‘new value chain’, have proposed one model
or the other, some of which are a little different from traditional industry
models, while some are radically different.

The hunt for the ideal model is still on...

But why does everyone start with the presumption that there has to be an ‘ideal’
model? Why the need to find a ToE–theory of everything?

All earlier models were based on the assumption (and at that time the fact)
that there are fixed ‘categories’ of service providers. What it meant was:
if there is a class of service provider x, and another category y, and the
relationship between them is defined as a function f then there is a definite
relationship equation possible, where y=f (x).

Over a period of time, the nature of relationship f kept on changing with
time. And the ultimate objective of consultants and analysts remained to
discover and define that f as accurately as possible at a given point of time.

That phase is over.

Today, a telco can be a content provider, a cable service provider can be an
Internet access provider. And a website can offer realtime audio. One telco may
compete with an ISP, another may co-operate. An ISP may decide to generate
content, or it may just outsource that. So you cannot define category x and y in
a fixed manner. And if you are unable to do that, the question of a definite
relationship does not arise. Instead, relationships are specific to companies.

But that being the case, how does one solve the who pays whom puzzle?

One can’t. The only argument that it provides is that there is no single
interrelationship model anymore. So there cannot be a single money-flow
mechanism. You cannot say a telco will pay a content company or vice-versa.

So let us consider a specific-relationship scenario–between a service
provider company A and another company B–and then repeat the question: who
pays whom?

The answer to this question is extremely simple: The company that provides
more value to a common end-customer has the right to charge the premium,
notwithstanding whether it is a telco, a content provider, a website, or a local
access provider.

But how do you know who provides more value? Simple. Think who will lose if
the partnership is not there, and what he will lose... and you won’t need to
ask who pays whom?

And now, the other part of our question–pay for what? Quality of content?
Reliable connection?

Nonsense! You pay for getting that customer. And the value that you get out
of him.

Shyamanuja Das