“I’m always grateful for whatever help I can get from the press, or a bunch of business-school students, whatever,” Mr. Parsons said dismissively.
Those words yesterday from Dick Parsons, who is about to become CEO of AOL Time Warner. Thanks for asking, Dick. Here’s some more of what you said:
“We’re the No. 1 movie company, the No. 1 online company, the No. 1 premium cable network company, the No. 1 cable network company, No. 2 cable company, No. 2 music company. What am I missing? All of these businesses are roaring, with one exception, no question. What we’ve got to do is answer some serious questions around AOL. What is the future of narrowband? Is this a medium that has a long-term advertising future and if so, at what rate can we expect growth and how will it migrate to broadband?”
Here’s the thing. People go broadband to consume information. From all reports, Napster drove broadband traffic. Record companies squealed like stuck pigs, but note a new report from Jupiter Research. Again, from the New York Times:
Disputing the position held by the major record companies, a report issued on Friday found that people who use file-sharing networks to obtain music at no charge over the Internet are more likely [italics mine] to have increased their spending on music than are average online music fans. The report … also found that people who use high-speed Internet access and CD burners to make homemade compact discs ÷ a practice that has been criticized by the record industry as abetting piracy ÷ are as likely to increase their spending on music as to decrease it.
Wait — it gets even better. Another Jupiter report finds considerable pent up demand for broadband service:
[W]hile only 16 percent of U.S. online households subscribe to broadband, more than 24 percent of dial-up consumers are considering signing up for a broadband service within the next 12 months.
[F]or the first time in years, the top motivator of dial-up users planning to switch to broadband is a persistent “always on” connection (59 percent). Less important are entertainment-related features such as the ability to view quality video (26 percent) and listen to audio (15 percent).
It’s true: an always-on connection is lovely, though I have a not very sneaking suspicion that an always-on 56kbps connection would soon get old. And those 26 percent and 15 percent figures feel anecdotally low. I could probably find you a ton of research that says that no one plays games or surfs porno — and I could probably find server logs that demonstrate the exact opposite. As a friend of mine says, no one has ever traded for a slower connection.
So what does all this mean for Parsons’ dilemma? I think it means that AOLTW should embrace broadband like a California tree-hugger embraces a redwood. Push the bandwidth, and push the content that drives demand. CNN? The Atlantic Records archive? Raw satellite feeds? The Wizard of Oz? Put it online. All of it. You want to put up a tollgate? I could get behind that; servers and server-side bandwidth are expensive.
But the cheaper you provide the broadband content, the more people will want broadband access, and the more people have access, the more they’ll want content. I have no idea where the demand cycle tops off, but you know what? Neither does anyone else. And of all companies, only AOLTW has the power on both ends of the pump to find out.
Piracy? Well, what about it? You think people aren’t already burning your records, your DVDs? Remember that study — downloads drive demand, they don’t satisfy it.
Get out of the narrowband business. All those modems that old management bought five years ago? Trash ’em. Get on cable systems, get on DSL lines. Jump on bandwidth, and show people how much they need it.
“Grateful,” you said? Happy to help.