The Content Trap
Strategy framework for the connections business Netflix built.
Summary
Anand, a Harvard Business School professor who studied media economics, argues that media and information businesses fail by focusing on their content when the value lies in connections around it.
The content trap of the title is the belief that better content is the answer to a strategic problem. Anand argues that content is generally not defensible, that quality is a weak predictor of success in markets with strong network and social effects, and that firms which respond to disruption by investing more in content usually lose.
His alternative framework identifies three kinds of connection. User connections mean network effects, where a product becomes more valuable as more people use it, and Anand argues that the correct response to piracy and free distribution is often to permit them because they build the user base that monetises elsewhere, using Tencent and Chinese media as extended cases. Product connections mean complementarities, where the value of one product depends on another, which changes what should be priced and what should be given away. Functional connections mean the internal linkages between activities within a firm, and he argues that successful transitions, including The Economist's and Schibsted's, came from reorganising activities rather than from changing content.
The evidence includes case studies of newspapers, television, music, education technology and Chinese internet firms, plus empirical work on television advertising and on piracy.
The framework is more useful as a diagnostic than as a prescription, since identifying which connections matter in a given business is the hard part and Anand supplies no method. The cases are chosen after outcomes are known. Some of the examples, particularly around digital advertising and news paywalls, have developed differently since 2016, with subscription strategies working better than the book's framing suggests.
Key takeaways 7
- Investing more in content is the standard response to disruption in media and it usually fails.
- Content quality is a weak predictor of success in markets where network and social effects determine what people consume.
- Piracy and free distribution can be correct to permit when they build a user base that is monetised through complements.
- The value of a product often depends on complements, so pricing decisions must be made across the bundle rather than product by product.
- Successful media transitions came from reorganising internal activities rather than from changing the content produced.
- Chinese internet firms monetised free content through games, virtual goods and services rather than through the content itself.
- Identifying which connections matter in a specific business is the analytical work, and the framework does not do it for you.
Who should read it
Operators and investors in media, publishing and information businesses who need a framework for where value sits when the content itself cannot be defended.
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