I meant to add that’s the split for the Kindle version of books, and it’s actually that the publisher gets 35% of the retail price. Amazon still pays 5%ish for affiliate sales from whatever is left.

Also, the “content is king” motto came from a completely different context that what you are talking about here.

While distribution is essential (and it’s one of the first things you learn in strategy – that the entities with more leverage pretty much squeeze all the profits from the system), content is also essential. It’s the publisher that is not essential anymore – the content creators are also becoming content publishers due to technology.

Amazon is powerful, but still doesn’t hold all the cards – if they squeeze too much profit from the relationship, content creators will also start distributing their work themselves – right now it’s still very profitable for content creators/publishers to also list on Amazon.

Thoughts?

Of course, we all know who holds the power still, so who knows if that will change.

An interesting observation, but I have to disagree with the hypothesis.

The reason distribution appears to be the source of value isn’t distribution itself but the monopolistic nature of new distribution channels. Each of the examples you have cited describes a near monopoly over the distribution system. iTunes/iPhone don’t have a similarly sized competitor and neither does Amazon’s Kindle. The network effects of these distribution methods actually make them further entrenched and stronger–but, the underlying source of value is still the monopoly.

If content was truly losing its ability to create value, Comcast would not try to purchase NBC–they might instead bid for Netflix or for a content delivery device company like Roku.

Cable companies are worried that with the advent of content delivered over the internet (e.g. TV shows on the web, which have a much lower ad yield) they might be left out of the content value chain. They are responding first by preventing the spread of online TV and movies (notice the 250GB/month cap on home internet users) and they will now try to place bets on other sources of value: content being the biggest.

See more on the subject: http://www.economist.com/businessfinance/displayStory.cfm?story_id=13611259

Rishi

Very interesting post. I wonder if the Kindle model requires a subsidy to offset the upfront cost of technology development and/or design manufacturing. Personally I do not find cost of electronic books, which is not much lower than a cost of a paperback, to reflect economic cost advantage of electronic publishing. Presumably higher availability at a lower cost would result in higher total revenue, but the reality IMHO is the high cost of the device, we currently experience, would make this relationship between content and distribution, non-sustainable.
It seem the only scarcity we will continue to experience is the attention time people will be willing to spend. And that depends mostly on a quality of content. So to me content still is the king.