Markets Are Cyclical: Why the Internet Monopolies Don’t Matter (that much)

Survival of the biggestThere was a nice feature on Technology in this past week’s Economist. In fact, there were a number of articles I found intriguing (medical tricorders was a good one!), but I want to draw your attention to one in particular: Battle of the internet giants – Survival of the biggest. The case is made that these internet behemoths are getting too big and that their scope needs to be curbed. Okay, I understand that, but I think that the fear is a bit unfounded. Here’s why.

Remember back to when railroads were the only way to get around? Remember when all commerce and long-distance travel was done by locomotive? Now, I don’t know if this is a perfect comparison, but bear with me for a second. There were at least a few big players in the railroad game back in the 19th century (Union Pacific, Central Pacific, and Southern Pacific). I’m sure that there were people back then who were irked that there were monopolies in the railroad business and probably wanted there to be more regulation (like is being argued in the article about the internet).

However, with the turn of the 20th century, a new form of transportation was starting to emerge: the automobile. It didn’t happen overnight, but the automobile eventually became a much more preferred method of transportation.

There’s another example: television. Remember in the early days of TV, there were just a few channels? If you had a TV (and you watched it), you probably saw the same program that everyone else who had a TV was seeing. Again, I don’t know, but I imagine that some folks were pretty peeved by this monopoly. Although, slowly but surely, there came to be more and more choice of TV channels. In fact, it’s gotten to the point where we’re unlikely to ever see the most watched television program eclipsed because there’s so much choice.  Though, some would argue that there still are monopolies in television.

And now what’s starting to breach the monopolies of TV? The internet and online media. There was a slide deck that was passed around courtesy of Business Insider earlier last week that shows the future of digital. There were lots of graphs and lots of data. One of the graphs showed that the percentage of live TV watching has dropped 25% in just the last 4 years. Conversely, recorded TV watching is up over 50%! And a new category has emerged: streaming TV. Whereas there was no streaming TV watching in 2008, it now makes up 7% of primetime viewing in the US.

So, even with all of this choice in television, there is still room for newness and growth.

Tying this back into my argument about the internet behemoths: maybe we can’t see it now, but based on history, I would bet that there’s going to be something that comes along (eventually) and unseats these internet behemoths. Of course, that’s not a reason not to regulate them, but it is something to keep in mind when you see articles like the one in last week’s Economist.

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