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Why You Want to Eliminate Middlemen in the Cloud

Posted by Bob Warfield on February 20, 2009

Hulu’s decision to cut off Boxee from being able to display Hulu content is driving some consternation in the blogosphere.

Fred Wilson, an investor in Boxee, thinks people just don’t understand and that Hulu should come back to the table.  Understandably its a blow for Boxee that is tough to take early on when momentum is everything.  Fred has long been a lover of streaming media and predicts the ultimate demise of owning your own media.  He and I have gone back and forth on this issue in the past, and what’s happening to Boxee is a bit ironic, because it proves my point.

Meanwhile CBS is going to go after Hulu for shutting off TV.com which is ironic given the Boxee situation.

Techcrunch writes an amusing post entitled Free Fred Wilson.  Fred needs “freeing” because he is caught between the rights of a user to view content the way they want to and the rights of the content owner to control how that content will be displayed.

What does all of this have to do with Middlemen in the Cloud?

O’Reilly Radar comes closest to my thinking with this quote:

The real insult, though, is calling the people who made them cut Boxee off “content providers.” They might as well have told the studios they are the moral equivalent of the guy schlepping reels around the projector booth.

Did you catch it?  Hulu and Boxee are the Middlemen.  They have no power, no control.  You can think you’re buying something from them, but the real power is with the Content Providers, and you don’t have a deal with them.  Unless you bought the media.

This applies to other types of virtual goods and service available through the Cloud.  If you go to some organization that’s trying to arbitrage Cloud Computing resources, but doesn’t actually own any computers, they’re just Middlemen.  They are resellers.  Their margins are thin and the value they can add is limited.  Worse, if the owner of the real value add, the guys like Amazon that have the servers, want to change the deal, they can do so.

To be sure, you can make a deal with the Content Providers or original owners of the physical goods such as servers and still get into trouble, but at least you only have to wade through the terms of one deal.  When dealing with Middlemen, you usually have no idea what deal they have with the ones really creating the value.  You have no idea whether they can deliver on the deal you think you have with them.  There is a cutout that allows the Originators of Value to do as they please.  BTW, Hulu is an instrument of the Content Providers.  Read that O’Reilly article to see more detail.

The other problem at work here, and vaguely implied in the O’Reilly article, is that ever since William H. Gates III got the better of IBM, big companies have been afraid the nerds would steal their treasure and make them look foolish.  They work overtime on Draconian Measures to prevent that.  They’re certainly not about to let both a Middleman and a Nerd get hold of an actual Golden Goose, or likely even a whole Golden Egg.  If there is one thing Content Providers can never ever let happen, it’s being made to look foolish.

Hmmm.  I wonder what the content providers think about the idea that the URL for O’Reilly is radar.oreilly?  One of my startups hired Radar O’Reilly one time to help us promote a service called PriceRadar.  He was very clear that he couldn’t even call himself Radar because he was just a Middleman for his own character.

Hate when that happens!

One Response to “Why You Want to Eliminate Middlemen in the Cloud”

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