A recent Bear Stearns report entitled “The Long Tail: Why Aggregation & Context and Not (Necessarily) Content are King in Entertainment“ highlights a shift in paradym away from the old “Content is King” mantra to “The Content Packagers are King”. The report states that “digital technologies are ‘democratizing’ content creation” and “barriers to content creation are falling, giving rise to ‘user generated content’.”

The report diagrams the continuum of content: Content Creation > Content Packaging > Content Distribution > User Interface > End User. Thanks to the increase in broadband adoption and lowering storage costs, the “Content Distribution” bottleneck is going away. Likewise, the proliferation of user generated content (i.e. YouTube.com) has increased the amount and demand of Content Creation. Using this logic, the demand will come in the Content Packaging arena, a shift away from the previously popular Content Creation or “Content is King” mantra.

An example from the report is the growth and fragmentation of television content. From 1950 to 2005, households had access to an average of 32.5 channels to 56.6 channels of content due to cable and satellite television growth. With this growth in content, the average household’s television usage went from 2.9 hours a week to a whopping 105.7 hours of usage in 2005. More content, more demand.

This phenomenon is repeating itself in the Internet world but at a much more rapid pace. In the Content Packaging arena, websites like Google, Yahoo, AOL, MySpace and others are aggregating user generated content and layering their search and/or categorization technology on top of it to add value to this food chain.

While this report is a great testimony to the need, growth and future adoption of local portals, I’m afraid it will be skewed to make a case for local video given the latest YouTube.com and Rob Curley hype.

What this report does verify in my mind is the following predictions:

• User generated content will dramatically increase and the demand for such content will increase as well. There are a lot of closet journalists out there that would like to “report” on local happenings. They are just looking for an outlet to do so.
• Fragmentation will give way to new viable vertical local sites. As more content is produced, the need for new vertical aggregators will emerge. The strongholds of content aggregation that we know today (Google, Yahoo, etc.) will be less relevant in the future.
• The key to Content Packaging is access to Content Creation. Thanks to RSS feeds, anyone can aggregate anyone else’s content pretty easily. The secret will be the access to user generated content that users want to use.

Allow me to ellaborate on the later point.

YouTube.com was successful because it was easy to use, gave people free video hosting, and created a vertical portal that virally brought in new users. People adopted YouTube.com. Similarly, MySpace.com was adopted by users because it was easy to use, gave people free web pages, and it was a vertical portal that virally brought in new users. AOL, Facebook, Google, and the list goes on of easy to use vertical portals that were adopted by their users. All of these portals had one thing in common: intimate access to the content creators. They are the platform of choice for content creators.

Given this dynamic, I believe that user-generated local content websites (such as my projects atGeist.com and atFishers.com) will be adopted and show significant growth in the next three years. Like other successful verticals, they will need to be free to the consumers, easy to use, and viral in nature. The aggregators that position themselves as close to the Content Creation but are still technically in the Content Packaging segment will come out ahead.

The Bear Stearns report noted that “General Entertainment Networks” are at risk but will “endure with proper investment and differentiation”. They also warned newspapers and television networks against four threats:

• Complacency
• The Innovator’s Dilemma
• Bureaucracy
• Corporate Infighting

Again, I refer back to my Why Newspapers are Dying a Slow, Painful Death post, all four of these traits are prevalent in the newspaper world. However, television networks are really in the cat’s seat when it comes to winning this war. Networks have been competing for eyeballs for years. They constantly innovate, try new things, purchase online properties, and have a growing user base.