Less Expensive Distribution With Little Savings For Consumers
iDon’t want to start this out by ripping Apple. After all, iTunes is a brilliant distribution method for digital media. So iWon’t rip the method but iMust criticize the cost for consumers. I have to aim a good portion of the criticism at Apple because they are the leading retailer of digital media. They’re also the standard by which all other services are measured. Let’s have a look at some Apple milestones…
- 8.6 billion songs sold: September 9, 2009
- 2 million feature-length films sold: July 31, 2007
- 200 million television episodes sold: October 16, 2008
- 1+ million HD episodes sold: October 16, 2008
- 2 billion apps downloaded: September 28, 2009
Unlike traditional store purchased items, the distribution of digital media bypasses the costs of packaging, shipping, and salaries of employees who would normally process transactions and restock shelves. Perhaps the best situation of all though is a single original copy of any item can be distributed an unlimited number of times. This means very little storage space for mass distribution, where traditional stores must maintain a specific inventory to meet demand. Whether an item is hot on the market or has only sold 2 copies in the past month, the storage space remains static, and it’s impossible to sellout.
With such significant cost savings for retailers, why is the end result not so different than that of a traditional store?
| iTunes | Best Buy | |
| The Office: Season 2 | $34.99 | $34.99 |
| Wintersleep –Welcome To The Night Sky | $9.90 | $11.99 |
| The Lives Of Others | $9.99 | $7.99 |
New Portals For Media 
Home entertainment no longer needs shelves. With wireless HDMI and broadband soon to reach gigabit per second speeds, the future is sure to see media distribution like never before. For example, the Toshiba REGZA is a 55” LED television featuring built-in Opera-based web browser and sporting a 3 terabyte hard disk. The hard disk is there for digital media… not just any digital media though… media in high definition.
Portable media players are starting to come with various methods for hooking into the home entertainment environment, which means one device can meet all entertainment needs and still be small enough to tuck into a front pocket. Imagine losing the entanglement of cords running from the DVD player to surround sound receiver to the TV, all replaced by a device roughly the size of a TV remote like the Iomega ScreenPlay Plus HD Media Player.
What this means for consumers is on demand entertainment in high resolution and crystal clear sound. What it means for retailers is more products to offer and a simpler distribution method. This should result in lower costs for everyone but let’s look at the current situation as a template for what’s to come.
The Cell Phone Strategy, Net Neutrality, & The Losing War Against Piracy
Cell phone companies have found a way to bleed a dime out of every service they offer: minutes, text messages, data plans, and now apps (thanks again to Apple whose motto should be, “There’s a price for that.”)
Don’t expect a media-rich future to look much different. With the improved speed of broadband, customers will be downloading everything. ISPs will react by significantly limiting bandwidth usage. Basically, think of your current cell plan but replace the word minutes with gigabytes: 500 gigs a month for $49.99 or 1tb for $69.99 (but nothing with the word unlimited in it).
Next, iTunes and others will get on board. Plans will be called something similar to 500 Gold Premium + iTunes for $59.99, which will provide subscribers with 10 free downloads per month (and a minimal 3 year contract with $250 early termination fee).
With all the new services, bundles including telephone, television, and a slew of internet friendly entertainment will be locked into specific clients. Titles will be released exclusively to so-and-so, meaning a future where you will not be able to enjoy a title because you have an Android-based system instead of an iPlatformYetToBeNamed or vice versa.
As more portals open up giving evermore access to digital media, it will become even easier for the internet community to obtain content through illegal downloading. Lobbyists are going increase their efforts exponentially in this losing battle. A lot of money is going to be tossed around the political community to influence support of so-called protection laws specifically aimed at closing the doors on open platforms like Android and Linux. Regardless of support from politicians and the legal system, illegal downloading will remain the dominant means by which consumers obtain their entertainment.
Video Stores Close Their Doors
The biggest effects of digital media can be felt by video rental outlets of all sizes. Giants like Blockbuster Video have failed to meet the demands of the modern movie rental business. While these businesses close their doors, Netflix and Redbox have changed the industry and met with soaring success.
However, this has also been an opportunity for the smaller rental store to boom when competition is dwindling. Nothing can compete with good customer service. The enterprising rental store owner has an opportunity to succeed here where the unattended box has no chance to compete.
My brother was quick to jump on this. He closed the doors on his Puyallup, Washington store Video World at the end of December. Rather than have a fire sale, he moved the entire contents of Video World to City Mart & Smoke, a convenience store he owns in nearby Edgewood. The store can provide customer service as well as candy, soda, popcorn, ice cream, cigarettes, beer and Lottery tickets while meeting the same $1 a day price of a Redbox. Even better, City Mart offers a wider selection of rentals, not just new releases. The older titles are available for just 50 cents a day. To contend with Netflix, City Mart has a similar unlimited movie rental program for a low monthly fee.
The All-In-One Strategy
Like the video store owner who embraces the modern movie rental industry, the retailer who breaks from the flock’s attitude of milking a dime out of every service is sure to succeed. The solution is in being an all-in-one content provider for an affordable monthly fee. The goal should be long-term success achieved through the largest population of happy subscribers. Retailers stuck in a mindset of breaking down every element of digital media into individual services are doomed to lose subscribers who jump ship to for the one-stop solution. The all-in-one solution will provide TV, telephone, and media content for a monthly fee competitive to today’s high speed internet prices. Music, movies, audiobooks, and other additional content will be provided at prices reflective of the savings retailers are seeing. If a movie is $9.99 at Best Buy, the digital version should be half the price or less.
Low prices will also be the only means by which intellectual property has any chance at all of dealing with illegal downloading.
