The Economist's main editorial this week is on the challenges, and opportunities, that digitization gives to content companies. Noting the malaise in content companies equity prices, the migration of advertising revenues to the Internet, the decline in movie ticket and DVD sales, The Economist notes that the digitized, networked economy is hitting the content industries in the core of their business model. This seems right, and furthermore, the winds have yet to hit gale force, which they inevitably will.
At the same time, the editorial notes the remarkable staying power of content and the content companies' being good at marshaling the capital and creative talent to produce high quality (at least in production values, if not actual content) entertainment. In short, content is what people are willing to pay for over those high speed connections, and it is not likely that a garage entrepreneur is going to produce and create the next blockbuster film or TV series.
The business model is being challenged. As I noted yesterday, the irony of the a la carte regulatory debate is that the broadband Internet is the ultimate a la carte-bringing market machine. The task in the policy world will be to do no harm – and impose no premature restrictions – on different contractual and pricing mechanisms as they emerge and are tried.
To lose the subtlety of my point, this means: no net neutrality, no a la carte, no mandates and contract restrictions absent tangible, proven consumer harm.