Tuesday, January 9, 2007 - The Progress & Freedom Foundation Blog

Dispatch from CES - Day 3 (Is Packaged Media Dead?)

In an increasingly digital world filled with intangible products and instantaneous downloads, does the world really need packaged media anymore? That was the theme of an interesting panel I sat in on this morning at CES in Las Vegas. Panelists debated the future of packaged, physical media (CDs, DVDs, tapes, etc) and generally concluded that it was not dead just yet.

For example, DVDs as a form of packaged media are not dead but growth is slowing, argued Stephanie Ethier, an analyst with market research firm InStat. As broadband speeds grow, however, this could change. Homes need to have roughly 10 Megs of bandwidth to have a satisfactory movie downloading experience, she said, and that world could be upon us soon. 18% of music will be distributed electronically by 2010, she said, but there is still value in the CD due to the "collection value" many users place on having the actual physical disc in their home somewhere. Don Patrican of Maxell agreed saying that "people are collectors by nature" and that they love the idea of having a small personal and physical library in their home that they can see and feel. I thought that was a very good point which I can certainly relate to since I do that myself.

But I then asked a question about whether or not this was all just a generational thing and wondered if my kids would have ANY physical media / storage devices or formats when they are adults in the 2020's. In response, Don Patrician said we shouldn't confuse early adopters with the mass market. "Many demographic groups will not embrace all this new technology for some time." Rich Lappenbusch of Microsoft generally agreed saying that "Many families still don't trust technology" and want the security that comes along with a physical backup copy.

Don Patrican of Maxell noted that the data storage business continues to grow rapidly and that a big chunk of this business involves physical media. "Packaged media is here to stay" he argued because it makes storage permanent and secure. People are not comfortable just leaving all their content on a hard drive or in some other intangible format somewhere online. With the rise of holographic data storage, which promises much greater physical storage capacity on smaller physical media formats, he said physical media has a bright future.

But attitudes might change over time. Mary Coller Albert of MovieLink, a movie downloading service offered by the major movie studios, gave an excellent example of how consumer attitudes adjust to new media / storage formats: Film. She noted that there was a time when everyone took their physical rolls of film to a photo shop to be developed and expected to get negatives back. Then, suddenly, we didn't get negatives back; we got a disc. And consumers got used to it. Then they film developers dumped the discs and put the backups on an online site. And consumers got used to it. And now we all take digital photos and transfer them to hard drives and online photo storage services. And consumers got used to that, too. So much so that few people rely on physical film or negatives anymore. I thought this was an excellent example but the problem with it is that consumers still order physical prints of all their photos and often make backups of their photo files on physical media, like CD-Rs. So perhaps the example isn't perfect, but I do believe it shows how quickly consumers can grow comfortable with new ways of storing media.

Incidentally, Rich Lappenbusch of Microsoft told the crowd about the Digital Data Exchange, of which MS is a member company. DDEX brings companies come together to develop and maintain a single set of voluntary communications standards for commercial digital media industries. They develop and license standard to support the digital distribution of media content. The aim is to make information sharing and transaction processing more efficient in the digital broadcast and music supply industry through these standards.

But this led the moderator of the session to ask whether non-interoperable DRM standards are holding back the development of more intangible forms of media and media distribution. "There's no question about that," replied Jim Cantwell of Starz / Vongo. From a consumer point of view "it is maddening" and it represents "a huge barrier to mass adoption." For companies, "we cannot reach a mass audience" because of conflicting DRM standards and media formats. But "I don't see companies making nice" and suddenly start working together, he said. He used the example of instant messaging standards, which are still not interoperable after all many years on the market.

In conclusion, the panelists generally agreed that packaged media is not going away, but that its growth will slow over time. Physical and electronic distribution will likely continue to co-exist for a long time. I think they're probably right but I still believe that my kids' generation will look at storage and physical media quite differently than my generation.

posted by Adam Thierer @ 7:07 PM | Generic Rant , IP , Mass Media