Wednesday, December 10, 2008 - The Progress & Freedom Foundation Blog

Of Holiday Gift Guides and New Media Business Models

This week's Wall Street Journal featured a special Journal Report entitled "The Way We'll Watch" on new movie technologies that will be available soon, some in time for this holiday season. It got me thinking about some of the business plans that have already been tried in the content industry in the past few years.

The content industry is at the tail end of a transition from distributing media on physical goods (CDs and DVDs) to digital downloads and streaming content. Distributing physical goods, whatever the container happens to be (wax cylinders, LPs, 8-track tapes, cassette tapes, DAT tapes, CDs, minidiscs, SACDs, DVD-Audio, and now flash memory) is a well-established business model that the content industry is very comfortable with. But most consumers are tired of lugging around their libraries with each album or movie on a separate piece of media that can be too easily lost or destroyed. Freeing the media from the container it arrives on (or distributing it via computer network without a physical container) allows the media to be easily time-shifted, space-shifted, format-shifted, and re-purposed (e.g. sampling). But the content industry is wary about giving up their old market and is terrified of piracy. So as it slowly warms to digital distribution, the content industry is trying to provide a taste of those conveniences in the old physical goods model. As a result we have the following interesting but ultimately short-term business models:

CDs and DVDs have been given as gifts since these formats were introduced. The options discussed above all allow digitally-challenged parents and grandparents to buy something for their iPod-toting relatives that the kids may actually appreciate. But a better choice is to get them a gift card that lets them choose the media they want. These types of gift cards are available for Apple iTunes, eMusic, Napster, Microsoft Zune, and Best Buy's own digital music store. Most of these provide music in DRM-free MP3 format which should play on just about all digital music players.

Digital distribution of music and movies (and TV) is here and it will only become more common. iTunes is already the top music retailer in the U.S. Because of the much higher bandwidth requirements of High-Definition video, it will take a bit longer before digital downloads are the top means of obtaining video content. But it's fast approaching. More than half of America already has broadband connections at home. Netflix and Hulu already offer HD content, and Netflix is accessible from a number of devices besides a computer.

If you're still confused about what to get your favorite geek this holiday season, I suggest the gift that won't go obsolete, won't expire, and that's guaranteed compatible with everything: Cash.

posted by Adam Marcus @ 10:48 AM | Capitalism , Generic Rant , Innovation , Mass Media