Exploring Digital Distribution Part 3: Fact or Fiction?

Go to Part 2

In this multi-part article on Digital Distribution, we will explore various aspects of the digital distribution model along with successes, failures and speculate on the future of this model based on current and past trends. This series will be primarily aimed at video gaming and media such as film and television.

In our last article, we discussed all the Good Things(tm) that Digital Distribution promises; both to consumers as well as Content Providers. Now we need a reality check on these points.

Content Providers believe Digital Distribution will provide them with several things; absolute control, anti-piracy measures, after-market resales, price/flow control and reduction in costs.

Absolute control requires complete anti-piracy measures and this simply isn’t possible. So, let’s look at that first.

If it can be seen, heard or played – it can be pirated; it is all a matter of how much time it will take. DVD (CSS) was cracked. Blu ray was cracked. Anti-piracy techniques are created by man and can be cracked by man. Much like a lock on a door, anti-piracy techniques help keep “honest people honest”.

Unfortunately, invariably the pirates aren’t hurt by draconian DRM and copy protection systems because they consume cracked or stripped versions of the content. The only people jumping through hoops to consume the piracy protected content is – that’s right, the consumer.

Just how many hoops does a consumer have to jump through to legitimately use their content? Take a look at any DRM/copy protection scheme and you will find a help desk log or stream of consumer complaints regarding issues affecting legitimate users:

  • Server protection checks requires 24/7 internet access (and servers that can actually stay up *cough* Sony *cough*).
  • Disc-based protections sometimes caused content not to run – in the old days the protection would actually damage your hardware.
  • Movie copy protections require regular updates to player firmware to keep up with the latest schemes.
  • Music copy protection can strap you down to certain hardware/software to get to your content (I’m looking at you, Apple).
  • Software locked to hardware often requires a lengthy call to support to get your software “re-licensed” to the new hardware.

My point is – pirates don’t suffer from any of these issues; only legitimate users do. Digital Distribution won’t stop pirates from copying your content – in fact, I understand they love the challenge (I’m looking at you, Sony).

It has been a long time “joke” in the industry that piracy costs companies billions of dollars – but when you read articles written by groups OUTSIDE the Content Provider’s advocacy, it’s very apparent that while some revenue is lost due to piracy, a large percentage of these “lost sales” would never have represented conversions to legitimate sales if the content had been “uncrackable”. In the end, pirates don’t pay for content – no matter how hard you make it to crack.

There is also solid evidence that piracy has INCREASED exposure to content and created conversion to sales. This would be lost in a pure Digital Distribution world where content was “uncrackable”.

So, piracy isn’t going anywhere. Frankly it is my opinion that Digital Distribution will INCREASE piracy and hacking acts against companies that engage it exclusively. With that in mind, you’ve lost “complete control”.

What about after-market resales? Publishers are tired of used game sales and want a piece of the action. Let me explain why used game sales work FOR the industry and why eliminating them isn’t good for business.

First off, why do people frequent GameStop in the first place? They want cheaper games and they want to get rid of the games they are tired of. For a handful of people, we enjoy the selection of older, harder to get games that Gamestop offers and many of us still like to peruse brick and mortar where we can see, touch and experience games. Of course, the 7 day no-questions-asked return policy on used games (which essentially means “free game rentals from Gamestop”) doesn’t hurt.

I mentioned before that much of content is disposable these days. Many games offer 5-20 hours of play, little-to-no replay and no reason to actually keep the game after the gamer has finished it. It is not unheard of for a kid to buy a game on Friday, play it (and finish it) over the weekend, and trade it in on Monday. Gamestop build a business model around the disposable nature of games.

Games don’t become “used” by themselves, so people are still buying games at full price, new off the shelf. If you believe Gamestop (and there is no reason not to), much of the credit/money received on used game buybacks are actually spent on new games. Hardcore gamers want the latest and greatest and they are apparently willing to pay for it. It makes the cost of new games much easier to swallow for consumers if they get one-third to one-half of the “new” game by trading in used games along with cash. I’m not a supporter of Gamestop, but I understand the ecosystem – and it works – what’s more, consumers seem ok with Gamestop ripping them off on used trades.

Pure Digital Distribution puts Gamestop out of business – and that’s not necessarily the best thing for the gaming market. They fill a much needed niche and while they could treat their own customers better, cutting off the “local neighborhood game peddler” doesn’t make much sense to me.

Price control doesn’t appear to be an issue even under the current system. New games, regardless of quality or replayability command top dollar. In x number of months, the price drops so that regular people can afford it – and finally it ends up in the bargain bin where those on the fence can finally check it out. What’s more, current Digital Distribution systems like Xbox Live and PSN aren’t really giving the customers an even break – making full game downloads the SAME PRICE as the full boxed edition. So much for “passing the savings on to you”. It’s a business – companies will continue to charge what the market allows – regardless of cost.

People who cannot use their content the way they want will find other ways of getting it. Flow controlling content by locking it to a single machine or a certain format or a certain “anything” takes away people’s right to do with the content what they want – and I’m not talking about piracy.

My van doesn’t have wifi, so if I want to let the kids watch a movie, I need a DVD. If your car only has a tape deck (first off, my apologies) and you can’t copy a CD down to a tape, you’re screwed. In Digital Distribution, they want to sell you the same content across different formats. Sure sure, there are some “user based” services like Netflix that doesn’t care WHERE you watch, just that you are YOU – but believe me, when Content Providers have you by the balls, they will make you pay extra. Remember when we had to “pay extra” to get blus from Netflix? Imagine your “NetFlix” account only working on a PC and not on your console (unless you pay extra) – oh wait, Hulu Plus is just like that. Tried it out on Xbox? Find something to watch that is “PC ONLY”? There you go. You think the cable company nickels and dimes the consumer? You will be paying mobile access fees, TV access fees, and portable device fees. Sounds ridiculous, but I’m telling you how it is going to be. This will encourage piracy like nobody’s business.

So is Reduction In Costs the only valid argument here? I’m afraid not. Digital Distribution brings it’s own share of costs to the table. Now instead of tech supporting a single platform for your Content, now you need staff versed in all sorts of platforms – TV, portable devices, cell phones … you’re promising ubiquitous access to your content, after all. You now have to pay for ungodly amounts of bandwidth – and the infrastructure required to push this content to all these devices; or you have to pay someone else to do it for you. Let’s not forget the additional marketing and consumer confusion you’re going to have to deal with – getting rid of physical media. Sure, the techies get Netflix and Hulu. But what about those Baby Boomers that are still alive and lining your pockets? Are THEY going to be champions of the Digital Distribution model? Let’s not forget R&D for all those new devices you’re going to have to support (like the 50 Android phones that got released since you started reading this article).

No, Digital Distribution isn’t the pipe dream that Content Providers believe it will be. But what about the consumer benefit? Is THAT a reality?

Consumers are supposed to see several things: reduced costs, ease of accessibility, no more media, ubiquitous access and all-you-can-eat/VIP access. But how much of this is reality?

We already talked about Content Providers incurring more costs than they expect. Those costs are inevitably passed on to consumers. You aren’t going to get a new AAA title for $4.99. You’re not going to get the latest GTA game with your $9.99 all you can eat subscription price. Why? Because there are too many hands in the pie already. The subscription price has to pay for hardware, software, bandwidth, support, infrastructure considerations – oh, and the Content Provider wants some money too. You know how they will start getting that money? Right now, they are charging gamers an extra $10 to play online if you buy the game used. In the bold new brave world of “all you can eat” subscription based content, you will start paying PREMIUMS to get access to the “new games” and “first run” content. You want to play Halo 1? Free with your subscription. Want to play Halo Reach Around the Master Chief Edition? Along with your monthly fee, you’ll get charged an additional fee. Nickel and diming through a series of micro transactions is a great way to fool the consumer.

You think this won’t happen? It already has been happening with a well-known online gaming service that charges a monthly fee PLUS a premium to play the latest games.

Ease of accessibility and ubiquitous access are huge with consumers right now. They want their content – NOW, and they want it on whatever platform is vogue today. Ask your local Android user how he feels about Netflix support on the Android platform. Ask your local Apple owner how he feels about not having Flash on his iPad 2. Take the Xbox 360 week-long trial of Hulu Plus and see just how much content you CANNOT watch because you’re not on a PC. This sort of conflict is just the tip of the iceberg when it comes to issues with accessibility. Content Providers want CONTROL. They can’t have it AND give you ultimate ease of accessibility and ubiquitous access. This it going to be one of the biggest challenges of Digital Distribution.

What about reducing the need to purchase or maintain a media collection? Surely THAT can’t be refuted as a positive to consumers? I wish it were true. Of course, if you don’t BUY anything, you don’t have to store it in your home. That’s true. But what happens as failed avenues of Digital Distribution go under? Remember Wal-Mart’s online music service? The one that took your money then shut down? Remember their solution to “saving your music” before they closed the virtual doors? Right, “to save your music, burn it to a CD and re-rip it to MP3 format”. WHAT? Can that ACTUALLY be true? Yes. That was the only way to save your music when Wal-mart’s service closed down. Many services offer “offline backup” of your content – “just in case”; like Amazon and Steam. You are supposed to make your own media copies and keep them.

While we’re on the topic of screwing over the consumer when your services go down, just take a long, hard look at how many consumers and developers Sony screwed over with their PSN service – going down for a FULL MONTH, brought back up – then pulled down again. You think if any company would have their crap in one sock, it would be Sony. Digital Distribution developers that sold games exclusively on PSN lost a MONTH of revenue. Consumers that purchased PSN-locked content couldn’t play their games for a MONTH. Even Netflix-by-proxy of PS3 was down for a considerable number of people for quite a while.

You think CBS, ABC, Capitol Records or any other major Content Provider could stand up to the hack job that was served to Sony? Hell, Amazon’s services were actually used to attack Sony – so I guess even Amazon isn’t safe.

But hey – Digital Distribution makes a lot of sense – safety and service to consumers.

Finally, what about these “all you can eat” subscription services that everyone is crowing about? You don’t have to own ANYTHING if you have ACCESS to everything whenever you want it for one low low price, right? I’m afraid not.

First of all, we saw that “whenever you want” is a misnomer. While Netflix hasn’t been brought to its virtual knees like Sony, Netflix has had more than its share of outages in their streaming service. Hulu too. Even online music streaming giants like Pandora and Slacker have had their own issues. “Anytime you want” suddenly becomes “any time the service is up”. What most consumers don’t think about is that there are several links to this chain. You’re paying Netflix $8 a month – but if your internet goes down, you have no Netflix. If you lose 3G connectivity, there goes Netflix on your phone. You really aren’t just paying $8 a month for Netflix. You’re paying $40-$80 a month on your home internet service provider. You’re paying $30-$50 a month for cell phone data access. How much are you paying extra a month for that 3G on your tablet? “Anytime you want” is now “anytime Netflix is up, your ISP is up, you are not roaming on your cell phone” and the list goes on and on.

I know, I know – you’re thinking that these services don’t go down enough to care. It’s a minor inconvenience periodically. That’s NOW – when there are 100 other ways to get content. But, you make Digital Distribution the Magic Bullet – suddenly you have a lot more people crowding on that pipe. Then you start having infrastructure problems. That is followed by outages. Last time my ISP was down, it was 72 hours before I had cable TV or internet access (ask around, this isn’t an unusual event OR an unusual amount of time to be down).

I said in the first article in this series that electronic (Digital) Distribution requires two things; an adequate delivery mechanism and a means to accept and use the content delivered. I also said there is a lot more required to be successful. In the next article, we’ll look at the current success stories – why they are successful and how unsustainable Digital Distribution is as a replacement for physical media.

Go to Part 4

About Shane Monroe

Shane R. Monroe has been doing technical and social commentary writing for over 20 years. Google+