Exploring Digital Distribution Part 4: Unsustainable Success Stories

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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 compared and contrasted the promised delivery of Digital Distribution and why they just don’t pass the test. In this final article, we will take a look at some of the success stories of current day Digital Distribution and discuss the future.

Netflix and Hulu
It would be easy to look at these two video distribution juggernauts and say that the future of Digital Distribution is already here. These services appear to have delivered on much of the promise that the Digital Distribution model makes.

But is it true?

First and foremost, it is important that (at the time of writing) neither of these services are Content Providers – they are simply the delivery infrastructure. Just like Blockbuster and Hollywood Video rented you movies they didn’t create, these services provide you with video content they did not create.

As such, neither of these services has any real control over what you get to see – they are bound hand and foot to whatever the whims of the Content Providers might be. This is why you don’t see every new movie available to watch on Netflix. That’s why the latest TV shows aren’t always on Hulu. This is why some content is available on a PC but on the Xbox 360 or PS3. This is why your favorite movie suddenly vanished from your Instant Watch queue. Content Providers are exerting their control over these services.

The relationship between Content Providers and delivery services is a shaky, ever-negotiated one. Content Providers ultimately can pull the plug, place any restriction and really make the final call on any content they created. However, the Content Providers do NOT have the muscle to push Netflix or Hulu out of the picture and take over themselves (or they would – believe me – they hate that Netflix is making money on their content).

With this information in hand – is this Digital Distribution bliss – or a shaky treaty thrown together by circumstance?

iTunes and the Apple Ecosystem
You cannot deny Apple their due – they dragged music distribution into the modern age. Love or hate iTunes, you cannot argue that they are a force to be reckoned with in the industry – and the Content Providers know it.

Unlike the uneasy truce with Netflix where Content Providers are still calling the shots – the relationship between Apple and Content Providers is a bitter, hateful one. Music labels fully realize the barrel Apple has them over and Apple is happy to massage the deals in their favor every chance they get. This is completely contradictory to the way things should be – after all, Apple doesn’t own any of that content, either. But unlike Netflix, Apple can and does dictate to Content Providers the way things are going to be – and the Content Providers are scared crapless to oppose them.

While this sounds like the best plan EVER – to have the delivery system in charge instead of the providers – I assure you it isn’t. You do not want those without full vested interest in the content’s well-being to be ultimately in charge of its delivery either. Ultimate control by ANY entity in the distribution food chain spells doom and gloom for the consumer – if not now, soon.

Apple wants you locked into their ecosystem – which locks you into their hardware; after all, they don’t own content – hardware is how they make a living. For Apple, it makes sense. For consumers – any restriction on choice isn’t a good thing.

The Clouds (Amazon and Google)
Cloud computing is nothing new – although the term “cloud” is by and far the most sticky buzz word I’ve heard in a long time.

Amazon reinvented books. Love them or hate them, Amazon cannot be denied their place in making eBooks “officially” (again, according to Amazon) more popular than the printed book. They created a device, based on a need and spun it into the most popular electronic reading product on the planet. More importantly they created a device that was not tethered to a computer and never required a computer to get content. Heck, it didn’t require an internet connection either or a cell phone or … well … ANYTHING. Finally, a standalone Digital Distribution device that used an very capable delivery method – 3G.

Amazon turned this into one of the greatest examples of successful Digital Distribution on the planet – and to date, it still hasn’t been matched by a dedicated device.

But just how successful is this?

Amazon sold the world a bill of goods – “Under $10 eBooks”. But, as usual – Amazon doesn’t own the content that they deliver which puts them in the crosshairs of the Content Providers. Once the system took off, Content Providers put the hammer down, demanding that they were allowed to set the price of the books – and GONE was the never-guaranteed-yet-implied $10 eBook.

Another fragile alliance is formed – shaky, but still an alliance.

Google has been the leading edge in the cloud since people started calling it a cloud. Internet-based services is the bread and butter of Google – but they are also feet-first into Digital Distribution with books, music and other content (considering they own youTube – but that’s another story).

Google should be a Digital Distribution love story – after all, they aren’t hardware manufacturers (like Apple and Amazon; and no Android isn’t hardware) – with an agenda to push iPods, tablets or readers). Unlike Apple and Amazon, they actually are both Content Providers AND the delivery service – wrapped up in one – since they technically have full rights to pretty much anything uploaded to youTube and have plenty of those shaky alliances with other Content Providers to produce free and pay content for their consumers.

This puts Google in a very powerful (and dangerous) position. Google doesn’t want your money – they want … YOU. They want you using their services, providing them with profiles to hock their advertising which they have built a billion dollar empire on. For some people, they would much rather have privacy than “free stuff”. Others? As long as it’s free, they don’t care (in case you’re wondering, more people fall into the latter camp).

Whether you love or hate Google, it is abundantly clear that they alone have what it takes to take the leadership in the Digital Distribution game; they wield both sides of the sword – content and delivery. Google had the balls to open Google Music without getting a blessing from the recording industry. When you can walk on water like that, you have some serious power (and no, that isn’t always good).

There are more “success stories” out there, but we’re running out of space here and we still have some points to make.

While these all appear to be solid success stories of Digital Distribution – there is something very important missing from the utopian world of pure Digital Distribution – and that is unity and the BBD concept (bigger, better deal).

Digital Distribution is the Carnot Engine of our day (go ahead – Google it .. I’ll wait). A perfect machine that is impossible to obtain because in order for Digital Distribution to replace physical mediums you must have access to the same (and more) content than what you have now. This is pretty much common sense. You get new ideas implemented and change to occur when you can offer something more than what the consumer has.

Right now the consumer has a metric buttload of choices. You can get music from Wal-Mart on a CD, from Amazon MP3 store or from iTunes (or dozens of other retailers real and virtual). Movies are available at the theater, on Blu, on DVD – even on VHS if you look hard enough. Games can be had everywhere – Target, Wal-Mart, GameStop, app stores … you can pay as much as $70 or as little as … FREE … depending on what you like and what you want.

What’s more – there is an established infrastructure and delivery method already in place to get consumers their content – and consumers appear pretty happy with it; since even through times of great financial stress – consumers never stopped buying.

To overthrow the status quo, you have to be able to offer MORE for LESS. This is where unity comes into place.

Music. Do you know why there is no such thing as perfect audio Digital Distribution? Because there are too many record labels and they are all in competition with each other. Even with iTunes (which they all secret loathe) they want the kind of control of the market that physical mediums offer. You think they want to play nice with each other? Be on a level playing field? No. Competition is good for everyone – but competition will ensure that no ONE music service is going to have all the content. Apple has the music hardware market wrapped up, but even they cannot guarantee that every song ever made is available on iTunes. Between eBay, Amazon and your local brick and mortar – you can lay your hands on just about any song/album you can remember. With pure Digital Distribution – this isn’t possible. In the end, where and more importantly HOW you buy music will stop pure Digital Distribution from removing CDs from the shelves.

Video/Media. TV is in deep trouble – and so are consumers. If network television cannot come up with a plan to stay relevant, you can forget about great big budget TV shows and you’ll be having “spin the wheel of youTube night” when you want some video entertainment. Since the beginning of broadcasting, television studios created a sustainable model of content vs. advertising – and they are fighting tooth and nail to keep it. With the most important revenue stream of movies coming from the home video market, film studios are in NO hurry to change the status quo – they are much more interested in stopping piracy than actually embracing a method of giving customers what they want. As with music studios, they are always in competition and that will stop content from all Content Providers from being available in one place at the same time. There is value in exclusivity – great for the Content Providers; a huge pain in the ass for consumers.

Gaming. Speaking of value in exclusivity, the video game market has an even bigger issue to deal with. Sony, Microsoft and Nintendo are not going to go quietly into the night and allow their billion dollar industry to fall solely into the hands of Content Providers. With pure Digital Distribution, you can kiss gaming consoles goodbye. Forget about all the reasons why console gaming is so great (fixed system specs, selection, etc.) – pure Digital Distribution will kill console manufacturers, taking all-but-major gaming publishers with it. Forget about great properties like God of War or Halo or Mario – these money-from-hardware companies aren’t going to stick around selling $1 fart games on the App Store. You want pure Digital Distribution? I hope you like Pocket Madden and Call of Duty Mobile – because that’s what you’re going to end up with in the end; lowest common denominator gaming.

So, there is no unity. There will BE no unity. There isn’t the same kind of money in letting Netflix pay you a stipend for access to your Star Trek library when you can be selling the same shows ten times cross ten platforms – platforms and methods where the Content Providers have the control – not the delivery service.

There are advocates of Digital Distribution that believe in “one service to rule them all”; that Netflix can really get to the point where they can deliver any show or movie at any time on any platform. These advocates believe that one service can provider every book, or every song or every insert-medium-here – all without ever needing to buy anything other than paying that one-low-price monthly bill.

The facts are clear to me. Content Providers are going to become delivery services. They will have control over the content they own – and none other. They will graciously allow you access to their whole library for that one low price – say $9.99 a month. Sure, some of the little fry Content Providers will allow their content (SOME of their content) to be absorbed by the big fries – but in the end, the huge companies are going to stay segregated. Disney/ABC will never join forces with CBS or NBC or Fox. So, you’re going to be paying a monthly stipend to not just Netflix or GameFly or iTunes – but a dozen other Content Providers that are tired of paying a middle man to stream their content. Remember the Google TV mess? That’s little fish in a very big pond.

And you think the Android market is fragmented? Wait until you have to go through ABC.com to watch Desperate Housewives and CBS.com to watch Two and A Half Kutchners (and you’ll still have to watch commercials AND/OR pay for the content each month). Sony.com will happily let you play all the moldy oldie games last year for $10 a month too (as long as they can stay up, that is). This list could go on and on – each one pulling a saw buck from your wallet every month.

Once you’re paying 10-20 difference sources $10 a month, you’ll be BEGGING for physical media to come back – because suddenly you’ll realize that Digital Distribution is NOT about choice. It is NOT about your well-being – but the maintenance of control by Content Providers – Providers that don’t care if you have to go to 30 web sites to watch your shows in broken fragments between commercials and pop-over ads.

Is Digital Distribution sustainable? No. I do not believe it is. Sure, as with multiple retailers, various web stores and private person to person trades/sales – this model will continue to be a CHOICE for consumers – albeit a limited one. There is a reason that physical media is still popular – it resonates with humanity; it’s something you can hold and enjoy anytime you want it. There are many of us alive that hold a great deal of stock in even “fake” ownership because it was how we were raised.

When content becomes so disposable that worrying about its retention, replayablity, nostalgia factor or a multitude of other human platitudes makes no sense – that will pave the way for pure Digital Distribution. Personally, I don’t believe that day will come – and if it does, it won’t be while I’m alive – and that’s good. I’ll be buried with my CDs, my DVDs … my game cartridges and I’ll be sure to put in my final wishes that I want to have the undertaker put a smile on my face before they close the lid.

About Shane Monroe

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