To make a fair prediction of where the future of Digital Media and Home
Entertainment is heading, an analysis of its history is imperative. There
are major lessons to be learned from the past, since many initiatives
failed to succeed while some became a huge success. In this article I
will go into more detail on the successes and will try to extrapolate
the trend into the near future. While putting down my thoughts on paper,
it turned out to be a lengthy piece, but I think it contains enough information
to hold your attention.
A short history of Home Entertainment in the late 20th century
In the sixties it was quite common to have a TV set, a radio and a record
player in the living room. TV and radio came in through the air (or in
some early cases through cable), while vinyl records were bought in the
record stores. Radio and TV were sponsored media and practically for free,
music was totally non-sponsored and consumers had to pay for the content
itself, by means of paying for its physical carrier. In the seventies,
the compact cassette became widespread and many record companies feared
this would be the end of mass record sales. It did not turn out that way,
primarily because consumers wanted the 'real thing' and record sleeves
also played a part in the emotions of owning a specific title.
With the introduction of the video recorder, the movie industry expressed
the same fears, but the new market for video rental (and later video sales)
did not turn out to be cannibalistic. Even better, this new market generated
so much new revenue that movie companies suddenly discovered new business
models that enabled them to produce titles that otherwise would never
have been profitable.
With the rise of the CD in the early eighties, practically replacing the
old vinyl record, there was some concern regarding the replacement market.
After all, vinyl scratches or gets broken, while CDs potentially have
an indefinite lifetime. There is indeed a classic example of this phenomena:
Pink Floyd had a permanent position in the Billboard hot 100 with their
album 'Dark side of the moon', simply because the huge crowd of Floyd
aficionados bought a new record every two to three years, due to the deteriorating
sound quality. As soon as the CD version of 'Dark side of the moon' hit
the market, Pink Floyd dropped out of the Hot 100!
Physical distribution versus network distribution
In the eighties, PCs where generally available, but very few people were
willing to spend a substantial sum on a device which was only able to
produce relatively simple and stand alone output. With the introduction
of HTML on the Internet (which itself already existed for decades!), PCs
suddenly had a new function: a home entertainment and communication centre.
In my opinion, this single element is responsible for the overwhelming
success of the PC ever since. But with the upcoming of the Internet a
new channel was introduced, that of electronic distribution, rather than
physical distribution. As it turned out, this new form of content distribution
had a major impact on consumer behaviour in regard to media and home entertainment.
And on top of that, the availability of the home PC to youngsters in the
family opened the way for a whole new industry in the media and entertainment
branch: computer games.
Why Napster and Kazaa became such a success
And so, suddenly there was Napster, a peer-to-peer file sharing network.
People could download every imaginable music title, enabled by a new compression
standard called MP3. And they did, in gigantic numbers often exceeding
millions at a time. There are many specialists and insiders who blame
the file sharing sites like Napster and KaZaa for the sharply declining
record sales world wide, but I think there is more to it than that.
Pop groups in the sixties were, in retrospect, musically quite illiterate
and were experimenting a lot, with changing success. In the second half
of that decade, the singer/songwriter became very prominent and as it
turned out, the composition was actually the major factor in success.
In the seventies, pop musicians came of age and mastered their musical
abilities, while the industry had not as yet caught on. In the eighties,
however, the music industry as a whole saw its chances and started to
mass market all kinds of concept groups while, at the same time, record
companies turned their established acts into mega stars filling stadiums
and selling by the millions. The driving force behind this movement consisted
of many independent production units and management firms, who conceived
the new marketing concepts.
In the nineties, this trend slowly transformed the music market into a
battlefield of 'one hit wonders', more often a marketing campaign than
a genuine artistic effort by the musicians themselves. But even then,
the composition was in most cases the differentiator between success and
failure. This mechanism lead the consumer into an ad hoc buying pattern,
with by now more loyalty towards a specific song than towards the artist
himself. And even today, acts come and go, but very few really stick for
more than two or three years (Robby Williams possibly being the only positive
exception to this rule). And as the saying goes: 'the song remains the
same', in this case referring to the fact that once proven hits re-occur
every ten to twelve years, helping yet another one hit wonder to the top.
So exactly which need did Napster and KaZaa fill, in the current music
market? CD and CD single prices are relatively high, partly due to the
fact that music is still a non-sponsored media type. If you like a particular
song, it is much easier and definitely far cheaper to download it from
the internet and burn it onto a CDR (yet another technical enabler!).
The alternative would be to buy the full CD or the CD single, with the
probable result that you end up playing just the one track it all comes
down to. But there is also another side effect of file sharing networks.
Certain titles, especially older ones, are very hard to come by on a physical
medium. On file sharing networks, however, practically every title ever
released can be found, downloaded and burned on CDR. And all this for
free as well, a package hard to beat!
Copying music has been possible from the early seventies, but the reason
it has grown to such immense proportion as today has probably everything
to do with the ease of electronic distribution, combined with a gigantic
title library. So it is not only the copying facilities, but rather the
distribution possibilities that are driving the file sharing trend. In
general, one might argue that the gigantic choice of title is perhaps
a stronger driver for file sharing activities than the fact these titles
can be obtained for free.
Some concerns about the future of the music industry
Since the early days of modern music, the record companies have been the
breeding ground for new artists. Money earned with major successes is
partly re-invested in developing and marketing new acts, with the main
purposes of filling the title catalogue and creating continuity. When
revenues drop due to declining record sales, less funding can be allocated
to development of new artists. And moreover, when artists of world fame
start marketing there own products, this situation will only become more
critical. Of course the Internet provides upcoming artists with a new
way of promoting themselves, but this could lead to an non-transparent
sea of new titles and acts, subsequently leading into the discovery of
new artists one likes becoming quite time consuming. Falling revenue due
to declining record sales and major artists branching out on their own
could mean a dangerous downsizing of the breeding of new acts. After all,
if the record companies are no longer able to invest in such activities,
who will step in?
Will the movie industry follow the fate of the music industry?
As compression standards improve, e.g. DiVX, it will become easier to
download a complete movie, maybe some day in the near future just as easy
as a music file. With the furious growth rate of ADSL subscriptions, the
consumer seems to be readying himself for this coming trend. Recent experiments
with a new TCP protocol have resulted in an increase in transfer rate
by a factor 6000! This would result in a download time for a multiple
gigabyte movie file of just a couple of seconds. Of course the movie industry
has every reason to worry!
Advancements in music recording equipment have lead to lower production
costs for music, but the production budgets for movies only tend to rise.
With the introduction of yet another baffling digital video effect device,
the standard for special effects only increases and movie productions
get more and more complex. The mind boggling fees that popular movie stars
get for feature films does not help much either. The Return on Investment
for a major movie production becomes a very delicate exercise, and movie
companies cannot allow themselves mistakes. The illegal digital distribution
of a new title in sufficient viewing quality can be fatal.
The relationship between content owners and consumer electronics manufacturers
Since many decades there has been a strong bond between content producers
and consumer electronics manufacturers. Philips has been a long time owner
of its own major record company (Polygram, later to become Universal Music
Group) and Sony early on became owner of Columbia records and films. The
underlying reasoning for this construction was the notion that you have
to be able to provide a large enough title catalogue for a specific technical
standard in order to make the related consumer device a marketing success.
But through the years, the creative divisions and the CE divisions of
many multi-nationals tended to go their own way. While the creative factories
tried to protect their assets, the CE manufacturing divisions constantly
came with new CE devices which were able to copy these assets freely.
With the introduction of the Internet, and therewith the introduction
of easy and fast electronic distribution, devices able to copy onto a
digital medium became ever more threatening. The market launch of the
writable DVD will accelerate this trend.
Protecting the entertainment industry in the future
Securing any media asset, which is under the protection of copyright,
on a network level is quite useless. The workings of the Internet with
its hundreds of millions of users cannot be controlled any more, whatever
the effort might be.
So if electronic distribution is the malevolent factor in all this and
can no longer be controlled, it is time to go back to the copying aspect.
The only way content creators can secure their valuable assets is by packaging
them in a secure container that can only be opened by the appropriate
device under the right circumstances. These circumstances would consist
of (amongst others): the consumer has legal access to the content, has
paid for it, and will not illegally distribute it any further than allowed
under the business rules as defined by the content owner. This implies
a joint effort by the content creators/owners and the CE manufacturers,
to come up with a system that can securely package content, only to be
opened by CE devices that are compatible with this system.
The beauty of it all is that digitizing media assets enables such a scheme,
because securely packaged content can also be distributed by a physical
digital carrier such as DVD. The absolute ground rule to make it work
is that all content owners package their assets right from the beginning
of the market life cycle and comply with world wide standards. These standards
will have to be formulated by the major content owners and the world wide
CE manufacturers, the sooner the better. The good news is that such initiatives
have already been launched.
What is in it for the consumer?
The possibilities of networked distribution have had a enchanting effect
on the modern consumer. The living room of today is moving towards a wireless
network environment in which all kinds of compatible devices will be linked
with each other, together forming a 'home domain'. Exactly to which geographical
magnitude this home domain reaches is actually insignificant. It might
incorporate the car stereo or even the TV and sound system used in a remote
holiday location. Again, if the content itself is protected by means of
a secure container, the location of the content becomes irrelevant. It
might even circulate on file sharing networks, without the threat of being
Many experts claim that the introduction of Content Protection and Digital
Rights Management systems will only frustrate consumers. I wonder why,
because if the consumer sticks to the rules, he or she might never notice
any difference with the old situation. Of course, if a consumer wants
to copy and distribute to his or her own liking, thereby breaking the
rules, he or she may be confronted with some hindering side effects. But
is that not a common risk when one breaks the rules?
There is no stopping the wireless interconnected home domain, it will
emerge, with or without the support of the content industry. But if it
happens without their support, it could very well turn out to be that
this home domain will lack proper content! If content owners and CE manufacturers
can come up with a transparent standard for Content Protection and Digital
Rights Management, the consumer will actually gain a lot in the form of
a huge title offering as well as a platform on which many new consumer
services will become possible. Video On Demand is a widely discussed potential
new application and, seen in the light of the widespread success of video
rental stores, might indeed be the killer app. Still, to succeed, it needs
a large title catalogue with the blessings of the content creation industry.
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