[Ecommerce] Digital futures-'rotten value'?

[Michelle Childs]

Interesting quotes below from the recording inudstry - e.g cutting off a
distributor when you have a monopoly, who is seeking to undercut a
recommended resale price.

They also show contempt for consumers views and usage as the reporter
astutely points out:

<snip>Then again, executives sometimes seem so bewitched by the new
digital distribution possibilities they forget that they're rotten value.

"It's going to be difficult to get the consumer to stop thinking about
owning music, and think about paying for participation instead," said one
executive.

But hearing and sharing music is participation - so what's wrong with this
picture. The fact that the consumer might see it as worse value for money
than having both "participation" and "ownership" sometimes escapes
tomorrow's digital visionaries. It's unlikely to escape the attention of
the alert consumer



http://www.theregister.co.uk/2005/09/27/warner_apple_decapitation/
Warner raises decapitation strategy for Apple
This won't hurt a bit
By Andrew Orlowski in San Francisco
Published Tuesday 27th September 2005 22:56 GMT
CTIA Michael Nash, Warner's digital strategy chief, suggested labels might
have no choice other than cut Apple's digital music sales off at a stroke.

"What if Jobs says 39 cents or 29 cents per download - what then? The
industry can say, OK we'll cut him of - very few people people buy music
from digital downloads," said Nash, who pointed out that most of the music
on iPods is from their own collections.

 The iPod won't disappear, he pointed out, and the decapitation will
really feel no more painful than a gentle shave.

"[Jobs] will figure out another model," said Nash.

He may have a point. Digital downloads form a fraction of the music
market, dwarfed by ringtones, which the rights holders as a pathfinder.
And Apple has never seen its iTunes Music Store as a profit center - but
as a marketing ploy to promote its iPod music player. It barely breaks
even on iTunes Music sales, and keeps about four cents of every 99 cent
download.

But sales of iPods have rocketed since the iTunes store was launched in
spring 2003, and Apple made the device friendly for the Windows PC
mainstream. Nash pointed out Jobs will have to find another sales gimmick.

But he put the responsibility for Apple's dominance of paid digital
downloads on the labels' own inertia. "The industry got together and said
'We don't want another MTV'. Well, now we've got another MTV, in Apple.
And we have to deal with it."

His comments came at the CTIA Telecomms Show, in a panel titled 'Artists,
Labels, Publishers: What Do License Holders Want'. Rights holders were
much more positive than in recent years.

Universal's Courtney Holt thought the P2P generation, which record
executives had thought had been lost for good, were returning to buying
for stuff, and all because of mobile.

Jim Ryan, Cingular's VP of consumer data, agreed with him: "There's so
much value there we're not going to have a hard time making money."

The other cause for optimism was the sense that with so much
experimentation yet to take place - both in fixed broadband and cellular -
the breakdown of the industry, because of the 99 cents song, had been
postponed.

Revised estimates also suggest that CD sales have yet to peak. At $3 for a
digital download to your phone that you can't keep or transfer, this isn't
so surprising. Surveys also suggest that DRM-dabblers then go out and buy
more real physical product.

Then again, executives sometimes seem so bewitched by the new digital
distribution possibilities they forget that they're rotten value.

"It's going to be difficult to get the consumer to stop thinking about
owning music, and think about paying for participation instead," said one
executive.

But hearing and sharing music is participation - so what's wrong with this
picture. The fact that the consumer might see it as worse value for money
than having both "participation" and "ownership" sometimes escapes
tomorrow's digital visionaries. It's unlikely to escape the attention of
the alert consumer. =AE




--
Michelle Childs -Head of European Affairs
Consumer Project on Technology in London
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http://www.cptech.org

Consumer Project on Technology in Washington, DC
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Consumer Project on Technology in Geneva
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