Perhaps It's Not The Entertainment Industry's Business Model That's Outdated

from the just-its-understanding dept

After last week's post in my ongoing series about the economics of non-scarce goods, where I discussed the ridiculousness (economically speaking) of saying you can't compete with free, a friend emailed me to make an interesting point. He suggested that despite the common wisdom many of us have suggested, the entertainment industry's business models aren't actually obsolete. What is obsolete is what people think the industry's business model is. And, the worst thing is that the people most guilty of this are the industry execs themselves.

A few weeks back, one of the posts in this series was about recognizing what market you're really in. I used the example of horse-drawn carriage makers, who mistakenly believed they were in the horse-drawn carriage market, rather than the personal transportation market -- leading to troubles once the automobile came around. There's an important hidden lesson in that. You can actually be succeeding in a market you don't think you're in.

When it comes to the entertainment industry, that may be exactly the case. We've been arguing that there are plenty of business models that don't involve actually selling the content, but involve selling other, related products that are made valuable by the content. In fact, that's what both the music and the movie industry already do. Everyone may think that you're buying "music" or "movies" but that's very rarely what you're actually buying. You're buying the experience of going to the movies. Or the ability to have the convenience of a DVD. Or the convenience of being able to listen to a song on your iPod. And, in many cases, it's not just one thing, but a bundle of things: the convenience of being able to hear a song in any CD player, combined with a nice set of liner notes and the opportunity to hear a set of songs the way a band wants you to hear. It can be any number of different "benefits" that people are buying, but it's not the "movie" or the "music" itself that anyone is buying.

So the problem isn't that the industry's basic business model is obsolete -- it's just that everyone thinks they're actually selling music or movies, and that leads them to do stupid things like put DRM on the music to take away many of those benefits, or making the movie-going experience that much worse by treating everyone like criminals. What they're doing, and why it's hurting them, is that they're actually taking away the features that they used to be selling -- and missing out on opportunities to sell other benefits as well. So while we may still point out that the basic business model is obsolete, it may be more accurate to simply say that it's the understanding of the business model that's really out of date.

If you're looking to catch up on the posts in the series, I've listed them out below:

Economics Of Abundance Getting Some Well Deserved Attention
The Importance Of Zero In Destroying The Scarcity Myth Of Economics
The Economics Of Abundance Is Not A Moral Issue
A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy
A Lack Of Scarcity Feeds The Long Tail By Increasing The Pie
Why The Lack Of Scarcity In Economics Is Getting More Important Now
History Repeats Itself: How The RIAA Is Like 17th Century French Button-Makers
Infinity Is Your Friend In Economics
Step One To Embracing A Lack Of Scarcity: Recognize What Market You're Really In
Why I Hope The RIAA Succeeds
Saying You Can't Compete With Free Is Saying You Can't Compete Period

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  1. identicon
    Reverendpaqo, 3 Feb 2012 @ 7:01pm

    It could be argueable, if you take the content industry's behavior out of the equation.

    I don't honestly understand how having the option to watch a movie on a display attached to a disc drive is more convinient than watching a movie on a display thats attatched to anything that can read any compatable storage medium of your choice.

    I have for all intensive purposes, a media center on the living room TV that can read anything I want to read. So I can watch the disc on that. I can also watch the disc on any of my computers, but usually theres some software BS on it, so I'd perfer not to plug it in and have to deal with that, but the option is there.

    My TV can read my USB stick and most video files I put on it or it pull the file directly off the wired network and easily handle 1080P without any noticable buffer time, my XBOX 360 can read my USB stick or pull the file from the network directly again with almost no buffering time, I can pull the file on my phone from the network, I can watch the movie on my tower with either the USB stick or off the network with a buffering of less than 2 seconds total (even on a 2160P video file), I can watch it on any of the 4 laptops or 3 other computers in the house with either my USB or pull it directly from the network, and if the DRM doesn't stop me from doing so, I could embed subtitles in any and every language and even put other features and abilities into it just by putting in a little effort and then repackaging the movie into a matroska wrapper on my main tower.

    I fail to see how it is "convinient" carrying around a significantly larger and more fragile disc than the pocket sized terabyte hard drive/32gb USB alternatives or pulling the file from the dualband gigabit network on pretty much any device in the house. This fails to address the fact that in most cases the disc also is restricted on how or even if I can skip around to different parts of the movie, is loaded with a bunch of previews for crappy movies before I get to the main feature and in a lot of cases being unable to skip those, there being a pelithra of "extras" that are completely retarded 99% of the time such as commentary from someone that no one cares at all about while it lacks subtitles or other features you actually might want such as commentary from the main actor(s)/director, deleted scenes, trailers and or teasers of the movie itself and/or sequels planned or in production, how the major special effects where done, etc.

    I realize that a lot of those things fit into the whole "adding DRM and taking away the features", and are exactly what you are talking about, but it's not like this is something that just started happening in the last couple months, just like it wasn't until after DRM entered the playing feild that adding extra features to almost all sold content became standard practice. As far as the "experience" of going to the movies, I find it's largely impersonal and largely not very enjoyable. The only redeeming feature is the HUGE screen that I would otherwise not be able to watch the movie on. The clarity is not that much better (1080p on any of 6 different screens, including the 46" infront of the comfy leather chair, or I could use the 1600P monitor only a couple feet away...), the audio is often times no better (7.1 surround sound matrix at 1,500 watts RMS at home), I have plenty of popcorn, and other snacks, and if I'm out the store is 4 minutes away, and I don't have to worry about getting a "good" seat.

    My problem with the concept that drives this article is that there is a distinctly visible trend of piracy growing as sold content became worse and more restrictive and the piracy excellerated as the content producers kept getting more extortive and more tenatious, even though they did add other features and made digital copies available without having to use something like alcohol soft. Not only this, but they also fail to keep their product readily available, keep taking new measures to restrict people's access to it (netflix and WB for example), keep making it more difficult for stores and companies to stock it (half of the movies at work that we're out of have been on order by our DC for weeks if not months), and keep taking it out of circulation sooner (I'm doing price adjustments and complete recalls 4 times more often than before, and they are NOT being sent to the DC, but rather picked up and the requests being generated by the individual studio distribution reps and groups themselves even though our inventory system apparently didn't get the memo they were pulling the movies).

    To be honest, I fail to see any single point where the content industry is anything but 100% guilty of their own decline on every single possible front and angle and how they have done any single thing that actually benefits them other than the short term boost they saw by extorting the consumer more and the false facade they made by including rediculous commentary about nothing important as the "bonus features".

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