The Entertainment Industry: The Pond and The World
Recently I have been doing a lot of thinking about digital information, the music and movie industry and their tussles with digital music/movies and P2P networks.
What I have been trying to think of is a win-win solution for all parties involved. That is, to come up with a digital information distribution business model that enable the music and movie industry to earn a good profit, to ensure producers such as musicians, actors, directors, writers all get a fair share of their cut and of course, that we as consumers still continue to get what we want (high quality music) at what we believe is a fair price. The result, is this series of articles examining what's wrong with the current model and what needs to change to create a robust entertainment market.
The Entertainment Industry As It Is Today, Is Flawed
I do not need to repeat what just about every blog and news article is saying, that the entertainment industry's current view of their own industry is seriously flawed. For example, the four major music distribution companies, Sony BMG, EMI, Universal and Warner, think they are selling music but actually they are only selling a specific type of music that I call "Billboard Music". Likewise the movie industry is currently mostly only interested in selling "Blockbuster Movies".
The entertainment industry cannot be blamed for selling Billboard Music and Blockbuster Movies because they are only following the brick and mortar Economics: Sell as many of the most popular products. It is a good model that has worked for decades, so why change to something new? One reason is that the assumptions made by Economics about brick and mortar businesses changed when a company moves to the Internet.
This change in Economics is somewhat similar to the situation in the early 1910s when Einstein discovered the Theory of Relativity. Relativity did not prove that Newton's Law of Universal Gravitation is wrong. Newtonian gravity continues to be accurate on Earth even today. In fact, the only difference is that Newton assumed the force of gravity is constant throughout the universe whereas Einstein showed that the force of gravity is different at different locations in the universe. The result is that as long as we stay on Earth, both Newton as well as Einstein's formulas work equally well. When we move into space, Einstein's relativity formulas are much more accurate than Newton's.
The entertainment industry faces the same issue today. The laws of brick and mortar Economics would continue to work so long as the entertainment industry stays in the brick and mortar world. If the entertainment industry decides to move (and has to move) into the much larger universe of cyberspace, then it better be using the laws of Internet Economics and not the laws of brick and mortar Economics.
Like Newton's Laws, the brick and mortar laws of Economics makes the assumption that every resource, every step, every process used to bring a product to market costs money. It takes money to buy raw materials, hire people, store stuff, transport stuff, buy machinery. Yet strangely in the laws of Internet Economics, there are certain resources and certain processes that are so cheap that they are essentially do not even cost a cent per product sold. This might seem like a small difference between brick and mortar Economics and Internet Economics, but as we will see in the next article, the implications are huge.
What I have been trying to think of is a win-win solution for all parties involved. That is, to come up with a digital information distribution business model that enable the music and movie industry to earn a good profit, to ensure producers such as musicians, actors, directors, writers all get a fair share of their cut and of course, that we as consumers still continue to get what we want (high quality music) at what we believe is a fair price. The result, is this series of articles examining what's wrong with the current model and what needs to change to create a robust entertainment market.
The Entertainment Industry As It Is Today, Is Flawed
I do not need to repeat what just about every blog and news article is saying, that the entertainment industry's current view of their own industry is seriously flawed. For example, the four major music distribution companies, Sony BMG, EMI, Universal and Warner, think they are selling music but actually they are only selling a specific type of music that I call "Billboard Music". Likewise the movie industry is currently mostly only interested in selling "Blockbuster Movies".
The entertainment industry cannot be blamed for selling Billboard Music and Blockbuster Movies because they are only following the brick and mortar Economics: Sell as many of the most popular products. It is a good model that has worked for decades, so why change to something new? One reason is that the assumptions made by Economics about brick and mortar businesses changed when a company moves to the Internet.
This change in Economics is somewhat similar to the situation in the early 1910s when Einstein discovered the Theory of Relativity. Relativity did not prove that Newton's Law of Universal Gravitation is wrong. Newtonian gravity continues to be accurate on Earth even today. In fact, the only difference is that Newton assumed the force of gravity is constant throughout the universe whereas Einstein showed that the force of gravity is different at different locations in the universe. The result is that as long as we stay on Earth, both Newton as well as Einstein's formulas work equally well. When we move into space, Einstein's relativity formulas are much more accurate than Newton's.
The entertainment industry faces the same issue today. The laws of brick and mortar Economics would continue to work so long as the entertainment industry stays in the brick and mortar world. If the entertainment industry decides to move (and has to move) into the much larger universe of cyberspace, then it better be using the laws of Internet Economics and not the laws of brick and mortar Economics.
Like Newton's Laws, the brick and mortar laws of Economics makes the assumption that every resource, every step, every process used to bring a product to market costs money. It takes money to buy raw materials, hire people, store stuff, transport stuff, buy machinery. Yet strangely in the laws of Internet Economics, there are certain resources and certain processes that are so cheap that they are essentially do not even cost a cent per product sold. This might seem like a small difference between brick and mortar Economics and Internet Economics, but as we will see in the next article, the implications are huge.
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Labels:
Information,
Internet,
Movies,
Music,
Television
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