Players step quicktime in the gatekeeper shuffle
This week Amazon opened the virtual doors of its of its much anticipated digital music store. This marks an interesting development in the rapidly changing business of music and screen content distribution. Amazon is not only a long-established online presence that probably has greater web brand power than iTunes, but it is already a regular content shopping haunt for millions.
From one perspective this move seems a little overdue - digital music sales seem like a no-brainer for Amazon. A few statistics from Steve Jobs at the launch of the new iPod range in September show the business opportunity that Amazon is just now attempting to tap into:
- The iTunes store is the number one online music retailer in all of the 22 counties it operates in
- It’s the third biggest retailer of music, digital or non-digital, in the US trailing Wal-Mart and Best Buy
- It has six million songs on catalogue – ‘millions ahead of anyone else’ says Jobs and has sold more than three billion songs.
Perhaps the statistic with the biggest shock value: in 2006 in the US, 32 per cent of all music was released in digital form only (no CD with that thanks). The iTunes store also has 550 TV shows on catalogue and has sold 95,000,000 so far.
One reason Apple has been so dominant is the seamlessness of its user experience. From desire to gratification, Apple has produced an experience that, for many, is better than the old bricks and mortar version. The cornerstone of this experience is, of course, the iPod itself.
Less visibly, the lock-in effect of Apple’s FairPlay digital rights management system means that the iPod’s success in the portable music player market helps drive the success of the iTunes store.
But cracks began to appear in April this year when Apple announced a deal to sell DRM-free songs from the EMI catalogue. This was a friendly move by Apple and EMI to attempt to stimulate digital music uptake. Some argued that it was a ‘try anything’ play by beleaguered EMI, the smallest of the major record companies.
In July the cracks widened with the Universal Music Group’s announcement that it would not resign its long term contract with Apple. In August UMG announced it would sell DRM-free music through Wal-Mart and Amazon but not through iTunes, where it would continue to sell DRMed tracks on an ‘as needs’ basis – a move that seemed designed to gall Jobs. UMG is the biggest music player and accounts for one third of Apple’s US sales. So will iTunes have a viable business without Universal?
NBC Universal now plans to sell its video content though Amazon’s Unbox but is also launching a video download in partnership with News Corp called Hulu.
Writing in the New York Times, Bill Carter says that ‘NBC intends to transform the service into a model similar to iTunes by the middle of 2008 — that is, consumers will pay NBC directly to download episodes of the shows.‘ Jeff Gaspin, the president of NBC’s digital division, is quoted in the article as saying ‘We did this to eliminate the middleman.’
Meanwhile, YouTube under Google ownership remains by far the most popular site for short copyright-free (or ignored) video and any number of ‘streaming players’ such as Joost are attempting to get a toehold in that marketplace.
Never has the structure of the content distribution business been in such a state of flux. Its industry structure used to be accurately described by economists’ jargonistic mouthfuls like ‘monopolistic competition’ and ‘oligopoly’. But tomorrow’s market structure is anybody’s guess.
What this means for content producers is more opportunity but also more uncertainty. Online distributors can be expected to be hungry for content deals and not just for mass market fare – new niches are appearing everywhere. But singing up with a distribution play that proves unsuccessful could see your content withering on the vine. ‘Do no exclusive deals’ would seem to be a sensible starting point. The other point we could take away from all this chaos is that at least you should be able to tell fairly soon if your deal is working out. In Internet quicktime there’s likely to be only a few months between ‘try it’ and ‘see’.
