Posted by: Jordan | August 25, 2009

The Future of Digital Media

A good friend of mine, let’s call him Mike, has a collection of digital media that is now upwards of 4 terabytes in size and growing, all of which has been downloaded using BitTorrent. It’s not only the fact that he has virtually every movie that has been released on DVD in the past 20 years and any television series you can think of in its entirety at his fingertips that is so impressive, but also that the majority of the collection is in high-definition, beautifully indexed, and is complete with meta data that is linked to, in case you are curious who the Gaffer was for Ferris Bueller’s Day Off.

As I have told him many times before, it’s almost like he’s back from the future, and rather than checking out the lottery picks or Superbowl winners, he took a trip to Best Buy.

The thing is, I’m only half joking. This, we should hope, is in fact the future of digital media.

So why don’t we have more Mikes today? This kind of access to movies, television and music is readily available right now to anyone with a television, a hard drive, and a rudimentary understanding of the internet. It is also not particularly expensive, difficult or time consuming to set up.

The obvious answer is that Mike is a criminal and has stolen virtually his entire collection, despite being a generally law abiding kind of guy.

There is a fundamental problem here, which is that the current legitimate market for digital media cannot adequately serve our desire for variety. The fact that there exist companies that produce and sell DVDs, and that there are consumers who buy them, shows us that there is a viable market for digital media. In other words, the fact that Paramount is willing to produce and sell a DVD copy of Transformers for $15, and that people are buying that DVD for $15, shows that a good number of people value a Transformers DVD at $15.

However, in addition to valuing Transformers at $15, I also value being able to sit down in front of my TV and have 1000 movies to choose from. I ascribe a particular value to knowing that at any moment, I will be able to choose to watch a movie that fits my mood. Under the current digital media paradigm, which involves me going to HMV and buying 1000 of my favourite movies, it becomes prohibitively expensive to satisfy my desire for variety. I might value having 1000 movies to choose from, but I certainly don’t value it at $15,000.

To be sure, not every desire for variety can be fulfilled. My desire for a variety of cars to choose from for my morning commute isn’t feasible, simply because it costs a significant amount to produce each car. Digital media, however, is different. The costs are fixed at the production and marketing, and each copy produced after the fact is essentially costless. So unlike Ferraris, if you have 1 person willing to spend $15 on a DVD copy of Transformers, producers should be equally happy with 100 people paying $0.15 for a digital version.

Currently, a market does not exist where I can buy $0.15 digital movies. Moreover, it is illegal for me, and Mike, to obtain the variety of digital movies that we want, even though that variety is easily accessible online. It is a lot like the market for contraband drugs, where those serving the market are outlawed — except in the case of digital media, there are no negative social consequences and therefore the illegality of sharing media doesn’t have the same kind of persuasive force as it does with sharing cocaine.

What seems to be holding back this jump forward in the distribution of digital media is that the intellectual property holders are not convinced that there are in fact 100 people willing to spend $0.15 on a digital download for every 1 person willing to spend $15. Specifically, they are worried that each person that was previously spending $15 on their Transformers DVD will simply download it for $0.15. So it would seem all that is needed is an adequate demonstration that the market for variety is large enough to more than enough to make up for the lost DVD market.

Steve Jobs is starting to do it for the digital music market with iTunes, but we are yet to see it happen with the rest of digital media. In my opinion, this shift is inevitable. So until then, we’ll need to keep looking to the Mikes of the world to show us how good it can be.



  1. You hit on another problem but never really address it: the entertainment industry overvalues itself, has no idea how to value it’s own products and still thinks consumers don’t know either. The entire production schema of entertainment media is as blowhard Vogue magazine, which is currently getting cut down to size by McKinsey and Co for outsize budgets and minimal return.

    Furthermore, the industry doesn’t exactly have a great notion of fiscal honestly, because box office records aren’t adjusted for inflation. Every summer, some asshole movie “breaks the record” for PR purposes, ignoring that Gone With the Wind is still the undisputed king of box office gross when adjusted for inflation.

    In any case, you’re right about the rights holders being behind the times. But these were the same people who were afraid that consumers would tape movies off TV or tape songs off the radio and never buy proper media. It betrays the opinion they have of their own product, which is that it doesn’t merit owning outright if sold for cheap. And yeah, more often than not, it doesn’t.

  2. (Should have specified American Vogue) Foreign Vogues do much better with smaller budgets.

    I was wondering when we’ll get Hulu in Canada. That to me seems like a great leap forward. You can go back in time and pick your fave SNL skit and watch it ad nauseum free.

  3. Thought-provoking article. Another spin on how to fix a business model that’s been disrupted by a new technology is the idea of ‘freemium’, offering free, stripped down versions of digital products, and betting that the people who buy ‘premium’ versions will offset those who don’t pay for anything. I talked to a guy trying this with university textbooks recently:

  4. I like the point you made in the second last paragraph. I personally think the ratio may be a little different, but you’re totally right.

    I have also informed the appropriate authorities about your friend “Mike” and his orgy of piracy.

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