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Digital Age Distribution

-- By ShyamPalaiyanur - 23 Oct 2012

The Net Alters Human Consumption of Media

The net fundamentally alters human media consumption. First, by increasing the number of distributors, the net increases distributional efficiency and lowers distribution cost, facilitating access to diverse and broad ranging media. It is now technologically possible for any two people with working internet connections to share digital files with one another. Second, the net reduces the marginal cost of producing media to zero by replacing physical objects with bit streams. Technological advances have enabled users to convert physical goods such as DVDs, CDs, and books into digitized files. These two factors enable people to copy and distribute media to other consumers for zero marginal cost. There is no technological reason for producers to retain control of the distribution of media. However, because the capital costs of producing new creative content is still non-zero, effective means for monetizing creative works must be developed. Traditional distributors in the film and music industry have failed to grasp the technological changes leading to various legal and technological attempts to stymie the fundamental change caused by the net. However, the net still offers methods for monetizing digital content that are beneficial to both consumers and artists. Unfortunately, for traditional distributors, these changes effectively cut them out from the distribution and production of low-capital goods.

The Future of Copyrighted Works

On December 10th 2011, comedian Louis C.K. released his fourth full-length comedy film, Live at the Beacon Theater. Although critically acclaimed, the release drew special attention for its unorthodox business model and distribution system. Louis C.K. self-produced the video and distributed the routine on his website for $5, free of any DRM. Consumers purchase the video by providing an e-mail address (to receive a log-in and password) and pay through PayPal? or Amazon. They can then download or stream the video. Further, the website will not retain personal information (besides the email and log-in) or spam the purchaser’s email account. In less than two weeks the video generated over $1.1 million in sales. Louis C.K. earned over $220,000 in profit from the video, donated $280,000 to charity, paid bonuses to production teams totaling $250,000, and used the rest of the revenue to pay production costs. Overall, the artist himself acknowledged “the experiment really worked.” This is just one of the most recent cases where an artist has forgone traditional distribution methods to bring their creative work directly to the consumer. In the past marquee bands such as the Smashing Pumpkins and Radiohead released albums, Machina II and In Rainbow, respectively, directly to the public. However, under the Louis C.K. model, the video was offered for a fixed price, while under the Radiohead model, the consumer paid what they thought was fair. Since the release of Live at the Beacon Theater, other comedians, such as Aziz Ansari, have also released their routines through a similar model. There are several key points to take away from this experiment. First, consumers are willing to pay for quality content despite the ease of pirating. Consumers are willing to pay a reasonable price to support artists. Further, many consumers daunted by the “challenge” of torrenting or downloading media will also pay rather than pirate and the reduced price will allow them to afford the work. Second, consumers will pay for content when producers don’t restrict their use of the media. Live at the Beacon Theater was sold DRM-free. The most important point, though, is that this distribution model is a success for both the artists and the consumer. As Louis C.K. acknowledges, artists can always choose traditional distribution systems, but users will continue to “[enjoy] torrenting that content”, resulting in reduced profits for the artist.

Criticism

One possible criticism is that the success of Live at the Beacon Theater is due to the experimental nature of the distribution model rather than the efficacy of the model. The claim is that consumers will pirate rather than buy the album once the distribution model becomes mainstream. However, because of the novelty of the distribution model and that it appeals to a consumer’s sense of fairness, people bought the video this time. There are several objections to this line of thought. First, the model isn’t new. In 2008, Radiohead released their album first through online digital sales and then through iTunes , CDs, and box-sets, forgoing record label distribution. They earned more money through this model than distribution through a record label. Next, it is true that many people will continue to pirate music and video content, but if prices are reduced more people will also be able to buy the content. Traditional distribution has utterly failed to stem the tide of piracy. In fact, almost 100 million files have been shared in the first half of 2012 alone. Third, this criticism misses the point. The net is technologically designed to share information and media, whether pirated or not. By embracing the way consumers use digital media and reducing barriers to buying the media, this model increases a consumer’s willingness to buy the creative work.

Conclusion

The structure of the net imposes changes in the form of media and the way society consumes media. However, far from destroying traditional content, the structure of the net may be harnessed to enable artists to distribute their work directly to consumers. One way for both consumers and artists to benefit from the increased distributional efficiency of the net is to embrace these features rather than pursuing the Sisyphean struggle of developing legal and technological mechanisms designed to maintain the status quo.

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