Tuesday, August 16, 2011

Woolworths Lessons For The Content Industry

The gas bill is up 18%, the electricity bill up 11% and rail fare up 12% and as for petrol prices....

It seems that our world is becoming prohibitively expensive. But these price rises are restricted to over-taxed monopoly businesses (or, to be kind to them, regulated oligopolies).

In the rest of the world, where there is real competition, prices just keep on going down. I was working my way through an old CD collection recently and noticed the price stickers on some of them - £12.99 or even £17.45 - a decade ago! The cost of entertainment has inexorably fallen. Indeed, I haven't bought a CD for two years since starting to use Spotify, which costs just £10 a month for almost all the music I need.

We live in a dollar to cents world (or a pound to pence or a euro to cents, depending on where you're located).

Which is, perhaps, why companies like Poundland are taking over the UK High Street. And hereby stands a tale for the content industry.

Once upon a time, Woolworths was the king of the 'five and dime' stores. But it lost its way badly, and whilst companies like Poundland flourished, it went bust. Ironically, this also lead to the death knell for the DVD industry as we know it since Woolworths' distribution arm accounted for so much of the industry's capacity. Moreover, it left most high streets with nowhere you could browse or buy music or films.

The price of music has been falling inexorably, and the same market forces are hitting film rental, where the cost of a DVD at £19.99 is no longer, especially if you go beyond a couple of weeks after release.

And this same effect is hitting television. Top Gear is one of the world's leading TV brands, but all the evidence I have seen indicates that it is amongst the most pirated. Taking a copy from the BBC transmission and making it available in cyberspace is so easy, and this undermines the cash cow that is the international sales of this programme (even if format and licensing rights aren't hit).

The content industry is enjoying halcyon days, but it is the calm before the storm and the industry needs to act now to preserve its rights and assets.