Tuesday, January 10, 2012

Timing is everything

"Digital deniers" are pretty thin on the ground now (or perhaps like the Marxists are waiting for their day to come and getting old and fat in the process while listening to Genesis box set LP's at 33rpm) but some recent developments offer a very good indicator of where in process of transition to digital we stand.

Netflix yesterday launched an IP delivered film service in the UK & Ireland to compete directly with LoveFilm who themselves have an online offering LoveFilm Instant. Clearly this is preferred to offering a linear channel via a traditional EPG (Film 4)- the economics if takeup is at all significant will be massively more attractive given technical costs alone. Similarly the Sky Go online version of the TV product has been a massive hit with the customer.

In contrast HMV released results showing declining sales (even taking account of the snow problems in 2010) which show that "physical" distribution continues to take a hammering.

It may be that digital, due to the fact that it cuts the supply chain down (or disintermediates if you are in investment banker), will contribute less to the economy overall but the move is inexorable. How legitimate distributors compete with pirate offerings when they are only a few clicks apart remains to be seen but we can leave that for another day.

Neither LoveFilm, Netflix or Sky were the first in digital distribution and many similar offerings have already fallen by the wayside - but it looks like the consumer market has finally arrived about 14 years after the first propositions in this area were formed. My guess is that we are about 10% into the switch over to IP / digital distribution.