If a commodity in today's world economy can be digitally distributed, the creators of those commodities are attempting to push it in that direction. In today's the days of such things like the book, the newspaper, the CD, the DVD, and even the Blu-Ray are numbered. All of those things which we know and love are going the way of the dinosaur because the era of digital distribution has rendered them obsolete. This is part one of a two diary series where I will explore both the good side and the bad side of digital distribution in the world economy.
Many of you are familiar with things that are digitally distributed in your everyday lives now. For example think about any app on any smartphone or tablet. Think about e-books that you can read on a Kindle. Think about many of today's video games both on consoles and the PC. Those are areas where digital distribution is becoming the norm. When you buy an e-book on a Kindle you're buying data of that book that is stored in the Kindle's solid state drive and not a physical book. This isn't always a bad thing but there are parts of this new reality that give great cause for concern. However, below the fold I will share with you the reasons why this new reality is a very good thing for content creators, businesses, and consumers.
What follows now is a list of reasons why digital distribution is the enormously beneficial to both businesses and consumers in today's economy.
1. Lower Production Costs
Digital distribution can lower the cost of producing and distributing goods tremendously. If you're a book publisher you no longer have to incur the expense of printing the book, shipping copies all over the country, and in some cases giving the retail middlemen a cut of the profit. You're able to cut several levels of the supply chain out completely and sell your product directly to your customers no matter where they are. These cost savings can be passed right along to the consumer as they are now able to offer the product at a lower price.
2. It's Environmentally Friendly
Think of the cost in resources that it takes to make something and get that thing to someone who wants it. Using books as an example, trees need to be cut down to make the paper. Petrochemicals need to be used to make the bindings and the ink. Diesel and gasoline need to be burned to transport the item from the factory, to the store or to the customer. Digital distribution largely eliminates all of that and is on balance better for our planet.
3. The End User Can Get What They Want Faster
Think about the time that you invest to go to a store and buy something. If you drive it costs you fuel to get to the store and go home. You also have to go into the store and find what you want to buy, which also takes time.
But what about online shopping? Sure you can save the commute time going to and from the store. but you will still have to wait a few days for what you ordered to show up at your doorstep or pay extra for expedited shipping. But even if you pay a lot of money to have what you ordered overnighted to you, you're still waiting overnight to get what you bought.
Now take digital distribution. The time it takes you to buy something is limited to how fast your computer/smartphone/tablet can download it. Today you can buy something and be able to use it in one minute when doing the same thing 15 years ago would take you an hour or longer.
Take a moment to think about that. It really is quite remarkable.
4. Lower Barriers For Entry
Technology is reaching a point where individual artists/writers can obtain the technology necessary to professionally produce their own content. I used to work for a company in the music industry that sold equipment to musicians looking to build their own studios and they were able to do that for only a few thousand dollars. We've reached a point where an artist can write, record, produce, and sell a professional quality album on iTunes right from their own home without any involvement from any record label.
The same can be said about the book industry and self-publishing. Authors who were rejected by or don't want to deal with the publishing industry now have a viable alternative to get their work out there. By selling their books only as e-books they can circumvent the publishers and get a larger share of the money the book generates. These lower barriers for entry allow us to get access to content that we wouldn't have otherwise gotten access to before and digital distribution has made that possible.
Side note: This doesn't by any means make book publishers, record labels, and movie/TV studios obsolete. Though an artist can easily self-produce and digitally make their product available they still can't market it on a large scale unless they're already very well known to begin with. It's all well and good that the content is there but how will potential customers/fans know if they should buy it or not? Marketing is what those big media companies excel in and that is why all the major players will be around in the foreseeable future.
5. Physical Space
If any of you collect books, music, movies, and video games think of how much space they take up where you live. If you have a lot of any of those you need a place to store it all. Digital distribution solves this issue entirely. For example, with a kindle you can have all of this:
stored in this:
This will not only free up room in your living space but you're able to take that giant book collection anywhere with you. You can go away for a vacation and be able to read all of those books without bringing any of them with you. The same exact thing can be said for music and movies through services like iTunes and Netflix.
6. Supply Will Always Meet but not Exceed Demand
One of the really beautiful things about digital distribution from the perspective of a business is that the supply of the product will always meet but not exceed the quantity demanded. When someone buys an e-book from Amazon, the customer downloads a digital copy of the book they purchased. If you think of what this means from Amazon's perspective though you'll see two things:
a.) They will never sell out of that product and customers will never be turned away or have to wait longer to get the product that they want to buy. Think about Black Friday for a moment. The reason people are lined up at midnight to get these deals are because there is a very limited supply of deeply discounted items. For a counterexample of this I'm going to go to the video game industry.
PC gaming is one of my hobbies and I get almost all of my games from a program called Steam (made by Valve which is IMO is the most consumer-friendly company in the industry). They very often offer big discounts on games they want to sell but the duration of the special is only limited by an arbitrary timeline that they set and not by supplies. So if they have a one day special sale offering Skyrim for 50 percent off, everyone who buys Skyrim on that day will be able to get it for that price. It come with the caveat "while supplies last" that you often see for other goods in other stores.
b.) They will never be stuck with a large amount of unsold inventory of a product that didn't sell as well as they anticipated.
From a retailer's perspective that's having the best of both worlds. That's having your cake and eating it too. That is the type of efficiency that economists dream about. I would argue that this more than anything else is the reason why companies are pushing harder and harder for digital distribution to be the norm.
Final Thoughts
So if this new economic system is so much cheaper, greener, more convenient, and better for the little guy why aren't we all embracing this new reality with open arms? Why don't they just stop manufacturing CDs, DVDs, video games, and books right now? I think that is where we will go in the future but not just yet. There is also a big downside to this new reality as well. When we examine the dark side of digital distribution you will find that I am personally undecided on whether this new reality is a good or a bad thing on balance. But that is a whole other diary and will be the subject of part two of this series.
The floor is yours.