9 Reasons Digital Media Products Are A Bad Deal For Consumers

The utopian dream of ubiquitous media access is on the verge of becoming a reality. Consumers can watch TV on their iPods, download sports highlights to their cell phones, and take vast libraries of music with them wherever they go. You would think that all of these new digital distribution systems would be a boon for consumers, but that isn’t necessarily the case.

There are signs that media companies are using the transition to digital distribution as an opportunity to redefine consumer expectations about the value of media products, while at the same time eliminating much of what is currently considered to be fair use.

When consumers buy digital music, movies, or television programs from iTunes, Amazon, and most other digital content sources, they are ultimately paying more, getting less, and being forced to make platform decisions with long term implications.

Here are nine reasons why most digital media products are a bad deal for consumers:

  1. Digital media prices are too expensive when compared to traditional media products. iTunes album prices are generally $2 to $3 below the price you would expect to pay for a discounted CD. Amazon Unbox is actually charging the same price for many downloadable movies as they are for the DVD editions. The price differential is negligible when you consider the risks and disadvantages associated with digital media. Given the limitations imposed on digital media products, you would expect digital movies and music to be sold at a more substantial discount.
  2. Consumers supply their own bandwidth and physical media. If you burn your music to a CD, you provide the blank disks. When you download a movie, you supply the bandwidth. Media and bandwidth are roughly equivalent to what the entertainment industry calls “manufacturing and distribution”. Those are costs that used to be fronted by media companies and built into the price of their products. In the era of digital downloads consumers are now bearing the costs of manufacturing and distribution. Meanwhile media companies are still including those costs in the price of their digital products. You could argue that Apple and Amazon are providing bandwidth as well – and while that’s certainly true, the media companies are still benefiting from the fact that someone else is paying for the transfer of bits. In a future article we’ll take a look at how media companies use digital media products to take advantage of their partners.
  3. Packaging not included. CD covers, jewel boxes, and liner notes are a thing of the past. When you buy a digital media product physical artifacts are obviously not included. In some instances you may get a PDF download from iTunes, but it’s up to the consumer to foot the bill for printing (color ink isn’t cheap). Where the price of digital media products is lower than physical media products, the corresponding price differential is usually not enough to make up for the fact that the product does not include any of the traditional packaging.
  4. Product extras are frequently missing. While digital albums may provide bonus tracks, digital movies usually don’t include the DVD extras.
  5. Platform lock-in. Thanks to proprietary and incompatible DRM systems almost all digital media products released by major studios require consumers to choose a platform and lock-in to the selected platform. If you buy an iPod you’ll be limiting yourself to iTunes. If you buy a Zune, then you’ll be limiting yourself to the Zune Marketplace. Would you buy a DVD player if you could only buy movies from Best Buy? Or a CD player if you could only buy music from Tower Records (if you did, you might be re-thinking your decision right about now). When you buy a CD or DVD you expect it to work across a broad range of devices, and for a very long time. There are no such guarantees in the digital realm. Consumers who bought into Microsoft’s PlaysForSure standard are about to be left behind when Zune is released. Who stands to benefit from these changing standards? Everyone but the consumer.
  6. Shorter product life-span. Digital media products arguably have a much shorter product life-cycle and will require more frequent replacement than physical media products. You might decide you want to change player platforms, which would require you repurchasing all of your DRM encrypted music, or maybe your hard disk dies and you have no backup. There are all sorts of scenarios that could quickly wipe out your digital media collection. Comparatively speaking it would take a much larger disaster to wipe out a physical CD or DVD collection.
  7. No returns. Ever try to return a song to iTunes? Can’t be done. Sure, they might let you re-download the track if there was something wrong with the source file, but in general digital products cannot be returned in the same way physical media products can. It should also be noted that media companies have traditionally budgeted for product returns. It is assumed that a certain percentage of any given media product will be returned by retail outlets as unsold merchandise. The costs associated with those returned items are built into the price you pay for CDs and DVDs. You would expect the fact that digital products can’t be returned to be reflected by a lower price.
  8. No resale value. So you logged onto iTunes in a drunken haze and downloaded the complete works of A Flock of Seagulls. What happens after the hangover has passed an you realize your mistake? In the good old days you could take your used CD’s down to the nearest record store and sell them for cash or credit. When you buy digital media products that’s not an option. The traditional Right of First Sale has been stripped away in the digital age.
  9. Fair use restrictions. Most digital media products come with a variety of limitations designed to restrict their usage. Depending on the source, you may or may not have the ability to make a copy for personal use. Likewise, DRM restrictions may prevent you from playing your media content on the device of your choice. And don’t even think about sharing with your friends. Despite Microsoft’s attempt to facilitate legal file sharing, digital media products can’t be shared in the same way physical media products can. While it’s perfectly legal to loan a DVD box set to your neighbor, you would likely have to break any number of federal laws to do the same with the digital equivalent of the same content.

When you add it all up digital distribution doesn’t look like such a good deal for consumers. At the very least media companies will need to adjust their pricing to reflect the reduced value of digital media products.

18 Responses to “9 Reasons Digital Media Products Are A Bad Deal For Consumers”

  1. Tim says:

    This is all interesting, of course. But you raise an even bigger question: I’m not sure the entire Flock of Seagulls catalogue is available on iTunes. At least not in their original album form. You can get a best of that includes the classic Bill Nelson-produced “Telecommunication” for sure. As for their later stuff, I wouldn’t bother. You really only need their first album, which is an 80s classic. Thanks for reminding me about the Flock!

    BTW – of their first, self-titled album, Robert Christgau had this to say in his A- review: “This is very silly, and I know why earnest new-wavers resent it. But I think it’s a hoot–so transparently, guilelessly expedient that it actually provides the hook-chocked fun most current pop bands only advertise.”

    But the bottom line for digital distrubution are things like instant gratification, no driving to Tower, portability, no ripping, etc. The new digital booklets are at least trying to go some way towards “packaging.”

    But what I find most compelling about your 9 points is that maybe you are much better off just buying the CD after all!

  2. bruce says:

    Finally! It’s about time somebody (other than myself) has realized the shortcomings of digital media. The way I see it, digital media are non-returnable, quality-compromised products with absolutely no resale value. Just as an increasing number of music lovers long for a return to beautifully packaged, sonically superior vinyl recordings, I suspect consumers will eventually regret ever having embraced digital media.

  3. There’s absolutely nothing wrong with digital media in and of itself. The way digitized commercial content is distributed, however, is a complete crock.

    I download a lot of free, legal music from a site where artists can upload their music for distribution, and I have no complaints about it — because I’m not paying for it, I haven’t lost rights, and the files are in open formats like OGG.

    I totally agree about stuff like iTunes and Amazon, though.

  4. Bill Insisted says:

    So the suits have looked at the massive P2P, illegal downloads which are free and DRM-less as well as being high quality (mostly, at least better than 128 k/s iTunes standard) and platform-less and they think that offering a high-priced, DRM’ed, low quality, crippled product will tempt users away to becoming ‘legal’. I can’t imagine why this wont work?

    allofmp2 has 14 % marketshare in the UK for a reason – people don’t mind paying for content, but they don’t want to pay top dollar for a metaphorical car that only has one gear and will only run on that companies approved roads and fuel. And you cant take any passengers.

    Until they come up with good business model (heaven forbid they might offer more content for your money or even innovate (gasp!) they are really just pissing into the wind, they can all just get wet.

  5. Keith says:

    wow, a lot more people pay for music than I thought.

  6. Reg Crandall says:

    Digital Media – Good Deal – Not Bad – both for consumers and distributors –
    http://www.9thxchange.com. The 9thXchange marketplace is the newest way to bring together buyers and sellers of digital content. The service dramatically reduces content piracy by offering the seller lifetime royalties — even on exchanges between consumers. Moreover, the service I found an incredible company that will take digital media to new heights in profit: accommodates all technology platforms, file types and creators. I read about The 9thxchange in Crains Detroit recently as well. It’s new and exciting – Reg Crandall

  7. Kirk says:

    Reg, your comment smells like comment spam, but I’ll leave it in order to make a few points.

    Your service would appear to address several of the points in my article by allowing consumers to resell digital media files.

    I’m skeptical about a number of aspects of your business model. First of all, I can’t buy into the ‘digital media files as collectibles’ world view.

    The concept of scarcity has no intrinsic meaning in the digital world. You can only turn digital media files into collectibles by enforcing artificial scarcity, and you can only do that with DRM. Even then the artificial scarcity is only good as long as someone doesn’t crack your DRM or create an unprotected digital file from another source.

    Your marketplace appears to be a closed system based on proprietary DRM scheme. That alone would be enough of a reason for me not to recommend your service to our readers.

    I won’t even get into the fact that half of the files listed look like they’re in the public domain, while the other half look like they might be covered by copyright (are you really licensed to sell Elton John’s music?).

  8. Jim says:

    Here’s part of the FAQ on their website:

    Q: As the content creator can I place restrictions on how the digital files are used?

    A: The content creator will determine the licensing criteria for the digital files distributed on The 9thXchange. Users will be made aware of licensing restrictions on files on which they they bid. The following are some of the potential restrictions that could be placed on digital content:

    * How many times a file is played
    * On which computer the file can be played
    * On which devices a file can be played
    * Whether the file can be copied
    * Whether the file can be backed up and restored
    * When the file can be played (time/date ranges)

    I’m out.

    It is beyond me why any consumer would ever pay even a penny for any digital file with all of these restrictions.

    Nothing is that rare forever.

    Imagine buying a book that restricted not just the amount of times you can read it, but the time and place you can read it.

  9. Angelo says:

    Well wait a minute…what is wrong with the artist determing how they want their music to be played? I think if they limit usage rights, that’s their call. The market will dictate one way or the other on that. I download ebooks all the time, and I can’t exactly do with what I please with them.

    Some how it’s ok to share music, but ebooks you can’t? Why is this? I have no problems with DRM, or Apple DRM. I don’t know about you, but I’d rather have a piece of content that I know is legal, rather than something placed on youtube that’s being sued over. it just bugs me. Maybe my artist compassion side is talking here.

    The anti-DRM movement is funny to me. There are cracks in every piece of technology and the evil twits who live to crack them for sure. But am I an idealist who thinks that most people want to do good and not break any copyright laws?

    And a collectible state is really more about authentication than scarcity at least for me. I’m more apt to buy a baseball card that is rare, then to buy one that is just a cool card.

  10. Kirk says:

    Hey Angelo:

    We’re talking about consumers right to use legitimately purchased media products in ways that have normally been considered ‘fair use’. It’s good that you’re happy to pay for iTunes. I suppose you’re equally happy to be locked into Apple’s proprietary solution. Just don’t switch brands. You’ll have to repurchase your entire music library.

    DRM limits consumer choice and freedom. DRM as it’s currently being implemented has nothing to do with artist’s rights. The artists aren’t the ones who determine what limitations DRM will impose on their work. And, as you’ve noted, DRM doesn’t work. The only people who are punished by DRM are the honest consumers who purchase DRM protected media products, then can’t get them to work across a broad range of devices. Pirates have no problems with DRM.

  11. The Ceej says:

    Don’t forget that physical media almost always comes with a free digital copy. I guess, if you can figure out how to scan your books into some decent format, that would drop the almost from in front of the always.

    Try asking iTunes for the physical disc of the digital album you just bought. It doesn’t work that way in reverse.


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