Digital Distribution and You

Media format wars are nothing new. We've all been through them in one form or another, from Betamax versus VHS to cassettes versus CDs to Blu-ray versus HD DVD. The current big conflict is one of traditional physical media versus digital content delivery, and it's one that's likely to be much more important in its ramifications than any prior format war. The simple fact of the matter is that digital distribution will one day kill traditional physical product content, and though that day is not quite here yet, it's only a matter of time.

Regardless of whether you think you are not really familiar with digital distribution, you've probably experienced it. It's a wide category, encompassing direct-download and direct streaming options as well as cloud computing options such as Valve's Steam network. If you've ever downloaded games from Microsoft's XBox Live network, for example, or watched direct streaming video from OnDemand, you've experienced digital distribution. Current consumption patterns indicate this method of delivering media content is gaining in popularity and will overtake current physical formats such as Blu-ray, though it may be some time before that occurs.

The major delay for the changeover from traditional physical media to digital distribution is that right now the Internet connectivity infrastructure of the United States is less than ideal for the widespread adoption of digital delivery. It works well in some major cities due to the advent of high speed Internet in all those areas but 36% of Americans do not have this access, and in addition overall the United States maintains a connection speed of 1.7 Mbps which is frankly insufficient for the mass adoption of digital delivery. This isn't to say that the U.S. necessarily sets the benchmarks regarding media formats, however it would be the big player with regards to consumer spending on recreation and therefore the consumption trends in the United States heavily influence format wars. (Japan comes in second in recreation consumption and still only spends a third of what the U.S. spends, though interestingly Japan also comes in second with regards to connection speed.)

The additional major delay would be the economics of such a mass reduction in the manufacturing process of what's almost a trillion-dollar industry in the United States alone. The majority of Blu-ray manufacturing plants, for example, are outside of the United States. Digital delivery is for that reason plainly against the interest of companies which produce the discs, since adopting digital delivery would result in a drastic reduction in the import of these kinds of products and a loss of revenue and employment for each the companies specifically and their home countries in general. The companies that support physical content can be pushing against digital delivery as hard as they can, however if consumers continue to flock to digital delivery this resistance can't hold them back -- and by all indications, that is exactly what's happening at this very moment.

Of course, there are actually other factors to consider. Certainly, for example, there's an amount of consumer reluctance to adopt digital delivery, as there is with any new technology. Reasons for this reluctance vary; some people might not want to fall prey to the problems which so often plague early adopters. Others can simply enjoy having a physical product complete with the various accoutrements that come with modern media. (There's one thing to be said for it, after all: that you can't line a wall with your Netflix Instant Queue titles the same way you can with your movie collection.)

So when will digital content reign supreme? The answer to this is actually most likely to be found in the American Recovery and Reinvestment Act of 2009. The Recovery Act allocated roughly $7 billion in initiatives to bring broadband and high-speed Internet access to millions of Americans across 37 states. The recipients of the Recovery Act funds are due to be announced in early October 2010, and so any final true estimates can be dependent on those announcements. It's entirely reasonable to estimate that digital distribution will gain the majority of the market by 2015, with 2020 as a safe bet for digital distribution to entirely edge out its competition. What's the next battle in the format wars after that? Only time will tell.

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